“Building a Better Business Model” Rich Novak, Senior Fellow Association of Governing Boards Board of Governors Summit August 2, 2014 © Copyright 2014 | Association of Governing Boards of Universities and Colleges 1

Reasons for Re-thinking the Business Model • • • Unpredictable and unstable state fiscal environment Approaching a ceiling on tuition charges and affordability Federal research dollars at risk 2

A New Business Model • • • May entail significant changes for some institutions Tweaks of existing model for others No one model for all © Copyright 2013 | Association of Governing Boards of Universities and Colleges 3

Consider a “Strategic Finance” approach – aligning all resources with mission, vision and strategic plan • • • Examine costs and revenues Non-academic and academic Focus on student outcomes: resources for student success (remediation, academic advising, undergraduate curriculum) 4

“Strategic Finance” approach – aligning all resources with mission, vision and strategic plan • • Make decisions based on data and evidence, and on cost as well as anticipated benefit Know cost and revenue drivers 5

Framework for a New Business Model: Managing Costs Focus on “cost effectiveness,” not just budget-cutting by: 1) reducing spending in areas least damaging to access and attainment From “{Improving Cost-Effectiveness: Leadership Challenges for Public Higher Education” by Jane Wellman and Ellen Chaffee 6

Framework for a New Business Model: Managing Costs 2) increasing the proportion of students who complete degrees, and reducing the costs of degree production 3) reinvesting in core academic capacity From “{Improving Cost-Effectiveness: Leadership Challenges for Public Higher Education” by Jane Wellman and Ellen Chaffee 7

Managing Costs: increasing productivity and efficiency in administrative areas • • • Consolidate back-office functions among departments and colleges Consider shared services among with sister institutions Pay special attention to employee benefits 8

Managing Costs: increasing productivity and efficiency in academic areas • • • • Benchmark academic cost structures Incentivize innovation, entrepreneurship, and partnership Engage faculty Focus on positive student outcomes 9

Framework for a New Business Model: Enhancing Revenues • • • • Understand what the economic engines are for the institution Know top programs by FTE Know top programs by net revenue generation Incentivize innovation, entrepreneurship, and partnership From ”How to Review Your Business Model: Some Best Practices in March/April 2013 AGB Trusteeship Magazine, by Rick Staisloff, rpk consulting, and AGB Consultant 10

Framework for a New Business Model: Enhancing Revenues • • • Mission: What are we good at?

Market: What do people want?

Margin: How do we bring these together in a way true to mission and generates resources?

From ”How to Review Your Business Model: Some Best Practices in March/April 2013 AGB Trusteeship Magazine, by Rick Staisloff, rpk consulting, and AGB Consultant 11

12 Framework for a New Business Model: Enhancing Revenues

Market Mission Margin

The business model is your institution’s plan to generate and sustain revenue so that it can meet its expenses while bringing value to stakeholders.

Structure for a Business Model Review • • • • Creative a baseline of data Appoint a Leadership Team (include faculty and staff) Develop a communication plan Board engagement is critical From ”How to Review Your Business Model: Some Best Practices in March/April 2013 AGB Trusteeship Magazine, by Rick Staisloff, rpk consulting, and AGB Consultant 13

Implementing a New Business Model Develop metrics: 1) Key Performance Indicators 2) Dashboard indicators 3) Comparison groups From ”How to Review Your Business Model: Some Best Practices in March/April 2013 AGB Trusteeship Magazine, by Rick Staisloff, rpk consulting, and AGB Consultant 14

Some Institutional Examples 15

Thank You Rich Novak AGB Senior Fellow [email protected]

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