Administration

On Administrative Spending, Which Colleges Get the Most Bang for the Buck?

July 25, 2017

Administrative costs are a popular target for groups concerned about the rising price of college. A new report puts that spending in context and finds that large, public research universities are the most efficient compared with smaller and private institutions.

The study, released Tuesday by the American Council of Trustees and Alumni, also suggests ways for governing boards to be aware of their colleges’ administrative spending, and to find ways to limit it.

Median spending on administrative staff was 17 cents for every dollar spent on instructional staff at large, public, doctoral-granting universities with the highest levels of research activity, the study found. Small, baccalaureate-granting liberal-arts colleges, however, spent about 64 cents on administrative staff for every dollar of instructional staff, the study concluded.

Michael B. Poliakoff, president of the council, said he was surprised at how much higher the administrative costs were at small, private liberal-arts colleges. The findings raise questions, he said, about the long-range fiscal health of that sector and increase the need for such institutions to explore shared administrative services and purchasing consortia where possible.

"I strongly believe we are coming into a sort of 'join-or-die' imperative," he said.

But groups representing some private colleges said the study looked too narrowly at what might be considered instructional costs.

"The researchers seem to be stretching the … data beyond what it was intended to do," Pete Boyle, vice president for communications at the National Association of Independent Colleges and Universities, said in an email.

In fact, the council's research uses a rather broad definition of instructional costs and a much narrower definition of administrative spending. Using federal data, reported by 1,200 institutions to the National Center for Education Statistics, the study includes in instructional costs not only the expense of employing faculty, but also academic support, some academic administrators, such as department deans, and "anything else related to supporting the institution's primary mission." That includes spending on things like art galleries, libraries, and museums, the report said.

Administrative costs, on the other hand, include only endeavors that support the day-to-day operations of the college, and not things like student activities, career services, or financial-aid staff, which are reported to the government as "student support" activities.

"Not including costs associated with student activities and career services as being germane to academics — an institution's primary mission — is faulty," Mr. Boyle said in his email.

The goal of the study was not to set a specific target for each college but to make trustees aware of the data so that they can compare their own institutions to the trends within each sector, Mr. Poliakoff said.

Armed with that knowledge, trustees should seek ways to make colleges more efficient while putting money into activities that improve student outcomes, the report urges.

"Bear in mind that not all administrative costs are problematic," the study says. "If higher costs in particular areas correlate with better outcomes, they may be considered investments in line with the school's mission," the report says. "If they do not, trustees should reconsider their institution's budgetary priorities."

Barmak Nassirian, director of federal relations and policy analysis at the American Association of State Colleges and Universities, said he was not surprised by the study's findings because large universities benefit from economies of scale. But he praised the report's "thoughtful tone on a topic that tends to evoke a lot of heated rhetoric."

The focus on administrative costs has grown more urgent because the instructional employees in higher education are "de-professionalizing" at the same time that administrative staff are becoming more professional. While there has been a lot of attention on the potential excesses of administrative spending, not all those costs are frivolous or unnecessary, Mr. Nassirian said.

"The main point here is that administrators do oversee academic budgets, and it makes sense for someone to oversee administrative budgets," he said.

Eric Kelderman writes about money and accountability in higher education, including such areas as state policy, accreditation, and legal affairs. You can find him on Twitter @etkeld, or email him at eric.kelderman@chronicle.com.