Planning for Your Institution’s Future Financial Success: Secrets from 6 Higher Ed Leaders
The third annual edition of Kaufman Hall’s financial trends report provides insights on key performance benchmarks, and plans and challenges facing higher education budget and finance professionals in 2020.
The report also includes insights from innovative officials at the University of Southern California, University of Arizona and Lane Community College in Oregon, among others.
This web seminar addressed some strategies, uncovered by research, from these leading institutions that can help any institution plan for financial success and sustainability.
Senior Solutions Engineer
Higher Education Practice Lead
Stewart Clark: We analyzed our survey data from 100 higher ed institutions and compared it against survey results from prior years, and the responses haven’t shifted significantly. In particular, most institutions continue to see a challenging financial landscape for higher education, and they haven’t shown forward momentum against key financial goals. This year’s report also includes the insights and advice from a panel of prominent budget and finance experts at both public and private colleges and universities.
The first section of the survey is a high-level view of the current state of higher ed finances. We asked the respondents if they believe their institution’s current business model will be viable in five to 10 years, and 40% don’t believe it will be, which is a pretty scary statistic. The panelists acknowledge that changes to organizations’ financial management are going to be required to ensure sustainability over the long term.
Another survey question asked what specific actions they’re taking to address financial sustainability. Reducing expenses has been the top goal for several years, and it was slightly lower this year versus last year—67% versus 73%. That begs the question of whether some of the schools are feeling a little less pressured on the cost side. Panelist Kimberly Bregenzer said, “It’s a real need to reduce expenses, given how challenging it has become to continue to increase tuition.”
The final question in this section highlights whether institutions feel like they’re agile. The vast majority, about 86%, lacked a high level of confidence, and 1 in 5 had no confidence at all.
Logan Anderson: One of the things that came out in this year’s survey was that a lot of institutions aren’t operating efficiently. When I talk with clients, they want to transition from trying to figure out what happened in the past to thinking about what’s going to happen next.
One of the indicators of operational inefficiency at a lot of the institutions is the budget cycle length, which can indicate whether an institution can perform critical, basic functions in an efficient manner. The survey results indicate that these processes are becoming longer, not shorter. Many institutions are using an incremental budget model as a way to shift unrestricted or allocated resources across the institution.
The survey asked: “How do leaders within higher education feel they stack up against other industries when it comes to adapting modern financial planning tools?” Of the respondents, 76% feel they’re behind. This leads to a lag in the key strategic decision-making process, reducing the ability for the institution to flex dynamically.
Stewart Clark: Quality data enables institutions to follow the money trail. Unfortunately, though, for most colleges and universities, transparency of financial data is still an ongoing challenge. More than half the institutions we surveyed struggle with a whole range of key financial reporting capabilities.
The final survey question looked at a more recent trend in data science: predictive analytics. Given the challenges that many schools are having with the basics around reporting capabilities, it’s probably not surprising that only about one-quarter of institutions are using predictive analytics to support their planning and their finance activities. That said, 47% have predictive analytics as a long-term goal for the institution, and we think that’s a positive trend given the challenges the industry is facing.
Logan Anderson: One of the interesting points that came out of this year’s survey is how important organizational structures are, and it came in two parts: how the process is managed and how the people are managed.
This comes down to the idea of centralization versus decentralization. Because most universities are leveraging a centralized model, users are notified of their spending authority, but they don’t have a lot of discretion over the funding and the spending. But if you have great tools that allow you to distribute the process, it’s easier to execute a decentralized model.
To watch this web seminar in its entirety, please visit UBmag.me/ws030320