Prioritizing Academic Programs and Services

Reallocating Resources to Achieve Strategic Balance, Revised and Updated

Robert C. Dickeson

• Publisher: Jossey-Bass
• Year: 2009
• Print ISBN: 9780470559680
• eBook ISBN: 9780470588109
• Edition: 2
• Topic: Education
• Subtopic: Education Administration

Prioritizing Academic Programs and Services

REVISED AND UPDATED

Increasing economic concerns make the new edition of this best-selling classic an invaluable resource for those who want and need to implement a proven step-by-step approach to reallocating resources in tough times. Thoroughly revised and updated, Prioritizing Academic Programs and Services includes new recommendations from the field, communication strategies for more successful campus implementation, a new section on the sources of hidden costs, and a Prioritization Process and Implementation workbook designed to help administrators avoid costly mistakes. This book includes access to additional content online, including models for prioritization from a variety of campuses. Based on the author's extensive consulting experience, this necessary and timely resource offers the best advice for addressing the current economic concerns affecting most colleges and universities.

Praise for Prioritizing Academic Programs and Services

"For more than a decade, higher education leaders have turned to Dickeson's practical guide to academic program assessment. These newly expanded approaches are just in time for today's competitive environment."
—SUZANNE SHIPLEY, president, Shepherd University

"Dickeson provides a compelling rationale for program prioritization as well as a practical planning structure that promotes alignment between programs, resources, and university mission. Presidents and provosts can use his approach to frame campus discussions around the future of the institution and away from legacy programs whose time has passed."
—KYLE R. CARTER, provost and senior vice chancellor, Western Carolina University

"Dickeson's approach ensures that critical decisions regarding academic programs and resource allocation are aligned with strategic goals and institutional mission. As one of the early adopters of the process that he proposes, I am convinced that it is a powerful and practical tool for any college or university committed to remaining focused, resilient, vital, and relevant in a dynamic and increasingly challenging environment."
—DAVID MAXWELL, president, Drake University

1

RECOGNIZING THE NEED FOR REFORM

The most likely source for needed resources is reallocation of existing resources.

American higher education has been regarded universally as the best in the world. Yet American higher education institutions are overwhelmed by competing demands, internal and external, that threaten the capacity of higher education to meet ever increasing expectations, including those of retaining global leadership. The contrast between internal and external pressures could not be more illustrative of the need for reform.

Internal Pressures

Internally colleges and universities are under increasing pressure to accomplish four things: increase revenues, decrease expenses, improve quality, and strengthen reputation. They have been particularly successful at raising revenues. Revenues required to fuel the collegiate enterprise have risen dramatically as campuses have tried to cover increases in enrollments, inflation, faculty salaries, additional programs and services, shrinking state budget support (in the case of public institutions), and institutional student financial aid to improve access (in the case of private institutions).

Increasing Revenues

Nearly thirty years ago, Howard Bowen observed that revenues were the economic drivers for higher education and that colleges and universities raised all the money they could and spent all the money they raised (Bowen, 1980). Nothing in the past three decades has operated to refute his observation. Higher education revenues have increased from all sources: tuition, federal, state, and local appropriations; private gifts, investment returns, and endowment income; and restricted revenues, including auxiliaries and hospitals.

But increases in tuition revenues have been the major source of additional funding for both public and private institutions. These increases have consistently exceeded the pace of inflation, a fact that rankles students, families, and policymakers alike. Colleges and universities argue that it is inappropriate to use standard measures of inflation to evaluate the growth of tuition and fees. The Consumer Price Index (CPI) is based on the proverbial “market basket” of goods and services used by consumers. It is composed of housing, transportation, food and beverages, apparel and upkeep, medical care, entertainment, and other goods and services. Institutions of higher education, of course, buy different things. The market basket does not contain faculty members or library books or laboratory equipment, for example.

To rectify this situation, the Higher Education Price Index (HEPI) was created. HEPI tries to approximate the market basket for what colleges buy. It includes an analysis of faculty salaries, based on data from the American Association of University Professors (AAUP) and a representation of several price indexes for other commodities that institutions purchase. The HEPI has lost favor recently, primarily because the salary portion—the AAUP survey—was self-referential. A new index was introduced in 2004 by the State Higher Education Executive Officers to correct past deficiencies and to offer a more valid tool for measuring higher education inflation: the Higher Education Cost Adjustment (HECA). HECA is composed of 75 percent salary data, generated by the federal Employment Cost Index and 25 percent from the federal Gross Domestic Price Deflator that reflects general inflation in the U.S. economy. HECA will probably emerge as the tool-of-art in the future.

Despite the increasing sophistication of the measures, the fact remains that tuition and fees have far exceeded all three of the indexes for the past twenty years (Dickeson, 2006).

Revenue is also increasing through substantial and successful efforts to tap the generosity of donors. Donations to educational institutions, including colleges and universities, have increased continually, although year-to-year percentages will vary, depending upon economic conditions and donor behavior (Giving USA, 2008). Many institutions are undertaking capital campaigns with goals in the multiples of millions of dollars. A few high-profile campaigns now exceed a billion dollars. The development office is one of the fastest-growing departments at many institutions as the thirst for revenue continues unslaked.

Decreasing Expenses

The institutional quest to cut expenses has been less dramatic. Institutions typically attempt to make budget ends meet on the expense side by not filling positions, curtailing or deferring certain expenditures, and implementing across-the-board cuts in operating budgets for departments. These efforts are traditionally short term in nature and are designed to “get through another budget year.”

Further, recent institutional spending behavior would indicate that, while students are picking up an increasing share of the cost of their education, institutions are spending less on instruction. At most types of institutions (private research universities are the exception) an increasing share of “education and related” expenses are directed toward administrative support and student services, according to the 2009 report of the Delta Project (Wellman, Desrochers, and Lenihan, 2009). This finding would suggest that institutions have not made the tough decisions about adapting to lower subsidies from traditional sources but instead are using tuition increases primarily to shift revenues.

By contrast, several current practices have made some inroads into needed collegiate cost containment. Benchmarking—the practice of comparing best practices in management with one’s own—has been the subject of creative effort by the National Association of College and University Business Officers (NACUBO). Working with Coopers & Lybrand, NACUBO has developed since 1991 a process of sharing information among several hundred participating institutions. A database of institutional practice permits measurement and comparison of work processes in several internal functions, activities, or operations. Such administrative activities as processing an application for admission or processing a purchase order have received sophisticated analysis for “business process reengineering” (NACUBO, 1994; Douglas, Shaw, and Shepko, 1997).

Another promising area for cost containment is privatizing, or outsourcing non-mission-critical functions of the institution, presumably at a savings. The growth of outsourcing in higher education, although it does not parallel the practice in other organizations (notably business and government), is significant. My own review of this subject revealed some twenty-three different functions that colleges and universities have outsourced to noncollegiate providers. A list of these functions, together with critical questions that institutions should answer before proceeding with outsourcing, is contained in Resource A. The extent of the privatization trend has gone beyond outsourcing and now includes both tactical and strategic alliances that hold great promise (Dickeson and Figuli, 2007).

Still another promising practice is the growing movement toward activity-based costing (ABC) in higher education. A cost accounting system that seeks to determine accurately the full costs of services and products, ABC has been applied to college settings. By identifying “activity centers,” or revenue and cost units, and assigning resource costs, institutions can identify outputs or cost objects, thus more strictly connecting costs with results. This tool can be especially effective in budgeting, evaluation, reporting, and pricing decisions (Lundquist, 1996; Trussel and Bitner, 1996).

An interesting insight into the financial viability of higher education is available by reviewing the changes in college bond and other debt ratings, made periodically by the public finance departments of investors service bureaus. One typical report, by Moody’s, notes that although there is a generally stable outlook for higher education, certain trends are noteworthy, among them the following:

• For more than a decade, tuition increases have far exceeded corresponding increases in family income. The potential for future tuition increases is limited, which will reduce operating flexibility.

• Private institutions face the challenge of spiraling financial aid costs and an increasing tendency to “buy” students through generous financial aid awards.

• Schools are increasingly recognizing the need to control both administrative and academic costs. Only a handful, however, have actually implemented academic cost-cutting measures [Moody’s, 1996, p. 1].

Benchmarking, outsourcing, and newer cost accounting techniques have proven successful for some institutions. In most cases, however, real cost-containment efforts have thus far avoided significant penetration into the sacred precincts of the academic side of the higher education enterprise.

Increasing Quality and Strengthening Reputation

Higher education’s other two internal objectives—increasing quality and strengthening reputation—are perceived by campus faculty and staff not only to be at severe odds with the cost-cutting objective, but absolutely essential to the imperative to increase revenues. And it is here that the dilemma tightens. Quality in higher education has usually been measured by inputs: degrees held by the faculty, number of volumes in the library, and, today’s measure, the degree of campus-wide access to the Internet. These are all costly items. Traditional definitions of reputation are harder to measure, but it is clear that colleges and universities have been adding programs, services, equipment, buildings, and public relations efforts to achieve greater reputational prominence. By so doing, they hope to attract more (and better) students, a higher-quality profile among its faculty, and the heightened interest of generous donors.

How to reconcile these competing objectives internally, in addition to the fundamental and simultaneous battle over allocation of scarce resources among the competing purposes of higher education—teaching, research, and service—is anomalous indeed. And then there are the external pressures.

External Pressures

Throughout most of its history, higher education in the United States has been relatively free from external pressures that would alter its vaunted independence. Reform efforts usually came from within the academy or its loyal advocates. If the recent spate of national reports and externally generated calls for action is any harbinger, however, those pressure-free days are gone forever. The late Frank Newman used to observe that higher education was attracting more outside attention because it was becoming so important. Others might argue that the financial and academic delivery model employed by colleges and universities is no longer sustainable. Still others contend that higher education, if permitted to run without apparent direction, will not yield the desired results necessary to achieve national aims.

While there are dozens of examples of this outpouring, the following major reports and calls to action are representative of this trend and received significant amounts of national attention, especially among policymakers. The reader can detect a clear pattern among the respective findings and conclusions.

The Commission on Costs

Formed by Congress as an independent advisory body, the commission expressed concern that tuition increases from 1987 to 1996 outpaced instructional costs for the same time period. The impression left with the public for this disparity was that institutions were increasingly greedy.

To deal with this and others of its concerns, the commission presented a five-part action agenda with forty-two recommendations in five areas:

1. Strengthen institutional cost control.

2. Improve market information and public accountability.

3. Deregulate higher education.

4. Rethink accreditation.

5. Enhance and simplify federal student aid.

No fewer than ten specific recommendations—more than for any other part of the national commission’s action agenda—related to cutting or controlling costs in higher education. At the same time, the commission included in its final report an “unfinished agenda,” which addressed the need for a more thorough analysis of academic programs, levels of instruction, faculty load distribution, and other issues that are the focus of this book (Straight Talk About College Costs and Prices, 1998).

Rising Above the Gathering Storm

The National Academies (Science, Engineering, and the Institute of Medicine) were asked by members of the U.S. Senate Committee on Energy and National Resources and the U.S. House Committee on Science to identify action steps that federal policymakers could take to enhance the science and technology enterprise. The blue-ribbon committee formed for this purpose made several recommendations and suggested implementation actions, many of which addressed higher education. Among the recommendations for universities:

• Strengthen the skills of teachers through summer institutes and master’s programs.

• Increase degree recipients in physical sciences, life sciences, engineering, and mathematics.

• Expand research efforts through increased grants and tax incentives (Rising Above the Gathering Storm, 2005).

Measuring Up Reports

The National Center for Public Policy in Higher Education has issued a series of national and state report cards on higher education that document and assess progress among five categories: preparation, participation, completion, affordability, and learning. Over the past decade, these biennial reports have chronicled a generally disappointing trend line.

Preparation: While progress has been made in several states, most high school students do not take a curriculum that prepares them for college.

Participation: The nation as a whole has made no progress in access to education and training beyond high school.

Completion: Except at the most highly selective institutions, retention and completion rates have not improved.

Affordability: Over the last decade, it has become considerably more difficult for many families to pay for college. For low-income families, this means that the cost of one year’s attendance at a four-year public college or university equates, on average, to 40 percent of family income.

Another consequence is that student borrowing and the indebtedness of college graduates have increased every year.

Learning: Measuring Up Report Cards regularly give each of the fifty states a grade of “Incomplete” in learning. College learning outcomes are not consistently evaluated and compared across states (Measuring Up, 2000-2008).

National Commission on Accountability in Higher Education

Organized by the State Higher Education Executive Officers to consider and recommend ways of improving accountability and performance in higher education, the National Commission on Accountability in Higher Education made several recommendations that shared responsibility among key stakeholders. Among its recommendations, the following were targeted to institutions of higher education:

1. Establish institutional goals aligned with fundamental public priorities.

2. Create the conditions, including necessary incentives and management oversight, for students and faculty to meet ambitious objectives in learning, research, and service.

3. Monitor progress on specific institutional goals aligned with fundamental public priorities.

4. Establish and communicate clearly to students explicit learning goals for each academic program as well as learning goals for general education.

5. Employ internal and external assessments of learning and publicly communicate the results in order to monitor and improve performance.

6. Employ rigorous, broadly conceived standards for institution-ally supported research and service.

7. Reassess institutional priorities continuously and implement strategies to increase productivity and cost-effectiveness (National Commission on Accountability in Higher Education, 2005).

Innovation America: A Compact for Postsecondary Education

The National Governors Association undertook a program to promote improvements in higher education that focused on (1) fostering student skill development; (2) producing a well-qualified teacher corps highly skilled in science, technology, engineering, and mathematics disciplines; and (3) creating new knowledge that translates into innovative products, processes, and services. To accomplish ...

Table of contents

• Title Page
• Copyright Page
• Preface to the Revised Edition
• Foreword
• Preface to the First Edition
• Dedication
• About the Author
• Chapter 1 - RECOGNIZING THE NEED FOR REFORM
• Chapter 2 - IDENTIFYING RESPONSIBLE LEADERSHIP
• Chapter 3 - REAFFIRMING INSTITUTIONAL MISSION
• Chapter 4 - DEFINING WHAT CONSTITUTES A PROGRAM
• Chapter 5 - SELECTING APPROPRIATE CRITERIA
• Chapter 6 - MEASURING, ANALYZING, PRIORITIZING
• Chapter 7 - ANTICIPATING PROCESS ISSUES
• Chapter 8 - IMPLEMENTING PROGRAM DECISIONS
• Chapter 9 - ACHIEVING STRATEGIC BALANCE
• Resource A: Outsourcing Practices in Higher Education
• Resource B: Sample Process Agenda Adopted by a Land-Grant University
• Resource C: Criteria for Measuring Administrative Programs
• Resource D: Case Studies
• Resource E: Sources of Hidden Costs
• Resource F: Model Communication Plan
• Resource G: Prioritization Process and Implementation
• References
• Index