Strategic Finance For A University System


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Understanding strategic finance and strategies for dealing with scarce resources, presentations for an all-day workshop. Audience is executive officers of a university system

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Strategic Finance For A University System

  1. 1. Strategic Finance and the USC  System Organization Task Force University of South Carolina Ellen Chaffee and Buzz Shaw Ellen Chaffee and Buzz Shaw January 29, 2010
  2. 2. Agenda Introductions • Introductions Strategic Finance Strategic Finance • Strategic Finance Strategic Finance Most Important Lunch • What is Most Important? Discussion • Lunch L h Strategic Change Hard Work • Continue discussion Lessons Learned Lessons Learned • Options f Strategic Change for h • Doing the Hard Work • Lessons Learned
  3. 3. Ground Rules Introductions • It’s your show Strategic Finance Strategic Finance Most Important • Everyone is equal Lunch • No relevant topic is excluded Discussion Strategic Change • No discussion is ended Hard Work • Respect each other and the time Lessons Learned Lessons Learned • Have fun
  4. 4. Goals for the Day Introductions • Understand strategic finance  Strategic Finance Strategic Finance Most Important as a context for Task Force  f T kF Lunch work Discussion • D l Develop an action plan for  ti l f Strategic Change Hard Work the Task Force Lessons Learned Lessons Learned
  5. 5. USC Task Force Goals Introductions • More students, especially  Strategic Finance Strategic Finance Most Important South Carolinians S h C li i Lunch • Better affordability Discussion Strategic Change • Better accessibility Hard Work • Better efficiency Lessons Learned Lessons Learned • Better effectiveness
  7. 7. The Conundrum Introductions Strategic Finance Strategic Finance We CANNOT do Most Important Lunch What we MUST do Discussion If we KEEP doing If we KEEP doing Strategic Change Hard Work What we USUALLY do Lessons Learned Lessons Learned
  8. 8. What we MUST do Introductions Strategic Finance Strategic Finance Most Important Lunch Discussion Strategic Change “By 2020, America will once again have  Hard Work the highest proportion of college  Lessons Learned Lessons Learned graduates in the world” in the world ‐ President Obama, 2/24/09
  9. 9. And there’s consensus on that Introductions To increase the percentage of  Strategic Finance Strategic Finance Most Important Americans with high‐quality  A i i h hi h li Lunch degrees and credentials to 60  Discussion percent by the year 2025 percent by the year 2025 Strategic Change Hard Work Currently: 39% Lessons Learned Lessons Learned Lumina Foundation for Education Lumina Foundation for Education “More students, especially South Carolinians”
  10. 10. Knowledge‐Economy Work Force Introductions Strategic Finance Strategic Finance Most Important Lunch Discussion Strategic Change Hard Work Lessons Learned Lessons Learned
  11. 11. Can we go on this way? Introductions Strategic Finance Strategic Finance Most Important Lunch Discussion Strategic Change Hard Work Lessons Learned Lessons Learned
  12. 12. State Financials: Gaps could approach 7% of spending  ‐ “The Lost Decade” of state funding The Lost Decade of state funding Introductions Strategic Finance Strategic Finance Most Important Lunch Discussion Strategic Change Hard Work Lessons Learned Lessons Learned Source: Don Boyd (Rockefeller Institute of Government), 2009 *
  13. 13. Recent Revenue/Expense Trends Introductions • State funding: 3% Strategic Finance Strategic Finance Most Important • Tuition: 3% above CPI Lunch • Student aid: 4% Discussion Strategic Change Hard Work Lessons Learned Lessons Learned • Expenditure per student :  p p 1‐2% above CPI
  14. 14. Our Business Model is Not Sustainable Our Business Model is Not Sustainable 20 Years of Trends 3 2.5 AFFORDABILITY GAP 2 Tuition Expend/FTE STATE FUNDS GAP 1.5 State Approp CPI 1 0.5 0 Start Y1 Y2 Y3 Y4 Y5 Y6 Y7 Y8 Y9 Y10 Y11 Y12 Y13 Y14 Y15 Y16 Y17 Y18 Y19 Y20
  15. 15. We cannot go on this way Introductions Strategic Finance Strategic Finance Most Important Lunch Discussion Strategic Change Hard Work Lessons Learned Lessons Learned ome,  Hitting Ho Reindl
  16. 16. What is Strategic Finance? Introductions Strategic finance is aligning  Strategic Finance Strategic Finance financial decisions—regarding  financial decisions regarding Most Important Lunch revenues, creating and  Discussion maintaining institutional  maintaining institutional Strategic Change Hard Work assets, and using those  Lessons Learned Lessons Learned assets—with the institution s  assets with the institution's mission and strategic plan.   In USC Task Force terms: Creating a system that can serve more students as well or better at an affordable price through increased  p g efficiency and effectiveness.
  17. 17. What is Strategic Finance? Introductions Strategic Finance Strategic Finance Mission Most Important Lunch Discussion Strategic Change Hard Work Lessons Learned Lessons Learned
  18. 18. In other “words” . . . More graduates,  especially from SC Introductions Strategic Finance Strategic Finance Most Important Accessible Lunch Discussion Efficient Affordable Strategic Change Hard Work Effective Lessons Learned Lessons Learned
  19. 19. The New Bottom Lines Core Issue Balanced Scorecard Good to Great Kaplan and Norton/et al Collins/Staisloff/et al Is the organization doing  Quality, effectiveness,  Mission the right things and doing  customer satisfaction them well? What s the cost/benefit of improvement in this? What’s the cost/benefit of improvement in this? Does the environment  Financial stability and  Market want/need what the  strength organization does? YES Is the organization   Operating efficiency,  Margin ensuring that revenues  i th t internal processes i t l exceed costs? What’s the cost/benefit of improvement in this? Is the organization  Learning and growth Momentum investing in its own future? What’s the cost/benefit of improvement in this?
  20. 20. Task Force Charge/Bottom Lines (which elements of our charge are most relevant/powerful?) ( h h l f h l / f l?) Introductions Mission/Quality Strategic Finance Strategic Finance Programs and their locations Programs and their locations Most Important Distance education Lunch Accreditation and regulation Demand analysis Discussion Market Strategic Change Efficiency Hard Work Student capacity by campus, by program Lessons Learned Lessons Learned Ease of transfer Ease of transfer Tuition rates; tuition/state revenue mix Data consistency True cost of attendance Learning Faculty and staff workforce Campus contribution to economic value Faculty governance F lt
  21. 21. Importance of ALIGNMENT and Tracking Progress p g g Strategic  Strategic  Finance  Goals  (Momentum, (Mission,  Margin) Market) Strategic  St t i Communication Indicators Information Analysis Course Correction Actions
  22. 22. Task Force Strategic Indicators (examples) ( ) Introductions • More students Strategic Finance Strategic Finance – Enrollment growth by in/out of state Enrollment growth by in/out of state Most Important • Affordability Lunch – Net tuition/median household income Discussion – Total financial aid/Total tuition revenue l fi i l id/ l ii Strategic Change • Accessibility Hard Work – Enrollment growth by race, income, transfer  Lessons Learned Lessons Learned status • Efficiency – Cost per SCH by program, by site, by delivery • Effectiveness – Retention and graduation rates
  23. 23. From Steve Jobs to YOUR Job Introductions Strategic Finance Strategic Finance • 20th Century was one of Century was one of  Most Important Lunch technological innovation Discussion Strategic Change Hard Work Lessons Learned Lessons Learned • 21st Century must be one of Century must be one of  institutional innovation David Wiley, BYU,
  24. 24. DISCUSSION What are the most  important action  items for the Task  it f th T k Force? Introductions Strategic Finance Most Important Most Important Lunch Discussion Strategic Change Strategic Change Hard Work Lessons Learned
  25. 25. Introductions Strategic Finance Most Important Lunch Lunch! Discussion Strategic Change Hard Work Lessons Learned
  26. 26. Introductions Strategic Finance Most Important Lunch Discussion Continues Discussion Continues Discussion Strategic Change Hard Work Lessons Learned
  28. 28. Current Institutional Responses Current Institutional Responses Introductions • Increase efficiency Increase efficiency Strategic Finance • Increase administrative productivity Most Important Lunch • Leverage stimulus money Leverage stimulus money Discussion Strategic Change Hard Work • APLU survey just out: “The survey  Lessons Learned results indicate that "universities are  striving to protect th t i i t protect the core education  t t d ti mission of their institutions.”
  29. 29. Missing in Action? g Introductions • Progress to strategic goals Strategic Finance Strategic Finance Most Important • Growth Lunch Discussion • Quality improvement Quality improvement Strategic Change Hard Work • Academic productivity Lessons Learned Lessons Learned • Innovation I ti • Development of a sustainable  business model David Wiley, BYU,
  30. 30. What do institutions need? Introductions • Growth by substitution Strategic Finance Strategic Finance Most Important • Greater cost containment Lunch Discussion • Greater productivity Greater productivity Strategic Change Hard Work • Clear expectations Lessons Learned Lessons Learned • Innovation I ti • LEADERSHIP
  31. 31. Reducing Cost and Increasing Productivity Reducing Cost and Increasing Productivity 31 *
  32. 32. Cost Effective  Cost Reductions Productivity Cost Effective = Cost Reductions + Productivity Productivity  Cost reductions = improvements  improvements = p Increase in output  Permanent structural  (learning, research, jobs),  ( g, , j ), reductions in spending  d ti i di without changing  admissions or spending 32 *
  33. 33. Examples of Cost Reductions  Examples of Cost Reductions • Reduce high cost/low demand programs  g / p g • Address retirement eligibility • Reduce growth in health care cost • Consolidate administrative functions • Reduce spending on non‐revenue producing  athletics thl ti • Restructure debt  • Restructure faculty compensation and rewards Restructure faculty compensation and rewards  (use turnover to substitute teaching faculty for  research faculty) 33 *
  34. 34. Examples of Productivity Improvements  p y p • Increase in student retention and graduation  Increase in student retention and graduation • Reduce excess credits for the degree • Increase credit‐by‐exam  di b • Increase distance‐based learning programs • Increase proportion of graduates who meet  g goals for critical learning  g • Increase proportion of students who remain – and are employed  in state and are employed – in state 34 *
  35. 35. Building Cost Effective Institutions  Building Cost‐Effective Institutions Introductions • Reduce administrative costs Reduce administrative costs Strategic Finance • Tackle ‘automatic’ cost  Most Important Lunch increases Discussion Strategic Change • Reengineer curricula Hard Work Lessons Learned • Reengineer course delivery • Eliminate, innovate, or   , , consolidate high cost/low  demand programs p g slide 35 *
  36. 36. Learning Productivity Learning Productivity • Students come to college fully  g y Introductions Strategic Finance prepared (no remediation) Most Important • Accelerated learning Lunch • Minimize “rework” and reduce credits  Discussion Strategic Change to degree  Hard Work • I Improve rates of course completion t f l ti Lessons Learned • Encourage use of assessment/”test  out options out” options • Learning in the workplace/credit for  experience p slide 36 *
  37. 37. Improving Affordability & Choices Improving Affordability & Choices • Commit to average undergraduate Commit to average undergraduate  Introductions Strategic Finance tuition growth no more than CPI, with  Most Important increased need‐based aid Lunch Discussion • Allow differential tuitions for high  Strategic Change cost/demand programs Hard Work • Experiment with low priced options  Lessons Learned • Greater on‐campus employment  opportunities for students • Reduce time to degree 37 *
  38. 38. Implications for Leaders Implications for Leaders Introductions • Re‐imagine your business model Re imagine your business model  Strategic Finance to create long‐term sustainability Most Important Lunch • Support change in approach to Support change in approach to  Discussion budget building  Strategic Change – Examine old habits and conventional  Hard Work wisdom about costs Lessons Learned – Focus on big picture, and progress  on achieving strategic goals hi i i l – Commit to institutional innovation 38 *
  39. 39. Where are you headed, and how will you get there? y , y g Strategic  Strategic  Finance  Goals  (Momentum, (Mission,  Margin) Market) Strategic  St t i Communication Indicators Information Analysis Course Correction Actions
  40. 40. “It is not necessary to  Introductions Strategic Finance change. Survival is not  h S i li t Most Important Lunch mandatory.” y Discussion Strategic Change Hard Work W. Edwards Deming W Ed d D i Lessons Learned David Wiley, BYU,
  41. 41. Introductions Strategic Finance Strategic Finance Most Important Lunch Discussion Hard Work Hard Work Strategic Change Hard Work Lessons Learned Lessons Learned
  42. 42. Introductions Strategic Finance Strategic Finance Most Important Lunch Discussion Lessons Learned Lessons Learned Strategic Change Hard Work Lessons Learned Lessons Learned
  43. 43. Introductions Strategic Finance Strategic Finance Most Important Lunch Discussion Evaluations, Please Evaluations Please Strategic Change Hard Work Lessons Learned Lessons Learned
  44. 44. Resources • HITTING HOME: Quality, Cost, and Access Challenges Confronting Higher Education  Today, Travis Reindl, • Strategies for Tough Times, Dennis Jones and Jane Wellman, November 19, 2009
  45. 45. CAUSES of Strategic Indicators (brainstorm on flip chart) ( ) Introductions • Enrollment growth by in/out of state Strategic Finance Strategic Finance Goals/Charge • Net tuition/median household income Most Important Lunch • Total financial aid/Total tuition revenue Discussion • Enrollment growth by race, income,  Strategic Change transfer status Hard Work Hard Work Lessons Learned • Cost per SCH by program, by site, by  delivery • Retention and graduation rates