1991, Norman Jewison's film Other's People's Money, based on Jerry Sterner's off-Broadway hit, dramatized the leveraged buyout craze of the 1980s in the person of one Larry the Liquidator. Played by Danny DeVito, Larry was a cynical fast-talking, corporate raider who used other people's money to take over companies. Larry promised improvements in productivity and profits to the shareholders and managers of a small New England manufacturing plant but was really only interested in selling off the firm's assets, eliminating jobs and livelihoods, and making a quick buck.
As a Graduate dean and vice provost for Academic Affairs at a Doctoral/Research-Extensive institution with more than 6,100 graduate students in 35 doctoral programs and 77 master's programs, I often think of Larry the Liquidator as I go about my business: getting and spending other people's money.
True, the dollars I manage come from students, parents, and taxpayers as opposed to shareholders. And it's also true that public and private universities are not, at least not yet, primarily interested in turning a profit. But Larry's cavalier and questionable use of his borrowed funds reminds me that being the steward of other people's money may occasionally blind us to its efficient and effective use. In what follows, I offer a brief guide on treating other people's money as though it were your own.
The best way for a university administrator to improve her handling of other people's money is to track its use as rigorously as possible. Some of us weren't trained to be budget hawks. This is especially the case with faculty members, such as myself, turned administrators. As university administrators, we often focus on improving the quality of our programs, students, and faculty.
Unless you have access to ready money with no questions asked, however, you really do need to become eagle-eyed when it comes to your unit's budget. Although it may take several years of tedious labor to do so, develop a real annual budget for each upcoming fiscal year that lays out what you actually plan to spend in different general categories such as admissions, recruiting, technology, staff, graduate student support, office renovations, and fundraising. Create sub-categories for areas such as advertising, recruiting materials, staff professional development, and office supplies. At many schools, this is much more difficult to do than it sounds. It's especially difficult if you have inherited, as I did, a budget that contained outdated categories and expenditures that were uncritically re-submitted in each annual budget process.
Simply put, our Office of Graduate Studies was spending money hand over fist in many areas without any real oversight as to priorities, efficiency, and efficacy. And the lack of a real budget meant we could not even see the outlines of the problem, let alone begin to address it.
We weren't even tracking whether other campus units had transferred the funds they promised us for various shared initiatives. In fact, we were the proverbial drunken sailors. Except we were buying our drinks with other people's money. Although it took them over a year to build budgets based on our actual revenues and expenses, the executive assistant and accounting technician we hired proved to be worth their weight in gold. We now know where each hard earned dollar in our budget is coming from and where it's going to.
You can't assess your spending until you know where the money is going. But once you establish your expenditures, ruthlessly pay attention to them. Keep a constant eye on your return on investment and your opportunity costs. Develop and implement appropriate short-term and long-term metrics for gauging the results of your major initiatives and outlays. Give each initiative the right amount of time to show results and to improve before reallocating the funds. But don't be timid about eventually throwing a program overboard if the results really aren't there.
In our office, we were assessing only a small portion of our activities in recruiting, admissions, enrolled student services, thesis/dissertation, and certification. For example, we often didn't have good annual data on whether our recruiting initiatives, including our various forms of advertising, were effective. And many of our metrics were frequently marred by the "post hoc, ergo propter hoc" fallacy, or "It happened after..., so it was caused by..." thinking. That is, linkages between various initiatives and increased enrollments were often assumed or asserted by staff members rather than proved by causal evidence.
Once we became more rigorous in our assessments, we discovered that some programs were in need of an overhaul and others were actually working much better than we had realized.
Another way to improve your handling of other people's money is to review your long-term funding for certain initiatives. When I became a graduate school dean, I approached budgeting for our multi-year initiatives, such as fellowship programs, by planning out the funding for successive annual cohorts. In practice, I was running smaller cohorts each year and saving unused funds as surpluses to apply to future cohorts in order to avoid possible deficits some four and five and six years out.
Now, nature may abhor a vacuum, but university central administrators abhor a surplus, especially if it's in a budget line. At the end of each fiscal year, we occasionally looked as though our fellowship programs had serious surpluses.
Additionally, few university officials wanted to hear about what we might require in five years to sustain these programs at their current levels. So we took a page from the federal government's playbook and burned the program balances down by increasing the number of fellowships in the next two annual cohorts.
I don't think that we're simply saying "After me, the deluge," because we are still committing to fund all the years of each fellowship cohort. How you exercise this option, of course, depends on your comfort level. I admit I usually ask permission first rather than seek forgiveness later. But some form of this planning does seem reasonable to me.
Remember Deep Throat's advice in All the President's Men and "Follow the Money." In this case, identify the revenue sources for your budget, learn how to protect and increase them. Is your budget dependent on fees? Then you better know who pays them, who sets them, what the process for changing them is, and what their use definitions are.
Identify and develop other revenue streams. Work with your provost, vice president for Finance, students, and other stakeholders to develop and obtain approval for pragmatic tuition and fee proposals that allow you to fully fund your mission and undertake important new initiatives.
For example, our efforts to improve graduate student persistence and degree completion rates are primarily funded by a non-resident student fee. With graduate student support, we're working to halve the fee and require all graduate students to pay it. With the increased annual revenue from this change, we hope to improve significantly our mentoring and professional development programs, thereby reducing the time it takes our students to earn their degrees and make the transition from school to work.
Know what your competitors charge for the same services and align your fees accordingly. Get involved in development and capital campaign efforts. But as you identify ways to increase your share of other people's money, pay close attention to the debate over tuition deregulation in your state legislature.
In Texas, for example, the legislature's emphasis is on deregulating tuition, blaming universities for increasing tuition, and trying to hold the line on fees. It's a politically explosive situation for universities.
By all means, remember that those who live by the fee in good times may also die by the fee in bad times. This is especially important if you are putting staff in fee accounts due to cuts in state funding. You're dealing with other people's jobs here and should plan accordingly.
Finally, develop initiatives that involve cost sharing with other academic units on your campus. We found out the hard way what the word "free" really means: "Please use without much regard for cost, efficiency, or effectiveness materials and initiatives that our office has funded."
Indeed, I came to suspect that everyone was using our "free" graduate catalog CD for all sorts of purposes, including the ubiquitous Frisbee competitions on campus. Well, that's probably an exaggeration. When we changed our policy to emphasize our online catalog and charge a modest fee for the CD and print versions of the catalog, however, people began to use these materials more judiciously.
By the way, since some units may have inexpressibly low maintenance and operation budgets that haven't altered in years, you might consider differential cost sharing from units.
At the risk of rising to an anticlimax, I conclude, not with Larry the Liquidator, but with Exodus 1:8--"Now there arose up a new king over Egypt, which knew not Joseph" (King James Version). Remember to hold on to your chits. No matter how much you have been fortunate to accomplish as a university administrator, there will come a day when you will no longer recognize the faces of your superiors. Nor will they recognize yours. Academic promises being what they are, it's best to memorialize most agreements, especially those involving money, via memos or thank you e-mails. Handshakes, nods, and hastily scrawled notes won't do. When other people leave, their money should not.
Philip Cohen is dean of the Graduate School and vice provost for Academic Affairs at the University of Texas-Arlington.