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. StrategicĀ FinanceĀ andĀ theĀ USCĀ SystemĀ OrganizationĀ TaskĀ Force UniversityĀ ofĀ SouthĀ Carolina EllenĀ ChaffeeĀ andĀ BuzzĀ Shaw Ellen Chaffee and Buzz Shaw JanuaryĀ 29,Ā 2010
- 2. Agenda Introductions ā¢ Introductions StrategicĀ Finance Strategic Finance ā¢ StrategicĀ Finance Strategic Finance MostĀ Important Lunch ā¢ WhatĀ isĀ MostĀ Important? Discussion ā¢ Lunch L h StrategicĀ Change HardĀ Work ā¢ ContinueĀ discussion LessonsĀ Learned Lessons Learned ā¢ Options f Strategic Change for h ā¢ DoingĀ theĀ HardĀ Work ā¢ Lessons Learned
- 3. GroundĀ Rules Introductions ā¢ ItāsĀ yourĀ show StrategicĀ Finance Strategic Finance MostĀ Important ā¢ EveryoneĀ isĀ equal Lunch ā¢ NoĀ relevantĀ topicĀ isĀ excluded Discussion StrategicĀ Change ā¢ NoĀ discussionĀ isĀ ended HardĀ Work ā¢ RespectĀ eachĀ otherĀ andĀ theĀ time LessonsĀ Learned Lessons Learned ā¢ HaveĀ fun
- 4. GoalsĀ forĀ theĀ Day Introductions ā¢ UnderstandĀ strategicĀ financeĀ StrategicĀ Finance Strategic Finance MostĀ Important asĀ aĀ contextĀ forĀ TaskĀ ForceĀ f T kF Lunch work Discussion ā¢ D l DevelopĀ anĀ actionĀ planĀ forĀ ti l f StrategicĀ Change HardĀ Work theĀ TaskĀ Force LessonsĀ Learned Lessons Learned
- 5. USCĀ TaskĀ ForceĀ Goals Introductions ā¢ MoreĀ students,Ā especiallyĀ StrategicĀ Finance Strategic Finance MostĀ Important SouthĀ Carolinians S h C li i Lunch ā¢ BetterĀ affordability Discussion StrategicĀ Change ā¢ BetterĀ accessibility HardĀ Work ā¢ BetterĀ efficiency LessonsĀ Learned Lessons Learned ā¢ BetterĀ effectiveness
- 6. Why? STRATEGICĀ FINANCEĀ ANDĀ THEĀ STRATEGIC FINANCE AND THE UNIVERSITYĀ SYSTEM
- 7. TheĀ Conundrum Introductions StrategicĀ Finance Strategic Finance WeĀ CANNOTĀ do MostĀ Important Lunch WhatĀ weĀ MUSTĀ do Discussion IfĀ weĀ KEEPĀ doing If we KEEP doing StrategicĀ Change HardĀ Work WhatĀ weĀ USUALLYĀ do LessonsĀ Learned Lessons Learned
- 8. WhatĀ weĀ MUSTĀ do Introductions StrategicĀ Finance Strategic Finance MostĀ Important Lunch Discussion StrategicĀ Change āByĀ 2020,Ā AmericaĀ willĀ onceĀ againĀ haveĀ HardĀ Work theĀ highestĀ proportionĀ ofĀ collegeĀ LessonsĀ Learned Lessons Learned graduates in the worldā inĀ theĀ world ā PresidentĀ Obama,Ā 2/24/09
- 9. AndĀ thereāsĀ consensusĀ onĀ that Introductions ToĀ increaseĀ theĀ percentageĀ ofĀ StrategicĀ Finance Strategic Finance MostĀ Important AmericansĀ withĀ highāqualityĀ A i i h hi h li Lunch degreesĀ andĀ credentialsĀ toĀ 60Ā Discussion percentĀ byĀ theĀ yearĀ 2025 percent by the year 2025 StrategicĀ Change HardĀ Work Currently:Ā 39% LessonsĀ Learned Lessons Learned LuminaĀ FoundationĀ forĀ Education Lumina Foundation for Education āMoreĀ students,Ā especiallyĀ SouthĀ Caroliniansā
- 10. KnowledgeāEconomyĀ WorkĀ Force Introductions StrategicĀ Finance Strategic Finance MostĀ Important Lunch Discussion StrategicĀ Change HardĀ Work LessonsĀ Learned Lessons Learned
- 12. StateĀ Financials:Ā Gaps couldĀ approachĀ 7%Ā ofĀ spendingĀ ā āThe Lost DecadeāĀ ofĀ stateĀ funding TheĀ LostĀ Decade of state funding Introductions StrategicĀ Finance Strategic Finance MostĀ Important Lunch Discussion StrategicĀ Change HardĀ Work LessonsĀ Learned Lessons Learned Source:Ā DonĀ BoydĀ (RockefellerĀ InstituteĀ ofĀ Government),Ā 2009 *
- 13. RecentĀ Revenue/ExpenseĀ Trends Introductions ā¢ StateĀ funding:Ā 3% StrategicĀ Finance Strategic Finance MostĀ Important ā¢ Tuition:Ā 3%Ā aboveĀ CPI Lunch ā¢ StudentĀ aid:Ā 4% Discussion StrategicĀ Change HardĀ Work LessonsĀ Learned Lessons Learned ā¢ ExpenditureĀ perĀ studentĀ :Ā p p 1ā2%Ā aboveĀ CPI
- 14. OurĀ BusinessĀ ModelĀ isĀ NotĀ Sustainable Our Business Model is Not Sustainable 20Ā YearsĀ ofĀ Trends 3 2.5 AFFORDABILITYĀ GAP 2 Tuition Expend/FTE STATE FUNDS GAP 1.5 StateĀ 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. WeĀ cannotĀ goĀ onĀ thisĀ way Introductions StrategicĀ Finance Strategic Finance MostĀ Important Lunch Discussion StrategicĀ Change HardĀ Work LessonsĀ Learned Lessons Learned ome,Ā HittingĀ Ho Reindl
- 16. WhatĀ isĀ StrategicĀ Finance? Introductions StrategicĀ financeĀ isĀ aligningĀ StrategicĀ Finance Strategic Finance financialĀ decisionsāregardingĀ financial decisions regarding MostĀ Important Lunch revenues,Ā creatingĀ andĀ Discussion maintainingĀ institutionalĀ maintaining institutional StrategicĀ Change HardĀ Work assets,Ā andĀ usingĀ thoseĀ LessonsĀ Learned Lessons Learned assetsāwithĀ theĀ institution sĀ assets with the institution's mission andĀ strategicĀ plan.Ā Ā InĀ USCĀ TaskĀ ForceĀ terms:Ā CreatingĀ aĀ systemĀ thatĀ canĀ serveĀ more studentsĀ asĀ wellĀ orĀ betterĀ atĀ anĀ affordable priceĀ throughĀ increasedĀ p g efficiency andĀ effectiveness.
- 17. WhatĀ isĀ StrategicĀ Finance? Introductions StrategicĀ Finance Strategic Finance Mission MostĀ Important Lunch Discussion StrategicĀ Change HardĀ Work LessonsĀ Learned Lessons Learned
- 18. InĀ otherĀ āwordsāĀ .Ā .Ā . MoreĀ graduates,Ā especiallyĀ fromĀ SC Introductions StrategicĀ Finance Strategic Finance MostĀ Important Accessible Lunch Discussion Efficient Affordable StrategicĀ Change HardĀ Work Effective LessonsĀ Learned Lessons Learned
- 19. TheĀ NewĀ BottomĀ Lines CoreĀ Issue BalancedĀ Scorecard GoodĀ toĀ Great KaplanĀ andĀ Norton/et al Collins/Staisloff/etĀ al IsĀ theĀ organizationĀ doingĀ Quality,Ā effectiveness,Ā Mission theĀ rightĀ thingsĀ andĀ doingĀ customerĀ satisfaction themĀ well? What sĀ theĀ cost/benefitĀ ofĀ improvementĀ inĀ this? Whatās the cost/benefit of improvement in this? DoesĀ theĀ environmentĀ FinancialĀ stabilityĀ andĀ Market want/needĀ whatĀ theĀ strength organizationĀ does? YES IsĀ theĀ organizationĀ Ā OperatingĀ efficiency,Ā Margin ensuringĀ thatĀ revenuesĀ i th t internalĀ processes i t l exceed costs? WhatāsĀ theĀ cost/benefitĀ ofĀ improvementĀ inĀ this? IsĀ theĀ organizationĀ LearningĀ andĀ growth Momentum investingĀ inĀ itsĀ ownĀ future? WhatāsĀ theĀ cost/benefitĀ ofĀ improvementĀ inĀ this?
- 20. TaskĀ ForceĀ Charge/BottomĀ Lines (whichĀ elementsĀ ofĀ ourĀ chargeĀ areĀ mostĀ relevant/powerful?) ( h h l f h l / f l?) Introductions Mission/Quality StrategicĀ Finance Strategic Finance ProgramsĀ andĀ theirĀ locations Programs and their locations MostĀ Important DistanceĀ education Lunch AccreditationĀ andĀ regulation DemandĀ analysis Discussion Market StrategicĀ Change Efficiency HardĀ Work StudentĀ capacityĀ byĀ campus,Ā byĀ program LessonsĀ Learned Lessons Learned EaseĀ ofĀ transfer Ease of transfer TuitionĀ rates;Ā tuition/stateĀ revenueĀ mix DataĀ consistency TrueĀ costĀ ofĀ attendance Learning FacultyĀ andĀ staffĀ workforce CampusĀ contributionĀ toĀ economicĀ value FacultyĀ governance F lt
- 21. ImportanceĀ ofĀ ALIGNMENTĀ andĀ TrackingĀ Progress p g g StrategicĀ StrategicĀ FinanceĀ GoalsĀ (Momentum, (Mission,Ā Margin) Market) StrategicĀ St t i Communication Indicators Information Analysis CourseĀ Correction Actions
- 22. TaskĀ ForceĀ StrategicĀ Indicators (examples) ( ) Introductions ā¢ MoreĀ students StrategicĀ Finance Strategic Finance ā Enrollment growth by in/out of state EnrollmentĀ growthĀ byĀ in/outĀ ofĀ state MostĀ Important ā¢ Affordability Lunch ā NetĀ tuition/medianĀ householdĀ income Discussion ā TotalĀ financialĀ aid/TotalĀ tuitionĀ revenue l fi i l id/ l ii StrategicĀ Change ā¢ Accessibility HardĀ Work ā EnrollmentĀ growthĀ byĀ race,Ā income,Ā transferĀ LessonsĀ Learned Lessons Learned status ā¢ Efficiency ā CostĀ perĀ SCHĀ byĀ program,Ā byĀ site,Ā byĀ delivery ā¢ Effectiveness ā RetentionĀ andĀ graduationĀ rates
- 23. FromĀ SteveĀ JobsĀ toĀ YOURĀ Job Introductions StrategicĀ Finance Strategic Finance ā¢ 20th Century was one of CenturyĀ wasĀ oneĀ ofĀ MostĀ Important Lunch technological innovation Discussion StrategicĀ Change HardĀ Work LessonsĀ Learned Lessons Learned ā¢ 21st Century must be one of CenturyĀ mustĀ beĀ oneĀ ofĀ institutional innovation DavidĀ Wiley,Ā BYU,Ā http://davidwiley.org/
- 24. DISCUSSION WhatĀ areĀ theĀ mostĀ importantĀ actionĀ itemsĀ forĀ theĀ TaskĀ it f th T k Force? Introductions StrategicĀ Finance MostĀ Important Most Important Lunch Discussion StrategicĀ Change Strategic Change HardĀ Work LessonsĀ Learned
- 25. Introductions StrategicĀ Finance MostĀ Important Lunch Lunch! Discussion StrategicĀ Change HardĀ Work LessonsĀ Learned
- 26. Introductions StrategicĀ Finance MostĀ Important Lunch DiscussionĀ Continues Discussion Continues Discussion StrategicĀ Change HardĀ Work LessonsĀ Learned
- 28. CurrentĀ InstitutionalĀ Responses Current Institutional Responses Introductions ā¢ Increase efficiency IncreaseĀ efficiency StrategicĀ Finance ā¢ IncreaseĀ administrativeĀ productivity MostĀ Important Lunch ā¢ Leverage stimulus money LeverageĀ stimulusĀ money Discussion StrategicĀ Change HardĀ Work ā¢ APLUĀ surveyĀ justĀ out:Ā āTheĀ surveyĀ LessonsĀ Learned resultsĀ indicateĀ thatĀ "universitiesĀ areĀ strivingĀ toĀ protect th t i i t protect theĀ coreĀ educationĀ t t d ti missionĀ ofĀ theirĀ institutions.ā
- 29. MissingĀ inĀ Action? g Introductions ā¢ ProgressĀ toĀ strategicĀ goals StrategicĀ Finance Strategic Finance MostĀ Important ā¢ Growth Lunch Discussion ā¢ QualityĀ improvement Quality improvement StrategicĀ Change HardĀ Work ā¢ AcademicĀ productivity LessonsĀ Learned Lessons Learned ā¢ Innovation I ti ā¢ DevelopmentĀ ofĀ aĀ sustainableĀ businessĀ model DavidĀ Wiley,Ā BYU,Ā http://davidwiley.org/
- 30. WhatĀ doĀ institutionsĀ need? Introductions ā¢ GrowthĀ byĀ substitution StrategicĀ Finance Strategic Finance MostĀ Important ā¢ GreaterĀ costĀ containment Lunch Discussion ā¢ GreaterĀ productivity Greater productivity StrategicĀ Change HardĀ Work ā¢ ClearĀ expectations LessonsĀ Learned Lessons Learned ā¢ Innovation I ti ā¢ LEADERSHIP
- 31. ReducingĀ CostĀ andĀ IncreasingĀ Productivity Reducing Cost and Increasing Productivity 31 *
- 32. CostĀ EffectiveĀ Cost Reductions Productivity Cost Effective =Ā CostĀ ReductionsĀ +Ā Productivity ProductivityĀ Cost reductions = improvementsĀ improvementsĀ = p IncreaseĀ inĀ outputĀ PermanentĀ structuralĀ (learning,Ā research,Ā jobs),Ā ( g, , j ), reductionsĀ inĀ spendingĀ d ti i di withoutĀ changingĀ admissions orĀ spending 32 *
- 33. ExamplesĀ ofĀ CostĀ ReductionsĀ Examples of Cost Reductions ā¢ ReduceĀ highĀ cost/lowĀ demandĀ programsĀ g / p g ā¢ AddressĀ retirementĀ eligibility ā¢ ReduceĀ growthĀ inĀ healthĀ careĀ cost ā¢ ConsolidateĀ administrativeĀ functions ā¢ ReduceĀ spendingĀ onĀ nonārevenueĀ producingĀ athletics thl ti ā¢ RestructureĀ debtĀ ā¢ Restructure faculty compensation and rewards RestructureĀ facultyĀ compensationĀ andĀ rewardsĀ (useĀ turnoverĀ toĀ substituteĀ teachingĀ facultyĀ forĀ researchĀ faculty) 33 *
- 34. ExamplesĀ ofĀ ProductivityĀ ImprovementsĀ p y p ā¢ IncreaseĀ inĀ studentĀ retentionĀ andĀ graduationĀ Increase in student retention and graduation ā¢ ReduceĀ excessĀ creditsĀ forĀ theĀ degree ā¢ IncreaseĀ creditābyāexamĀ di b ā¢ IncreaseĀ distanceābasedĀ learningĀ programs ā¢ IncreaseĀ proportionĀ ofĀ graduatesĀ whoĀ meetĀ g goalsĀ forĀ criticalĀ learningĀ g ā¢ IncreaseĀ proportionĀ ofĀ studentsĀ whoĀ remainĀ ā andĀ areĀ employedĀ inĀ state and are employed ā in state 34 *
- 35. BuildingĀ Cost EffectiveĀ InstitutionsĀ Building CostāEffective Institutions Introductions ā¢ Reduce administrative costs ReduceĀ administrativeĀ costs StrategicĀ Finance ā¢ TackleĀ āautomaticāĀ costĀ MostĀ Important Lunch increases Discussion StrategicĀ Change ā¢ ReengineerĀ curricula HardĀ Work LessonsĀ Learned ā¢ ReengineerĀ courseĀ delivery ā¢ Eliminate,Ā innovate,Ā orĀ Ā , , consolidateĀ highĀ cost/lowĀ demandĀ programs p g slideĀ 35 *
- 36. LearningĀ Productivity Learning Productivity ā¢ StudentsĀ comeĀ toĀ collegeĀ fullyĀ g y Introductions StrategicĀ Finance preparedĀ (noĀ remediation) MostĀ Important ā¢ AcceleratedĀ learning Lunch ā¢ MinimizeĀ āreworkāĀ andĀ reduceĀ creditsĀ Discussion StrategicĀ Change toĀ degreeĀ HardĀ Work ā¢ I ImproveĀ ratesĀ ofĀ courseĀ completion t f l ti LessonsĀ Learned ā¢ EncourageĀ useĀ ofĀ assessment/ātestĀ out options outāĀ options ā¢ LearningĀ inĀ theĀ workplace/creditĀ forĀ experience p slideĀ 36 *
- 37. ImprovingĀ AffordabilityĀ &Ā Choices Improving Affordability & Choices ā¢ Commit to average undergraduate CommitĀ toĀ averageĀ undergraduateĀ Introductions StrategicĀ Finance tuitionĀ growthĀ noĀ moreĀ thanĀ CPI,Ā withĀ MostĀ Important increasedĀ needābasedĀ aid Lunch Discussion ā¢ AllowĀ differentialĀ tuitionsĀ forĀ highĀ StrategicĀ Change cost/demandĀ programs HardĀ Work ā¢ ExperimentĀ withĀ lowĀ pricedĀ optionsĀ LessonsĀ Learned ā¢ GreaterĀ onācampusĀ employmentĀ opportunitiesĀ forĀ students ā¢ ReduceĀ timeĀ toĀ degree 37 *
- 38. ImplicationsĀ forĀ Leaders Implications for Leaders Introductions ā¢ Reāimagine your business model Re imagineĀ yourĀ businessĀ modelĀ StrategicĀ Finance toĀ createĀ longātermĀ sustainability MostĀ Important Lunch ā¢ Support change in approach to SupportĀ changeĀ inĀ approachĀ toĀ Discussion budgetĀ buildingĀ StrategicĀ Change ā ExamineĀ oldĀ habitsĀ andĀ conventionalĀ HardĀ Work wisdomĀ aboutĀ costs LessonsĀ Learned ā FocusĀ onĀ bigĀ picture,Ā andĀ progressĀ onĀ achievingĀ strategicĀ goals hi i i l ā CommitĀ toĀ institutionalĀ innovation 38 *
- 39. WhereĀ areĀ youĀ headed,Ā andĀ howĀ willĀ youĀ getĀ there? y , y g StrategicĀ StrategicĀ FinanceĀ GoalsĀ (Momentum, (Mission,Ā Margin) Market) StrategicĀ St t i Communication Indicators Information Analysis CourseĀ Correction Actions
- 40. āItĀ isĀ notĀ necessaryĀ toĀ Introductions StrategicĀ Finance change.Ā SurvivalĀ isĀ notĀ h S i li t MostĀ Important Lunch mandatory.ā y Discussion StrategicĀ Change HardĀ Work W.Ā EdwardsĀ Deming W Ed d D i LessonsĀ Learned DavidĀ Wiley,Ā BYU,Ā http://davidwiley.org/
- 41. Introductions StrategicĀ Finance Strategic Finance MostĀ Important Lunch Discussion HardĀ Work Hard Work StrategicĀ Change HardĀ Work LessonsĀ Learned Lessons Learned
- 42. Introductions StrategicĀ Finance Strategic Finance MostĀ Important Lunch Discussion LessonsĀ Learned Lessons Learned StrategicĀ Change HardĀ Work LessonsĀ Learned Lessons Learned
- 43. Introductions StrategicĀ Finance Strategic Finance MostĀ Important Lunch Discussion Evaluations,Ā Please Evaluations Please StrategicĀ Change HardĀ Work LessonsĀ Learned Lessons Learned
- 44. Resources ā¢ HITTINGĀ HOME:Ā Quality,Ā Cost,Ā andĀ AccessĀ ChallengesĀ ConfrontingĀ HigherĀ EducationĀ Today,Ā TravisĀ Reindl,Ā www.makingopportunityaffordable.org ā¢ StrategiesĀ forĀ ToughĀ Times,Ā DennisĀ JonesĀ andĀ JaneĀ Wellman,Ā NovemberĀ 19,Ā 2009
- 45. CAUSESĀ ofĀ StrategicĀ Indicators (brainstormĀ onĀ flipĀ chart) ( ) Introductions ā¢ EnrollmentĀ growthĀ byĀ in/outĀ ofĀ state StrategicĀ Finance Strategic Finance Goals/Charge ā¢ NetĀ tuition/medianĀ householdĀ income MostĀ Important Lunch ā¢ TotalĀ financialĀ aid/TotalĀ tuitionĀ revenue Discussion ā¢ EnrollmentĀ growthĀ byĀ race,Ā income,Ā StrategicĀ Change transferĀ status HardĀ Work Hard Work LessonsĀ Learned ā¢ CostĀ perĀ SCHĀ byĀ program,Ā byĀ site,Ā byĀ delivery ā¢ RetentionĀ andĀ graduationĀ rates