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Business Officer Magazine
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A Realistic Approach to Management

What are the key financial, human resource, and institutional factors that keep colleges and universities viable? Read on.

By Marta Perez Drake

Institutional Viability

To begin the focus on institutional performance, representatives from Moody’s Investors Service presented a financial industry outlook. According to Moody’s research, credit rating upgrades outpaced downgrades this year for the first time since 2001. Given this trajectory, the discussion turned to some relevant questions: What are the characteristics of the most robust institutions? What can you do to ensure the most productive visit with a rating agency?

Defining characteristics. Dennis Gephardt, an analyst from Moody’s Higher Education and Not-for-Profit Service, outlined the indicators that his firm associates with an institution’s financial viability. Colleges and universities with momentum, Gephardt said, tend to be elite institutions with large diversified endowments. They also tend to be urban, private and public institutions; large public entities and systems with growing philanthropic support; and large community colleges that serve vibrant metropolitan areas—particularly community colleges located in the same city as the state’s flagship institution. Gephardt noted that, as the saying goes, “the wealthiest just get wealthier.”

Stable institutions tend to be midsize, liberal arts colleges with a regional draw; regional public universities in the South and West, where demographic trends indicate an increase in college-aged individuals; and community colleges as a whole. Meanwhile, institutions facing challenges are most likely small, private institutions with limited geographic appeal; private entities with ambiguous strategic plans and a tendency to spend significant funds to improve their national reputation; regional, public institutions in weaker demographic areas, which compete with community colleges; and community colleges in economically stagnant areas.

When the rating agency comes to call. To prepare for visits by rating agencies that evaluate institutions, Gephardt suggested that business officers include the following strategies for effective interactions:

  • For initial meetings, ensure that the primary participants include the board chair; the president and CEO; the treasurer or chief investment officer; and top representatives from the business office, admissions, development, and academic administration.
  • Provide an institutional history or background for rating agencies once they are on campus, because you cannot assume that the agencies know what your college or university wants them to know. “Selling is good; spinning is bad,” Gephardt said. So, it’s important to share details and to show that the institution focuses energy around the future.
  • Recognize that revealing problems can be good as long as the institution has a plan to address them. Confirm this by presenting a detailed plan for problem resolution backed by data and cost analysis.
  • Provide a statement as to why students want to attend your institution.

What can prove unproductive during rating agency visits are general, broad assertions with no data to support them. Gephardt noted these actions to avoid:

  • Allowing the banker to do most of the talking.
  • Making the rating agency the “bad guy.”
  • Asking the rating agency what the representatives want the institution to do.
  • Working with unprepared analysts from the rating agency. You’ll achieve much better results when the rating agency is familiar with your institution’s portfolio and is not forced to ask obvious questions or to repeat requests for information.

Refocusing Human Resources

The discussion then turned to managing human capital. Representatives from Brill Neumann Associates, a consulting and executive search firm, discussed strategic alignment and talent management in higher education. Brill representatives pointed out how the present-day workforce is truly intergenerational—from pre-boomers to baby boomers, from Generation X and Y to the Millennials. Along with this diverse generational mix, it is predicted that 40 percent of the workforce may retire within the next 10 years. These statistics are simultaneously enlightening and disconcerting. Clearly, with this kind of massive shift on the horizon, institutions must have the ability to retain solid employees with the appropriate skill sets to do their jobs.

Brill Neumann representatives raised another concern related to predicted retirements. The pipeline for staff in top positions likely will not be the “lifers,” or those who choose to stay for the long haul, as it has been in the past. This assertion led the chief business officers at the roundtable to a discussion centered on the need to fill the faculty pipeline while shifting the human resources focus from operational practices to strategic and visionary ones.

A real-life example demonstrated the seriousness of the human capital situation. At Cornell University, performance evaluations indicated that the faculty members most likely to underperform were those in their late 40s and 50s, who had been hired at a time when demand for faculty was high. “Bubble faculty,” as they are sometimes called, were part of a mass-hiring period during which selectivity and high quality were often forsaken to fill positions.

Another similar scenario is brewing. But this time, Cornell has strategically begun to prefill the gap by bringing in tenured faculty rather than relying on junior faculty members whose performances have not been established. This approach proves to be expensive, and one challenge of bringing in a tenured faculty member is the increase in funding on the academic side at the expense of the administrative side. Although hiring tenured faculty comes across as a viable plan, it still generates concern over prefilling positions in anticipation of certain retirements. What happens when institutions staff up and faculty on the cusp of retiring wind up staying longer?

Other strategic components to focus on within the institution, advised Brill Neumann, are reframing jobs and encouraging staff to collaborate more. Aligning staff into the roles you want them to have is key. Being true to what your needs are and getting current staff to that point—or hiring additional staff for these new roles—are also critical.

Another element is that of rethinking the framework for Generation-X and -Y employees. Oftentimes, the focus is on the negative—these generations, for example, are seen as more high maintenance and not as loyal as previous generations. Instead, the focus should be shifted to younger workers’ strengths—their technological capabilities, the tendency to be more socially conscious, and the desire for more work/life balance.

Building the Case for Institutional Metrics

From a President’s Perspective

What should a chief business officer strive to be within the institution? According to John Roush, president of Centre College, Danville, Kentucky, that role is to be a contributor to the intellectual machine by providing ideas that are innovative and fresh. Roush also gave insight as to what should be most important to the chief business officer, or to any senior officer for that matter, with regard to leadership:

  1. Tell the truth. With no truth, there’s no trust. So, focus on creating a culture of honesty.
  2. Serve with a humble spirit. It is about attitude—not necessarily about thinking less of yourself but, rather, not thinking about yourself and your own interests during decision making.
  3. Communicate.
  4. Give authority. Delegation is imperative. A leader cannot do everything on his or her own.
  5. Cultivate informed intuition. Decisions cannot solely be dictated by data.
  6. Identify “pockets of greatness.”
  7. Dream big and hit a home run.

In some final words of wisdom, Roush said that you need to know who is in the pipeline. So, familiarize yourself with the characteristics of incoming students, particularly the Millennials, born 1980–2000. And remember, bad days happen to everyone.

The ability to evaluate your institution’s organizational effectiveness and viability rests in large part on access to reliable data and metrics. Only then can chief business officers gain the ability to analyze the institution’s performance and evaluate future trends. Kelly Jones and Barbara Butterfield from Segal/Sibson, a strategic human resources consulting firm, presented successful approaches, tools, and metric frameworks for evaluating organizational effectiveness.

“What are the presidential concerns that you are hearing?” Butterfield asked at the beginning of the session. Participants’ responses honed in on financial concerns: Will we have the cash? How are we positioned financially to support initiatives?

First, advised the presenters, outcomes-oriented questions are crucial to figuring out how to measure and collect the right data. For instance, ask questions around enrollment numbers: What is our enrollment target? What enrollment numbers can we sustain? What is our minimum? How have particular enrollments, such as those from out-of-state, changed?

Additionally, said Jones and Butterfield, it is important to start slow. Focus on metrics that leaders can get their arms around—items that they can manage and understand and that are important enough to impact and represent the entire university.

Butterfield suggested a stop to sending out reports just because it is what you have always done. She recommended that you wait and see what calls start coming as a result of the lapsed report. That will confirm which individuals review and use the report, so take advantage of their outreach. Ask pointed questions that get to a better understanding of how the current data is used. Also, advised Butterfield, determine what specific details are of interest to constituents. This will help segment desired information so that extracting the right data can begin and priorities can be determined. It is important, Butterfield said, to remember that “if everything rises to the top, then nothing will get done.”

As a core framework of metrics evolves, institution leaders must then explicitly state what the desired outcomes are, determine specific targets, and measure the organization based on these targets. When the target is missing, institutions collect data and know what their numbers are—but have nothing against which to measure. Jones and Butterfield also suggested developing an opportunity matrix for mapping specific metrics. The matrix illustrates quadrants that delineate the four distinct areas of institution operations: areas that are important and are doing well; areas that are doing well, yet don’t receive additional dollars because the efforts are not as important; areas that are not doing well and are not important; and, of utmost significance, areas that are important and are not doing well.

Going through such an exercise does two things. First, it communicates the priorities of the institution and its state of affairs in a quick and clear way. Second, the mapping exercise allows the identification of opportunities that would make the highest impact on overall effectiveness.

Managing Complex Change

How do you know if your institution is ready for change? Using a grid, Jones and Butterfield identified key components to the change process. The visual demonstrated how a missing component can lead you down a path of true change—or to one of false starts, confusion, or staying with the status quo.

Participants also learned from a case study in how to navigate through the institutional metrics dilemma and achieve positive change. Al Turgeon, executive assistant to the vice president for finance and enterprise systems at the University of Vermont, Burlington, presented details on how the institution recently implemented a balanced scorecard on its campus.

This process at UVM resulted in an extensive implementation plan and accompanying strategy map that focuses on one strategic destination: the support of the academic enterprise. The plan calls for accomplishing this in two ways—superior resource stewardship and quality service. Components of the effort include explicit focus on the following:

  • top financial objectives, such as, ensuring accountability and legal/regulatory compliance and practicing environmentally sustainable land, energy, and resource management;
  • top internal processes, such as, creating, preserving, and growing a reliable infrastructure and fostering a culture of diversity, inclusion, and openness; and
  • top values, such as, understanding the university’s customers and practicing its code of business integrity.

Getting to the “Go” Point

Michael Useem, a business professor at the Wharton School of the University of Pennsylvania, Philadelphia, focused on aspects of what he called “leadership moments”—times when one is pressed to make difficult decisions—and how to be effective at crucial junctures in an organization’s future. Useem, who wrote The Go Point: When It’s Time to Decide—Knowing What to Do and When to Do It (Crown Business, 2006), believes that institutions inappropriately punish failure and do not act quickly enough to enact true change in an organization.

Students who enroll in Useem’s courses gain an experience of a lifetime, in some cases, spending concentrated time in a real U.S. Marine Corps boot camp. As Useem put it, the drill instructor experience forces a person to make tough decisions under high stress while staying clear-minded. From his research as well as work conducted by David Freedman, author of Corps Business: The 30 Management Principles of the U.S. Marines (Collins, 2000), Useem has developed key guidelines that he recommends leaders follow and instill in others:

  1. Don’t wait for 100 percent consensus. Focus on getting to 70 percent.
  2. Explain what you want. Make it clear to your team and, then, get out of the way.
  3. Recognize that failure is an opportunity to learn. Tolerate mistakes, even encourage them, so long as they point to stronger performance the next time.
  4. Know that being indecisive is a fatal flaw worse than making a mediocre decision. At least a mediocre decision stands a chance.
  5. Distribute decision-making power to the group. Leaders who do not do this find themselves with few men left.

In essence, leaders need to know what the ultimate objective is and need to stay on this target. As Useem said, “You can’t say [the objective] too often.” Additionally, leaders must continually monitor themselves and their progress. They must realize what aspects of situations are optional and what aspects are essential, keeping the focus on the essential.

MARTA PEREZ DRAKE is director, constituent services for research institutions and community colleges, at NACUBO.