At 4:15 a.m. on a crisp summer morning, a vice president for finance made small talk outside the downtown Sheraton while awaiting an airport shuttle on the final day of the 2014 annual meeting of the National Association of College and University Business Officers.
“I thought Bill Gates was really good,” he said.
A day earlier the billionaire philanthropist drew loud and long applause from some 3,000 higher-education administrators with remarks that might have gotten him pelted with fruit if he’d voiced them before a similarly sized crowd of college professors: MOOCs embedded with hyperlinks will soon supplant the lecture, and a renewed push for faculty unions would be unfortunate for the industry at this critical juncture.
But Mr. Gates wasn’t the only one at the conference to utter thoughts that would have riled much of the professoriate. If shared governance, shared services, and too-small classes were among the week’s heavily discussed topics, the culture gap with the faculty was a strong undercurrent.
The college vice president agreed that some of the proposals discussed for fixing the broken financing model for higher education might alienate some faculty members. But “they don’t see what we see,” he said.
That may change if college business officers heed the command of the association, known as NACUBO, to go forth and educate their campus “stakeholders” on the current realities of higher-ed financing. The faculty could just be the most important member of that group, as one commenter observed during a session.
“Presidents come and go. Students come and go. Trustees come and go,” the commenter said. “Professors are eternal.”
They might be—if their colleges survive.
The Triumvirate
Karen L. Goldstein, an executive-search consultant with Witt/Kieffer and former chief financial officer at Davidson College, said she has sometimes wondered about professors who refuse to engage.
“Don’t they understand,” she said, “that if they don’t participate in this, not only are they not going to get raises, they’re not going to have a job because there won’t be any institution?” Ms. Goldstein said dialogue is critical because “having head-on conflict between faculty and the senior administration means that’s an institution that is not going to succeed.”
Now more than ever, chief business officers must be great communicators, be strategic, and be visionary—qualities that before the crash of 2008 were more commonly sought in presidents and provosts. Nowadays, Ms. Goldstein said, the chief financial officer serves alongside those two as the third leg of the triumvirate, bringing a vital business sense to any discussions of how the enterprise must change to meet the new challenges of limited tuition and tax dollars.
Ms. Goldstein led a survey last fall of college presidents that explored, among other things, what qualities they desire in a chief business officer. High on their list, she said, was that “the CBO needs to be an educator in the sense of helping the trustees, cabinet members, faculty, students, and staff to understand the financial status of the institution.”
A Shifting Model
John D. Walda, president of NACUBO, echoed Ms. Goldstein’s remarks about the shifting role of the financial officer, but in an interview this week he challenged the notion of a single business model for higher education.
“The first thing that’s important is for us all to quit talking about the business model for higher education and realize that there are multiple business models,” he said. “It all depends on what your mission is, and it depends on your size, whether you’re public or private, and whether you’re well endowed.”
Most business models these days are challenged, he said, with the exception of the high-profile, deep-pocketed, big-reputation universities. But he dismissed doom-and-gloom scenarios as “exaggerated” and “an oversimplification.”
“The severity of the challenge depends on which of the business models you’re locked into,” he said. “We’re all exploring what the weaknesses are in our business models, and we’re doing something about it, one piece at a time.”
The revenue side of colleges finances is the one that gets most of the attention. But the other half of the equation—the expense side—is increasingly important, Mr. Walda said.
“There’s a robust discussion about how to constrain costs,” he said. “It goes from more profound things like combining academic programs or sharing academic programs with other institutions to using technology to reduce costs. And then there are simpler things like outsourcing and realigning procurement.”
But Rick Staisloff, principal of the RPK Group and an authority on higher-education finance, said the sector was undergoing a fundamental shift from a budget-balancing focus to a model that takes advantage of marginal returns. “It’s not just ‘How can we spend less?’” he said. “It’s ‘How can we get more for the money that we already spend?’”
Filling Those Seats
Mr. Staisloff cited an innovative study of seven colleges by the Education Advisory Board that analyzed data to help the colleges make smarter decisions about things like course scheduling and classroom utilization.
“They found that class size was potentially one of the bigger levers you could use to generate more margin,” he said.
Another was capacity. The University of New Mexico, one of the institutions that participated in the study, explored the question of filling a few more chairs in the classroom to generate more revenue. Kevin Stevenson, director of strategic projects at the university, was among a group that presented results of their work with the Education Advisory Board at this week’s conference.
Mr. Stevenson said the researchers had identified 90,000 empty classroom seats—representing a significant revenue opportunity for the university if it could lure more students to those desks using some sort of incentive. He emphasized that usurping faculty authority was not the intention of the research.
“We don’t want to assume what the capacity of a course would be,” Mr. Stevenson said. If the professor says the capacity of the course is 22, then the university would not seek to admit 25. “But we’re taking the approach that if, all things being equal, you can teach an intro-to-English class of 22 students, then we’d like you to have 22 students instead of having 15,” Mr. Stevenson said.
He said that the researchers had also been careful, when looking at cost per credit hour, to compare only programs that are similar.
“We don’t want to get into the business of comparing a music department or a college of fine arts to a physics department or a college of sciences, because they’re completely incomparable,” he said. Music departments are among the most expensive departments, he added, “because you have full professors providing one-on-one instruction.”
The goal, he said, is not to point out that music is inefficient but to use the data to “move the needle a little closer to optimal and realize savings on the margins.”
Mr. Staisloff said that traditional higher education is not going away anytime soon. “So we need to find ways to help it operate in a more effective and productive manner,” he said, “because that ultimately benefits the students.”