May, 2022 - doorstoacademia.com

Why Colleges Struggle to Change in Times of Crisis

by Michael K. Townsley | May 21, 2022 | Strategic Planning

The quickly evolving financial crunch, which is due to a sharp decline in the student pool over the next decade, is not unexpected by boards of trustees and presidents. For example, Susan Resnick, in her book Governance Reconsidered, remarked that “significant economic and political pressures have…led many boards [of trustees] to call for [presidents to make] immediate responses to problems.”^[1] These forces may encompass, but are not necessarily limited to, the alumni, donors, board members, faculty, academic administrators, staff, students, accreditors, or governmental regulators. If boards are pressuring presidents to take action, and if presidents are pushing for action, why are so many colleges seemingly unprepared for the escalating changes in the marketplace for higher education?

College presidents and boards often encounter institutional friction that stymies their strategies when proposing significant changes in operations or academic structures. College leaders have a legal and/or fiduciary responsibility for the long-term financial stability of their institutions and for providing quality academic choices that further the expectations of their graduates. However, there are internal and external forces that may constrain or slow down leaders’ ability to change.

This section addresses six conditions that impel resistance to strategic change in higher education in general, and within private colleges and universities in particular. Conditions hindering change discussed here encompass: dual authority, tenure, interest group political action, accreditation and government regulations, legal restrictions, and the mismatch between human and tangible assets. These impediments to change boards and presidents may encounter are even more challenging when large-scale strategic changes are necessary so that their institutions can effectively respond to the marketplace.

Resistance to Change at Private Colleges

There are two concepts that are central to resistance to change – authority and power. Max Weber describes three types of authority: rational, traditional, and charismatic.^[2]

Rational authority is a legal authority that is distributed hierarchically in which a position holder is granted authority to make decisions over a circumscribed area of responsibility.^[3] In the case of higher education, the administrative hierarchy is, in most cases, organized as a hierarchy of authority. This hierarchy stems from the board of trustees to the president to vice presidents and so on.

Traditional authority is defined by customs that a community accepts as legitimate action. In the instance of an institution of higher education, authority over academic programs has been accepted as a customary right of the faculty. Over time, this right has become enshrined in institutional dogma, court cases, governmental rules, and accrediting agency policy.^[4]

The third form, charismatic authority, is associated with the “sanctity … or exemplary character of an individual person….”^[5] For example, a tenured faculty member that is well respected by peers or by members in other administrative departments of a school may have charismatic authority. A major donor with ties to faculty may also be considered a charismatic authority.

It is not difficult to conceive that all three forms of Weberian authority exist in higher education: rational authority or the administrative hierarchy; traditional hierarchy or the academic collegium; and charismatic authority or the honored and respected professor or alumnus(a). Traditional and charismatic authority are always problematic to rational authority because they can operate outside the bounds of the hierarchy, circumventing the rules that govern the decision process.

Power can be defined within an organization as the ability of someone to get something done by virtue of the person’s position or the capacity to influence another person to take action.^[6] Power is the general construct that encompasses authority. Authority is a specific aspect of power, in which a position or person is assigned decision-making action over a specific area and the assignment is legitimized in an official statement of the organization or in the law. While an organization may have a formal authority system, usually described as a hierarchy, the organization will also exhibit power relations among its members that lie outside the bounds of the legitimatized hierarchical decision system.

A simple example of authority assigned to a position in a hierarchy is the president, who has the authority to supervise subordinates in the hierarchy, to delegate authority, and to make decisions within the scope of the president’s authority. In contrast, power is aggrandized by the faculty using political skills to form coalitions in opposition to hierarchical decisions by the president. The capacity to aggrandize power can be due to rhetorical skills, independent relations between the faculty and external third parties such as foundations and government granting agencies, trustees or alumni.

Authority and power, and the interaction of both, pressure the forces that drive resistance to decisions. In higher education, these forces can be conceptualized in terms of the following propositions:

Contradictions of dual governance
Faculty tenure
A political model of decision-making through interest groups
Constraints imposed by accreditors and regulators
Legal constraints – explicit and implied
The mismatch between human and tangible capital investment.

First Proposition: Contradictions of Dual Governance^[7]

Dual governance is where two or more parts of an organization have the authority to make a choice over specific organizational decision. In higher education, the board of trustees, the president, and the faculty all have authority over academic decisions; such as changes in academic programs, allocation of academic resources, hiring and firing of faculty, and changes in the academic mission of the institution. This list is not exhaustive; it may be broadened or delimited by prior practice or legal agreements, such as a faculty handbook, or by governmental regulations or accreditation standards. Where shared governance is a robust aspect of decision-making, and the decision is deemed to be within the authorized scope of shared governance, the parties may respond to a decision issue through affirmation, stalemate, or veto.

Woodrow Wilson, as President of Princeton, had a significant role in setting the foundation for shared governance by granting tenure to the Princeton faculty.^[8] Tenure underlays shared governance by protecting the faculty against arbitrary dismissal and shielding them when they seek involvement in board and presidential decisions.

In 1915, the American Association of University Professors (AAUP) laid the basic foundation of shared governance by declaring that “faculty ‘are the appointees, but not in any proper sense the employees’ of universities.”^[9] In other words, faculty were to be treated as semi-autonomous professionals independently assenting to involvement in a university. By 1966, the Association of Governing Boards (AGB) and the American Council of Education (ACE) formally assented to shared governance as a generally-accepted policy in higher education.^{^[10]}

Under shared governance, boards of trustees delegate authority oversight of academic programs, academic hiring and firing decisions, and academic advisory roles in board decisions to the faculty. Some boards even grant authority to the faculty to allocate funds among academic programs. Each new accretion of academic authority over the years strengthened the faculties’ hands in insisting that an institution of higher education involve them when boards seek to make significant changes in the institution. Interestingly, most boards gave these responsibilities to faculty even though they conflict with state laws which require boards to have ultimate authority in missions, operations, and fiscal decisions.

Shared governance involves several inherent contradictions that make decision-making in higher education difficult and, in some cases, nearly impossible. The contradictions are due to imbalances in accountability, time constraints, and personal and professional risk resulting from decision errors. Decision-making within colleges and universities is conflict-ridden because the faculty and administrators operate under different decision-making rules. For the faculty, decision-making is by consensus seeking, while administrative decision-making is assigned to specific positions within a hierarchical authority structure. Consensus and hierarchies have different imperatives related to accountability, timeliness of decisions, and horizon of the impact of the decision.

Collegiality is fraught with problems for the administration because collegial groups seek to benefit the interests of the group in contrast to the administration and board of trustees. O.E. Williamson, a distinguished economic theorist of organizational behavior, has noted several other problems with decision-making within peer groups: opportunism, where a member or members exploit the group for their own self-interest; malingering, where too much time is spent to reach a decision; and low productivity, where the members of the group are not held accountable for decisions that diminish the productivity of the group or the institution.^{^[11]}

The problem of self-interested behavior is compounded when it is combined with bounded rationality in which not all members have the same knowledge about a particular decision and in which decisions are to be made by consensus. Lack of an equal distribution of knowledge within a consensus-driven peer group might leave some members exposed to opportunistic behavior by those claiming to be better informed.^[12] Opportunistic behavior means that a decision will mainly benefit the person(s) who understands the outcomes of the decision. Other faculty will not openly challenge colleagues over an academic decision due to the presumption that the faculty in each discipline hold specialized knowledge about their discipline and how to organize their discipline. Under these conditions, consensus may not be possible across the faculty when the president or another person in the administrative hierarchy seeks a decision from the faculty that has a negative impact on a particular discipline.

In a hierarchical setting, when a president has a decision opportunity, the presumption is that the president will seek a decision that benefits the institution and not a particular member or group within the institution. However, in a knowledge-based organization, an optimal decision by the president may be constrained by a collegial decision-making process.

Under shared governance, decisions involving the president and the faculty collegial group can be distorted because the latter can exploit their expert knowledge in a particular academic discipline or classroom curriculum that serves their self-interest.^[13] The faculty can easily exploit this form of self-interested behavior, especially when the president has not passed through faculty ranks. The president may even face a greater conundrum when the faculty cannot reach consensus during a period of financial instability, as a consensus stalemate may well place the institution at risk.

As a consensus-driven decision forum, faculty governance is susceptible to machinations by those most committed to either preserving the existing academic program or by those who are devoted to pressing a particular academic or political action. The committed faction of the faculty tends to take over committees as those less committed faculty drift away from meetings. In the end, faculty decisions under these conditions may leave institutional leaders in an unenviable position where faculty decisions may only represent a small but activist fraction of the faculty. As Cohen and March noted in their book, Leadership and Ambiguity, about decision-making in colleges, participants in a particular decision-making process often come and go, and those participants most involved in a particular decision depend on the attributes of the choices involved in the decision.^{^[14]}

Another problem with shared governance (i.e., dual authority) is that there is a legal liability imbalance between the faculty and the administration and board of trustees. In many cases, federal and state laws make boards and presidents legally liable for maintaining the financial integrity of the institution and to assure that its financial processes conform to federal and state laws and procedures and accounting standards. If faculty collegial decisions imperil the financial viability of the institution, the board and president could face fines or even the possibility of imprisonment. These legal liabilities are one reason why colleges carry director and officer’s (D & O) insurance to protect the institution, boards, and senior administrators from the direct costs of violations of laws or regulations. Of course, the insurance will not cover purposeful actions. Moreover, board members and the president may be held personally financially liable for their actions and decisions, which may or may not be covered by insurance.

On the other hand, the faculty are not held legally liable for their participation in the decision because they either are not involved in the final decision or state laws absolve them from liability. Nevertheless, the faculty can put tremendous political pressure on the president and the board of trustees through a ‘no confidence’ vote, negative and unsubstantiated press statements, and lawsuits, or by encouraging their students to support their stance. As a result of the faculties self-interested opposition to changes that alter their working conditions, college administrators or boards may, in an attempt to avoid conflict, continue to offer programs with insufficient demand to support the program costs, while adding legal risk to the president and board for failing to alleviate financial stress.

An example of how shared governance confounds decision-making on the mission and operation of the college is evident when a new academic program is introduced. During an existential crisis like the coming demographic collapse, an existing or new program that is not a good fit with a survival strategy, can and probably will lead to conflict. The conflict often pits the president, board of trustees, and the faculty over the decision whether or not to accept the proposed program. The reason that decision-making is difficult under shared governance is because the process is meandering and may lead to a random result that is not in the best interest of the college. At its worst, shared governance simply becomes the sum and average of multiple self-interests with the unfortunate capacity to devastate a leaderless institution. Conflict can have a deleterious impact on an institution’s market and strategy by driving away conflict-averse students. Moreover, students and their parents may also be concerned that the conflict could diminish the quality of a particular academic program, and they may be reluctant to enroll at an institution whose financial condition is uncertain.^[15]

Summary: The following are the contradictions inherent in dual authority decision systems:

Timelines – The president, as the responsible officer for the financial condition of the institution, must act quickly to make strategic changes to stem further financial decline. The faculty, because it is not charged with financial responsibility for the institution, is not pressed to speed-up its consensus-seeking decision process.

Scope of responsibility – The decision horizon for the president and the board is constrained by the time needed to preserve the institution. The decision horizon for the faculty has no time limit except the need to thwart the decision horizon of the president and the board so that the faculty can evaluate and preserve their narrow self-interest; i.e., the effect of decisions on themselves and their academic programs.

Efficiency – Given the student market’s concerns about price (i.e., tuition) presidents and boards must look for increased efficiency to limit cost increases. Since the faculty scope is limited to academic programs, they are not impelled to manage costs. For instance, concern with faculty involvement in merger negotiations may cause the negotiations to collapse; see the Mt. Ida article in The Chronicle of Higher Education on the merger discussions with Lasell College.^[16]

Outcomes – The president and the boards of private colleges must respond to the outcomes sought by potential students. The faculty, on the other hand, is invested in and oriented toward their existing academic programs and their disciplines.

Ambiguity of decision-making – The duality of power and authority in shared governance results in ambiguities about control of the decision-making process with authority and power constantly shifting within the institution. These ambiguities can turn decision-making into a Machiavellian game where self-interested behavior undermines institutional goals.^[17]

Second Proposition: Faculty Tenure

When an institution grants tenure, it is granting an entitlement to a property interest that cannot be revoked without due process based upon the conditions of employment.^[18] Those conditions are usually set-out in employment contracts or policy manuals. As a property interest, tenure, now under Federal age discrimination laws, implies a life-time contract subject to a guarantee of due process before dismissal.^[19]

Depending on the faculty handbook, tenure does not necessarily prevent the dismissal of tenured faculty when colleges eliminate academic programs. Nonetheless, the faculty handbook must be explicitly followed when making changes in academic programs. Boards, the president, and legal counsel must clearly review and understand the handbook before moving forward with any changes to academic programs. One of the ruling cases on this matter is Jimenez v. Almodovar from 1981 that declared that a college had the right to dismiss tenured faculty when a program was cancelled due to falling enrollment.^[20] The elimination of the program, and thereby the dismissal of tenured faculty, cannot be done in a willy-nilly fashion. The decision to end an academic program must be justified by objective factors and, to paraphrase the 1940 American Association of University Professors (AAUP) statement on tenure,

“Discharges [of tenured faculty] may occur as a result of bona fide formal discontinuance of a program or department of instruction provided that they are based essentially upon educational considerations and primarily determined by faculty (italics by the author].”^[21]

In other words, according to the AAUP, a college can eliminate a program; but elimination of a program requires the consideration and determination of the faculty of whom some members will lose their property interest. Self-interest obviously would make this decision by faculty to eliminate a program difficult on two levels. First, it would be in the self-interest of some members of the faculty to oppose the loss of their positions. Second, it would be in the future self-interest of other members of the faculty to assent to elimination of a program only after an arduous and long period of review.

Therefore, the problem is not that the college cannot dismiss tenured positions from cancelled academic programs, the problem is the time, cost, and conflict associated with a dismissal. Given that most presidents and even boards of trustees are risk averse, they prefer to avoid the angst of dismissing tenured faculty by arranging buyouts. The problem with buyouts is that they cannot be targeted to specific faculty; usually buyouts must be offered to all faculty. As a result, the tenured faculty in the program to be terminated may not choose the buyout, leaving the institution with a failed but costly strategy. Additionally, if an institution is strapped financially, a buyout many not be possible. Institutions in dire financial stress may consider declaring financial exigency, which offers administration and boards more latitude in eliminating academic programs and dismissing faculty. However, financial exigency may create a public relations issue and further erode enrollment.

Third Proposition: Political versus Hierarchical Decision-Making

In 1971, J. Victor Baldridge postulated that universities and colleges use a political model where decisions are shaped by interest groups vying for allocation of resources.

“Power and influence, once articulated, go through a complex process until polices are shaped, reshaped, and forged out of the competing claims of multiple groups [within the institution and outside the institution].”^[22]

The political model of decision-making is most evident during budgeting when interest groups like the faculty, administrators, students, and others vie for the allocation of scarce budgetary dollars. Again, depending on the institution’s shared governance model, the faculty, may be granted extensive input during the decision-making on budgets that lie outside their immediate purview. A corollary of the political model is Michael Cohen’s and James March’s proposition that decision opportunities yield ambiguous stimuli in which participants dump problems and solutions into a ‘garbage can,’ which does not necessarily lead to a decision that is in the interest of the institution but rather tends to serve the interest of interest groups.^[23]

The problem for a president is that as interest groups shape a decision, the resulting plan may be a mishmash lacking a clearly-defined outcome, plan of action, or expectation of costs. Too often during a financial crisis that requires dramatic changes, the political meat grinder yields decisions that perpetuate the status quo and a continuing decline in fortune.

Political decision-making also generates conflict when a board goes directly to faculty, bypassing and usurping the president’s authority. Moreover, by not including the president in decisions affecting the faculty, the board implies that they are sanctioning a change in the relationship between the board and the faculty and that the next president, in order to survive, may determine that the best solution is never to propose action that raises the ire of the faculty.

In the worst case, the political decision model may begin to resemble a classic political contest where one of the interest groups uses the press to attack the leadership of the institution. As anyone who has had to deal with the press in the midst of campus conflict knows, the press tends to exacerbate the conflict and rational decision-making tends to collapse.

In other words, a political model of decision-making exploits the ambiguities of shared governance by Balkanizing the faculty, administration, and individual members of the board into self-serving outcomes that may contradict institutional strategy and the long-term interests of the institution.

Fourth Proposition: Constraints Imposed by Accreditors and Regulators

Higher education is one of the most highly-regulated industries in the economy. Regulation is mainly concentrated in regional accreditation commissions and government regulatory agencies (federal and state) that establish academic, financial, and civil rights standards for colleges and universities. Accreditors and regulators often act as a brake on the flexibility of the institution to respond to financial stress, to student markets, or to job markets for graduates.

Title IV (Financial Aid Act of the Federal government) undergirds the authority of regional accrediting commissions by requiring an institution of higher education to comply with accreditation standards and to be accredited by a regional commission before the institution can receive federal student aid.^[24] Note that this discussion will center on regional accreditors, but discipline-specific accreditations also exist. Some discipline-specific accreditations are required in order for an institution to grant a degree that allows a graduate to practice in a profession. For example, nursing accreditation is required in order for a school to offer a nursing degree where students may seek licensing and a job upon graduation.

Accreditors

Accreditors typically have the following core and collateral missions:

Core Missions: authenticating colleges; affirming credibility of the institution; facilitating transfer of academic credits among institutions; auditing sustainability of faculty, graduation rates, and finances; strengthening institutional fit with new technology, student markets, and employment markets; and sustaining oversight by the accrediting commission through periodic reports.^[25]

Collateral Missions: ensuring effective governance (governing board and shared responsibility with faculty); involving faculty and administrators in accreditation audits to learn best practices; enabling public understanding of the role of accreditation; facilitating change in academic disciplines; and encouraging social justice.^[26]

Accredited institutions must comply with accreditation standards if they are to conform to the Title IV requirement that an institution must be accredited to receive Federal financial aid funds. There are six standards common to accrediting commissions that can impede institutional change – shared governance, general education distribution requirements, full-time faculty qualifications and numbers, substantive change review, financial performance, and assessment of student performance. While there are many other accrediting standards that constrain institutional change, these six standards can absorb large amounts of scarce time and resources at times when a college must respond expeditiously to financial distress or fierce competition.^[27]^[28] Below is a discussion of how select accreditation standards might hinder change.

Shared Governance

While shared governance has been discussed earlier, it will be considered here in reference to accreditation requirements.

“Primacy of ‘shared governance’ is meant to give voice to the faulty in order to protect their academic freedom and the integrity of their programs.”^[29] According to the Southern Association of Colleges and Schools Committee on Colleges (SACSCOC), “institutional policies concerning the role of faculty in academic matters should make clear that the faculty has primary responsibility for the content, quality, and effectiveness of the curriculum.”^[30] The faculty is responsible for “appropriate courses reflecting current knowledge within a discipline and include courses appropriate for the students enrolled.”^[31] “[T]he administration affirms that educational programs are consistent with the mission of the institution and that the institution possesses both the organization and resources to ensure the quality of its educational programs.”^[32]

Although shared academic governance seems on its face to be complimentary between a board of trustees, the administration, and the faculty, it is often the source of conflict as both sides work at cross-purposes determining what is an “appropriate” educational program for the institution and whether the programs fit the mission of the college. Even though most significant academic changes generate heat and lighting, the inherent conflict and ambiguity can quickly become an existential issue during periods of financial stress, enrollment declines, or the possibility of accreditation sanctions. For example, the faculty may claim that a classical liberal arts course is a necessary program for a liberal arts mission. However, enrollment in the program may have less than five students enrolled and may include the cost of two full-time professors and associated material and support costs. Unless the cost of the program is fully subsidized through an endowment, small, financially-struggling colleges will find such a revenue-cost structure unsustainable.

General Education Distribution Requirements

General education distribution requirements (or a core curriculum) are not necessarily overbearing as demanded by accreditation standards. However, faculty demands that each liberal arts major have representation within the general education requirements are often couched in terms of accreditation requirements. Large number of general education credits required for a degree may diminish the interest of some prospective students’ interests in a particular program, such as: nursing, game design, or information technology, because these majors already have so many course requirements.

Full-Time Faculty Qualifications and Numbers of Faculty

Accreditation standards require appropriate faculty qualifications in each discipline and appropriate numbers of faculty to teach the discipline. For example, accreditation standards may specify faculty possess doctorates in programs and the ratio of full-time to part-time faculty in certain programs. There are some disciplines where faculty with doctorates are very costly (such as nursing, accounting, and computer science) and where faculty with a Masters and work experience could suffice, especially in a baccalaureate program. Accreditation standards often allow for justification of the latter, but this does not guarantee approval. Accreditation is a self-policing process so teams of peers evaluate an institution against the standards. Peers may believe that numbers of faculty are inadequate based upon their own experiences, and critique a school on this standard. Again, the school administrators may justify their decision on appropriate faculty numbers, but this does not guarantee the Commission will accept the justification.

Substantive Change Review

In making a major change at the institution (for example, adding a new academic program) an institution must apply to the accreditor for a substantive change. Substantive changes are often confounded by the ambiguities inherent in shared governance and the conflict generated by self-interested groups. Importantly, substantive change approval may take six months to two years from the start of the process to the approval and there is no guarantee of approval.

The changes, though they may be designed to ensure an institution avoid financial stress, may fail in this goal due to the time delay in accreditation approval. For example, a college may seek approval to begin a new academic program in order to increase enrollment. The goal of accreditation is to verify that the institution has the resources to provide a creditable program. However, an accreditation review process that takes years to complete may increase financial stress when a new program cannot be started in a timely manner. Additionally, because substantive changes require approvals by accreditors, delays and extensive discourse may act as openings for interest groups to expand their opposition.

Financial Performance

Financial performance relates to all resources available to provide a quality, safe, learning (and, if applicable, living) environment for students and a fair working environment for employees. As institutions are stressed financially, diminishing resources must be reallocated among academic programs competing to survive. Yet scarce funds must also be allocated to non-academic needs, such as: technology updates, marketing and enrollment, student health and wellness, deferred maintenance repairs, and the ever-increasing costs of insurance and benefits. Non-academic expenses are necessary to sustain the viability of all programs. More items can easily be added to the preceding list. A college must assure accreditors that the resources are enough to maintain quality offerings.

Assessment of Student Performance

Accreditors require assessment be conducted in courses, programs and majors, and schools. David Eubanks, Assistant Vice President for Assessment and Institutional Effectiveness at Furman University, “‘… said that the whole assessment process would fall apart if we had to test for reliability and validity and carefully model interactions before making conclusions about cause and effect.”^[33] In other words, the tremendous effort in time, money, and testing may not really measure the capacity of a course, a program, or a degree to achieve the programs published outcomes. Eubank’s critique suggests that assessments may be self-serving and not provide useful information on performance because they are designed by a department, a program, or a college. His criticism should not be interpreted as meaning that assessment should not be conducted; rather, that colleges need to be meticulous and approach self-assessment in an arm’s length manner to diminish analytic flaws. Note that assessment is a reaction to the demands of federal regulations. While assessment is a necessity to validate academic quality, it is time-consuming and costly.

In summary, strategic change may be delayed as institutions wait for their proposals to pass accreditation approval. Delay carries real costs in money, time, and energy. The length of time to meet accreditation proscriptions can take several years. In today’s competitive markets, that could mean the loss of valuable student market as other institutions with fewer accreditation impediments jump into the vacuum. Furthermore, meeting standards (for example, doctorly-qualified faculty) may prove to be costly. Smaller, less-endowed schools are usually challenged to meet the cost of accreditation standards.

Governmental Agencies and Regulations

Federal and state regulations can have an unfavorable effect on a college’s financial condition and legal liabilities. Here is a short-list of such governmental regulations that will be discussed below: determining eligibility for federal financial aid, setting standards for complying with Title IX rules governing sexual harassment, assessments of programs offered by a college like ‘gainful employment,’ and, in some states, non-compete rules that limit the offering of new programs or the entrance of new colleges into the marketplace. This short list does not begin to cover the full panoply of governmental regulations that seem to impinge on all aspects of the higher education industry.

Financial Aid

The Department of Education (DOE) establishes one rule that is the sine qua non for the financial viability of a program or a college. The rule is that before a college can receive federal financial aid funds, the DOE must approve existing and new academic programs. New program approvals can be bogged down by bureaucratic delays in the preparation of documents, review, back and forth communication with the Department during revisions, and waiting for final approval before financial aid can be awarded for students enrolling in the program. Delays in the approval cycle slows recruitment of students to a new program needed to boost enrollment.

While the Financial Responsibility Test was discussed in Chapter III, it needs to be emphasized that a worthy goal of assuring financial viability can be particularly onerous for small colleges hit by inconsistencies in applying regulatory standards. For instance, many colleges over the past several years realized that their scores were incorrectly computed. The errors occurred within a Federal region or computed in error by a single analyst.^[34]^[35] As a result of the errors, a number of colleges, which were actually in compliance, were required to tender a costly letter of credit to assure that the government would not withhold access to Federal financial aid funds. Another unfortunate result of these computational errors was that the names of these institutions that were actually in compliance were reported in news media, which may have adversely affected enrollment decisions by students.

Title IX

Title IX regulations require that a college comply with gender diversity and sexual harassment regulation policies of the Federal law and the Department of Education. Compliance issues can have a major impact as a college sets out to make any significant changes in academic, student, or athletic programs. For instance, The Chronicle of Higher Education reported that field hockey athletes at the University of Kentucky sued the University because it does not comply with the Title IX requirement that women have the same intercollegiate opportunities as men.^[36] This suit, if successful, has the potential to force the University to greatly expand the number of intercollegiate teams for women.^[37] As The Chronicle reported, the successful outcome of this suit may also force other universities like the University of Florida, Eastern Michigan University, and the University of North Carolina at Chapel Hill into adding more women’s intercollegiate teams.^[38] Title IX claims that allege discrimination can derail diversity strategies for wealthy institutions and financial strategies at financially-stressed colleges.

Federal Assessment Program Criteria

Various assessments or reports can generate problems for colleges because data collection (the time spent collecting, analyzing and reporting the findings and the direct cost of hiring personnel to prepare the reports) is costly. One assessment the DOE requires is an assessment to determine if graduates are ‘gainfully employed.’ Surveys, calls, and follow-up reports are all time consuming and can be difficult to get graduates to respond.

There is a specific case of tracking recent graduates from teaching programs to determine if the teacher has been hired but also to determine if the graduate is an effective teacher. Furthermore, these ‘gainful employment’ assessments assume that all teachers attained their skills solely from the academic programs and that the skills are consistent across regions. This oversight into the career of a new teacher assumes that the process may or may not be a valid form of assessing performance of a college’s Education academic program.

State Non-Compete Regulations

Non-compete regulations constrain an institution from either entering a state or proposing a program already offered by another nearby college. For example, Pennsylvania reviews documents by colleges applying to enter the state to determine if their programs will compete with other colleges within the geographic area where the college plans to locate. These non-compete reviews restrict competition and give an incentive to existing institutions within the state to set prices within an oligopolistic economic pricing structure. In addition, colleges currently approved for the program are not challenged to improve their instructional design, scheduling, or method of distributing the courses.

In summary, accreditation standards and practices and government regulations energize institutional conflict in the following ways:

Acting as an incentive – Faculty may use accreditation standards and regulations as a cudgel against administrators’ attempts to make strategic changes. For example, when an administration needs approval of the faculty senate to terminate an under-enrolled program, the faculty senate may ignore institutional consequences for failing to support the termination because the senate tends to operate as a political body protecting its members’ self-interest and instead insist accreditation standards do support the programs’ termination.

Forcing a divide – The chief administrator and the board of trustees may view accreditation standards differently, for instance, some academic accreditation standards may clash with fiduciary standards. For example, requirements for maintaining pricey doctorates and full-time to part-time faculty ratios may threaten the standard that an institution maintain its financial viability.

Conflicting communication channels – Accreditation may encourage members of the board of trustees meeting with a member of the faculty or the faculty as a whole (and vice-versa), which undermines the president’s authority regarding responsibilities related operations, policies, and financial stability.

Fostering regulations – As with the discussion on federal regulations requiring extensive data collection, some accreditation standards, such as tracking the careers and lives of graduates, may also involve costly data collection processes that impose significant costs and staff time to collect.

Fifth Proposition: Legal Constraints – Explicit and Implied

Institutions of higher education are congeries of explicit and implied contracts and legal constraints that bind its internal and external relationships. Explicit contracts stipulate certain actions or activities between two or more parties that are enforceable either by provisions within the contract or through contract law. On the other hand, implied contracts are not formal statements that stipulate specific action but are unwritten understandings by customary practices among several or more parties that certain actions or activities will take place. The courts or administrative adjudication bodies may recognize implicit contracts as enforceable.

Explicit contracts often define relationships with, but are not limited to: personnel; governance or corporate polices and bylaws; information technology (hardware, software, and websites); equipment; lawn, parking lot, and roadways; auxiliary services; external admission recruiters; student health care and counseling; public safety; housekeeping; dining services; and auditors. There are also explicit contracts for government and third-party grants, construction contracts, bond covenants, loan agreements, and partnerships or articulations with other institutions and organizations. Donor conditions are explicit constraints that bind an institution on the purpose of the gifts and how gift monies are expended. Typically, donor conditions necessitate donor approval for a change or complex legal processes to change those conditions, especially if the donor is deceased.

Government regulations are also explicit contracts that delimit such matters as legal reporting requirements, minimum standards, student and employee discipline procedures, student and employee physical or other special needs regulations, research guidelines, unemployment rules, and tax rules and procedures.

Implied contracts that can be enforceable by courts or administrative bodies may comprise, but are not necessarily limited to, such issues as: faculty and personnel manuals, student handbooks, course catalogs, scholarships, course guides, online curricula catalogs, administrative procedures, and graduation rules.

There are other aspects of a college that are becoming part of the realm of implied contracts: athletic teams; employment compensation and long-term health costs; student outcome expectations as described in advertisements, program brochures, and recruiting statements; campus safety involving members of the institution and outside parties; residence hall services related to quality, quantity, and availability; inter-student relationships and fears about threats to their belief systems; illegal drug use; self-harming behavior; and the expectation by parents that a college will act as in loco parentis for their children, even though colleges have abandoned the concept.

As a result of explicit and implied contracts, presidents and boards may be unable to introduce changes to reduce financial stress, bring the institution in-line with market forces, change the mission and structure of the institution, or form new relationships with third parties. Contracts, be they explicit or implied, act as forces of inertia that keep the institution operating in a particular way whether those operations continue to be economically viable. Here are several examples from the literature of how contracts limit change.

Employee termination – There are numerous instances where the courts have upheld the contractual rights of faculty. An unusual variation of this issue is the Mr. Steven Saliata case at the University of Illinois. The University withdrew the offer of a tenured position to Professor Saliata and claimed they had no contractual obligation because the board of trustees had not approved the contract. The court disagreed saying:

“The judge in the case held, although university administrators had told Mr. Salaita his employment there would be ‘subject to’ the board’s approval, their letter to him did not apply such conditional language to the job offer itself, suggesting that what was up in the air was not the existence of a contract but the university’s ability to follow through on its end.”

If the university truly regarded such job contracts as hinging on board approval, he said, it would have the board vote on them much earlier in the hiring process, before paying a prospective faculty member’s moving expenses and offering that professor an office and classes. ‘Simply put, the university cannot argue with a straight face that it engaged in all these actions in the absence of any obligation or agreement….’”^[39]

Faculty and third-party contracts – In 2017, Purdue University signed an agreement to purchase the for-profit and online Kaplan University. The purchase of Kaplan gave Purdue the opportunity to quickly make a deep penetration into the online market. The Faculty Senate took umbrage to the purchase and voted a resolution asking the University’s leaders to rescind the deal based on the academic shared governance model and procedures. Even though the faculty complaint did not end the deal, it did make the process more cumbersome. Moreover, the Department of Education said that they would only approve the purchase if Purdue assumed the debts and liabilities of Kaplan.^[40]

Donors/alumni – A gift from a donor or alumna(us) usually entails more than the addition of money to the endowment fund. Typically, gifts include conditions that may limit how the gift is used and/or applied. There are numerous instances where gifts were earmarked to exclude certain races or religions.^[41] These gift conditions have had to either be rejected or submitted to the courts to rule on removing the conditions.

There are also instances, and these cases may become more frequent, where donors demand the return of gifts when the donor no longer agrees with how the gifts are being used or no longer wants to be associated with the institution. The following are several examples where donors asked that a gift be returned or used for other purposes. One donor requested that the University of Connecticut^[42] return a gift to the athletic program after disagreements with the athletic director. Chapman University^[43] was sued for the return of a substantial gift when the donor became dissatisfied with the leadership of the University. When Sweet Briar College^[44] announced plans to close, donors and alumnae banded together to prevent the closure of the College and to direct funds to its survival.

An implied contract among several parties is inferred from the conduct and from other circumstances among parties when there is a tacit understanding between the parties and when there is an exchange of benefits among the parties.^[45] Following from this reasoning, an implied contract creates an obligation between the parties based on the facts of the situation. If the parties’ conduct or circumstances suggests they had an agreement or understanding, the law will find that their relationship was governed by an implied contract.^[46]

Here is an example from case law of how a court may interpret the presumption of an implied contract. The case cited is Olson v. Board of Higher Education in the State of New York. The case involved a student who claimed that the University failed to award her a degree representing a breach of contract.

“The court turned its discussion to the idea of an implied contract between a student and her college. Articulating the New York standard, the court said that when admitted, an implied contract arises: if the student follows all of the college’s rules and procedures and comports with academic standards (including passing all required classes, etc.) then the college will award the appropriate degree sought. … However, the breach of contract action fails for several reasons. The University gave plaintiff two chances to complete the training, and then a chance to get a different, but related, teaching degree. Going back to the contractual thinking mentioned above, the University gave the student ample chance to comply with any implied contract – and she failed to do so.”^{^[47]}

Besides the preceding New York case, implied contracts are also evident in these instances: student handbooks, course syllabi, faculty handbooks, and accreditation rules and reports. The subsequent examples are also implied contracts:

College catalog – The catalog is the primary document that establishes the contractual relationship between a student and the institution. Students and the institution agree to adhere to the policies, procedures, degree requirements, and other matters stipulated in the catalog. The contract goes into effect when a student matriculates and enrolls. The contract between the two parties is delineated by the catalog in effect at the time that the student enrolls. A student must be accommodated through graduation despite any changes by the institution to the catalog or even to the termination of the student’s declared major. Many students and some institutions do not appreciate that the catalog is an implied-in-fact contract.

Student handbook – The student handbook outlines the policy and procedures on matters such as student behavior, student due process and grievance procedures, and other matters related to a student’s life on campus. Many students do not appreciate that the student handbook, like the college catalog, is a contract. The student handbook may also lay out expectations of acceptable student behavior, academic integrity, and residence life policies. Conflict generated between administrators and students over the student handbook can arise because the administration views the handbook as an implied contract, while students may see the handbook as simply a set of processes. As a side note, student judicial courts, which were common in student handbooks, have been declining over the past years because courts at different governmental levels have held these student courts to the constitutional strictures of due process. While the members of the student court may not be financially liable for their decisions, the college may be held liable for any financial costs associated with the failure of the student judicial court to follow due process.

Faculty handbook – Faculty contracts commonly reference the handbook as governing the relationship between the faculty and the institution. If the contract does not explicitly name the faculty handbook, the contractual relationship is implied by the actions of both parties that conform to the handbook. Faculty handbooks should clearly stipulate that the board of trustees have ultimate authority in all aspects of the institution. If the stipulation is not stated or is ambiguous, courts may assume that, based on the customary practices of the faculty, the board has implicitly delegated the ultimate authority over academic decisions to the faculty, which conflicts with a board’s legal responsibility to the institution.

Course syllabus – This document is an implied contract between the student and the instructor on the requirements to earn credits for the course. The syllabus is subject to the implied contract of the college catalog.

Accreditation – Federal law requires a college to be accredited through regional or specialist accreditors to receive federal student aid funds. Since federal laws or regulations do not typically specify standards for accreditation, the accrediting agency establishes the standards that a member institution must accept. Although these commissions have full-time staff, volunteers from member institutions evaluate each other’s’ schools against standards, and vote on new standards, and changes to existing standards. Accrediting associations rarely lose lawsuits brought by individual colleges unless an accreditor’s ruling falls outside the purview of their policies, practices, and procedures.^[48]

The discussion so far has argued that colleges operate within an entangled web of legal constraints where shared governance, interest groups, contracts (both explicit and implied), governmental regulations, and accreditation standards bind what an institution can or cannot do. These legal entanglements can determine the direction and momentum of the institution, which renders change complex and often expensive in terms of time, effort, and money.

Whenever a college plans to change the terms of a contract (especially if one party, like the faculty, believes that their contracts or personnel policies should continue to be applied as they have interpreted the contract), the college should turn to legal counsel prior to taking any action. The administration and the board of trustees need to be ensured that they are interpreting the contract correctly. In the end, if the institution is sued, legal counsel will be able to defend the case based upon accepted legal principles. In addition, small, private colleges are usually best served by outside lawyers whose specialties can be utilized on legal issues for which the administration, board, or local barristers have no experience.

Sixth Proposition: The Mismatch between Human and Tangible Capital Investment

A mismatch between a college and its student market occurs when students seek skills that do not fit the institution’s curriculum or its physical or human investments. Physical investments typically include technology, buildings, furnishings, equipment, and grounds. These assets carry a value recorded as the cost net of depreciation on the balance sheet (Statement of Financial Position), which may provide collateral for current debt loads or for new debt. Students and their families have high expectations for a college’s physical investments; for example, WIFI in all buildings, a beautifully landscaped campus, necessary academic computer labs, modern furnishings, etc.

Human investments comprise the set of skills and knowledge that the faculty employs to deliver academic programs. The value of human investments is not recorded in any rigorous fashion nor is there any accounting of the depreciation of faculty skills or knowledge, even though their skills and knowledge do decline (i.e., depreciate over time). Even the human investment of liberal arts depreciates or becomes obsolete when students expect the humanities to prepare them for careers outside the traditional bounds of the humanities and/or integrate their studies with current technologies. Reconfiguring human investments may be the most time consuming and potentially expensive process due to constraints imposed by accreditors, shared governance, and vested interests.

Making dramatic and quick changes in either physical or human investments requires considerable time and money to purchase, improve, or renovate assets. Since private colleges often lack the financial resources to alter their asset structure, they turn to donors, debt, or depletion of their endowment to fund new investments. If time is of the essence in responding to the sharp decline in the student market, fundraising, new debt, and endowment funding are fraught with delays. Capital campaigns take several years to complete; debt acquisition depends on a lengthy review of financial and legal conditions prior to approval by state agencies and financial institutions; and endowment draws cannot be increased willy-nilly without approval by governmental regulators such as the state attorney general’s office.

The following describes why human and capital investment mismatches are difficult to change:

Accreditation – As suggested in Chapter VIII, the ‘Fourth Proposition,’ accreditors often act as a gatekeeper for insulating the traditional structure of higher education against change arising from the marketplace and financial instability. The following gatekeeping functions of accreditation can place major roadblocks to expeditiously resolving any mismatches between curricula, faculty, and student demand for programs that lead to jobs with sufficient remuneration to cover student loan debt and to provide a middle-class lifestyle.

Approval of mission change – Accreditation commissions, and in some states a state department of education, must approve a substantive change in the mission. A college, especially those offering degrees in the liberal arts, will most likely need to revise its mission statement if it plans to deemphasize liberal arts and move to career-directed degrees. A substantive change in the mission could take six months to a year or more while administrators, the faculty and the board work toward accreditor approvals.
Standardization of curricula – Accreditation standards require a general education core curriculum that is consistent across all academic programs. The core usually encompasses courses in the liberal arts and sciences. Accreditors typically require 25% or more of the credits needed for graduation to be devoted to the core. Nevertheless, the faculty may call for more courses to be added to the general education core. The additional courses protect the employment status of faculty assigned to those courses. This weighting of credits toward the core often limits the flexibility of an institution in designing new programs.

Sunk Costs of Capital Investments – Human investment and capital investments such as buildings, equipment, and land are long-term investments that drive the curriculum of a college in a particular strategic direction. These existing investments act as a brake on new investment as a college attempts to respond to new market conditions. Changing existing strategic investments can involve the cost of adding or terminating faculty; redesigning, constructing, or eliminating buildings and/or labs; and eliminating or installing new equipment and/or technologies.

Faculty – Even when a program is discontinued due to insufficient enrollment, faculty must be compensated given their tenure status, the faculty contract, institutional employment policies, or any other legal requirements. Terminating faculty positions is never trivial. In many cases, these faculty will remain to teach out the programmatic course requirements of currently-enrolled students. The worst-case scenario happens when faculty cannot be terminated for some contractual or regulatory reason because continuing to compensate them while hiring new faculty in response to adding new programs will diminish financial resources and affect campus morale.
Plant, equipment, and land investments – Sunk costs refer to costs where their value is only recoverable by a return on the investment or partially recoverable by their salvage value. Plant, equipment, and land investments are sunk costs because once these investments are made, it may prove to be expensive to use the assets in ways not originally planned. This is especially true if a campus is in a region of undervalued property.

Non-productive assets – Investments that no longer fit the mission of the institution or fail to generate sufficient enrollment to sustain their operating and maintenance costs are non-productive assets. Technologies that are out-of-date and no longer reduce operational costs or provide improved services for students are also examples of non-productive assets. Unfortunately, schools, in particular poorly-managed schools, continue to fund non-productive assets because it is easier to stay the course than take the risk to eliminate and invest in new, potentially more-productive assets.

Staff Employees – Restructuring staff positions is easier than dealing with faculty mismatches because staff are normally at-will employees and in non-tenured positions. Therefore, staff employees are not considered here as sunk costs. However, staff, like faculty, may have protections provided by employee handbooks and state and Federal employment laws. Nevertheless, staff positions, as with faculty positions, need to fit the mission of the college and the goals of their department. Too often staff are retained when they no longer have the skills to perform a new work assignment or are redundant after comprehensive institutional restructuring.

There are at least five options that presidents and boards of trustees may consider when determining what is the best strategic use for mismatched human and tangible assets:

Reuse tangible assets elsewhere
Reassign and retrain faculty and staff to productive programs
Discard tangible assets and deploy their operational costs to more productive areas
Discharge faculty and staff
Do nothing

The first two options can embody substantial costs, as tangible assets are fitted for new use or faculty and staff are retrained and prepared for new programs. The costs are not limited to dollars but can also include the expenditure of scarce time and energy resources resolving conflict generated by any changes, which is likely in the case of employment changes. The next two options may be more expeditious and less costly but will most certainly create conflict. The problem for presidents and boards is that strategic changes in the uses of mismatched assets often lead to conflict with interest groups like the faculty, alumnae(i), and/or students who see the changes as threatening their interests, values, or cherished memories. The good news is that the memory of change in higher education tends to fade as semesters pass and students graduate.

Concluding Note: The Structure of Strategy and Conflict

Because governance at most colleges is characterized by conflict engendered by a profusion of political interests and semi-autonomous collegial groups clashing over a carousel of ever-changing minor and major issues, crisis events like the on-coming demographic crash can overwhelm institutional leaders as they attempt to develop coherent strategic responses.

The strategy and conflict in higher education follows in a straightaway fashion from the preceding propositions. First, strategy begets operational plans. Second, new operational plans stimulate operational friction. Friction is the cost and energy expended to resolve opposition to proposed plans. Commonly, the greatest friction follows from the reallocation of resources among interest groups like the faculty, students, or alumnae(i). Eventually, strategic action exhausts itself when friction absorbs the surplus time and energy of the administration and board of trustees. Earmarks of the exhaustion phase of strategic action may embrace cancellation of strategic projects, only partial implementation of a strategic project, redesign of projects with new parameters that do not necessarily conform to the original strategic intent, or full implementation of strategic projects. In other words, strategic actions may result in sub-optimal outcomes.

The ambiguities created by shared governance lead to conditions that Cohen and March^[49]describe as organized anarchy. Colleges that operate as an organized anarchy have no central control; decisions are made autonomously; and consequences of decisions are not controlled by anyone.^[50]

Baldridge, et al. assert that governance works through a political model where a clash of interest groups resulting in inaction prevails; participation is fluid and fragmented into interest groups; conflict is normal; and decisions are negotiated compromises.^[51] Political interests only compound chaotic decision-making of organized anarchy described by Cohen and March.

David Riesman said that presidents are hemmed in on all sides due to shared governance.^[52] He continued by noting that presidents have little influence over tenure, departmental budgets, or basic college policy, such as student-faculty ratios. Thus, presidents are left with trying to maneuver the collective decision-making apparatus of an institution to take action through deft manipulation or bargaining from a position of weakness because power in critical academic areas is located outside their office. Under these conditions there is no leader, there are only influential or interested parties. Most often the direction of the institution is shaped by the self-interests of the parties involved. In other words, Reisman, Cohen and March, and Baldridge, et al. concur that decision-making within most colleges is a haphazard operation which is difficult to control and generates a less than optimum strategy in times of crisis.

As George Keller avowed, “. . . every society and every major organization within a society must have a single authority, someone . . . authorized to initiate, plan, decide, manage, monitor, and punish its membership. Leadership is imperative.”^[53] Colleges seeking to rise above the coming demographic crisis must have the leadership to guide an institution of higher education toward the development and implementation of an effective strategy.

The following are several examples of the type of resistance that institutional leaders have faced recently. The theme of these examples is that the board of trustees and president rest uneasily on their authority and decisions.

Alumni and Donors – “Why Is It So Hard to Kill a College?”^[54]

The Board of Trustees of Sweet Briar College announced on March 3, 2015 that the College would close at the end of the summer session. However, students, parents, alumnae, faculty, staff, and the local Commonwealth Attorney filed a lawsuit to halt the closing, which reached the Virginia Supreme Court.^[55] On June 20, 2015, after mediation, the Virginia Attorney General announced that Sweet Briar would remain open.^[56] Soon after the declaration by the Attorney General, the Board of Trustees and the President at were removed. In other words, bad news for a college often leads to bad news for the leadership. Total enrollment at Sweet Briar was 320, when the Board announced its plans to close the College. As of the Fall of 2019, enrollment had grown to 336, an increase of 16 students and an annual compounded growth rate of 1.2%.

Students – “Another Speaker Shut Down”^{^[57]}

Students at Beloit College used drums and piled chairs on stage to prevent a speaker from talking. The students objected to the speaker, who had founded a discredited mercenary security force; he was also the brother of the Secretary of Education at the time. The President of Beloit “condemned the interruption, [and wrote,] “We need to be better than this.”^[58]

Faculty – “Wright State’s Faculty Votes No Confidence in Board”^[59]

Three-hundred-eighty-two faculty at Wright State voted no confidence in the Board of Trustees due their financial mismanagement of the institution. The Board, nevertheless, claimed that they had plans in place to correct financial problems at the University.

Regulators – “New FASFA Changes Will Bring Unintended Consequences for Colleges”^[60]

In 2015, the Department of Education made major changes in how students calculated their families expected family contribution. This change forced colleges to reveal their net price much earlier than in the past. In order to remain competitive, colleges were pushed to make larger financial aid awards. In addition, earlier and larger awards encouraged prospective students to apply to more colleges.^[61] Increased applications added to the uncertainty about the size of incoming classes and the reliability of budget estimates.

Non-Institutional Influences – “AAUP Rebukes College for Firing Professor Who Called Armed Student a Threat”^[62]

In 2015, a headline from The Chronicle of Higher Education said it all in light of the continued and unpredictable violence on campuses for which the board of trustees and president are often held responsible.

Courts – “Court Holds That U. of Illinois Broke Contract in Salaita Case”^[63]

In 2015, the U.S. District Court in Chicago ruled that “The University of Illinois cannot disavow having contractual obligations to Steven G. Salaita,” the controversial scholar whose job offer it rescinded last summer before he could begin teaching on the Urbana-Champaign campus.^[64] Salaita had been fired for tweets critical of Israel. The day after the court’s ruling was announced the Chancellor of the University of Illinois stepped down.^[65]

So, what can presidents and boards of trustees do to ameliorate resistance to change and move their institution beyond the demographic crisis waiting to crash down upon them? The next section presents two different approaches to moving a college forward. Each approach is dependent on the situation and the level of crisis at an institution.

References

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↑
It is not the intention here to present the full history of shared governance. There are two books that provide a fuller explanation of shared governance: Locus of Authority by William G. Bowen and Eugene M. Tobin, published by Princeton University Press in 2015, and Governance Reconsidered by Susan Resneck-Pierce, published by Jossey-Bass in 2014. ↑
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↑
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↑
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↑
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Boeckenstedt, Jon (September 16, 2015); “New FSFA Changes Will Bring Unintended Consequences for Colleges”; The Chronicle of Higher Education (Retrieved September 21, 2016); http://www.chronicle.com/article/New-Fafsa-Changes-Will-Bring/233137. ↑
Schmidt, Peter (May 16, 2017); “AAUP Rebukes College for Firing Professor Who Called Armed Student a Threat”; The Chronicle of Higher Education; http://www.chronicle.com/article/AAUP-Rebukes-College-for/240080. ↑
Schmidt, Peter (August 6, 2015); “Court Holds That U. of Illinois Broke Contract in Salaita Case”; The Chronicle of Higher Education (Retrieved September 20, 2017); http://www.chronicle.com/blogs/ticker/court-holds-that-u-of-illinois-broke-contract-in-salaita-case/102881. ↑
Schmidt, Peter (August 6, 2015); “Court Holds That U. of Illinois Broke Contract in Salaita Case”; The Chronicle of Higher Education (Retrieved September 20, 2017); http://www.chronicle.com/blogs/ticker/court-holds-that-u-of-illinois-broke-contract-in-salaita-case/102881. ↑
Norton, Ben (August 7, 2015); “University of Illinois Chancellor steps down as judge upholds Salaita lawsuit against school on 1^st amendment grounds”; Mondoweis; (Retrieved: November 5, 2019).

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Hiring a New College President

by Debra M. Townsley | May 21, 2022 | Presidential Leadership

General Problem

Hiring a college president is fraught with uncertainty about the capability of a president to lead an institution during a time of massive change in higher education.

Specific Problem

As threats like COVID-19, aggressive price competition, and sharp declines in the prospective student pool due to falling birth rates erode the financial stability of colleges, boards of trustees need presidents who can effectively lead in response to these threats. This problem is especially acute, when the board seeks a new president because they have been attuned to finding new leaders by drawing from candidates who have risen up the academic ladder. Too often academic leadership do not effectively groom candidates for institutional leadership. The academic ladder trains its leaders to avoid conflict by deferring to collegial decisions by the faculty: for class schedules, new programs, policy, and supervision. As a result, candidates from the faculty may not have developed the technical skills for institutional schedules, integration of new programs into the mission or support the financial sustainability of the institution, rigorously evaluate existing programs, or lead the faculty toward new methods or new institutional goals.

Solutions

In order to improve the probability of finding the best candidate for the presidency, boards need to change how they identify a new president. We recommend that boards take the following steps to selecting a president: Provide evidence of

Academic technical skills – scheduling of classes, reviews of policy manuals, identification of inconsistencies in catalogs, assessment of programs, degrees, and new programs, how to connect the program to the job market, etc.
Financial analysis of programs and degrees.
Academic program connection to marketing – ability to identify target student markets and what students expect
Leading a team versus deferring to a collegial decision.

Scarce Resources

by Michael K. Townsley | May 21, 2022 | Financial Strategy and Operations

Time, Energy, Staff & Money – Selecting Strategic Priorities

First Published on Stevens Strategy Blog

Every college president faces the same challenge of figuring out what to do with the limited resources that they have available. Usually, scarce resources are defined in terms of money. In 1974, James G. March and Michael Cohen proposed that in higher education, scarce resources should also include the time and energy available to the president and chief administrators. Assuming that these positions hold limited amounts of time and energy, when the focus is on the wrong issue or on too many priorities, the ability to focus on priorities needed to successfully drive the institution forward is greatly reduced.

This brief is mainly concerned with the effect of scarce non-financial (time and energy) resources on presidents of small, non-research institutions, especially those colleges that are financially unstable, and their ability to manage strategic initiatives. In most cases, these presidents do not have a deep administrative team because their chief administrative officers do not have supporting staff to help with their work. At some of these institutions, one or more of the chief administrative officers may not have the experience to understand the details of the work of their office or the requirements to effectively manage a strategic initiative. As a result, the presidents of these colleges must work with each chief administrator to help them develop and even manage their strategic initiative.

One example of the demand on scarce time and energy imposed on presidents would be the adoption of a new academic program as a major strategic initiative. The president and the Chief Academic Officer will more than likely have to work together to design the curriculum, prepare the budget, consult with the faculty, design a marketing plan, select and improve or add instructional space, and oversee implementation of the program. The expenditure of the president’s time and energy on such a project is not trivial and can be overwhelming if there is an obdurate faculty or other obstacles to planning and implementation. The time spent on getting this academic initiative will probably absorb excess time and energy needed for other critical initiatives.

Financially weak colleges are most vulnerable to the limits of scarce time and energy resources of their presidents because the college requires constant work to keep it afloat. The presidents at these colleges often face a Sisyphean dilemma – do they work solely on keeping existing instructional services, marketing programs, capital projects, and operational costs on track which keeps the college delving into and out of deficits. Or, do the presidents turn their attention to new strategies, reducing the time spent on monitoring existing operations and risking sliding backward as the quality of operations and financial viability diminishes.

So, how can presidents (with the board of trustees) select strategic initiatives that can advance the instructional, operational and financial integrity of a small, financially vulnerable college? Here are several suggestions:

Before a president adds a new strategic initiative to a to do list, an estimate needs to be made of the time required and how existing initiatives would diminish the time available, or how existing projects would take away the time from the management of a new initiative.
Presidents should concentrate on strategic initiatives to develop new academic programs and/or concentrate on new market segments (geographic segments, demographic segments, or other types of markets) to expand enrollment and/or new revenue sources.
Presidents should limit their involvement in trivial strategic initiatives that absorb a considerable amount of time and only produce a marginal impact on the financial condition of the institution.
Presidents of small, financially unstable colleges need to surround themselves with skilled chief administrative officers. The cost may be large but the benefits could outweigh the cost.
Presidents should seek chief administrative officers with specific characteristics for three key positions: Chief administrative officers should understand the implications of new academic programs and be able to produce management reports that track critical performance measures; Chief financial officers should be skilled accountants and should be able to produce financial plans that predict the effect of strategic initiatives; Chief marketing officers should know whether new students would be attracted to new academic programs, how to increase enrollment in existing programs, and how to develop effective advertising plans.
If the president must make dramatic cuts in personnel, a good education attorney should review the plans and any contracts. Otherwise, the president may find that their time is absorbed by court appearances and labor negotiations.
Presidents of these colleges must recognize that speed in implementation of a strategic initiative, in particular initiatives intended to generate enrollment, is everything. Taking more than one year to move from plan to action can raise the risk that a college’s financial condition will continue to deteriorate as enrollments decline further. As a college slides further down the enrollment scale, pressure on new programs to generate larger enrollments become greater and may fall beyond the capacity of the plan or the resources of the college to be successful. These risks are exacerbated as a president’s scarce time and energy resources are swamped by unexpected crises owing to the deteriorating condition of the institution. Tempo is everything in improving the financial condition of a small college.

Effective use of scarce resources requires a comprehensive strategic plan that lays out strategic initiatives, tests those initiatives, and sets priorities that account for the cost, time, and energy of the president and chief administrators. With a thoughtfully designed strategic plan, the president can focus on the most important initiatives and increase the probability that the college can strengthen its financial position and its academic programs.

Chief Financial Officer – Private Institutions

by Debra M. Townsley | May 21, 2022 | Financial Strategy and Operations

Private commuter colleges are a rare breed in higher education. They operate like a community college but offer undergraduate and graduate degrees. These colleges typically operate with multiple sites, tuition prices, and academic periods. They are fast-paced and aggressively competitive, reacting quickly to changes in student markets and to changes in their competitive environment. Financial stability at these colleges usually rests on these strategic elements: high enrollment growth rates, low net tuition, a flat administrative hierarchy, diversification of tuition revenue sources, and continual development of new programs and markets. Diversification of tuition revenue sources means that the college avoids reliance on a single sector of the student market. Programs are designed to attract students from different age ranges, work settings, income levels, and geographic areas. The intent of diversified tuition revenue sources is to avoid being trapped by unexpected and harmful changes in one segment of their student market. A commuter college program offers its students the best education for their money by applying accepted academic standards to the design, delivery, and assessment of courses and programs of instruction.

Strategic Elements

The first strategic element is a high annual rate of enrollment growth, which is necessary for the college to keep pace with external inflation and internal inflation rates. The external rates of inflation are the usual sorts that affect all institutions: utilities, benefits, instructional materials, and maintenance supplies. Internal inflationary rates necessarily result from the inherent structure of an institution: the number and quality of its administrators, staff, and faculty; its method of instructional delivery; the age and size of its plant; and its tuition discounting.

Low net tuition is a necessity because it is a primary and visible tool of competition. It is not unusual to find that commuter colleges do not offer tuition discounts because they believe that the posted price is how their student market chooses a college. They choose their posted price carefully, giving effect to, among other things, competitors’ rates and intangible factors such as consumer tendency to equate price to quality.

A flat administrative hierarchy is an important strategic element in a low-tuition strategy because, as Zemsky pointed out, there are powerful forces to expand the number and range of administrative offices in higher education^[1]. Unchecked growth of the administrative hierarchy can increase the pace of internal inflationary rates, which forces the college to increase tuition more rapidly than it would prefer or to expand enrollment faster than is warranted by the size of its markets.

Diversification of tuition revenue sources requires that as new programs are developed they should become part of the existing enrollment base so that new programs are not treated as fly-by-night operations. Solidifying the enrollment base is as important at these schools as at any other institution of higher education. They cannot have a base that is eroding faster than the growth rate from new markets. Any enrollment slippage (no matter how small) and any unanticipated large increases in enrollment can have a devastating impact on these colleges. To protect the base, commuter colleges need to continuously improve existing programs in response to demands in the student and job markets.

In addition, these colleges must continually find new student markets by under pricing the competition, moving into new geographic areas, locating new sources of students, and developing new programs to fit changes in the job market. Commuter colleges must be dynamic; They cannot remain static or competitors, costs, and student markets will change, leaving the institution teetering on the edge of failure. CFOs at these colleges may find themselves subjected to a high level of stress because they must keep everyone, especially the president, from buckling when confronted by internal interests that would raise tuition to cover higher costs or accede to higher costs without considering the impact on financial strategies. Markets, enrollments, financial management, and cost controls are mutually dependent factors for private commuter colleges if they are to remain financially viable and to offer quality academic programs to their students.

Operating Principles

The preceding strategies will only work if the financial manager has an effective set of operational principles to guide and control the finances of the institution. These principles are flexible budgets, exacting financial controls, constant monitoring of cash flows, and minimal use of debt for capital financing. The balance of this chapter will discuss how these principles are applied in practice.

Flexible Budgeting

Budgets are critical for the success of commuter colleges, despite the fact that enrollment and faculty expenses rarely match budgetary goals. The budget is a benchmark, which establishes the basic reference point for operational performance because the goal is not to match budgeted net income but to exceed it by a wide margin. A commuter college will fail quickly if its goal is to simply match the net income set by the budget, as is the case at most private institutions.

As will become evident, enrollment and actual expenses for the current fiscal year will become the basis for the following year’s budget. The reason that matching the net income goal is not good enough is that net income must be large enough to provide sufficient surplus to maintain buildings, to expand programs, to add new markets, and to act as a springboard to cover external and internal inflation for the following fiscal year.

A flexible budget simply means that the budget can accommodate changes that occur during the fiscal year. This sounds simpler than it is because the CFO must understand in detail the economic, financial, and operating conditions that drive revenue and expenses. Then, the CFO must construct a budget structure that takes into account the scale and timing of those conditions. A flexible budget is what budgets are supposed to be – objective references for actual performance. Budgets and performance must be monitored according to the academic schedule because that is when critical financial and operational decisions are made and when new flows of revenue and expenses are evident.

Flexible budgeting is based on the following concepts:

Tuition revenue and enrollment are tracked by academic level, price structure, site or campus, and academic schedule.
Projected enrollments are not used to estimate revenue because they would act as an incentive to unnecessarily increase fixed expenses.
Departments are budget units that are clearly defined, fit within the organizational structure of the college, and have the appropriate authority and responsibility for their budget.
All departments should have a common set of expense line items so that performance can be understood across departments.
Budget line accounts for small inconsequential expenditures should not be created because it complicates management of critical expenditures.
Excess revenues for a department should not inure to the department but default to the authority of the president. The presumption is that the president, who is ultimately responsible for strategic decisions, should have the authority to determine the appropriate use of surplus funds.
Discretionary funding should remain at the highest administrative levels rather than frittering these funds away at lower levels and should align with strategic goals.

Budget Management and Financial Controls

Budget management and financial controls are where the metal of the chief administrative team is tested at fast-paced commuter colleges. The team must be a team in all senses of the word. Team members must be compatible, supportive, extremely competent, and hard working. The budget is only a starting point; it is the work that the chief administrative team does with the budget that makes a commuter college successful. Each team member must know all levels of her/his responsibilities and conditions that can make or break the college’s plans. As important as it is to know their job, team members must also recognize how their work fits into the larger picture and what they must do to support the work of the other members of the chief administrative team. In addition, the team must assure that their staff is competent and reliably carries out departmental responsibilities. Sometimes, college administrators, faculty, and staff either ignore or do not understand that the performance of each employee is fundamental to the viability of the institution. Since many commuter colleges are tuition-dependent (90% or more of its revenue coming from students), they live on the margin of survivability and cannot tolerate staff incompetence or working against the system. Therefore the president and the administrative team must build esprit de corp to assure that all personnel and offices in the college work together. If this can be done, budget management and financial controls can increase the likelihood that the college can grow and achieve its mission.

The CFO is critical to the success of a commuter college because it is her/his responsibility to see that financial performance is guided by budgetary plans and kept on course by rigorous financial controls. Given the condition that chief administrators must act as a team, they must vigorously support the work of the CFO. Otherwise, financial performance and budgetary control may loosen, and decisions which should be made for the best interest of the college may be replaced by arbitrary, self-serving decisions. Commuter colleges that are heavily dependent on student revenue and budget controls cannot violate for a moment the principal that administrative teams can only achieve their goals if they subsume their personal interests to the mutual requirement to serve the best interest of the college and its mission.

The purpose of financial management is to use the total financial capacity of the institution to support the mission, to accomplish strategic goals, and to implement operational plans.^[2] On the other hand, financial controls refer to the management of current resources, revenue, expenses, cash, and short-term debt to accomplish operational plans and goals. It is the CFO who is responsible for financial management and controls, and it is the duty of the CFO to see that everyone on the team and in the organization understands the necessity and the policies and processes of financial management and controls.

Financial management and financial controls rest on the following concepts:

Financial Management
1. Assets must yield positive income results for the college. Since these colleges have small or no endowments, investment in physical assets must yield positive returns unless the investment is supported by gifts.
2. A portion of the cash from net income should be designated for capital projects, such as renovations, replacement, and repairs.
3. Assets should be cataloged and regularly revised to protect, control, and monitor whether or not they are being used effectively.
4. These colleges, given their dependence on enrollment for revenue, should have infrastructure that can be easily expanded or contracted. This can be done through space rental, online programs, use of part-time faculty, or contracted student services.
Financial Controls
1. During and immediately following an enrollment period, enrollment and part-time instructor expenses should be checked against the relevant budgets for the period.
2. Authorization of expenditures should take place before the expenditure is made. This control implies that petty cash and non-purchase order expenditures must be tightly controlled.
3. Department heads should receive timely reports with budget warnings of excess expenditures or of revenue flows that fall below plans.
4. The CFO must take immediate action to stem the loss on net revenue to excess expenditure. In addition, the CFO needs to prepare short-term budgets for emergency expenditures.
5. Only the office of the CFO can move funds between accounts.
6. Summary budget and financial reports (dashboards) should be provided to the President, cabinet, and board of trustees during the year. An annual review should be given within six weeks of the close of the fiscal year.
7. The CFO must begin Budget Management and Financial Controls on the very first day of a fiscal year and continue them through the “sign-off date” for the fiscal year. Quality financial systems enable the financial affairs function to perform this juggling act.
8. Cabinet members must review all situations where employees fail to follow policy or procedures.

Cash Controls

Cash is where the CFO does heavy lifting because cash is king for commuter colleges due to their high levels of tuition dependency. Significant deviations between cash flow budgets and actual cash flows can be costly to the college. At all times, the CFO must know the state of cash flows and any factors that might negatively alter cash balances.

Cash controls should follow these principles:

Receivables, especially late and uncollectible receivables, undermine cash. Receivables should be monitored monthly.
The CFO must track third-party receivables, for example, contracts with organizations making tuition payments for their employees.
Only an assigned member of the business office should cut checks and that person cannot have direct access to the ledgers.
The CFO should check cash balances.
The CFO should prepare a monthly cash flow budget and compare it to actual cash flow. Deviations may indicate market influences necessitating budget or operational modifications.
The CFO must maintain close working relationships with bankers.
Cash should be held in interest-bearing accounts.
The accounts payable staff must adhere to the discounts and due dates of invoices.
Use courier services or bank drops to quickly move cash into college accounts. (This is also an excellent internal control procedure.)

Minimizing Debt

If there is one factor other than enrollment that is critical to commuter colleges, it is debt. Debt can destroy these institutions if it is done without care. Debt puts commuter colleges at considerable risk because they often lack the reserves to offset unexpected variations in the production of net revenue, which is necessary to pay the interest and principal for debt obligations. The decision to employ debt to fund a project is subject to its use and the potential of the project to generate revenue that offsets debt service payments.

Minimizing the impact of debt on the financial structure of commuter colleges is determined by these circumstances:

Major capital investments should follow these rules:
1. Debt is used for income-generating capital projects.
2. Gifts and net asset reserves should be used for non-income or non-recurring generating projects.
The first priority at tuition- and fee-dependent colleges should be to use excess revenue to pay down debt principal to minimize risks that the college will have unforeseen events that reduce its capacity to cover its debt service.

Summary

Commuter colleges are a unique breed of private higher education institutions. They are in the unenviable position of having to husband their resources to conduct aggressive marketing campaigns to survive. If they are good at recruiting students, in some cases at double-digit growth rates, they offer a quality education at a reasonable price. At some commuter colleges, a degree may cost no more than a public education and may even be less if the degree is combined with a two-year community college degree. If a commuter college is not good at growing enrollment, the college will find that it is always on the brink of demise. It will have inadequate financial resources to provide its students with instructional programs that are acceptable in the marketplace or to accrediting agencies. The watchword at these colleges must be prudent aggressiveness that can overwhelm less flexible competitors while providing a marketable degree to its students.

Take Away Points

Husband cash.
Minimize debt.
Offer students degrees at low-net tuition prices.
Aggressively compete in student markets.
Generally limit tuition increases to less than the rate of inflation.
Carefully manage additions to administration and support services.
Use part-time faculty to reduce the cost of delivering a degree and provide flexibility in reacting to enrollment variations.
Find new ways of delivering a degree.
Monitor cash flows and keep receivables current and at an acceptable level. Cash Is King.
Use known enrollment data and not projections to forecast revenue.

Endnotes

1990 Zemsky, Robert “The Lattice and the Ratchet” Policy Perspectives; The Pew Higher Education Research Program; (June) Volume 2, Number 4: pp. 1-8 ↑
See Chapter XII, which discusses financial management for colleges and universities. ↑

Salient Institutional Relationships for the Chief Financial Officer

by Michael K. Townsley | May 21, 2022 | Financial Strategy and Operations

A CFO’s contribution to the mission of an institution – building and sustaining its financial viability – depends upon the relationships that she/he has with salient positions within the institution. Positions are salient when they are directly involved in budgetary and financial decisions. If a CFO has the skills to work well with salient positions, then there is a good chance that the financial condition of the college will reach a state of economic equilibrium^[1], ceteris paribus. Conflict with one or more of these positions reduces the opportunity to achieve equilibrium. It is in the interest of the institution to have a CFO who can foster strong relationships with salient positions that can influence the dynamics of producing financial strategies to foster and sustain the financial viability of the institution.

Key Salient Positions – Board of Trustees and President

The board of trustees and the president are the key salient positions for the CFO because they shape the goals, responsibilities, and much of the routine activities (for example, debt, major contracts, and budgets) of the CFO and the business office. In addition, the board and the president can provide validation and affirmation for financial decisions that the CFO must carry out.

Why is validation and affirmation important? Validation may be needed prior to taking action on a decision and when statute, regulation, or requirement by another legally-constituted entity requires formal authorization by the board of trustees. These conditions are mainly present in public institutions during the submission of budgets and for private institutions in applying for grants or offering a publicly-backed bond. Without validation, the CFO does not have the authority to act and may be held liable for unauthorized actions. Affirmation is the concept that prior to a finalizing a decision that she/he has the authority to make without the direct approval from someone higher in the administrative hierarchy, the CFO goes ahead and seeks the approval of the board and/or the president to approve her/his decision anyway. Affirmation is always a useful step to take to avoid future opposition that could stall the work of the CFO and/or the college. Ideally, there are board and college policies that identify categories of decisions that require affirmation by a higher level of authority, such as dollar limits on signing contracts and the types of gifts that the college will accept from benefactors.

The president and the CFO need to establish a mutually supportive relationship because it is in their self-interest to support the decisions and plans of each other subject to legal constraints. Of course, this proposition of mutual affirmation is subject to the good sense rule that it is not judicious for either party to make a decision without first acquiring mutual affirmation for the decision. There is nothing more upsetting to a president than to discover that the CFO has taken unilateral action, even though it is within the prescribed authority of the CFO, especially when the subject is sensitive to the mission of the college and to the president. For example, even though facilities may be under the authority of the CFO, start dates, length of the project, and the scope of projects should be shared with the president. There is nothing more upsetting to a president than to hear that work on the plant is taking place with news of the work coming not from the CFO but from someone else.

The CFO also plays an important role by being the proxy naysayer for the president. The implied understanding (but not formal duty) of the CFO is to say that some actions cannot be taken because it violates policy, budgetary plans, or other authority of the business office. Even though this duty can be distasteful to the CFO, it is imperative that she/he undertake this task so that the president can remain neutral and save his/her personal relationship capital for critical issues that must affect the well-being of the college. In support of the “nay saying” task, the president should acknowledge that the CFO has the authority to say “no” and that the president supports the decision without further argument. The aim is to make the CFO, not the president, the “go-to” person on budget and financial issues, policies, procedures, and requests. This practice can help the institution maintain the value of budget and business office policies, procedures, and plans. This practice is also in keeping with the basic management theory that employees, in this case the CFO, have the appropriate authority and responsibility to perform their jobs.

The chief components of the salient relationship with the board of trustees and president are to inform, educate, and expeditiously prepare solutions. To inform is to provide immediate and clear information about the current financial conditions of the institution and describe any factors that could have a positive or negative influence on those conditions. Information is best disseminated through a simple dashboard report. To educate is to explain complex financial transactions and reports in a fashion that can be understood by a layperson. To be prepared with solutions is to be able to design financial plans that respond to issues that the board or president wish addressed, such as changes in discount rates, debt financing, or employee benefits.

Because of the important responsibilities of the CFO, it is critical that the president and CFO have an open and on-going dialog to ensure that they are on the same page. The CFO must have a firm understanding of the institution’s mission and the trustees’ and president’s vision for the future of the college or university.

Key Salient Colleagues

CFOs obviously cannot perform their duties with only the input of the board and president. They need the support from their key salient colleagues: other senior administrators, especially the chief academic officer (CAO); the registrar and the staff from admissions; buildings and grounds; information technology; financial aid, billing, purchasing, and payroll. The relationship with these colleagues is predicated on involving them in operational meetings, budgetary performance reviews, and new operational and capital plans.

Operational meetings should be subdivided between formal and informal arrangements to assure a constant flow of information about conditions that affect current budgets and shape plans for future budgets. It is essential that regular formal meetings be held because informal arrangements too often result in missed communications or forgotten and/or ignored issues. Therefore, formal meetings should have agendas, minutes, and regularly scheduled items for review. The purpose of informal meetings is for the CFO to get into the infrastructure and get a sense for what is happening with policies, procedures, and budgets as they are used by the people who are actually carrying out the work and plans of the institution. Operational meetings ensure an ongoing understanding of policies and procedures. They are also useful in planning and reviewing new initiatives, for example, a new refund policy.

Budgetary performance reviews do not entail evaluation of the budget work performed by employees, but they do involve working with colleagues to ascertain if performance fits with expectations. The purpose of the budget performance review is to determine why existing or new policies, procedures, or plans do not conform to expectations. It is meant to question if the problems are caused by errors in understanding of the task or by unanticipated glitches in the system. Once the problem is understood, colleagues and the front-line staff can develop corrective actions to redesign the policy or procedure or plan to eliminate the problem.

Operational and capital requirement plans depend upon good information so that budgets and capital plans are based upon reliable data, true assumptions, and a valid conception of need. Budget and financial data should be collected in a tightly structured manner so that there is a direct link between the data, real conditions, and plans. The CFO should work through budget planning committees with fellow administrators or with staff who have responsibilities for the following information:

Enrollment – work with admission manager (enrollment manager, if the position exists), registrar, and financial aid staff to establish realistic revenue numbers. Too often, institutional managers drive enrollment estimates based on their expense budget or they estimate enrollment by adding a percentage increase that has no basis in fact or in the college’s share of the student market.
Faculty needed to cover enrollment for the coming year.
Student services needed to support the expected proportion of new students who may need academic assistance or personal support.
Building and grounds where a comprehensive list of renovations, repair, updating, or expansion of the plant and grounds is needed.
Auxiliary services budget requirements commonly include estimates of the number of students who will live in residence halls, use food services, or make purchases at the bookstore. Also, a list of renovations, repairs, updating, or expansion of auxiliary plant should be developed.
Capital projects plans should define the purpose, scope, and timing of new projects.
Business Operations –review if revenue or expenses could be affected by changes in the level of student collections, requirements for cash, and reformation of operational policies and procedure.
Cost Management Team should formulate solutions for cutting or minimizing cost increases.

Budget and capital planning groups do not guarantee that there will be no budget errors, but these meetings can reduce the chance for errors due to inattention. Additionally, the CFO cannot act in a vacuum on revenue and expense projections. The CFO must consult with each department about its budget goals, new initiatives, staffing, and support expenses. The budgetary meetings should be seen as an opportunity to conduct an annual review of spending trends and budgetary decisions over the past several years. The impact of decisions upon the budget become apparent over time; and the CFO, in conjunction with budget managers, should assess whether past decisions represent the best allocation of resources to serve the mission of the department and, most importantly, the mission of the institution.

The relationship between the CAO and the CFO needs to be fostered by both because their mutual understanding of the connection between academic mission, programs, and budget are essential to developing a valid budget. It is imperative that the CAO have direct input into the goals and operational estimates for the budget. The CAO is the conduit for the budget process to the faculty. If the faculty perceives that the budget process is transparent and that the CFO understands the requirements and constraints of the academic mission, then most faculty will be willing to support changes in financial strategies. The importance of the CAO-CFO relationship is indicated by the annual meeting for these officers conducted by the Council for Independent Colleges (CIC) and the National Association of College and Business Officials (NACUBO).

Common Set of Economic and Financial Principles

Financial management must necessarily rest on the assumption that everyone involved in developing and managing financial strategy and budgetary plans agrees with a common set of economic and financial principles. If they do not agree, financial management will deteriorate into a continuing squabble over revenue sources, expense allocations, responsibilities, and appropriate level for financial resources. These squabbles are not just sources of heartburn for everyone involved, but they also foster chaotic conditions in managing financial operations, which could also diminish the financial stability of the institution. Too often, it is the loudest department, not the department that has a significant role in the academic strategy of the college, which receives the largest share of the budget pie. Therefore, it is imperative that managers reach an accommodation on basic economic and financial principles. How agreement is achieved will depend on the unique characteristics of a specific institution.

The basic principles that the administration of the institution agree upon should state obvious and standard practices in managing finances in an institution of higher education. Agreement about a common set of principles has several direct benefits for the business office and the institution. Principles reduce disputes over finance; they can improve the quality of financial decisions; and they can promote the financial condition of the institution. The basic principles, which are discussed below, cover these areas at a minimum: economic forces, budget policies and rules, and essential accounting rules.

Economic Forces

There are three economic forces that affect the financial condition of an institution: revenue markets (sub-divided into student, gift, and grant markets), labor markets, and price. These forces involve classic economics in which the intersection of demand (revenue markets) and supply (educational output) determine price, while the marginal labor cost (the primary cost factor in higher education often accounting for 70% of the cost) and marginal revenue determine profit^[2]. If the college plans to continue on its current economic path, senior administrators need to understand how supply and demand will affect the institution and if those forces are or are not changing. It is a useful exercise during budget planning for senior administrators to meet and review what is happening with its markets and competition and how changes could affect its financial condition. If the college wants to change its targeted student market, it is a necessary exercise that senior administrators clarify and agree upon the structure of supply, demand, and competition that will affect its plans.

Budget Policies and Rules

There is an economic principle that is often only seen as a minor element in budgetary planning in higher education; the concept is “scarce resources”. Too many involved in budgets and capital planning treat expenditures and uses of funds as an issue independent of sources of funds, as mentioned earlier. It would seem to be the case that resources are assumed to be infinitely elastic and can be expanded to whatever need is deemed important. The likelihood that scarce resources are ignored increases as planning moves down into the organization or away from positions that have to produce financial resources. This happens because either the position makes little or no contribution to the production of funds or because her/his responsibility is so small that they do not see the larger impact of their requests on the budget or the finances of the institution. CFOs must not let the belief prevail that “scarce resources” are irrelevant in their institution if they want to have a financial and budgetary system built upon accepted principles of economics and just plain good sense.

Independent institutions that operate as not-for-profit entities must work within the financial constraint that excess revenue does not accrue to managers, trustees, or other members of the college or university. It is a misconception that not-for-profits cannot generate profit or excess revenue. If this constraint was true, the institution would never be able to generate adequate resources to maintain the purchasing power of its current assets (cash); or sustain the efficient, useful, and safe operation of the plant and grounds; or keep the purchasing power and the plant in line with changes in technology, student demand, government regulations, or the labor market.

The president, CFO, CAO, other senior administrators, faculty, and staff must understand and agree that the institution must grow its financial resources if it is to achieve its mission, successfully compete in the marketplace for higher education, and deliver graduates prepared for the job market. Understanding and agreement often depends upon the ability of the CFO to convince key decision makers and important constituencies that the college must do more than break-even. Failure to agree that the college must continuously expand its financial resources means it will face the possibility that erosion of financial resources will compromise the college’s or university’s ability to deliver on its mission and its educational goals.

Essential Accounting and Business Office Rules

Few things have greater potential for upsetting the relationship between CFOs and non-financial managers than problems related to accounting rules. CFOs typically see accounting rules as a given that guide the logical and coherent activities of the business office. On the other hand, non-financial managers see accounting rules as a maniacal plan that defies common sense and imposes unworkable rules as they try to solve budget problems that confront them daily. Therefore, it is important that non-financial managers understand the rationale behind essential accounting and business office rules and have ready access to those rules so that the CFO or her/his staff does not have to devote their time (which is in short supply) answering questions that are trivial. The CFO should also prepare and educate the president about reports and business office practices. CFO’s must inform and educate non-financial managers, which may resolve issues before they become contentious.

New and current staff in the business office must also understanding these essential accounting and business office rules:

Structure of the budget reports
Definition of line account titles and numbers
Rules on assignment of revenue to programs, departments and line accounts
Restrictions on what can be expensed to a specific line account
Authority limits on:
1. Dollar amounts that can be spent through petty cash
2. Dollar amounts that each level in the institution can approve for a contract
3. When a purchase order has to be prepared
Process for filing a purchase order and for requesting an invoice for payment
Process for requesting transfers between line accounts and limits on which accounts can be used for transfers

Misunderstandings sometimes occur around gifts and restricted funds. Established policy from the Federal Accounting Standards Board (FASB) delineates how gifts and restricted funds are to be treated in the business office. Many non-financial managers do not understand that the receipt of a pledge is not the same as the receipt of cash; nor do they understand that the use of restricted gifts is limited to the income generated by the gift. Cash received in a latter year for a prior year pledge is not posted as revenue to the fiscal year in which it is received. Therefore, budgets cannot be balanced on the back of cash received for pledge receivables. Gifts that are restricted for a particular purpose are placed in the endowment, and only the income from the gift can be used for the stated purpose. It is paramount that the CFO clearly and precisely inform everyone (the president, senior administrators, and non-financial managers) dealing with the gift how it is to be used and how regulations limit its use to its income. The proper controls, records, and assurance of the correct use of gifts and restricted funds are an essential duty of the CFO.

Obviously, these rules discussed above are not exhaustive, but they do indicate what non-financial managers need to know to effectively work with the business office. It would help if the CFO could assign a lead person on the business office staff to meet with non-financial managers to identify what questions they have and what information they need from the business office. These rules should be promulgated through short training meetings and then placed on the institution’s website for easy access to help someone quickly find an answer. As policies and procedures change, the changes should be sent out and should also be added to the website.

Summary

Salient relationships, as this chapter has noted, are critical to the success of a CFO. They cannot be ignored and should be part of a CFO’s approach to his/her strategic and operational plans. For the CFO, the task of building and maintaining successful relationships with salient positions must be founded on the following principles:

Inform, educate, and respond to the board and president about financial plans and operations.
Work with colleagues who are critical to strengthening the financial condition of the institution and include them in:
1. Operational meetings, which involve formal and informal meetings
2. Budgetary performance reviews to determine if budget plans are on or off course and what can be done to resolve operational problems
3. Budget and capital requirement planning so that colleagues can provide their insight into ways of improving the allocation of resources and of identifying potential problems
4. Establishing financial teams designed around important segments of financial or budgetary plans
5. Reaching common agreement on economic forces that shape the financial condition of the college
6. Work with non-financial managers so that they understand the rationale and benefits behind accounting and business office policies and procedures

Even if a CFO is a skilled communicator, which is becoming a significant requirement for this position, and a competent accountant and financial manager, this should not lead to the conclusion that all problems will be eliminated in their relationship with salient colleagues. The reality is that CFOs, presidents, chief academic officers, and other chief administrative officers have different interests because the goals and processes of their positions push them away from accepting the basic demands placed on the office of the CFO. The best that a good CFO can do under these circumstances is to see issues that salient colleagues raise as opportunities and not as tribulations to be born in disgruntlement and resentment. The latter makes for unhealthy relationships and an unhealthy life style. It is comforting to know that most problems, when viewed in the rear view mirror of time, are often much smaller than when you are next to them.

Take Away Points

A CFO needs affirmation by the president or the board to take action, even if the CFO already has the requisite authority, in order to reduce the possibility of conflict with colleagues, faculty, or staff.
The CFO and president need to form a mutually-supportive relationship.
CFOs should be prepared to become the proxy naysayer for the president.
The chief components of the salient relationship with the board of trustees and president are: to inform, educate, and expeditiously prepare solutions.
The CFO should meet regularly with colleagues to review operational and budget performance.
Key employees need to understand and agree upon the economic forces that affect the college’s student and labor markets.
The CFO is responsible for preparing and distributing the primary accounting and business rules used to manage the budget and finances of the college. As part of this responsibility, the CFO must conduct training for existing and new employees who are or will be budget managers.

Economic equilibrium is a state where the institution produces sufficient resources to support its mission. See chapter XIII for more information. ↑
Of course, we do not call it profit in higher education; it is referred to as a positive change in net assets. ↑

Key Salient Positions – Board of Trustees and President

Key Salient Colleagues

Enrollment – work with admission manager (enrollment manager, if the position exists), registrar, and financial aid staff to establish realistic revenue numbers. Too often, institutional managers drive enrollment estimates based on their expense budget or they estimate enrollment by adding a percentage increase that has no basis in fact or in the college’s share of the student market.
Faculty needed to cover enrollment for the coming year.
Student services needed to support the expected proportion of new students who may need academic assistance or personal support.
Building and grounds where a comprehensive list of renovations, repair, updating, or expansion of the plant and grounds is needed.
Auxiliary services budget requirements commonly include estimates of the number of students who will live in residence halls, use food services, or make purchases at the bookstore. Also, a list of renovations, repairs, updating, or expansion of auxiliary plant should be developed.
Capital projects plans should define the purpose, scope, and timing of new projects.
Business Operations –review if revenue or expenses could be affected by changes in the level of student collections, requirements for cash, and reformation of operational policies and procedure.
Cost Management Team should formulate solutions for cutting or minimizing cost increases.

Common Set of Economic and Financial Principles

Economic Forces

Budget Policies and Rules

Essential Accounting and Business Office Rules

New and current staff in the business office must also understanding these essential accounting and business office rules:

Structure of the budget reports
Definition of line account titles and numbers
Rules on assignment of revenue to programs, departments and line accounts
Restrictions on what can be expensed to a specific line account
Authority limits on:
1. Dollar amounts that can be spent through petty cash
2. Dollar amounts that each level in the institution can approve for a contract
3. When a purchase order has to be prepared
Process for filing a purchase order and for requesting an invoice for payment
Process for requesting transfers between line accounts and limits on which accounts can be used for transfers

Summary

Inform, educate, and respond to the board and president about financial plans and operations.
Work with colleagues who are critical to strengthening the financial condition of the institution and include them in:
1. Operational meetings, which involve formal and informal meetings
2. Budgetary performance reviews to determine if budget plans are on or off course and what can be done to resolve operational problems
3. Budget and capital requirement planning so that colleagues can provide their insight into ways of improving the allocation of resources and of identifying potential problems
4. Establishing financial teams designed around important segments of financial or budgetary plans
5. Reaching common agreement on economic forces that shape the financial condition of the college
6. Work with non-financial managers so that they understand the rationale and benefits behind accounting and business office policies and procedures

Take Away Points

A CFO needs affirmation by the president or the board to take action, even if the CFO already has the requisite authority, in order to reduce the possibility of conflict with colleagues, faculty, or staff.
The CFO and president need to form a mutually-supportive relationship.
CFOs should be prepared to become the proxy naysayer for the president.
The chief components of the salient relationship with the board of trustees and president are: to inform, educate, and expeditiously prepare solutions.
The CFO should meet regularly with colleagues to review operational and budget performance.
Key employees need to understand and agree upon the economic forces that affect the college’s student and labor markets.
The CFO is responsible for preparing and distributing the primary accounting and business rules used to manage the budget and finances of the college. As part of this responsibility, the CFO must conduct training for existing and new employees who are or will be budget managers.

Economic equilibrium is a state where the institution produces sufficient resources to support its mission. See chapter XIII for more information. ↑
Of course, we do not call it profit in higher education; it is referred to as a positive change in net assets. ↑

Key Salient Positions – Board of Trustees and President

Key Salient Colleagues

Enrollment – work with admission manager (enrollment manager, if the position exists), registrar, and financial aid staff to establish realistic revenue numbers. Too often, institutional managers drive enrollment estimates based on their expense budget or they estimate enrollment by adding a percentage increase that has no basis in fact or in the college’s share of the student market.
Faculty needed to cover enrollment for the coming year.
Student services needed to support the expected proportion of new students who may need academic assistance or personal support.
Building and grounds where a comprehensive list of renovations, repair, updating, or expansion of the plant and grounds is needed.
Auxiliary services budget requirements commonly include estimates of the number of students who will live in residence halls, use food services, or make purchases at the bookstore. Also, a list of renovations, repairs, updating, or expansion of auxiliary plant should be developed.
Capital projects plans should define the purpose, scope, and timing of new projects.
Business Operations –review if revenue or expenses could be affected by changes in the level of student collections, requirements for cash, and reformation of operational policies and procedure.
Cost Management Team should formulate solutions for cutting or minimizing cost increases.

Common Set of Economic and Financial Principles

Economic Forces

Budget Policies and Rules

Essential Accounting and Business Office Rules

New and current staff in the business office must also understanding these essential accounting and business office rules:

Structure of the budget reports
Definition of line account titles and numbers
Rules on assignment of revenue to programs, departments and line accounts
Restrictions on what can be expensed to a specific line account
Authority limits on:
1. Dollar amounts that can be spent through petty cash
2. Dollar amounts that each level in the institution can approve for a contract
3. When a purchase order has to be prepared
Process for filing a purchase order and for requesting an invoice for payment
Process for requesting transfers between line accounts and limits on which accounts can be used for transfers

Summary

Inform, educate, and respond to the board and president about financial plans and operations.
Work with colleagues who are critical to strengthening the financial condition of the institution and include them in:
1. Operational meetings, which involve formal and informal meetings
2. Budgetary performance reviews to determine if budget plans are on or off course and what can be done to resolve operational problems
3. Budget and capital requirement planning so that colleagues can provide their insight into ways of improving the allocation of resources and of identifying potential problems
4. Establishing financial teams designed around important segments of financial or budgetary plans
5. Reaching common agreement on economic forces that shape the financial condition of the college
6. Work with non-financial managers so that they understand the rationale and benefits behind accounting and business office policies and procedures

Take Away Points

A CFO needs affirmation by the president or the board to take action, even if the CFO already has the requisite authority, in order to reduce the possibility of conflict with colleagues, faculty, or staff.
The CFO and president need to form a mutually-supportive relationship.
CFOs should be prepared to become the proxy naysayer for the president.
The chief components of the salient relationship with the board of trustees and president are: to inform, educate, and expeditiously prepare solutions.
The CFO should meet regularly with colleagues to review operational and budget performance.
Key employees need to understand and agree upon the economic forces that affect the college’s student and labor markets.
The CFO is responsible for preparing and distributing the primary accounting and business rules used to manage the budget and finances of the college. As part of this responsibility, the CFO must conduct training for existing and new employees who are or will be budget managers.

Economic equilibrium is a state where the institution produces sufficient resources to support its mission. See chapter XIII for more information. ↑
Of course, we do not call it profit in higher education; it is referred to as a positive change in net assets. ↑

Key Salient Positions – Board of Trustees and President

Key Salient Colleagues

Enrollment – work with admission manager (enrollment manager, if the position exists), registrar, and financial aid staff to establish realistic revenue numbers. Too often, institutional managers drive enrollment estimates based on their expense budget or they estimate enrollment by adding a percentage increase that has no basis in fact or in the college’s share of the student market.
Faculty needed to cover enrollment for the coming year.
Student services needed to support the expected proportion of new students who may need academic assistance or personal support.
Building and grounds where a comprehensive list of renovations, repair, updating, or expansion of the plant and grounds is needed.
Auxiliary services budget requirements commonly include estimates of the number of students who will live in residence halls, use food services, or make purchases at the bookstore. Also, a list of renovations, repairs, updating, or expansion of auxiliary plant should be developed.
Capital projects plans should define the purpose, scope, and timing of new projects.
Business Operations –review if revenue or expenses could be affected by changes in the level of student collections, requirements for cash, and reformation of operational policies and procedure.
Cost Management Team should formulate solutions for cutting or minimizing cost increases.

Common Set of Economic and Financial Principles

Economic Forces

Budget Policies and Rules

Essential Accounting and Business Office Rules

New and current staff in the business office must also understanding these essential accounting and business office rules:

Structure of the budget reports
Definition of line account titles and numbers
Rules on assignment of revenue to programs, departments and line accounts
Restrictions on what can be expensed to a specific line account
Authority limits on:
1. Dollar amounts that can be spent through petty cash
2. Dollar amounts that each level in the institution can approve for a contract
3. When a purchase order has to be prepared
Process for filing a purchase order and for requesting an invoice for payment
Process for requesting transfers between line accounts and limits on which accounts can be used for transfers

Summary

Inform, educate, and respond to the board and president about financial plans and operations.
Work with colleagues who are critical to strengthening the financial condition of the institution and include them in:
1. Operational meetings, which involve formal and informal meetings
2. Budgetary performance reviews to determine if budget plans are on or off course and what can be done to resolve operational problems
3. Budget and capital requirement planning so that colleagues can provide their insight into ways of improving the allocation of resources and of identifying potential problems
4. Establishing financial teams designed around important segments of financial or budgetary plans
5. Reaching common agreement on economic forces that shape the financial condition of the college
6. Work with non-financial managers so that they understand the rationale and benefits behind accounting and business office policies and procedures

Take Away Points

A CFO needs affirmation by the president or the board to take action, even if the CFO already has the requisite authority, in order to reduce the possibility of conflict with colleagues, faculty, or staff.
The CFO and president need to form a mutually-supportive relationship.
CFOs should be prepared to become the proxy naysayer for the president.
The chief components of the salient relationship with the board of trustees and president are: to inform, educate, and expeditiously prepare solutions.
The CFO should meet regularly with colleagues to review operational and budget performance.
Key employees need to understand and agree upon the economic forces that affect the college’s student and labor markets.
The CFO is responsible for preparing and distributing the primary accounting and business rules used to manage the budget and finances of the college. As part of this responsibility, the CFO must conduct training for existing and new employees who are or will be budget managers.

Economic equilibrium is a state where the institution produces sufficient resources to support its mission. See chapter XIII for more information. ↑
Of course, we do not call it profit in higher education; it is referred to as a positive change in net assets. ↑

Key Salient Positions – Board of Trustees and President

Key Salient Colleagues

Enrollment – work with admission manager (enrollment manager, if the position exists), registrar, and financial aid staff to establish realistic revenue numbers. Too often, institutional managers drive enrollment estimates based on their expense budget or they estimate enrollment by adding a percentage increase that has no basis in fact or in the college’s share of the student market.
Faculty needed to cover enrollment for the coming year.
Student services needed to support the expected proportion of new students who may need academic assistance or personal support.
Building and grounds where a comprehensive list of renovations, repair, updating, or expansion of the plant and grounds is needed.
Auxiliary services budget requirements commonly include estimates of the number of students who will live in residence halls, use food services, or make purchases at the bookstore. Also, a list of renovations, repairs, updating, or expansion of auxiliary plant should be developed.
Capital projects plans should define the purpose, scope, and timing of new projects.
Business Operations –review if revenue or expenses could be affected by changes in the level of student collections, requirements for cash, and reformation of operational policies and procedure.
Cost Management Team should formulate solutions for cutting or minimizing cost increases.

Common Set of Economic and Financial Principles

Economic Forces

Budget Policies and Rules

Essential Accounting and Business Office Rules

New and current staff in the business office must also understanding these essential accounting and business office rules:

Structure of the budget reports
Definition of line account titles and numbers
Rules on assignment of revenue to programs, departments and line accounts
Restrictions on what can be expensed to a specific line account
Authority limits on:
1. Dollar amounts that can be spent through petty cash
2. Dollar amounts that each level in the institution can approve for a contract
3. When a purchase order has to be prepared
Process for filing a purchase order and for requesting an invoice for payment
Process for requesting transfers between line accounts and limits on which accounts can be used for transfers

Summary

Inform, educate, and respond to the board and president about financial plans and operations.
Work with colleagues who are critical to strengthening the financial condition of the institution and include them in:
1. Operational meetings, which involve formal and informal meetings
2. Budgetary performance reviews to determine if budget plans are on or off course and what can be done to resolve operational problems
3. Budget and capital requirement planning so that colleagues can provide their insight into ways of improving the allocation of resources and of identifying potential problems
4. Establishing financial teams designed around important segments of financial or budgetary plans
5. Reaching common agreement on economic forces that shape the financial condition of the college
6. Work with non-financial managers so that they understand the rationale and benefits behind accounting and business office policies and procedures

Take Away Points

A CFO needs affirmation by the president or the board to take action, even if the CFO already has the requisite authority, in order to reduce the possibility of conflict with colleagues, faculty, or staff.
The CFO and president need to form a mutually-supportive relationship.
CFOs should be prepared to become the proxy naysayer for the president.
The chief components of the salient relationship with the board of trustees and president are: to inform, educate, and expeditiously prepare solutions.
The CFO should meet regularly with colleagues to review operational and budget performance.
Key employees need to understand and agree upon the economic forces that affect the college’s student and labor markets.
The CFO is responsible for preparing and distributing the primary accounting and business rules used to manage the budget and finances of the college. As part of this responsibility, the CFO must conduct training for existing and new employees who are or will be budget managers.

Economic equilibrium is a state where the institution produces sufficient resources to support its mission. See chapter XIII for more information. ↑
Of course, we do not call it profit in higher education; it is referred to as a positive change in net assets. ↑

Key Salient Positions – Board of Trustees and President

Key Salient Colleagues

Enrollment – work with admission manager (enrollment manager, if the position exists), registrar, and financial aid staff to establish realistic revenue numbers. Too often, institutional managers drive enrollment estimates based on their expense budget or they estimate enrollment by adding a percentage increase that has no basis in fact or in the college’s share of the student market.
Faculty needed to cover enrollment for the coming year.
Student services needed to support the expected proportion of new students who may need academic assistance or personal support.
Building and grounds where a comprehensive list of renovations, repair, updating, or expansion of the plant and grounds is needed.
Auxiliary services budget requirements commonly include estimates of the number of students who will live in residence halls, use food services, or make purchases at the bookstore. Also, a list of renovations, repairs, updating, or expansion of auxiliary plant should be developed.
Capital projects plans should define the purpose, scope, and timing of new projects.
Business Operations –review if revenue or expenses could be affected by changes in the level of student collections, requirements for cash, and reformation of operational policies and procedure.
Cost Management Team should formulate solutions for cutting or minimizing cost increases.

Common Set of Economic and Financial Principles

Economic Forces

Budget Policies and Rules

Essential Accounting and Business Office Rules

New and current staff in the business office must also understanding these essential accounting and business office rules:

Structure of the budget reports
Definition of line account titles and numbers
Rules on assignment of revenue to programs, departments and line accounts
Restrictions on what can be expensed to a specific line account
Authority limits on:
1. Dollar amounts that can be spent through petty cash
2. Dollar amounts that each level in the institution can approve for a contract
3. When a purchase order has to be prepared
Process for filing a purchase order and for requesting an invoice for payment
Process for requesting transfers between line accounts and limits on which accounts can be used for transfers

Summary

Inform, educate, and respond to the board and president about financial plans and operations.
Work with colleagues who are critical to strengthening the financial condition of the institution and include them in:
1. Operational meetings, which involve formal and informal meetings
2. Budgetary performance reviews to determine if budget plans are on or off course and what can be done to resolve operational problems
3. Budget and capital requirement planning so that colleagues can provide their insight into ways of improving the allocation of resources and of identifying potential problems
4. Establishing financial teams designed around important segments of financial or budgetary plans
5. Reaching common agreement on economic forces that shape the financial condition of the college
6. Work with non-financial managers so that they understand the rationale and benefits behind accounting and business office policies and procedures

Take Away Points

A CFO needs affirmation by the president or the board to take action, even if the CFO already has the requisite authority, in order to reduce the possibility of conflict with colleagues, faculty, or staff.
The CFO and president need to form a mutually-supportive relationship.
CFOs should be prepared to become the proxy naysayer for the president.
The chief components of the salient relationship with the board of trustees and president are: to inform, educate, and expeditiously prepare solutions.
The CFO should meet regularly with colleagues to review operational and budget performance.
Key employees need to understand and agree upon the economic forces that affect the college’s student and labor markets.
The CFO is responsible for preparing and distributing the primary accounting and business rules used to manage the budget and finances of the college. As part of this responsibility, the CFO must conduct training for existing and new employees who are or will be budget managers.

Economic equilibrium is a state where the institution produces sufficient resources to support its mission. See chapter XIII for more information. ↑
Of course, we do not call it profit in higher education; it is referred to as a positive change in net assets. ↑

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Why Colleges Struggle to Change in Times of Crisis

Schmidt, Peter (August 6, 2015); “Court Holds That U. of Illinois Broke Contract in Salaita Case”; The Chronicle of Higher Education;

DiMauro, Mike (January 26, 2011); Major UConn Donor Demands Return of $3 Million: New London Day.

“Donor sues university for return of $12 million gift”(February 17, 2015); EAB, (Retrieved February 7, 2018); https://www.eab.com/daily-briefing/2015/02/17/donor-98-sues-university-for-return-of-12-million-gift.

Kelderman, Eric (September 30, 2016); Accreditors Rarely Lose Lawsuits, but They Keep Getting Sued. Here’s Why”; The Chronicle of Higher Education; “http://www.chronicle.com/article/Accreditors-Rarely-Lose/237944.

Norton, Ben (August 7, 2015); “University of Illinois Chancellor steps down as judge upholds Salaita lawsuit against school on 1^st amendment grounds”; Mondoweis; (Retrieved: November 5, 2019).

Hiring a New College President

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Why Colleges Struggle to Change in Times of Crisis

Schmidt, Peter (August 6, 2015); “Court Holds That U. of Illinois Broke Contract in Salaita Case”; The Chronicle of Higher Education;

DiMauro, Mike (January 26, 2011); Major UConn Donor Demands Return of $3 Million: New London Day.

“Donor sues university for return of $12 million gift”(February 17, 2015); EAB, (Retrieved February 7, 2018); https://www.eab.com/daily-briefing/2015/02/17/donor-98-sues-university-for-return-of-12-million-gift.

Kelderman, Eric (September 30, 2016); Accreditors Rarely Lose Lawsuits, but They Keep Getting Sued. Here’s Why”; The Chronicle of Higher Education; “http://www.chronicle.com/article/Accreditors-Rarely-Lose/237944.

Norton, Ben (August 7, 2015); “University of Illinois Chancellor steps down as judge upholds Salaita lawsuit against school on 1st amendment grounds”; Mondoweis; (Retrieved: November 5, 2019).

Hiring a New College President

Scarce Resources

Chief Financial Officer – Private Institutions

Salient Institutional Relationships for the Chief Financial Officer

Recent Posts

Recent Comments

Norton, Ben (August 7, 2015); “University of Illinois Chancellor steps down as judge upholds Salaita lawsuit against school on 1^st amendment grounds”; Mondoweis; (Retrieved: November 5, 2019).