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A Midwest Success: NACUBO in Milwaukee

Business officers convened at the NACUBO 2004 Annual Meeting for inspiring educational sessions and energized exchanges.

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Business officers convened at the NACUBO 2004 Annual Meeting for inspiring educational sessions and energized exchanges.

Richard SpiesEager to learn and excited about interacting with colleagues from across the country, business officers got into the spirit of things at NACUBO’s annual meeting in Milwaukee in July. Keynote speaker Jim Collins kicked things off with advice about how to make an institution great. “It is wrong to say that the answer for the social sector is that it should run more like a business,” he asserted, since most businesses, in his opinion, are mediocre. The critical distinction, Collins pointed out, is between great and good. Collins’s concepts resonated throughout the four-day conference at a variety of educational programs. The event also included plenty of networking opportunities for the 1,263 participants, plus receptions at two of Milwaukee’s museums, a 5K fun run, a golf tournament, and—for the truly adventurous—a Harley ride.

The conference theme, “Igniting the Entrepreneurial Spirit,” carried through many presentations. “The entrepreneurial spirit is about more than just examining new revenue sources or cutting costs,” said Patricia Farris, NACUBO’s outgoing board chair. “It’s a new way of thinking and interacting. It’s about how we merge independence and interdependence to the benefit of our entire community.”

Indeed, Sunday’s Community Day provided programming and networking events designed specifically for each of the four main constituent groups represented by NACUBO’s membership: research universities, comprehensive and doctoral institutions, small institutions, and community colleges. This year’s meeting also included three live webcasts of educational sessions. On the expo floor, attendees spent time browsing the products and services offered by the 232 exhibiting companies.

Derek Bok’s keynote address on the final day of the meeting gave attendees food for thought as they strive to evaluate opportunities to bring in profit without hurting academic integrity. He advised institutions to use the “publicity test” when considering moneymaking ventures: “If you wouldn’t feel comfortable explaining the deal to the local newspaper, don’t do it.”

NACUBO’s annual meeting launches the association’s educational year. Following are highlights from Milwaukee that represent the wide range of programming that will be offered to members in the next 12 months.

New Business Officers Talk About Today, Think About Tomorrow

Three pre-conference workshops set the stage for a value-packed meeting. The New Business Officers program introduced those new to the chief business officer role to common issues and concerns that they will face. In discussions and activities led by facilitators Larry Goldstein, president of Campus Strategies, and Pat Sanaghan, president of The Sanaghan Group, participants identified topics that demand attention or are likely to surface in the next 10 years. Topping the list were retirement and related benefits issues; cultural and demographic shifts; technology changes; and globalization and its effect on resources. Attendees shared challenges with one another and evaluated their own leadership styles and how their demeanor changes in stressful situations.

Panelists led discussions about some of the areas with which business officers must be familiar: facilities, public policy, and resource allocation. John Palmucci, vice president for administration and finance and treasurer, Loyola College, Baltimore, shared insight about the role of the CFO based on his distinguished career in higher education. Other speakers addressed subjects such as board relationships, technology, and management of risk.

Spotlight on IT

At the Business of Information Technology pre-conference workshop, discussions ranged from data warehousing to virtual scenario planning to business intelligence. Making data-driven decisions required a culture change at the University of Alabama, said Priscilla Hancock, associate vice president for information technology. But combining the right technology with a culture change ultimately leads to better decisions, hence a stronger university.

Frostburg State University, Maryland, needed a process for organizing information for its 13 institutions. Robert Smith, director of the office of information services, recommended steps to help organize data: Identify the question and clearly define the goal for answering the question, and select the reporting methodologies. Questions to consider include:

  • What form will the data take?
  • Who is the audience?
  • What are the opportunities?
  • How will the information be used? Is it measurable and quantifiable?
  • Is the data already there, and if so, in what condition?

Next, Reagan Ramsower, acting chief financial officer and chief information officer, dean of libraries at Baylor University, Waco, Texas, described the business intelligence solution Baylor is implementing to meet its 2012 vision. Organizing and understanding the data that are collected and stored is helping Baylor manage its enrollment, retain students at risk, develop a world-class faculty, and achieve a $2 billion endowment.

Phil Goldstein, an ECAR Fellow, discussed the results of a recent survey of CIOs and CFOs on IT funding strategies and issues. He then facilitated an engaging group discussion of the implications of these survey findings, including:

  • criteria to consider when making an IT investment decision;
  • the attributes of an effective IT decision-making process;
  • the most promising strategies to contain IT costs;
  • strategies and issues surrounding charge-backs as a method to fund mature technology; and
  • effective strategies to fund technology renewal and replacement.

Real-Estate Gifts: Open With Caution

Not so fast in accepting that ranch or condo—first follow policies for gift evaluation, acquisition, and management. That was key guidance offered by Jeffrey Potter and David Chadwick during their session at the Innovative Real Estate Management pre-conference workshop cosponsored by the Association of University Real Estate Officials with NACUBO.

Business officers should take steps to ensure that they’re aware of all gifts being solicited by and offered to various campus personnel, advised Potter, director of real estate administration, Duke University, Durham, North Carolina, and Chadwick, manager of real estate, University of Colorado Real Estate Foundation, Boulder. Deans, for example, frequently have their own development committees; and athletic departments frequently solicit gifts. Everyone must understand that not every potential real-estate gift should be accepted. Whether offered land, homes, commercial property, or water rights, institutions must follow well-thought-out policies. Here are the areas in which Potter and Chadwick recommend that policies be established:

  • Minimum values required for being a gift candidate.
  • Types and location of real estate.
  • Level of due diligence required.
  • Conditions of gift and donor restrictions.
  • Use of gift to satisfy outstanding pledge obligations.
  • Funding of acquisition, holding, and disposition costs.
  • Holding versus selling, and level of risk willing to assume.
  • Assessment of additional gift fee for real estate.

While real estate has the potential to play a large role in the success of an institution’s fundraising, Potter and Chadwick summarized, colleges and universities must keep in mind the potentially significant costs and liabilities associated with real-estate gifts and consider new or revised policies to protect the institution.

Break Out and Become Exceptional, Urges Collins

If your institution disappeared tomorrow, would it leave an unfillable hole? That was the question that keynote speaker Jim Collins, author of Good to Great, posed to the audience as he challenged universities to achieve greatness. There are four key outputs that define a great institution: results, impact, esteem, and endurance. “Everyone has their set of irrational constraints,” he pointed out. “In every sector, some break out and become exceptional facing those same constraints.”

Jim CollinsSo what are the principles that lead those institutions to greatness?

  • Know that building a great organization is a cumulative process. It’s never a single event or moment that makes the difference, Collins said.
  • Think first about who and then about what. “Getting the right people on the bus”—in other words, hiring the right people—is critical, he explained. In higher education, it might not always be possible to decide who gets off the bus, but you can decide who gets on.
  • Attain “Level 5” leadership. Collins used Katherine Graham, the former executive of The Washington Post, as an example of a level 5 leader—someone who displays humility; ambition for the cause and the work, rather than ambition for his/herself; and the will to make great things happen. Every company that Collins found that transformed itself from good to great had this type of leader, and more than 90 percent came from deep inside their companies. The revolving door of presidents on campuses makes this more difficult for higher education. Collins asked, “Have we systematically created a beast that de-emphasizes level 5?”

Collins also expanded on his hedgehog concept—the idea that if it doesn’t fit, you shouldn’t do it. He encouraged leaders to preserve the core and stimulate progress. Knowing what should never change (e.g., core values) is key. Practices and structures, on the other hand (e.g., tenure), can change. “You need to define with rigorous clarity what your core values are,” he said. “Be open to change what you do and how you do it.”

Talking Politics

Larry SabatoIn another keynote address, the University of Virginia’s Larry Sabato, the Robert Kent Gooch professor of politics, pulled out his crystal ball to make some predictions about the upcoming congressional and presidential elections. Most Americans have already made up their minds as to whether they’ll vote for George Bush or John Kerry, he said, so the candidates will be reaching out to the 10 percent who are undecided between now and November. The war in Iraq and fears about terrorism will influence voters this year, which may overshadow the economy as a deciding factor.

Sabato outlined what he sees as the pluses and minuses for both presidential contenders—but stopped short of predicting the winner. He believes we’ll see a higher voter turnout than usual. After revealing his thoughts on several state races and probable electoral vote designations, Sabato offered this caveat: “July wisdom rarely applies in November.”

Strengthening Processes

Paula Gill, director of student financial services at Belmont University, Nashville, led “Student Financial Services: Hoshin Planning for Improvement,” outlining steps that Belmont took to streamline its processes. The first initiative was to provide a one-stop shop for student services. Everyone was cross-trained and one person was pulled from each office to take care of front-line processes. Financial aid and student accounts were combined under one umbrella. The university adopted “hoshin” planning, a system that points an organization in the right direction. Strategies included:

  • aligning organizational goals with financial processes;
  • choosing and focusing on the vital few priorities;
  • involving everyone in assessing and closing the gaps;
  • specifying means and measures;
  • developing an understandable plan that links cause and effect; and
  • continuously reviewing and revising the plan.

The results from pursuing these strategies: the lowest accounts receivable balance in 10 years; lower student financial services employee turnover; decreased student fears of the financial aid process; and more time for counselors to assist students with debt management. This translated to increased enrollment, since the aid package and date by which students receive financial information influences their choice. The student financial services office at Belmont is now centralized, creating greater convenience for students and parents.

And speaking of one-stop shops... Many institutions have consolidated financial services for external constituents. The University of Minnesota has focused on the internal customer. The institution’s “Financial One Stop (FOS)” presents financial information online from a customer perspective, with the steps outlined in a flowchart and text format. Whether the user prefers pictures or words, the site provides key information needed to prepare an expense report, request a new vendor, or transfer a piece of equipment. Pat Spellacy, director of policy and process development, and Mike Volna, associate vice president, finance, and controller, discussed the tool’s development, implementation, and value.

FOS offers a view of information from a user, process perspective. A process is defined as a major activity completed to achieve specific results. Each process has multiple tasks, which in turn may have multiple steps. The structure of the site was built on the development of pen and paper flowcharts for each process. Software enabled those original flowcharts to appear on the site in a consistent manner. A text version of the flowchart was created to satisfy both visual and verbal learning preferences. Links to applications, forms, policies, training efforts, and other resources ensure that “one stop” provides the end user with the means to complete the task.

FOS reduces the time it takes to complete financial tasks; allows consistent presentation of information; supports Sarbanes-Oxley compliance with controls built into the process; and supports process improvement. A bonus byproduct was process simplification. For example, the purchase and pay process began as 39 flowcharts and 451 steps and finished as 30 flowcharts and 312 steps.

The university ran FOS through usability testing to determine the site’s user friendliness. Usability testing involves assigning end users with no experience with the site a set of tasks and unobtrusively watching the steps they go through to complete them. Of the 30 tasks assigned, 29 were completed with the correct answer. Benefits of the testing are an increase in customer satisfaction, reduced costs, a decreased number of help-desk calls, and the creation of objective content.

Focus on Facilities

At “Integrated Master Planning,” representatives from Tyler Junior College, Texas, and 3D/International discussed the benefits of having a long-range vision. “Planning offers the ability to integrate,” said Lee Burch of 3D/I. Campus planning begins with asking questions:

  • What do we want to do?
  • What facilities do we have?
  • What condition are these facilities in?
  • Are they adequate to fulfill the mission?
  • What facilities do we need?
  • What is the framework for development?

Tyler Junior College addressed these questions and identified its deficiencies, explained Fred Carson, director of facilities. Master planning helped his staff estimate the lifespan of facilities and predict what problems might arise. With 10,000 students and a $4.5 million operating budget, the institution was able to replace more than 20 roofs in five years and upgrade much of its HVAC equipment.

Burch said there are seven steps that are essential to master planning.

  • Define educational needs.
  • Assess facility conditions.
  • Establish current and future capacities.
  • Develop concepts.
  • Plan for change.
  • Estimate costs.
  • Document the plan.

Getting input from the community and campus as you move forward with construction and renovation is also important to build consensus. Master planning allows you to have layers to your plan, Carson pointed out. Burch indicated that a master plan takes at least six months to develop, probably longer if your institution doesn’t have existing floor plans and documentation.

Tyler Junior College’s plan took into account future land use and the layout of the campus and community. Other things to consider, Burch noted, are how people move around campus, how your borders are defined, and how you will handle security. “Part of the college experience is about having space to interact with others,” Burch added. “You need to leave those green spaces” as you plan for additional buildings. Ultimately, appearance is one of the main things that attracts students and parents to a campus, so maintaining your physical plant is a smart investment.

Entrepreneurship in the Air

In “The Role of the Business Officer in the Academic Enterprise,” John Palmucci, vice president for administration and finance and treasurer, Loyola College, Baltimore, articulated the “key to entrepreneurship: an atmosphere where people have an opportunity to be creative and know their idea will be carefully analyzed and evaluated. The leadership has to create the atmosphere that allows people to bring forth ideas.”

Palmucci’s belief is in sync with the thinking of Jim Collins, whose concepts were referred to throughout this session. James T. McGill, senior vice president, finance and administration, Johns Hopkins University, Baltimore, acknowledged the relevance of Collins’s “good to great” call to institutions. Johns Hopkins answered that call by enabling entrepreneurship to permeate the institution. “We’re very decentralized,” McGill pointed out. “It’s the role of the deans to allocate resources, so they are expected to be financially prudent.”

To illustrate the importance of academic/administrative partnership in effective entrepreneurship, McGill outlined highlights of the Hopkins annual planning process:

  • Chief academic and administrative offices work closely together.
  • The process starts with a few top-down parameters, such as tuition, salary, and overhead recovery rates.
  • Deans develop preliminary plans.
  • Central academic and financial officers review plans and budgets, talking with deans about what’s acceptable.

Good ReadsThis process works well, McGill said, because of the close cooperation fostered among chief academic and financial officers. Throughout the year, they regularly discuss any off-budget performance. They talk about issues until consensus is achieved. Overall, there’s a strong mutual appreciation of roles.

Keith Finan, associate provost and director of grants administration, represented Williams College, Williams-town, Massachusetts, in the discussion of entrepreneurship. When Williams—a 2,000-student institution—was founded about 200 years ago, the faculty handled administrative functions along with teaching classes. Today, faculty have few administrative responsibilities, “but still want to be in control,” Finan said. He described Williams as “very faculty-oriented,” with four committees led by faculty and with administration staff playing lesser roles.

Overall, faculty have “a lot of say” on what happens at the college, Finan continued, “and the most entrepreneurial people on our campus are faculty. They come up with lots of ideas.” He pointed out the dilemma with this at Williams that is likely shared by other colleges: “maintaining the atmosphere that encourages people to come forward with ideas while the institution does not have the resources to fund many of them.”

The Great Debate: Health Care

It’s one of the most pressing staff issues facing campuses today: controlling health care costs. Nick Paulish with Deloitte Consulting shared strategies for containing these costs, which have doubled in the past 30 years. Rising costs suggest that managed care isn’t working, he said. HMOs, which are supposed to be the most efficient plans, had the highest cost increases in 2003. An aging workforce is a major issue affecting health care costs.

Paulish believes consumer-driven health care is going to become more popular. This requires a more educated consumer, but in the long run it reduces demand and expenses. Consumer-driven plans help people understand what level of service they really need, he explained. While these types of plans are relatively new, Paulish predicted that most big insurers will have them available soon if they don’t offer them already.

Tom Schmitt, associate vice president for human resources, California Institute of Technology, Pasadena, led a session on “Do-It-Yourself Health Care Reform.” He gave an overview of Caltech’s health care plan and some recently implemented changes, including segregating retiree health care costs, closing a retiree indemnity plan, and introducing a PPO prescription drug benefit.

Caltech established a committee in 2003 to evaluate various health care options. The committee considered plan design changes, pricing policy changes, consumer-driven health care, and changing vendors. Ultimately the committee decided to go to the marketplace and solicited proposals from 12 carriers. The 2004 plan features stayed the same for the most part, with moderate price increases. About 5,900 employees in Blue Cross and CIGNA plans shifted to Health Net. Caltech introduced a new, lower cost coverage tier for employees with children. Retirees received new vision coverage.

Schmitt said good communication was essential to a smooth transition. Newsletters, employee and supervisor meetings, a customized vendor Web site, and Health Net’s on-site presence all contributed to a satisfactory process.

Tough Calls With Technology Transfer

“We should be getting out to the public what we’re doing in our labs, and in today’s society the only way to fulfill this duty to the public is through commercialization.” With that, Ted Poehler, vice provost for research, Johns Hopkins University, Baltimore, began his presentation of the tough calls his institution makes with technology transfer and the procedures that Johns Hopkins follows in its support of entrepreneurship.

Poehler pointed out that Johns Hopkins has many reasons beyond public service for its pursuit of entrepreneurial activities. The institution aims to satisfy faculty interest in transferring technology and, by doing so, keep key faculty on board. Another motivator is the desire to generate income to support research and education. And since universities are continually asked these days by government entities to assist with regional economic development goals, technology transfer helps Johns Hopkins oblige.

Of course “there’s no technology transfer in the world that doesn’t have some critics,” Poehler acknowledged, so he tries to better educate university leaders, faculty, students, staff, and companies about obligations and responsibilities related to technology transfer. Johns Hopkins has established comprehensive policies in this area and review and reporting requirements to manage or eliminate financial interests that constitute unacceptable conflicts.

Poehler noted several conflicts of interest about which business officers should be aware. For example, conflicts may arise from an inventor’s multiple potential roles and relationships: university researcher, royalty recipient, company consultant, and company board member. Faculty cannot represent the company and the university at the same time. Financial conflicts have the potential to increase bias in research, which in the case of human subjects research puts people at risk.

Referring to conflicts of commitment, Poehler said that faculty must recognize that their primary responsibility is to the university and that outside activities must be chosen with discrimination. Outside activities involving consulting, research, or teaching must be reported.

A proper balance of all interests related to technology transfer is important to achieve, Poehler said, and this requires great care and attention. Policies must be established; reporting requirements must be stringent; and, overall, participants in the entrepreneurial process must not allow their interest in pursuing technology transfer to overtake their responsibility for controls.

When Faculty Pursue a Start-Up

A panel of experts from the University of Wisconsin-Madison discussed how the Wisconsin Alumni Research Foundation has established a successful model for identifying and supporting faculty innovation. Since 1993, WARF has taken equity in 31 faculty start-up companies.

WARF requires that faculty who express interest in a start-up enter into a six-month “stand still” agreement. This period allows the faculty member to envision objectives and prepare a business plan. The proposed plan is submitted to the Equity Committee of the WARF Board of Trustees for review of the business plan/financing; proposed licensing terms; and licensing alternatives and exit strategies.

The Equity Committee may then recommend that the WARF Board license the technology. Board approval of the start-up provides the following:

  • certainty of title;
  • retention of access to the technology if it was the product of federally sponsored research, rather than reversion of access to the federal government;
  • the expense of obtaining U.S. patents (WARF fronts the money, which can range from $10,000-$20,000. If the start-up is successful, the company reimburses WARF; if the company fails, the money is not owed to WARF); and
  • enforcement and defense of patents.

WARF does not provide accounting or management services for the start-up companies it supports but refers faculty to experts. Panelists agreed that the critical elements are good management, good science, practical application of the science, lots of money, and, as with any new business venture, a healthy dose of luck. They noted that the University of Wisconsin seeks to encourage the best minds and innovators to remain on the faculty by supporting their efforts to bring new technologies to the marketplace.

Play Ball?

“The revolution is on. Somehow, some way, athletics has to be changed in this country,” proclaimed David Williams, vice chancellor and general counsel of Vanderbilt University, Nash-ville, at a session that explored the value of intercollegiate athletics. Williams’ passionate views were complemented by University of Cincinnati (UC) Director of Athletics Robert Goin’s steadfast philosophy and dedication to treating student athletes more like students than a segregated population. These university professionals each have a unique approach to achieving the highest standards of integrity, athletic and academic achievement, and prudent management of limited resources.

Vanderbilt has undertaken swift measures to counteract the runaway finances; the perceptions that come with lucrative football and basketball coach contracts; lack of integration of athletes into student life; and the ineffective reporting structure that prevented athletics from receiving the administrative guidance consistent with other university departments. The director of athletics doesn’t report directly to the president anymore. Vanderbilt eliminated athletic-specific compliance, marketing, academic support, and development offices, so athletics now shares these functions with the entire university. Coaches are held accountable for their budgets, and university student-life professionals have been assigned to oversee up to three athletics programs each. For the first time, student athletes are sharing dormitories with the rest of the student body.

More changes lie ahead. Williams would like to discontinue the practice of keeping more than 300 athletes in summer session. Although coaches like to have them on campus so that they keep training, the costs are significant.

At UC, several provisions integrate the administrative functions of the athletics department with those of the university. For instance, although the director of athletics reports to the president, the line of communication is facilitated by frequent meetings between the deputy director of athletics, the associate athletic director, and the vice president/director of budget and planning. Also, the senior associate athletic director for academics, compliance, and student services participates on a universitywide commission that is drawing up a new academic master plan for UC.

The department’s theme is, “There are no fences around our athletic department.” Goin is committed to directing a program that includes all constituencies of the university, provides value to student athletes, and contributes to the quality of life on campus.

Another session, “The Empirical Effects of Collegiate Athletics: An Interim Report,” covered the most extensive research ever conducted on intercollegiate athletics, in which five popular hypotheses were confirmed and four remained unproven. The goal of the study, commissioned by the Division I Board of Directors, was to provide empirical evidence to inform campus decision making and the broader debate about collegiate athletics. Data sources included existing academic literature, NCAA/EADA merged data, and a survey of 17 CFOs. Some highlights:

  • True: Operating athletic expenditures are a relatively small share of overall academic spending. At roughly 3.5 percent of the budget, athletic spending is not big enough to drive huge changes in institutional policy.
  • True: There is increased inequality in football and basketball spending compared to other athletic programs.
  • True: Increased operating expenditures on football or basketball produce no medium-term increase or decrease in operating net revenue. For every $1 increase in football spending, football revenue increases by 0.71–$1.18.
  • Not proven: Increased operating expenditures on sports affect measurable academic quality in the medium term. There is evidence that increased spending on athletics results in increased enrollment, but this has no effect on academic quality.
  • Not proven: Increased spending on sports affects other measurable indicators, including alumni giving. Donors remain fairly constant, and perhaps the only increase in giving comes from alumni who were on a successful sports team.

The NCAA and NACUBO have formed a task force to make improvements to the study by integrating definitions, identifying missing data elements, and discovering inconsistencies. Eventually, the study will be expanded beyond Division I institutions.

Truth and Transparency

The Honorable David M. Walker, comptroller general of the United States, talked to a packed crowd about transparency in financial reporting. As head of the Government Accountability Office, Walker’s mission is to make the government’s financial statements more meaningful and transparent. He discussed the true financial condition and fiscal outlook of the federal government, taking participants back four decades to illustrate that discretionary spending is decreasing, deficits are increasing, and the status quo is no longer an option. Looking ahead, balancing the budget by 2040 would require a federal spending cut of at least 60 percent or unprecedented tax increases. Consequently, Walker believes the government must start making tough decisions now to change the current course.

Walker’s vision is rooted in three processes:

  • Analyze and implement new accounting and reporting approaches. The government should apply “accountability nuggets” from the Sarbanes-Oxley Act of 2002. Current accounting standards represent what is minimally required for compliance. The government must embrace new standards that result from the reform of the accounting profession.
  • Modify the budget process. The revised process should include control mechanisms based on realistic growth and spending parameters. Such fiscal honesty will help rebuild the public’s trust in government.
  • Develop key national indicators that measure position and progress over time. The government and all organizations should have a plan that addresses desired results. Key indicators should be connected to outcomes and measure position and progress. Performance indicators must demonstrate that results of operations make mission-critical differences.

Walker noted that three personal attributes are necessary for the likely challenging times ahead: leadership, integrity, and innovation. Those with responsibility must know who they serve, recognize that people are true resources, embrace collaboration, do the right thing, be creative, and realize the importance of truth and transparency.

The State Systems Scoop

What’s keeping state system administrators awake at night? At their annual caucus, administrators discussed an array of tough issues they face. Shared concerns include how to allocate resources strategically among campuses, how to implement effective incentive compensation programs, how to respond to state governments that are pushing universities to participate in economic development efforts, and more.

Perhaps the most fundamental question that’s challenging administrators is: What’s the role of the system office? As one caucus participant put it, “We’re the home office that everyone loves to hate.”

The group reminded themselves of things that their offices do well, many pertaining to using the power of numbers to pursue great purchasing deals with technology, employee relocation, and health care. Despite these successes, administrators still ask themselves: What should we stop doing? In what areas are we too bureaucratic? How can we make sure that campuses feel helped by us rather than weakened?

As state system administrators wrestle with issues, business officers can rest assured that the people in the “home office” are immersed in an exploration of ways to improve the systems.

’Tis a Gift

A session about planned giving began with the question, “Would you take a zebra?” to illustrate the many considerations and unpredictable elements involved with gifts. Consultant Forrest Brostrom reviewed the various gift instruments, including the importance of considering the “time-value” of money. How can the business officer control the operation without destroying the program? Emphasize to the development staff that you do not want to say no to creative arrangements, provided that they benefit the institution. Encourage them to seek your advice while the gift is being negotiated, not after.

As with any stewardship responsibility, institutional liability plays a role. As owner of the asset, liability may be mitigated by performing due diligence prior to acceptance, with a focus on chain of title and environmental issues. As trustee, the institution must consider its fiduciary duty.

How much a deal is worth can guide how much money you put into it. Brostrom offered an admonition relative to administrative obligations, urging caution in offering extra services to the donor. He pointed out ways to evaluate the present value of a gift compared to the present value of its costs, as well as the long-term value of a gift to institutional growth relative to its non-cash benefits to the institution.

Charitable remainder trusts offer the most creative and unusual situations, according to Brostrom. Determining who the trustee is—whether it’s the higher education institution or an outside vendor such as a bank or trust company—is an issue of major import. It’s also necessary to determine whether the documents are adequate for the intended purposes. For example, does the document create a charitable trust? Does the document meet tax code standards?

Other areas include determining who the beneficiaries are and who the remainderman is (e.g., is your institution named, is it the only one named, is your designation irrevocable?). Considerations surrounding the terms of the trust include unusual payouts or length, written versus unwritten expectations, and types of trusts.

It’s best to consider, too, what assets are funding the trust. Brostrom addressed illiquid, community property, high maintenance, and difficult-to-value assets. Will funding assets be managed in house or by a vendor? Who is getting paid in the deal—what are the management fees? If buying the gift, what has the donor been promised?

When evaluating a planned giving program, Brostrom indicated that program comparisons can be made by benchmarking your institution’s program in terms of budget and staffing, production, and level of program maturity. In setting program goals, business officers should target the process rather than results, be realistic about potential, and think long term. Conduct an audit of your planned giving program to determine weaknesses and strengths.

Brostrom covered procedural issues, including acceptance, liquidation, investment, and tax returns and reporting. He advocated developing acceptance procedures that are simplified, streamlined, and to the extent possible, accelerated. Try to be timely in responding to gift proposals, he added. When you must decline the proposal, suggest acceptable alternative terms or assets.

Leadership That’s All About You

Does your institution’s culture suffer from any of these characteristics?

  • Faculty/staff allegiance to a local unit rather than the institution.
  • Weak sense of individual accountability.
  • Low risk-taking behavior.
  • Individual achievement valued over teamwork.
  • Distrust between central administration and academic units.
  • Fragmented and inconsistent leadership.

If so, you might want to follow a leader in leadership development: Cornell University, Ithaca, New York. To tackle the cultural issues that were hampering effectiveness on campus and to begin developing leaders for the future, Cornell launched a leadership development program for faculty and staff. The program, which combines theory with action learning projects, has resulted in personal growth for the participants as well as significant contributions to the university. On hand at the annual meeting to discuss the program and a recent study of its impact were two of the program’s leaders, Clint Sidle and Chet Warzynski.

In describing the program’s development, Sidle noted, “Everyone has a perspective on leadership; the most important thing to uncover is: What does leadership mean to you?” Once a program facilitator has that input from participants, an effective model of leadership can be built and used as a basis for the training. So the program participants actually build the model, based on their impressions of what constitute the values and attributes of a leader, what skills are demonstrated by a leader, what actions are taken by a leader, and examples of leadership at its best.

In surveying the leadership development participants, Cornell received constructive feedback about the program’s value. Participants cited strengthened self-discovery and improved skills in team building, communication, conflict management, cross-departmental networking, and more. As far as program weaknesses, participants said it should incorporate additional follow-up activities, incorporate more real-life scenarios to facilitate knowledge transfer, and place more emphasis on leading change. Another key comment was that participants needed stronger support from senior leadership to apply the knowledge back on the job.

Cornell is using the survey feedback to enhance leadership development. Components of this effort—from which any institution interested in establishing a leadership development program can learn—will be to focus greater attention on training in the areas of strategic thinking, budget and project management, organizational development, change management, conflict management, and communication. In addition, refresher courses and reunions will be planned.

Proceed Carefully With Commercialization

Derek BokEntrepreneurial activities on campus can yield benefits, but such activities can also pose dangers, warned former Harvard President Derek Bok in the conference’s final keynote presentation. Athletics is the most obvious and the oldest example of commercialization, he said, with admissions standards being compromised and curricula being watered down to allow athletes to attend prestigious universities with winning sports teams. “The leaders of our universities cannot be depended on to resist the temptations of making money,” Bok noted. He cautioned attendees not to let the same thing happen in the area of research. “Commercialization isn’t all bad, so you have to make delicate decisions,” he explained. Sometimes the risks aren’t tangible or immediate, making it more difficult to turn down profitable opportunities.

Bok addressed three areas in which he sees potential dangers lurking for institutions:

  • distance learning—technology has changed the education landscape, and many universities are looking at it as a profit center;
  • research—people conducting research who have financial ties to certain companies can harm a university’s reputation; and
  • executive education—decisions need to be made around whether it’s more important to educate top executives or students in the “normal” classroom setting.

He also outlined several ideas he considers myths:

  • Aggressive profit-seeking will pay big dividends. “Athletics make money for very few institutions,” he pointed out. And about 80 percent of patents don’t make enough money to be worthwhile.
  • “We’re just trying to make money to keep afloat.” If an institution does make big profits, Bok said, it likely will lose state funding or lose its profits to competition.
  • “We need to aggregate more authority in the administration and less in the faculty.” A lot of costly mistakes can be made by central administration, he warned.

Bok encouraged colleges and universities to draft general rules about evaluating entrepreneurial opportunities and to involve faculty in decisions. Agreements among institutions are an effective way to maintain integrity, he added. Above all, it’s critical that higher education leaders work to preserve the public trust.