Strategic Finance and the USC System Organization Task Force

University of South Carolina

Ellen Chaffee and Buzz ShawEllen Chaffee and Buzz ShawJanuary 29, 2010

Agenda

• Introductions

• Strategic FinanceIntroductions

Strategic Finance • Strategic Finance

• What is Most Important?

L h

Strategic Finance

Most Important

Lunch

Discussion • Lunch

• Continue discussion

f h

Discussion

Strategic Change

Hard Work

Lessons Learned • Options for Strategic Change

• Doing the Hard Work

Lessons Learned

• Lessons Learned

Ground Rules

• It’s your showIntroductions

Strategic Finance• Everyone is equal

• No relevant topic is excluded

Strategic Finance

Most Important

Lunch

Discussion• No discussion is ended

• Respect each other and the time

Discussion

Strategic Change

Hard Work

Lessons Learned• Have fun

Lessons Learned

Goals for the Day

• Understand strategic finance f T k F

Introductions

Strategic Finance as a context for Task Force work

D l ti l f

Strategic Finance

Most Important

Lunch

Discussion • Develop an action plan for the Task Force

Discussion

Strategic Change

Hard Work

Lessons LearnedLessons Learned

USC Task Force Goals

• More students, especially S h C li i

Introductions

Strategic Finance South Carolinians

• Better affordability

Strategic Finance

Most Important

Lunch

Discussion • Better accessibility

• Better efficiency

Discussion

Strategic Change

Hard Work

Lessons Learned • Better effectivenessLessons Learned

STRATEGIC FINANCE AND THEWhy?

STRATEGIC FINANCE AND THE UNIVERSITY SYSTEM

The Conundrum

We CANNOT doIntroductions

Strategic Finance

What we MUST do

If we KEEP doing

Strategic Finance

Most Important

Lunch

Discussion If we KEEP doing

What we USUALLY do

Discussion

Strategic Change

Hard Work

Lessons LearnedLessons Learned

What we MUST do

Introductions

Strategic FinanceStrategic Finance

Most Important

Lunch

Discussion “By 2020, America will once again have the highest proportion of college 

graduates in the world”

Discussion

Strategic Change

Hard Work

Lessons Learned graduates in the world

‐ President Obama, 2/24/09

Lessons Learned

And there’s consensus on that

To increase the percentage of A i i h hi h li

Introductions

Strategic Finance Americans with high‐quality degrees and credentials to 60 percent by the year 2025

Strategic Finance

Most Important

Lunch

Discussion percent by the year 2025Discussion

Strategic Change

Hard Work

Lessons Learned

Currently: 39%

Lumina Foundation for EducationLessons Learned Lumina Foundation for Education

“More students, especially South Carolinians”

Knowledge‐Economy Work Force

Introductions

Strategic FinanceStrategic Finance

Most Important

Lunch

DiscussionDiscussion

Strategic Change

Hard Work

Lessons LearnedLessons Learned

Can we go on this way?

Introductions

Strategic FinanceStrategic Finance

Most Important

Lunch

DiscussionDiscussion

Strategic Change

Hard Work

Lessons LearnedLessons Learned

State Financials: Gaps could approach 7% of spending ‐ “The Lost Decade” of state funding‐ The Lost Decade  of state funding

Introductions

Strategic FinanceStrategic Finance

Most Important

Lunch

DiscussionDiscussion

Strategic Change

Hard Work

Lessons LearnedLessons Learned

Source: Don Boyd (Rockefeller Institute of Government), 2009 *

Recent Revenue/Expense Trends

• State funding: 3%Introductions

Strategic Finance• Tuition: 3% above CPI

• Student aid: 4%

Strategic Finance

Most Important

Lunch

Discussion

• Expenditure per student : 

Discussion

Strategic Change

Hard Work

Lessons Learned p p1‐2% above CPI

Lessons Learned

Our Business Model is Not SustainableOur Business Model is Not Sustainable

320 Years of Trends

2.5

AFFORDABILITY GAPTuition

1.5

2

STATE FUNDS GAP

TuitionExpend/FTEState Approp

1

CPI

0.5

0

Start Y1 Y2 Y3 Y4 Y5 Y6 Y7 Y8 Y9 Y10 Y11 Y12 Y13 Y14 Y15 Y16 Y17 Y18 Y19 Y20

We cannot go on this way

Introductions

Strategic FinanceStrategic Finance

Most Important

Lunch

DiscussionDiscussion

Strategic Change

Hard Work

Lessons LearnedLessons Learned

ome, 

Hitting Ho

Reindl

What is Strategic Finance?

Strategic finance is aligning financial decisions regarding

Introductions

Strategic Finance financial decisions—regarding revenues, creating and maintaining institutional

Strategic Finance

Most Important

Lunch

Discussion maintaining institutional assets, and using those assets with the institution's

Discussion

Strategic Change

Hard Work

Lessons Learned assets—with the institution s mission and strategic plan.  

Lessons Learned

In USC Task Force terms: Creating a system that can serve morestudents as well or better at an affordable price through increased p gefficiency and effectiveness.

What is Strategic Finance?

Introductions

Strategic Finance MissionMissionStrategic Finance

Most Important

Lunch

DiscussionDiscussion

Strategic Change

Hard Work

Lessons LearnedLessons Learned

In other “words” . . .

Introductions

Strategic Finance

More graduates, especially from SC

Strategic Finance

Most Important

Lunch

Discussion Efficient

Accessible

Discussion

Strategic Change

Hard Work

Lessons Learned

Affordable

Effective

Efficient

Lessons Learned

The New Bottom Lines

Core Issue Balanced ScorecardKaplan and Norton/et al

Good to GreatCollins/Staisloff/et al

Is the organization doing the right things and doing them well?

Quality, effectiveness, customer satisfaction

Mission

What’s the cost/benefit of improvement in this?

Does the environment want/need what the 

Financial stability and strength

Market

What s the cost/benefit of improvement in this?

organization does?

Is the organization  i th t

Operating efficiency, i t l

Margin

YES

ensuring that revenues exceed costs?

internal processes

Is the organization  Learning and growth Momentum

What’s the cost/benefit of improvement in this?

investing in its own future?What’s the cost/benefit of improvement in this?

Task Force Charge/Bottom Lines( h h l f h l / f l?)(which elements of our charge are most relevant/powerful?)

Mission/QualityPrograms and their locations

Introductions

Strategic Finance Programs and their locationsDistance educationAccreditation and regulationDemand analysis

Strategic Finance

Most Important

Lunch

Discussion MarketEfficiency

Student capacity by campus, by programEase of transfer

Discussion

Strategic Change

Hard Work

Lessons Learned Ease of transferTuition rates; tuition/state revenue mixData consistencyTrue cost of attendance

Lessons Learned

LearningFaculty and staff workforce

Campus contribution to economic valueF ltFaculty governance

Importance of ALIGNMENT and Tracking Progressp g g

Strategic Finance 

Strategic Goals 

(Momentum,Margin)

St t i

(Mission, Market)

Strategic IndicatorsCommunication

Information

ActionsAnalysisCourse Correction

Task Force Strategic Indicators( )(examples)

• More studentsEnrollment growth by in/out of state

Introductions

Strategic Finance – Enrollment growth by in/out of state• Affordability

– Net tuition/median household incomel fi i l id/ l i i

Strategic Finance

Most Important

Lunch

Discussion – Total financial aid/Total tuition revenue• Accessibility

– Enrollment growth by race, income, transfer 

Discussion

Strategic Change

Hard Work

Lessons Learned status• Efficiency

– Cost per SCH by program, by site, by delivery

Lessons Learned

• Effectiveness– Retention and graduation rates

From Steve Jobs to YOUR Job

• 20th Century was one ofIntroductions

Strategic Finance • 20 Century was one of technological innovation

Strategic Finance

Most Important

Lunch

Discussion

• 21st Century must be one of

Discussion

Strategic Change

Hard Work

Lessons Learned 21 Century must be one of institutional innovation

Lessons Learned

David Wiley, BYU, http://davidwiley.org/

DISCUSSION

What are the most important action it f th T kitems for the Task Force?

Introductions

Strategic Finance

Most ImportantMost Important

Lunch

Discussion

Strategic ChangeStrategic Change

Hard Work

Lessons Learned

Introductions

Strategic Finance

Most Important Lunch!Lunch

Discussion

Strategic Change

Lunch!

Hard Work

Lessons Learned

Introductions

Strategic Finance

Most Important Discussion ContinuesLunch

Discussion

Strategic Change

Discussion Continues

Hard Work

Lessons Learned

STRATEGIC FINANCE CHANGEHow?

STRATEGIC FINANCE CHANGE

Current Institutional ResponsesCurrent Institutional Responses

• Increase efficiencyIncrease efficiency

• Increase administrative productivity

• Leverage stimulus money

Introductions

Strategic Finance

Most Important• Leverage stimulus moneyLunch

Discussion

Strategic Change

• APLU survey just out: “The survey results indicate that "universities are t i i t t tt t th d ti

Hard Work

Lessons Learned

striving to protectprotect the core education mission of their institutions.”

Missing in Action?g

• Progress to strategic goalsIntroductions

Strategic Finance

• Growth

• Quality improvement

Strategic Finance

Most Important

Lunch

Discussion Quality improvement

• Academic productivity

I ti

Discussion

Strategic Change

Hard Work

Lessons Learned • Innovation

• Development of a sustainable 

Lessons Learned

business model

David Wiley, BYU, http://davidwiley.org/

What do institutions need?

• Growth by substitutionIntroductions

Strategic Finance

• Greater cost containment

• Greater productivity

Strategic Finance

Most Important

Lunch

Discussion Greater productivity

• Clear expectations

I ti

Discussion

Strategic Change

Hard Work

Lessons Learned • InnovationLessons Learned

• LEADERSHIP

Reducing Cost and Increasing ProductivityReducing Cost and Increasing Productivity

31 *

Cost Effective = Cost Reductions + ProductivityCost Effective   Cost Reductions   Productivity

CostCost reductionsreductions =Productivity Productivity 

improvements improvements =

Permanent structural d ti i di

ppIncrease in output 

(learning, research, jobs), reductions in spending 

( g, , j ),without changing 

admissions or spending

32 *

Examples of Cost ReductionsExamples of Cost Reductions 

• Reduce high cost/low demand programs g / p g• Address retirement eligibility• Reduce growth in health care cost• Consolidate administrative functions• Reduce spending on non‐revenue producing 

thl tiathletics• Restructure debt • Restructure faculty compensation and rewards• Restructure faculty compensation and rewards (use turnover to substitute teaching faculty for research faculty)

33 *

Examples of Productivity Improvements p y p

• Increase in student retention and graduationIncrease in student retention and graduation 

• Reduce excess credits for the degree

di b• Increase credit‐by‐exam 

• Increase distance‐based learning programs

• Increase proportion of graduates who meet goals for critical learning g g

• Increase proportion of students who remain –and are employed – in stateand are employed  in state

34 *

Building Cost‐Effective InstitutionsBuilding Cost Effective Institutions 

• Reduce administrative costsReduce administrative costs

• Tackle ‘automatic’ cost increases

Introductions

Strategic Finance

Most Importantincreases

• Reengineer curriculaLunch

Discussion

Strategic Change

• Reengineer course delivery

• Eliminate, innovate, or  

Hard Work

Lessons Learned

, ,consolidate high cost/low demand programsp g

slide 35 *

Learning ProductivityLearning Productivity

• Students come to college fully g yprepared (no remediation)

• Accelerated learning

Introductions

Strategic Finance

Most Important

• Minimize “rework” and reduce credits to degree I t f l ti

Lunch

Discussion

Strategic Change• Improve rates of course completion• Encourage use of assessment/”test out” options

Hard Work

Lessons Learned

out  options• Learning in the workplace/credit for experiencep

slide 36 *

Improving Affordability & ChoicesImproving Affordability & Choices

• Commit to average undergraduateCommit to average undergraduate tuition growth no more than CPI, with increased need‐based aid

Introductions

Strategic Finance

Most Important

• Allow differential tuitions for high cost/demand programs

Lunch

Discussion

Strategic Change

• Experiment with low priced options 

• Greater on‐campus employment 

Hard Work

Lessons Learned

opportunities for students

• Reduce time to degree

37 *

Implications for LeadersImplications for Leaders

• Re‐imagine your business modelRe imagine your business model to create long‐term sustainability

• Support change in approach to

Introductions

Strategic Finance

Most Important Support change in approach to budget building – Examine old habits and conventional 

Lunch

Discussion

Strategic Change

wisdom about costs– Focus on big picture, and progress 

hi i i l

Hard Work

Lessons Learned

on achieving strategic goals– Commit to institutional innovation

38 *

Where are you headed, and how will you get there?y , y g

Strategic Finance 

Strategic Goals 

(Momentum,Margin)

St t i

(Mission, Market)

Strategic IndicatorsCommunication

Information

ActionsAnalysisCourse Correction

“It is not necessary to h S i l i tchange. Survival is not mandatory.”

Introductions

Strategic Finance

Most Important y

W Ed d D i

Lunch

Discussion

Strategic ChangeW. Edwards DemingHard Work

Lessons Learned

David Wiley, BYU, http://davidwiley.org/

Introductions

Strategic Finance

Hard Work

Strategic Finance

Most Important

Lunch

Discussion Hard WorkDiscussion

Strategic Change

Hard Work

Lessons LearnedLessons Learned

Introductions

Strategic Finance

Lessons Learned

Strategic Finance

Most Important

Lunch

Discussion Lessons LearnedDiscussion

Strategic Change

Hard Work

Lessons LearnedLessons Learned

Introductions

Strategic Finance

Evaluations Please

Strategic Finance

Most Important

Lunch

Discussion Evaluations, PleaseDiscussion

Strategic Change

Hard Work

Lessons LearnedLessons Learned

ResourcesResources

• HITTING HOME: Quality, Cost, and Access Challenges Confronting Higher Education Today, Travis Reindl, www.makingopportunityaffordable.org

• Strategies for Tough Times, Dennis Jones and Jane Wellman, November 19, 2009

CAUSES of Strategic Indicators( )(brainstorm on flip chart)

• Enrollment growth by in/out of stateIntroductions

Strategic Finance• Net tuition/median household income

• Total financial aid/Total tuition revenue

Strategic Finance

Goals/Charge

Most Important

Lunch

• Enrollment growth by race, income, transfer status

Lunch

Discussion

Strategic Change

Hard Work• Cost per SCH by program, by site, by delivery

Hard Work

Lessons Learned

• Retention and graduation rates