Indiana Trustee Academy

August 30, 2010

Rick Staisloff, Vice President for Finance And Administration, College of Notre Dame of Maryland Association of Governing Boards of Universities and Colleges. All Rights Reserved.

And as a result………

2

……….not much change

Association of Governing Boards of Universities and Colleges. All Rights Reserved.

Why Are We Here?

In the world of higher education, we must learn to live within a changed internal and external environment

– Commissions, Boards, Presidents and senior staff are uniquely positioned to help the institution operate at this juncture BUT…..

– Do we need to reevaluate our roles?

– Are we asking the right questions?

– How do we break down the divide between the mission and market sides of the house?

– What tools do we need? Association of Governing Boards of Universities and Colleges. All Rights Reserved.

Philosophy Corner

•Bump in the road or changed landscape •No one is going to rescue us (and they don’t need to) •Focus on what we can control Association of Governing Boards of Universities and Colleges. All Rights Reserved.

What is Strategic Finance?

Strategic finance is aligning resources with the institution's mission and strategic plan .

Association of Governing Boards of Universities and Colleges. All Rights Reserved.

Magic Formula

Mission + Market + Margin = Success

Association of Governing Boards of Universities and Colleges. All Rights Reserved.

Mission, Market and Margin Mission

What are you passionate about?

Market

What can you be best at in the world?

Margin

What drives your economic engine?

7 Adopted from Good To Great, Jim Collins Association of Governing Boards of Universities and Colleges. All Rights Reserved.

Mission, Market and Margin

Living at the Intersection of Mission, Market and Margin: Three Questions What are we good at? (Mission) What do people want? (Market) How do we bring these together in a way that is true to our mission and generates resources? (Margin) Association of Governing Boards of Universities and Colleges. All Rights Reserved.

“Tried and True” Reporting

• •

Financial

• Budget to Actual Financial Statements Audit

Metrics

• Ratio Analysis • Strategic Indicators/Dashboards Focus must be on what the numbers mean, more than on the numbers themselves Association of Governing Boards of Universities and Colleges. All Rights Reserved.

Why Bring This Analysis to the Table?

• Importance of looking at the “scary squiggly things under the rocks” • Need data before you tackle the hard choices One of the most important jobs of a leader is to clearly define where you are.

Association of Governing Boards of Universities and Colleges. All Rights Reserved.

Is This a Strategic Finance View?

• Importance of the “Reality Check” – Where are we right now?

• However, these tools are backward looking • New tools are needed for us to look forward and to act strategically • Shift from input focus to output focus Association of Governing Boards of Universities and Colleges. All Rights Reserved.

What Drives Activity?

Top 12 programs account for 89% of credit hours

CHM HIS CST PHY PED MUS POL ART HSV

Other 9 Programs = 11% Each 2% or <

6% 7% 9% 35% 4% 4% 4% 4% 4% 4% 3% 4%

Math Psychology Philosophy Modern Foreign Language Communication Arts English Religious Studies Biology Nursing Pharmacy Business Education

667 786 798 799 813 861

Core 8 Programs = 32%

873 904 1,227 1,330

Anchor 4 Programs = 57%

1,903 6,991 12 Association of Governing Boards of Universities and Colleges. All Rights Reserved.

What Drives Net Revenue?

Net Revenue Modeling - By Division

Revenue Tuition Discounting Discounted Revenue Total Discount % Discounted Revenue Direct Costs Net Revenue Net Revenue % Percentage of Total Revenue Base Discounted Revenue Total Direct and Allocated Cost Net Revenue Net Revenue % - FY 2008 Net Revenue % - FY 2007 Net Revenue % - FY 2006

UG

15,686,486 5,656,577 10,029,909 36.06%

PT UG

2,481,446 40,026

Accelerated

3,999,994 0 2,441,420 1.61% 3,999,994 0.00%

Graduate

10,266,637 876,158

Eng Lang Inst

464,207 0 9,390,479 8.53% 464,207 0.00%

UG

10,029,909 8,284,316 1,745,593 17%

PT UG

2,441,420 1,277,669

Accelerated

3,999,994 1,554,435 1,163,751 48% 2,445,559 61%

Graduate

9,390,479 2,874,851

Eng Lang Inst

464,207 347,933 6,515,628 69% 116,274 25%

Total

32,898,770 6,572,761 26,326,009 19.98%

Total

26,326,009 14,339,204 11,986,805 46%

UG

10,029,909 9,954,583 75,326 0.8% 2.1% 5.5%

PT UG

2,441,420 2,366,828 74,592 3.1% 18.8% 23.0%

Accelerated

3,999,994 3,149,668 850,326 21.3% 28.8% 20.0%

Graduate

9,390,479 7,858,580 1,531,899 16.3% 25.0% 25.0%

Eng Lang Inst

464,207 347,933 116,274

Total

26,326,009 23,677,592 2,648,417 10.1% 16.5% 16.0% Association of Governing Boards of Universities and Colleges. All Rights Reserved.

+$ 12,000 +$10,000 + $8,000 +$6,000 +$4,000 +$2,000 -$2,000 -$4,000 -$6,000 -$8,000 -$10,000 -$12,000 14

Reducing Costs

Direct Instructional Expenditure per FTE Student Health Phy Ed

Less efficient than market standard

Bio Bus Chem Psych Comm Computer EDU English Foreign Lang Nursing History Philos Math Music Rel Study

National Norm FY 2008

More efficient than market standard

Association of Governing Boards of Universities and Colleges. All Rights Reserved.

Increasing Productivity

Student Credit Hours per FTE Faculty

+ 45 +30 +15

Nursing Edu

More efficient than market standard

-20 -50 -80 -110

Philos Chem

-140 -170

Music Math Arts Bus Comp Sci Bio Comm Foreign Lang English

Less efficient than market standard

Rel Study

National Norm FY 2008

Psych Health Phy Ed History

Association of Governing Boards of Universities and Colleges. All Rights Reserved.

How will we make decisions about the academic portfolio?

Grow Maintain/ Manage Cost We will evaluate, dialogue then organize decisions into four buckets Mission Demand Conversion Contribution Efficiency Net Revenue

Program

A B C D

Mission # Prospects Yes Yes Yes No > 5,000 < 1,000 > 1,000 < 1,000 Yield >33% < 33% < 33% < 33% Credit Hours Student Cr Hr/FTE Faculty Direct and Indirect AllocatedCost Model > 1,000 > 500 > 500 Above Benchmark At Benchmark Below Benchmark Positive Positive Negative < 500 Below Benchmark Negative

Sunset Redesign

16 Association of Governing Boards of Universities and Colleges. All Rights Reserved.

Cost Reductions – What’s Working/What’s Not?

• Outsourcing • Strategic Sourcing • Benefit Cost Shifting • IT – Standardizing hardware and software • Consolidating course sections • Reducing high cost/low demand programs - Takes time but has big payback • Early Retirement Incentives proving difficult Association of Governing Boards of Universities and Colleges. All Rights Reserved.

Examples of Productivity Improvements

• Increase in Student Credit Hours per Full Time Equivalent Faculty • Increase in student retention and graduation • Reduce excess credits for the degree • Increase distance-based learning programs Association of Governing Boards of Universities and Colleges. All Rights Reserved.

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Roles and Responsibilities

• State Commission

– Resource Allocation – Where should the State invest?

– Discovery and Sharing of Best Practices

• Trustees

– Oversight - Implementation of cost reductions and productivity improvements – Ensuring development of appropriate data and metrics Association of Governing Boards of Universities and Colleges. All Rights Reserved.

Asking the Right Questions

• Are state and university strategic goals – Clearly stated?

– Clearly – and frequently – communicated? • Is performance considered in the resource allocation process – Are resources targeted to mission/market/margin opportunities?

– Are faculty and staff allocated to the highest priorities?

– Are there programs or services that should be eliminated?

– Are there opportunities for collaboration that would yield better results at less cost?

• Are metrics for measuring performance and achievement of goals in place?

– SCH/FTE faculty Association of Governing Boards of Universities and Colleges. All Rights Reserved.