Institutional Strength from CAO/CFO Partnerships

Institutional Strength from CAO/CFO Partnerships

How to help ensure strong, positive relationships between academic and financial leaders

IT SEEMS SO OBVIOUS TO me from the vantage point of an experienced president. The partnership (or lack thereof) between the chief academic officer and chief financial officer sets the collegial tone for the institution, whether the focus is on the academic program, and whether the administration and faculty are friends or foes. This is particularly true in small independent colleges where the CFO interacts directly with faculty. As a new president I began with independent relationships with the CAO and the CFO. I soon realized that I had to cultivate their relationship to each other, encourage them to get into each other’s heads, and expect their enduring goals to be identical.

Even with highly talented individuals in these roles, the CFO and CAO can take on orthogonal or adversarial roles. I found an experienced and gifted CFO when I arrived at the College of Saint Benedict (Minn.), and after a short period of transition I was lucky to find a similarly gifted provost from within our faculty ranks. But they had both spent considerable time in an environment where resources were tight and where budgeting decisions were competitive, not collaborative. The faculty didn’t really trust the CFO, and she was struggling to understand the reason for the mistrust and why the faculty didn’t understand that she was dedicated to protecting and preserving the institution she loves.

If a CFO fails to think like a CAO, the institution can develop a "living off your muscle" mentality.

Perhaps my own relative financial naivet? as a new president was helpful. I needed to depend on the CFO and trust her to quickly understand our finances. She was generous, gracious, and completely open with me. She patiently explained budget and financial technicalities and asked for my input even on large and small financial decisions in order to build my confidence. Could this be the person whom the faculty believed was secretive and who held her cards close to her vest?

In my unseasoned state, the only thing I could offer in return was my view on the centrality of the academic program?the need to grow the budget by finding additional revenues, not to shrink it to (seemingly) protect the institution, and to invest in the academic program. I convinced her that it was OK to take calculated and measured risks. This was intuition on my part, and I suppose it could have been disastrous. Instead it has been the secret of our success.

What I understand as an experienced president is that the scale must be balanced: If a CFO fails to think like a CAO, the institution can develop what I call a “living off your muscle” mentality. This is where the institution makes seemingly responsible cuts when budgets are tight, before examining revenue opportunities outside of tuition. Before long, programs and services are starved, not enhanced, all of the institution’s “fat” is gone, and it starts cutting “muscle” to survive. A corollary to this in a heavily tuition-dependent institution is that student numbers can become dollar signs in the CFO’s eyes, and the focus shifts away from net revenue, the real bottom line. Simply put, net revenue can be increased by making investments in key programs, thereby raising the perceptions of institutional value on the part of students and parents. Too many institutions ignore this important fact, focus only on “bodies,” and neglect to invest to enhance value.

On the other hand, if a CAO fails to think like a CFO, collegiality between the faculty and administration can disintegrate rapidly, as the CAO uses the CFO as a convenient excuse for why there is no money to invest in the academic program. This scenario is all too familiar: Faculty members question expenditures or the administration’s refusal to support new projects, and the CAO takes an easy out and blames the CFO for a shift in funding away from the academic program. When I worked for an accrediting agency I saw constant evidence of this, particularly in troubled institutions. Faculty got all of their information about the CFO’s motives from the CAO, and information about the faculty got communicated to the CFO through the CAO. This skewed view contributed to a downward spiral in relationships.

They were prepared with a solution and a plan. This is every president's dream.

In the sixth year of my presidency, I can confidently say that our CAO and CFO view their relationship with each other as central to the success of our institution. The budgeting process for this academic year was a difficult one for all institutions because of the recession. Tensions were high.

In the end, we did well in enrollment?and in expected net revenue?so we are facing a budget revision process where we must decide whether to save or spend some of the net dollars. At the moment, the CFO and the CAO don’t completely agree. I asked both for a meeting to discuss their differences. Five years ago I would have been the referee and the solution broker. Instead, by the time of our meeting, they had already solved the problems and were prepared with a solution and a plan. This is every president’s dream.

How are these relationships built?

? Presidential modeling. At small, independent institutions, the president has opportunities to interact directly with the faculty. She or he should take every opportunity to demonstrate openness to sharing data and discussing financial issues with the faculty. This sets the tone for institutional trust and demonstrates to the CFO that faculty can actually be reasonable. The CAO sees the president say “no” and maintain favor with faculty without needing to blame the CFO.

? Faculty inclusion. At our institution we bring the faculty into close contact with the CFO in formal and informal decision-making settings. Faculty members serve on the primary budget and planning committee as equal partners with the CFO, CAO, and other cabinet members. The provost chairs this committee, ensuring that the centrality of the academic program is clear to all. This is in contrast to a common model in which faculty members serve on an “advisory” committee and receive reports about decisions, sometimes after the fact. Last year, in recognition of challenges caused by the economic downturn, we invited faculty leaders to our Cabinet meetings as well.

? CAO as bridge. When our CAO references contrary decisions or viewpoints of the CFO in conversations with faculty, she never places blame, but rather describes reasons and rationale. The faculty trust this because they really know the CFO. In my experience, faculty and administrators are more likely to agree, or “agree to disagree” as our provost is fond of saying, if they trust each other’s motivations. I often also hear the provost asking faculty to “put on their institutional hats.”

? Shared wisdom. Our CFO and CAO present work together as professionals and scholars. For example, they both have shared wisdom about their partnership at the Council on Independent Colleges’ Institute for Chief Academic and Chief Financial Officers, an excellent venue for sharing ideas on partnership.

At our institution we have a budget analyst who reports to both the CFO and CAO. He works directly with faculty committees responsible for budgeting, compensation, and benefits, and he serves as a resource for their work. He sometimes finds himself sandwiched by competing priorities, but he is trusted by the faculty to provide accurate information and to understand their viewpoint.

We use a fiscal planning and modeling software tool called Future Perfect from The PFM Group (http://fm.pfm.com/PFMFuturePerfect). This program allows immediate access to real data and real-time modeling so that informed decisions can be made without waiting for the CFO to leave, run the numbers, and come back a week later. For example, if some member of the group is arguing for a tuition increase smaller than others feel is appropriate, we can immediately look at the effect of different increases over time. When we all have access to the same data, we can understand each other’s perspectives even if we don’t share them.

We also have a tradition of “field trips” for our Cabinet members and for other members of the team who are working on special projects. We go on the road to visit other institutions that share common strengths and challenges or that have recently had a great success or completed an important building project. This spring and summer our CFO, chief facilities officer, and several faculty and staff cruised the country together. The ostensible purpose was to look at facilities designed by several architectural firms we were considering. The best outcome was the further development of the relationships between the CFO and faculty?which, in this case, didn’t involve the provost as intermediary.

Sustaining and investing in exemplary academic programs is becoming increasingly challenging because of demographic and economic trends. There is no room in institutional leadership for diverging priorities on the part of the CAO and CFO. When a partnership develops between them, all manner of positive outcomes follow.

MaryAnn Baenninger has been president of the College of Saint Benedict in St. Joseph, Minn., since 2004. She serves on the board of directors of the Council of Independent Colleges, www.cic.org.


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