Step into the president’s office at Brenau University, and you find yourself surrounded by vivid maps displaying the geology of the United States in bright yellows and reds, greens and purples. Ask Ed Schrader about the maps, and he’ll explain how heat, pressure, sediments, and erosion molded this diverse landscape through the epochs. He’ll speak with all the enthusiasm that a former geology professor can bring to the subject.
But before he entered the academic world, in the late 1980s, Mr. Schrader was part of a more “cutthroat” environment: the mining industry, where he worked for corporations like Chevron and Süd-Chemie. There he learned a different kind of discipline, which he brings to the academic world now.
“We counted nuts and bolts, we dug things up for pennies and sold them for dimes,” he says.
Administrators at Brenau, in a similar fashion, tally all the revenue and expenses of its colleges, determining the net revenue of each. They count, down to the penny, what it costs to graduate a business student, or a humanities student, or a nursing student. They know precisely which academic units are cash cows and which aren’t, and by how much, and they use that information to figure out how to grow strategically.
Brenau’s gross income has doubled in the past decade, from $23-million to $48-million (with $51-million projected next year). It has run million-dollar surpluses in recent years, has expanded its campus to several locations across Georgia, and is considering moving into Florida.
For Mr. Schrader, this is more than just business discipline, but a way to preserve the more fragile aspects of Brenau’s mission. At its core, Brenau is a women’s college with a liberal-arts emphasis, an endangered species these days. The university’s weekend, online, and professional programs in business, occupational therapy, and other fields help sustain the women’s college. “I have to know how many people I need to educate in nursing to pay for those graduates in English,” Mr. Schrader says. “If I don’t know that, we’re subject to the whims of fate.”
“I have to know how many people I need to educate in nursing to pay for those graduates in English.”
That might seem like plain common sense. But observers of higher education say Brenau’s close attention to revenue and costs is fairly unusual, especially among smaller colleges. “It is very much the exception that an institution understands its costs at a granular level,” says Rick Staisloff, a consultant who spent more than two decades in higher-education finance. Drawing on a metaphor he often uses, Mr. Staisloff says colleges tend to look at their offices, programs, and departments as a big basket of stuff, not knowing what the individual pieces in the basket cost.
“No one asked you if you made or lost money on history, or made or lost money on business,” he says. “If it all added up, that’s all people cared about.”
That’s changing, Mr. Staisloff notes, for reasons that everyone in the industry knows: more pressure and scrutiny on institutions, along with more attention to the complex financial model of higher education, where richer students and richer programs usually cover losses from poorer students and poorer programs. “If you’re going to live in a world of subsidies,” he says, “you should know which things are making money.”
Edie Behr, an analyst in the public-finance group at Moody’s Investors Service, says colleges have had a longstanding culture of providing education without scrutinizing the costs—"an ingrained culture that is going to have to break down,” she says, “because there is a need for cost containment.”
“As the programs that cost more than they bring in are identified,” she says, “then the question becomes, What do you do with them?”
When Mr. Schrader came to Brenau in 2005, from Shorter University, where he was president, he inherited the institution from a leader who had gotten it back on firm financial ground. Still, he says, there were lapses. The administration set budgets for departments but did not strictly enforce them. Administrators believed they were spending 5 percent of their endowment value, but were actually spending 5 percent of the year-to-year growth, he says. And the college’s financial office was a bit behind the times. The CFO did not use any sort of computerized system to track the college’s spending. If you asked him for a figure, Mr. Schrader says, “he would run to his office, dig about three feet down in a stack of papers, and come back saying, ‘Here it is.’”
Mr. Schrader hired a consultant, James F. Galbally, to act as a kind of forensic accountant, working closely with a new chief financial officer, Wayne Dempsey, who also came from Shorter. Mr. Galbally had spent 20 years at the University of Pennsylvania, where he was an associate dean overseeing finances for the dental school, and had taught in the management school and the higher-education program alongside Robert Zemsky, an expert in college management. He also spent several years as a consultant specializing in training new college presidents.
“Ed asked the question that most boards ask of their presidents, but most presidents can’t answer,” Mr. Galbally says. With three academic platforms—a women’s college, an evening-and-weekend college, and an online college—"what do these cost, and which are winners and losers?”
At the time, Brenau, like most colleges, budgeted not by platform but by department. So Mr. Galbally and other administrators took a deep dive into the curriculum, allocating faculty and staff costs to specific departments and platforms. They looked at the revenues of various programs and the costs of financial aid. They found ways to split up the overhead—specialized labs, licensure costs, or equipment would be charged back to the program using them, while health coverage, retirement benefits, the library, administration, and other expenses were evenly distributed. (Mr. Galbally describes it as a “step down” from responsibility-center management, a budgeting practice that has been employed at big research universities like Penn, the University of Southern California, and Harvard University.)
Over the years, Brenau has refined the process, but from the beginning, it illuminated the university’s strengths. If you look at the performance of the women’s college, the evening-and-weekend college, and the online college over the past 10 years—accounting for instructional and indirect costs—the women’s college has always lost money, but its losses are especially pronounced in the past couple of years. It lost $3.6-million in the 2012 fiscal year and $4-million in the 2013 fiscal year. The evening-and-weekend college, by comparison, is a marginal moneymaker—it made $500,000 last year, fairly typical for most years of the past decade. (In an unusual show of openness, Brenau agreed to share its financial data with The Chronicle.)
The online college is a boon, with fabulous growth. It made $3.1-million in 2011, $4-million in 2012, and $5-million in 2013. (See chart, Page A25.)
When administrators analyze the spending per student (rendered in full-time equivalents), one begins to see, in part, how the online platform makes money: The cash-cow programs—business and health sciences—spend far less on their online students than on those in the women’s college.
When the numbers were first laid out, Mr. Galbally says, a prominent businessman on the Board of Trustees suggested that Brenau should just close the women’s college and teach online.
“We have that conversation at every board meeting,” says David L. Barnett, who became senior vice president and CFO at Brenau in 2012, after Mr. Dempsey retired. But when they talk about the business of the women’s college, Mr. Barnett adds, board members are “business-savvy enough to know that there are products within a product line that are valuable to the brand, that may not be on their own profitable.”
And the notion that the women’s college is a “loss leader,” in the words of Mr. Barnett, is borne out by the numbers. Sitting in his office with Mr. Galbally and a thick three-ring binder of charts and spreadsheets, Mr. Barnett produces two sheets labeled “Table 4,” which show the direct income and expenses of instruction in the 2013 fiscal year, without auxiliaries, financial aid, and other expenses to muddy the picture.
In the first version of the table, which keeps the income within the platform where a course was taken, the online platform is once again a big winner. Its gross income is $12.8-million, compared with $10.5-million in the women’s college, but its instructional expenses are far lower: $2.6-million compared with $4.5-million.
However, in a second version of Table 4—called the “parallel universe” by the administrators—the income from students is credited back to the college where those students are registered. This version shows the volume of women’s-college students who are crossing over to the online college for a more “hybrid” experience. With the income from women’s-college students taking online courses attributed to their home platform, the women’s college suddenly seems immensely more profitable: It brings in $14.2-million in gross income, compared with the online college’s $5.4-million, and its net income is $9.6-million compared with $2.7-million. (See chart, above.)
Table 4 shows the outcomes at the end of a fiscal year, but analyses like this also inform a lot of financial planning on the front end at Brenau. Shortly before the annual budgeting process begins, Mr. Barnett and his colleagues go to department heads and deans to ask how many students they expect to retain from the past year.
“That gives them ownership in what they think their enrollments in programs will be,” Mr. Barnett says. “That helps when we have the conversation about whether or not we need new faculty lines, or when we have the uncomfortable conversation about whether we need to take a faculty line away.” (Brenau has always used long-term contracts rather than tenure, which gives administrators yet more control over personnel and expenses.)
Mr. Barnett and his colleagues also tightly control cash flow throughout the year. Small colleges typically take out bridge loans in the summer and in December to cover their expenses until they get their big cash infusions from tuition in September and January. Brenau has not borrowed money for the past three budget cycles.
Mr. Barnett got his practical experience in finances running his father’s trucking business, handling the books for a construction company, and working for other industries before he went back to academe for a degree in higher-education administration. Managing cash flow was a big part of running a small business, but it isn’t always handled well in academe, in his experience. At one of the small, church-affiliated colleges where Mr. Barnett worked as a dean, he says, higher-paid employees like him often got a call in July, asking if they could forgo a paycheck until September.
“That was an attempt to avoid using credit—maybe because the credit line was already maxed out,” he says. “God would say, ‘The first shall be last.’ Welcome to being the last.”
Other institutions are beginning to take a similar dive into their finances to analyze costs of programs and units, but those driving the change aren’t always comfortable infusing business methods into an academic environment.
James Danko spent nearly 20 years as an entrepreneur, running companies specializing in medical and fitness equipment. When he transitioned into academe—as associate dean of business at Dartmouth University, then dean of business at Villanova University, and now president of Butler University—he had a hard time understanding the financial reports he was getting. There was nothing that resembled the standard profit-and-loss statements that he was used to in the corporate world.
“The more precise information you can have about how each unit is contributing to the bottom line, the better,” he says. “I just want to know how much is the dance program losing, and how much is, say, this online M.B.A. program making. That has been the problem with every academic budget that I have seen. I don’t have the level of precision.”

After he arrived at Butler, in 2011, he hired a consultant—Michael Leardi, a former vice president for finance at Drexel University—to help compile a complete financial picture of the institution. Over the past six months. Mr. Leardi has gathered hundreds of thousands of lines of data on the financial performance of various units and departments. Administrators are just beginning to examine the data.
Besides providing a more complete picture of the university’s departments, which could guide strategic investments, the information could also serve broader purposes. Mr. Danko describes one: As Butler’s president, he declared his plan to enlarge the undergraduate program—a common goal among new presidents, based on the belief that more students will lead to more revenue and market prominence. But at a meeting with faculty members, Mr. Danko says, a longtime biology professor stood up and said he was sick of hearing presidents say they would grow their way out of an institution’s problems—that growth had never yielded the benefits promised at Butler in the past.
“I thought, That’s a damn good point,” Mr. Danko says. With more precision in the financial picture, he says, administrators might find how much growth, if any at all, is optimal.
Assessing costs internally could have benefits externally as well. “Everyone is telling us in higher ed that tuition is running rampant,” Mr. Danko says. To know the costs of providing a college education, and to be able to clearly show that to policy makers, parents, and students, can help put higher education in “a defensible position to the noise out there, and to address the overarching belief that we are financially out of control.”
Still, Mr. Danko expresses some worry about talking so publicly about revenue, returns, and losses at Butler. “I am going to sound like Mr. BusinessSpeak, always worried about the bottom line,” he says—a perspective that has not always been welcome in academe. He tries to emphasize that by analyzing costs, he can better protect programs like music and dance, which typically operate at a loss at many colleges, along with the academic mission as a whole.
“The people in our English or philosophy departments just find the business world distasteful,” he says. “I am almost apologetic about it, but I am also aware of my fiscal responsibility.”
Academics have been wary of a more business-oriented approach in higher education, fearing that administrators and trustees would favor shallow, moneymaking programs at the expense of those more academically important—and perhaps less popular.
But Mr. Staisloff, the consultant, argues that colleges’ fundamental “discomfort with accountability” has kept them from grappling with financial matters at a more detailed level until now, when financial strain and public scrutiny have forced the issue. He recalls an incident during his years as a CFO, when he did an analysis and gave department heads targets in head count or revenue to shoot for. He thought it would free things up, allowing departments to run highly specialized, sparsely populated courses and seminars, provided that they could offset those with more-robust offerings that brought in money.
Eventually, however, people figured out that he could run the numbers and know which faculty members were filling up their classes—and contributing to the bottom line—and which ones weren’t.
“That is absolutely what killed it—the visceral resistance to the idea that there would be individual accountability in terms of contribution,” he says.
At Brenau, that’s not the attitude. Faculty members and department heads express an appreciation, or at least a grudging respect, for the financial calculations at the university—in part because they can see all the numbers laid out in big meetings at the beginning of semesters, and in weekly reports.
Ann Demling, chair of the theater department, says she sometimes believes that her department is on the “low end on the totem pole.”
“You realize that they who have, get,” she says. “We always hear about other departments hiring and we wonder why we can’t hire.” But she says that her department seems to get the essentials it needs, that she and other faculty members get regular updates on the finances, and that she has some control in how to use her allocations.
“It all seems to be based on the numbers,” she says. “It’s business sense, but sometimes you wonder if that’s the most important way of looking at it.”
Ken Frank, chair of the humanities department, says the financial scrutiny has encouraged him and others to be “good stewards of the institution’s resources.” The focus on enrollment targets and income might not always favor the humanities, but the steadiness in financial management is reassuring. “I would much rather deal with that situation than the situations I have seen at some of the state schools, where they give you a pot of money, and if you don’t have the enrollment, they yank it back,” he says.
During his long career, James Sennett has taught philosophy at five institutions, from Tacoma, Wash., to West Palm Beach, Fla. “My impression is that the level of faculty discontent about financial issues is much lower at Brenau than at other institutions,” he says. He actually left his position as a philosophy professor at Brenau in part because he realized that the numbers weren’t in his favor. When he saw that fewer students were taking philosophy courses, and that the business department seemed like a more secure place, he took an administrative position in business on one of the satellite campuses, which also happened to be closer to his house.
Sure, some cash-cow programs at Brenau get more resources than others, he says, but that also happens at institutions where administrators have only an intuitive sense of which programs make money. “The fact that Brenau can show you in precise dollars and cents that business is a moneymaker and humanities isn’t, hasn’t to my knowledge made Brenau any worse,” he says. The humanities department, he notes, is hiring much-needed new faculty members—in part to replace him. “If anything, Brenau honors humanities and fine arts.”
It has at least kept those programs alive and thriving, and at a relatively little-known women’s college, to boot. Women’s education is vitally important, says Mr. Schrader, especially in the South, where the culture teaches women to defer to men. And the liberal arts and American higher education, he says, are among the last great global advantages the United States has.
But he worries that liberal-arts institutions that stick to old ways of doing business will “cash-flow themselves out of existence.” Keeping institutions like his alive will take tough decisions, and leaders will need to know precisely where their strengths and weaknesses are. “You can’t be afraid of the truth,” he says.