Growing enrollments, shrinking budgets, reduced staffing, and increased workload. If this environment has you coming and going, here's how you can set manageable priorities.
By Howard Teibel
"Even if my organization ever returned to the same number of full-time equivalent staff, we'd look very different because we're doing different things now." This was Sandy Hicks's comment about economy-driven changes at the University of Colorado for the article "Steady Aim," in Business Officer's April 2010 issue. As the university's assistant vice president and chief procurement officer, Hicks took a preemptive approach to dealing with recession-related fallout—focusing on efficiencies and making strategic decisions rather than conducting business as usual.
To deal with sluggish economic times and ongoing budget challenges, colleges and universities have either waited out the financial crisis, seized opportunities for change, or navigated somewhere between the two. No matter what their earlier actions, this is as good a time as any to jump in and put steps in place to strengthen the way work gets done.
That said, institutions can no longer cut their way to efficiency or mandate effectiveness. Throwing more staff at a problem to improve efficiency used to be the quick solution. In today's market, it's all about getting the work done with the fewest hands in the mix. As for achieving effectiveness, many organizations still maintain a top-down structure with attempts at clear reporting lines. But, leaders can no longer simply demand that work gets done; it takes influence and collaboration. Doing most business today involves workflow administered by IT, involvement of academic departments, and input from human resources management. With all these groups competing when it comes to setting institutional priorities, the question on everyone's mind is: "How can we get our work done and the work we're responsible for that involves other areas?"
The chief business officer plays a critical role in determining the priorities of the institution. Think of the work as falling into three buckets:
- Work that absolutely needs to get done because it contributes directly to strengthening the institution.
- Projects that would be nice to do but may not have the greatest impact.
- Work that is no longer realistic for financial leaders and divisions to focus on.
Effective leaders from several colleges and universities have found ways to make these distinctions, genuinely motivate and engage the broader workforce, and influence the changes demanded by budget realities. They also heed Charles Darwin's observation that survival is based less on strength and intelligence than on the ability to adapt to changing environments. Adaptability is the key to getting through tough times. Following are some examples of effective institution and human resources management.
A Trio of Transformative Tools
There's no cookie-cutter approach to creating stability in an unstable environment. Whether it's assessing a broad institutional review, reallocating resources, dealing with shrinking budgets, or more effectively implementing local responsibility, the elements of positive organizational change require varying combinations of these three actions:
- Engaging the entire workforce to assess administrative and academic needs.
- Strengthening ways that work gets done with an already-reduced workforce and budget.
- Redefining the role of the chief business officer as "integrator."
Collaborative Rules of Engagement
Without the broad involvement of leaders at all levels in the institution, achieving financial targets while generating positive engagement would have been very difficult.
In the midst of the financial crisis, Brown University, Providence, Rhode Island, found itself facing a 25 percent reduction in the institution's endowment. The university's Web resource, Brown and the Economy, reports that in FY09 the endowment supported more than 18 percent of the university's annual operating budget. During that year, the value of the endowment declined by $740 million, or more than 25 percent. The drop was primarily due to the economic downturn's impact on the financial markets.
Senior leaders quickly committed themselves to taking action that would bridge this financial gap. The president, executive vice president, and a core group of senior leaders strategized to implement a broad organizational review focused on evaluating administrative functions and identifying revenue opportunities from auxiliaries. Brown took this initiative when many institutions were still waiting to see where things would bottom out.
As a result, 12 organizational review teams comprising 150 influential members of the Brown community (administrators, staff, and faculty) came together to assess some critical questions:
- How can we become a stronger institution?
- What can we be doing better?
- What should we stop doing?
From day one, leaders tackled the project by focusing on three core principles: (1) defining a clear financial mandate, (2) demonstrating active leadership involvement from the top, and (3) ensuring that the best people participated in this four-month collaborative process.
Put a number on it. The organizational change would occur in three phases designed to mitigate the effects of the economic downturn and preserve and sustain the progress made in areas of teaching, research, student support, and facilities. Phase I began in FY09 and FY10, as Brown revised its growth plans to close a $35 million projected budget shortfall. During Phase II, the university's leadership focused on realigning administrative functions and maximizing income from auxiliaries through a deliberate organizational review process, with the goal of eliminating an additional $30 million projected deficit in FY11.
"Setting financial targets was the initial key to making this real," says Elizabeth Huidekoper, Brown's executive vice president and chief financial officer. "Once we put a stake in the ground, with targets for each of the 12 teams that represented a total of $14 million in revenue and cost savings, people had a clear goal to work toward." Ultimately, success meant demonstrated savings from administrative process changes, staff reallocation and reductions, and new revenue sources, which would be the main focus of Phase III.
Teibel Inc. worked with Brown in developing a systematic process to assist and guide the 12 project teams through the organizational review exercise. The resulting recommendations for change spanned areas such as centralizing services, changing policies and procedures, eliminating or modifying programs or services, increasing net revenue, outsourcing certain functions, and considering shared-services options. No administrative stone was left unturned.
As a result of the detailed organizational review, Brown was able to realize a reduction in budgeted positions from 3,100 to 2,875, creation of administrative service centers, addition of one-stop shopping for events management, and enhancement of Web services, to name just a few of the significant changes. In terms of personnel, a total of 75 vacant positions were eliminated, making room for the creation of 50 new jobs with responsibilities and functions to support the institution's growth plans.
Don't leave anyone out. Without the broad involvement of leaders at all levels in the institution, achieving these financial targets while generating positive engagement across campus would have been very difficult. From the outset, the message to the project teams was to focus on recommendations that were not "business as usual." This charge, along with the recognition by the 12 teams that the president would be the final arbiter of the recommendations, created an atmosphere of experimentation and risk taking. In all, the teams offered up 175 revenue and cost-savings ideas during a three-month period.
In the end, faculty, deans, directors, and administrators all came together on cross-functional teams to create new structures and processes for areas such as human resources, finance, IT, graphics and Web use, events management, advancement, the library, continuing education, residential life, and facilities. This was achieved not by using surface cost-cutting measures but by taking a deep dive into improved processes and better resource allocation.
"The project exceeded our expectations in a number of ways," says Huidekoper, "not only from a fiscal standpoint, but also as a way to genuinely engage the campus community in positive change. Everyone who was part of the process is now thinking and managing more strategically."
Processes to Empower Slim Budget and Staff
The community colleges in Arizona have suffered state funding cutbacks for several years. According to Gregory Rogers, vice president of administrative services and planning, Glendale Community College, the fact that the area's community colleges are primarily funded through property taxes and tuition revenue generally allows them to fare better than the state's public universities. However, combine the decrease in property tax revenues with increasing enrollments and subsequent student needs, and you have significant stresses on staff. Glendale, one of the largest colleges in the Maricopa Community College System, is trying to address these issues with several adjustments.
Shoring up tumbling tax revenue. While 60 to 70 percent of Glendale's funding comes from property taxes, the college has seen its funding from the state decline from 10 percent in FY06 and FY07 to approximately 1 percent for FY12. Institution leaders expect that number soon will drop to zero. The impact from state cuts is felt immediately, but reduction in property tax revenues has more of an echo effect. It is felt approximately two years after a drop in property values and lasts for the duration of an economic downturn.
Glendale anticipates that this echo will hit its FY13 budget. In an attempt to lessen the budget impact, college leaders have requested a larger piece of the property tax pie for the community colleges. They are statutorily allowed an increase of 2 percent each year, which is cumulative. Having not requested anything for the past several years, Maricopa's leaders requested a 3 percent increase, which was approved in June.
Staffing for out-of-sight enrollment. Meanwhile, Glendale's enrollment spiked in 2009 with a 14 percent increase, and growth in ensuing years (8 percent in 2010, 2 percent in 2011) has essentially brought enrollment to capacity on the Glendale campus. (Students have other options in the system as a whole and can take some classes online.)
This increased enrollment, says Rogers, has had a huge impact on the staff in the front-line positions, particularly on positions directly related to student services. Consequently, the college has adopted the following human resources practices:
- Carefully evaluate staffing decisions, with executive leadership looking at all open positions on campus to see which ones can be repurposed to make for more efficient processes or whether current staff can absorb the additional role in upgraded positions.
- Where possible, reallocate positions to support those areas that directly influence student services. The evolution of Rogers's own role is an example of reevaluation and reallocation. Hired as the vice president of information technology, he then stepped in to fill his current position on an interim basis. Eventually, the two jobs were combined and Rogers now fills the dual position permanently. The dollar savings from combining the positions was passed on to fund adjunct faculty and other front-line positions needed to adequately service the influx of students.
Analyze processes to determine efficiencies that might allow the work to be done by fewer people. For example, in 2008–09, Glendale eliminated 5 IT positions out of 52, not including those in the media services department. The reduced staff was able to operate efficiently as a result of a number of actions including: accurately and honestly evaluating employees; co-locating help desk staff to an area where they could also serve students in person; extending the life of existing equipment, thus reducing the number of computer lab refreshes required; taking vacancies and combining the related duties before redefining and recruiting for open positions; and implementing technology infrastructure that helped avoid the need to fix the same, controllable problems repeatedly. Rogers also credits increased efficiency to asking for and getting more from the existing staff. Part of the staffing strategy was to hire temporary employees to assist during peak times. When the economy improves and the number of students decreases, the college won't have to lay off permanent employees.
Develop "stop-doing" and "start-doing-differently" lists. The college simply had to cease certain activities (see sidebar, "Building Your 'Stop-Doing' List"). One painful decision was the elimination of an exceptional on-campus child-care program staffed by Glendale employees and available to staff as well as students. The college partnered with Catholic Charities USA to create a Head Start program in the center's former location. Fortunately, other department managers were able to absorb the program's employees into other positions on campus. The Head Start program does provide care to children of students but the option for staff is gone.
Additionally, Glendale turned the operation of its outdoor Olympic-size swimming pool over to a local nonprofit. Although it is the only pool of its type in the area, the college determined it could no longer justify the expense of running it. Through this arrangement, Glendale was able to retain the asset while passing on the operational costs to the nonprofit organization.
An example from Glendale's "start-doing-differently" list is an arrangement made with local cell phone providers. The IT director negotiated the building of a cell tower on campus; service providers pay revenue to the college for its use. An external company built and donated the tower to Glendale and will use it rent-free for the first 18 months. After that, the company will make revenue payments to the college as well, with combined revenues of all participating companies projected at approximately $100,000 annually.
Another "business unusual" decision is Glendale's commitment to reevaluate its training and hiring processes. After staff received no cost-of-living allowances for the past three years, leaders recognized the importance of finding other ways to invest in people. The performance appraisal process has shifted from a looking-back to a looking-forward perspective, with per-formance goals linked to strategic goals.
For example, if an institutional goal is to improve graduation rates, what specifically can administrative leaders and staff do to help the college achieve that goal? These objectives are woven into the goals of the employees responsible for making this happen.
Glendale also recognized the need to develop cross-functional skills, and rolled out foundational training for staff using subject matter experts. In addition, Glendale has taken advantage of two initiatives available to all community colleges in the Maricopa system. The first focuses on talent management through a one-year program for managers and administrators to identify what their professional "next level" looks like.
The other initiative, Creative Pathways, offers eligible employees real-world learning experiences focused on career options and professional development. Rogers's background in human resources informs his commitment to ongoing education. He says, "We have to make every effort to strengthen the skills of our existing staff, because people are our most important resource."
External involvement. Rogers is keenly aware of the important role that Glendale serves in helping develop the community and the region. In response, the college has formed a partnership with the City of Glendale, the Small Business Development Center, and other educational institutions to look at providing the region with business acceleration and outreach centers. Rogers says he can't emphasize enough the fact that "a strong community leads to a strong community college, and vice versa."
Rogers notes that stressful economic times are often cyclical: "Institutions can take the lessons learned in this downturn and apply them to the next cycle." One such lesson is an emphasis on innovation, which often leads to doing more with fewer resources. Rogers also urges leaders to take a hard look at programs being offered. "With the exception of mission-driven programs," he says, "if courses cost more than the value they add, the institution should consider eliminating them. This includes all areas of the college and not just academic programs."
Expanding Sphere of Influence
Broadening the influential nature of the CBO beyond finance can help lead the charge in the integration of division activities that have continued to live in a silo mentality.
The chief business officer is typically seen as the owner of the finance side of the house. However, this role often oversees other key administrative functions. Broadening the influential nature of the CBO beyond finance can help lead the charge in the integration of division activities that have continued to live in a silo mentality. With the business office gaining more control or influence over the way dollars are spent, other groups may find it a huge incentive to participate in this integrative process.
Richard Cannon, vice president, finance and administration at the University of New Hampshire (UNH), Durham, takes this role seriously and works it on three fronts. This dynamic, which he calls his "Triple Play," involves bringing the right parties to the table to (1) focus on the core CBO mission of reducing costs, (2) provide meaningful data to help assess utilization of resources, and (3) bridge operations with strategic investments.
Put cost reduction at the core. Cannon notes that the focus on cost reduction of the current model of higher education is often in response to state cuts to public institutions or market-price pressures for both public and private institutions. "The reality today," says Cannon, "is that even in publicly supported institutions a tuition, room, and board bill of $20,000–$25,000 is less and less affordable for an in-state middle class family, especially when it consumes 30 percent or more of gross family income. Private bills are often more than double that. Playing a key role in controlling or reducing that cost is a vital part of a finance and administration leader's job description."
For research universities like UNH, the leader must also participate in identifying which areas of research can succeed and make significant contributions with minimal pressure on the already overburdened tuition budget. In this first play, the focus is employing traditional methods of a finance leader:
- Assess hiring- and salary-freeze options.
- Offer early retirement programs.
- Examine outsourcing options.
- Reduce benefits.
Facilitate data analysis that effectively assesses resource use and allocation. Cannon's second play focuses on analysis that supports effective decision making. A traditional measure may be analyzing staffing ratios—for example, identifying areas with a small number of employees per supervisor or too many layers of supervision. Both of these may indicate unnecessary bureaucracy and inefficiency. Such information helps challenge leaders to flatten out their organizations, a very conventional and effective tool in other industries.
Another useful analysis is to calculate the number of administrative assistants per relevant grouping. As support personnel become more IT savvy, it stands to reason that overall staffing will inevitably decrease, or will result in role reallocation to better suit the changing needs of the institution.
Cannon also looks at physical resources, such as the effective use of classroom space, as well as the research side, with regard to levels of sponsored research dollars per net assignable square feet of lab space. Finally, focusing on utilization uncovers opportunities to reduce duplicative administrative costs. For example, UNH was able to develop and refine the use of business centers across campus and saved approximately 30 administrative positions through attrition over several years. In addition, a network printing analysis as part of a managed-print project is on track to save $250,000 this year.
At a deeper level, says Cannon, the second play includes actively participating in adapting and building a model of higher education that is fundamentally lower-cost and more affordable. "The finance and administrative leader, while not positioned to lead this effort, can be a partner with the president, provost, student services, and other campus leaders to assemble data and design tools to rise to this challenge in a shared governance environment," explains Cannon. "Leadership manifests itself in asking relevant questions and providing useful analytics." (See sidebar, "A Leader's List of Enlightening Questions That Get Results," for examples of the kinds of questions Cannon likes to pose.)
Make strategic investments to shore up shrinking budgets and resources. The third and final play, says Cannon, is to find ways to make strategic investments for the future. These might include deploying information technology; catching up on deferred maintenance in key areas supporting academics and research; retraining a workforce for the 21st century; and creating a career mapping and rewards system that will attract and retain the talent the institution needs. "In short," says Cannon, "the third leg of the triple play requires the finance and administrative leader to find ways to find direct funds and resources for these strategic purposes."
Progress, Not Perfection
Each of these colleges and universities—through the chief financial officer's role—has embarked on proactive measures to help strengthen the institution. By doing so, their institution leaders demonstrate recognition that before an organization succumbs to a crisis that can't be reversed (perhaps even closing the doors), they can and must take action to move in the right direction.
"Active leadership" is the new mantra for the CBO. While that may result in many confusing possibilities, the worst of the choices is that of inaction. To some degree, chief financial officers and others need to unlearn their earlier training—for example, thinking about the bottom line in the absence of greater organizational engagement. Working in such isolation has inhibited true collaboration that focuses on the greater good of the institution, and on the core mission of preparing the next generation of adults for their own challenging and unpredictable future.
Cannon notes that the CBO can become a key player in a collaborative leadership model that involves senior leaders assessing efficiency campuswide, assisting staff to engage in the correct and necessary activities to achieve those efficiencies—and "not allowing the maintenance of the old to suffocate the life out of the new."
HOWARD TEIBEL is president of Teibel Inc., Natick, Massachusetts.