Dollars and Sense
New programs at University of San Francisco must fit "mission," but deans are using more sophisticated tools to show they can make money, too.
It’s a force of habit for higher education administrators to do a little name dropping -- usually Tom Friedman -- when justifying a new initiative. But lately, Salvador Aceves often finds himself referencing Jane Wellman, head of an ambitious project to dissect how money flows throughout colleges and universities.
Aceves, vice provost at the University of San Francisco, says Wellman’s Delta Project on Postsecondary Education Costs, Productivity, and Accountability has the right idea. As a general rule, universities aren’t looking at how their budgets match their stated goals when they embark on something new, he says.
“Quite often what you see is my rhetoric says X, but my spending priorities say Y,” says Aceves, an associate professor of accounting.
It’s somewhat curious to hear Aceves talk this way, when many perceive higher education as relatively leery of looking too closely at budget priorities – much less talking about a university as if it were a business. Indeed, the rap on many colleges is that programs are too often approved willy nilly with little regard for their true cost or importance. Not so at the University of San Francisco, says Aceves, who has made the case that the Jesuit institution can't live up to its mission without considering the profit margins of its programs. "No margin, no mission" has actually become something of a mantra for Aceves.
Putting his philosophy into practice, Aceves has helped introduce a more thorough and standardized process for deans to suggest new programs. Before this year, deans typically submitted a one-sheet proposal for new programs, conceding that their cost and revenue projections were essentially well-educated guesses. Now they’re filling out a nine-page Excel spreadsheet that assesses variables as diverse as three-year enrollment projections, technology and library costs, new teaching loads, marketing expenses, ongoing maintenance costs, and even new “university life” responsibilities the program is likely to create.
Eventually, Aceves plans to move from a spreadsheet to a Web-based tool that will be widely accessible across the university. While the new process is reserved for new program proposals, Aceves says he still thinks it's important to examine whether money should be reallocated from existing programs to fund new initiatives that are more in line with the university's strategic direction.
When San Francisco's School of Business and Professional Studies began contemplating a new weekend M.B.A. last year, Carl Gayden, assistant dean of finance and administration, was among the first to embrace the new database. He plugged in enrollment projections – 15 students in year one, 18 in year two, 22 in year three – and then crunched numbers on cost. By the end of the process, Gayden had a pretty good idea that the “contribution margin” – a higher ed euphemism for profit margin -- would be in the six figure range.
“If we have a new program, we need to justify the program is going to be viable and it’s going to make money for the university, and it’s going to meet whatever goal it needs to meet when it comes to our students,” says Gayden, who came to academe from the business world just three years ago.
“Contribution margin”? “Make money for the university”? Maybe this is how administrators talk in private, but it’s the kind of rhetoric that makes some faculty nervous that the bottom line is driving programmatic and curriculum decisions. Aceves says he’s aware of that sensitivity, and counters by saying the profitability of a program is just one of many factors the university weighs. If faculty begin to perceive that only cash cows will get approved in this new system, it’s not going to be embraced, he says.
“If we were not true to our own rhetoric, then we’d lose enormous credibility and it would be clear it was an exercise in [market] positioning and not an exercise of alignment with mission,” Aceves says.
Elliot Neaman, president of the University of San Francisco Faculty Union and a history professor, says faculty welcome anything that creates greater budgetary transparency. The jury is still out, however, on the extent to which this new system lifts the veil.
“This is a new kind of approach, and we’re still trying to figure out what it is they are showing us and what they are not,” says Neaman, whose union is affiliated with A.F.L.-C.I.O. and the American Federation of Teachers.
Additionally, Neaman says it’s important for administrators to look beyond mere numbers to assess the value of programs.
“I would say in general if you’re doing a cost benefit analysis solely, then of course it’s going to lead you to ‘Why do we have a philosophy department’ and you’re going to cut it or you’re going to merge it,” Neaman says.
If faculty are serious about the University of San Francisco thriving and surviving, however, they can’t ignore the business side of the equation, says Judy Karshmer, dean of the nursing school.
“We can’t continue to do that in higher ed,” says Karshmer, who has pushed through several new initiatives under the new budget planning model. “We have to look at how much things cost us and what we can afford to do.”
Wellman, of the Delta Project, agrees.
“For way too long, academics have had a kind of ‘don’t ask, don’t tell’ approach to looking at resources, as if it’s something sordid that is best left unmentioned among civilized people,” Wellman wrote in an e-mail to Inside Higher Ed. “The consequence has been that all programs are being eroded equally, and that too often means instructional programs are hurt. So good for [San Francisco] for lifting this up and making it an explicit decision.”
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