Several years ago, a medium-sized public institution grappling with a substantial operating deficit garnered national attention by unveiling a plan to eliminate academic programs, with a primary focus on the humanities. In their announcement, academic leaders defended these cuts, asserting that the resulting savings would be redirected to support burgeoning programs in science and the health professions. Predictably, the announcement triggered significant opposition from faculty, students, the local community, and humanities advocates nationwide. In responding, university leaders enlisted a consulting firm to assess the fiscal impact of these cuts and provide essential analytics to quantify the cost savings and future resource allocations. This analytical endeavor, conducted in collaboration with academic affairs staff, deans, and academic department chairs and other faculty, encouraged a productive dialogue about the institution’s financial health and the ways in which academic department―level decisions influenced academic costs. Over several months of collaboration, academic affairs staff and faculty worked together to devise a refined cost reallocation plan that minimized the proposed program cuts and, at the same time, identified additional resources for investment in new academic program initiatives. This illustration underscores the misunderstandings faced by academic affairs staff and faculty if essential decision support tools and analytics for academic cost stewardship are not readily available when making key curricular and financial decisions.

Identifying the Challenge

In the 2019‒2020 academic year, public and private not-for-profit colleges and universities in the United States spent more than $517 billion on their core expenditures—a nearly 41% increase over the past decade ($368 billion) These core expenses are defined by the National Center for Education Statistics (NCES) and include functional activities such as instruction, research and public service, academic support, student services, institutional support, and other expenses. Surprisingly, less than 27% of these costs was for instructional expenses, compared with the 32% allocated for these expenses 10 years earlier. Said another way, for every dollar allocated for instruction in 2013, $2.12 was allocated for non-instructional activities. Ten years later, the non-instructional costs increased by more than 28%, to $2.73. This shift indicates that a substantial financial reorientation had occurred, channeling resources away from instruction to cover administrative, compliance, student services, and research endeavors (NCES).

After reading section 3, many would think that once a college or university adjusts its non-instructional activities, additional funding is freed up for its core mission of teaching and learning. To this end, the higher education industry spends hundreds of millions of dollars in consulting fees every year to find ways to improve its performance, implement its technology, and redesign its organizational structure. The Huron Consulting Group, the largest higher education consulting firm in the world, reported more than $430 million in revenues for their Education segment in 2023 alone (Earnings Call). Additionally, many institutions facing financial difficulties set up internal administrative cost savings initiatives in order to free up resources for its academic mission, and this also happens to generate the vast majority of the revenue for many institutions. Although these activities are well intentioned, there are two primary flaws in this approach.

First, the administrative and academic functions of colleges and universities tend to be isolated from one another, as documented in a recent Chronicle of Higher Education report (Chronicle). The focus of the report was to call attention to the fact that faculty often wish to be more engaged in the budgeting, administrative, and planning processes at their institutions, efforts that are widely accepted to be the purview of institutional administrators. Of course, one would expect these concerns to grow considerably as colleges and universities continue to close, merge, cut programs, and lay off personnel. Second, these administrative cost initiatives often ignore or gloss over the significant administrative activities that often occur in academic units. In my experience, I have found that 25% to 33% of all full-time faculty teaching loads have been replaced by what are often referred to as “course reassignments.” Many of these reassignments are approved, often with additional compensation, to allow faculty members to take on administrative work, such as serving as department chair, providing support for accreditation, taking on the directorship of an academic center, and so on.

As I emphasize throughout this guide, the steps necessary to develop a comprehensive academic cost stewardship culture will result in a shared understanding of how administrative processes impact the academic mission and, just as importantly, how academic processes impact administrative units. Therefore, I ask the reader to pay careful attention to the potential value of improving institutional collaboration, ensuring policy effectiveness, and aligning information systems. This approach has the capacity to identify and remove the duplications and redundancies frustrating many in the higher education community. Said another way, an emphasis on comprehensive academic cost stewardship will almost certainly lead to improved services and reduced costs associated with administrative activities so that institutions may begin to shift a proportion of available dollars to the critical mission of teaching and learning.

As the proportion of instructional funding continues to dwindle, academic affairs staff and faculty confront a complex challenge—a shrinking budget amid an expanding array of curricular and administrative priorities. Given this reality, one might expect that higher education institutions would invest in the development of an integrated information system infrastructure to maintain or improve academic quality while at the same time optimize the use of limited resources. However, institutional efforts in this area are often underdeveloped or nonexistent, and this results in limited information for academic leaders and faculty to use when assessing key activities such as coursework delivery, faculty effort, and financial resource allocation. This lack of information becomes starkly evident during the institution’s annual budget cycle, as I discuss later in Section 12.

Budget planning and execution vary widely from one institution to another. However, as I have examined budget models for many institutions over the past decade or so, I have found that most use a centralized, historical, and incremental approach to budgeting. In this model, deans and chairs are provided with a proposed budget target based on the previous year’s expenses and revenue streams. If a unit experiences a growth in enrollment, its compensation adjustments, faculty lines, and academic overhead are quickly reviewed and approved. In challenging years, academic departments may be required to implement faculty line reductions or across-the-board cuts that may negatively impact student learning outcomes, faculty development opportunities, and more. This cycle then repeats itself, resulting in the incremental budget process (discussed in Section 3) focused on maintaining the status quo. As I have described previously, the challenge with this approach is that it does not consistently and systemically take into consideration the curricular or personnel changes that may have taken place in an academic department or administrative unit, nor does it assess the role that these departments and units have in fulfilling the institution’s mission. Further, this incremental budget process is not designed to make resources readily available for consistent and transparent investment in the strategic initiatives necessary for the long-term success of a healthy organization.

The Value of Academic Cost Stewardship

A largely incremental budget process often leads to a disconnect between the faculty and the administration. In my experience working with more than 500 academics (i.e., deans, chairs, and faculty), two predominant concerns have surfaced during the initial academic cost stewardship discussions. First, academics overwhelmingly perceive a lack of transparency in the budget process, how resources are allocated, and how institutional finances are managed in general. Second, academics at all levels express concerns about top-down decisions, such as across-the-board cuts, the lack of investment in growing programs, and the perception that inefficient academic disciplines are not held accountable. Of course, one should be careful when interpreting these age-old concerns; however, it is clear to us that many academic staff and faculty are frustrated by the perceived lack of communication and uncertain quality of data used to inform the decision-making process. These observations are supported by the 2023 NACUBO survey, which showed that 91% of business officers believed senior executives understood the financial challenges confronting the institution but only 45% of faculty shared the same understanding. As described in Section 3, there have been recent discussions in the higher education community encouraging faculty to become more involved in budget planning, especially as this planning pertains to academic programming decisions. My view on this matter is to welcome faculty engagement and establish opportunities for discussion that would benefit from the application of a meaningful and collaborative data development and dissemination approach. To accomplish this, I recommend documenting a clear process up front, such as the decision support circle provided in Figure 4.1. This modified approach, taken from McLaughlin and Howard (2000), provides a framework for describing specific steps, restructuring data, and identifying key stakeholders to ensure that access to high-quality data and continuous improvement processes necessary for long-term institutional success are in place.

Figure 4.1 Decision Support Circle

Far from being a simple fix, the approach to establishing a high-functioning decision support circle will likely take multiple iterations, with an emphasis on doing the best you can with what you have and establishing a robust continuous improvement approach upon completion of each budget cycle. Based on my experience, this approach will serve to address three key factors hindering the alignment of academic program delivery and financial resources; this will help both faculty and staff to have a clear understanding of the costs associated with delivering the curriculum:

Complexity of Issues ‒ Aligning actual dollars with the curricula proves challenging owing to internal variability within disciplines and the multidisciplinary nature of academic programming.

Timing of Budgeting Cycle ‒ The budget planning cycle often commences during the academic year, causing faculty to perceive the process as haphazard and top-down, given their focus on teaching, research, and committee work during this period.

Data Anomalies – Due to the fact that some institutional units leverage isolated data sources, key data points may not align, so that conflicting data are generated from different systems and unproductive discussions about their accuracy ensue. In this environment, there is no single version of the truth.

These observations are not meant to place blame on administrators or faculty. Rather, I call attention to these issues as a way of initiating a discussion within each institution. By understanding the various perspectives of each group, academic and administrative leaders can develop processes and resources that will help to minimize frustration and create mutual understanding, as I describe below.

Hallmarks of Effective Academic Cost Stewardship

As described earlier, I advocate for an approach fostering collaboration, transparency, and trust. This approach cultivates an environment wherein academic staff and faculty share a common interest in cost stewardship, enhancing partnerships not only with academic and administrative staff but also spanning other academic departments and disciplines. Effective academic cost stewardship is pivotal. It serves as the linchpin for delivering a high-caliber education and ensuring students attain stated learning outcomes, while still paying attention to the costs associated with providing instruction. This should not be an isolated endeavor; it is integral to maintaining the institution’s financial viability. In simpler terms, achieving student learning outcomes and providing effective academic cost stewardship are not mutually exclusive topics despite media-driven headlines suggesting otherwise. To strike this balance, I propose four strategies for academic leaders and faculty to consider.

Faculty Engagement: Engaging faculty in academic cost stewardship discussions is one of the most important strategies for effectively managing the cost of delivering the curriculum. This can be achieved by providing faculty with training and accurate data on drivers, contributing to the cost of instruction and including them early on in the decision-making process. Faculty members are the experts in their fields and play a crucial role in ensuring students achieve the learning outcomes necessary for proficiency in their selected fields. However, they may not always be aware of the costs associated with their teaching methods or the impact their administrative decisions have on various cost components of the curriculum. When faculty members are aware of how their actions contribute to expenses and revenues, they are more likely to make decisions that simultaneously support learning outcomes and align with financial realities.

Information Integration: Finding and addressing strengths and opportunities in coursework delivery is a critical strategy for stewarding academic costs. This can include (i) analyzing course schedules and enrollment patterns to optimize course offerings, (ii) monitoring administrative overhead and trimming unnecessary duplications related to coursework delivery, and (iii) creating a multidisciplinary approach to academic programming. Adopting best practices and resolving inefficiencies frees up resources that can be invested in areas that support student and faculty success, such as academic support services, experiential learning opportunities, and faculty development programs, to name a few.

Resource Alignment: Measuring and evaluating the impact of cost stewardship decisions on student learning and success outcomes is important for ensuring the long-term viability of an institution. To achieve this, institutions must align cost drivers with learning outcomes to ensure resource allocations are working as intended. By understanding the impact of cost management decisions on student learning and success outcomes, institutions can make data-informed decisions that support both student success and financial sustainability.

Technology Enhancement: Using technology to personalize the learning experience, manage expenses, and increase student and faculty interaction is essential. This can include adopting asynchronous learning platforms, providing students with access to digital resources and tools, and using data analytics to find areas for improvement in coursework delivery. By using technology to personalize learning experiences, institutions can reduce the costs associated with traditional classroom delivery methods while also providing students with greater flexibility and access to a wider range of resources. This can lead to improved student learning outcomes and success indicators. It should also result in greater institutional efficiency.

Realizing the value of effective cost stewardship in higher education requires a comprehensive and collaborative approach. By aligning curricular activities with financial planning and budgeting, institutions can optimize resources for a high-quality education—crucial for long-term survival. A cultural shift toward integrated and informed decision making ensures a mutual understanding among all stakeholders, paving the way for a resilient academic and financial landscape. Section 5 delves into identifying and developing institutional resources for cost stewardship, exploring organizational structures, and ensuring transparency through integrated information systems.

Key Points

• Operating expenses in U.S. higher education institutions saw an increase of nearly 41% over the past decade, with a little less than 27% of all core expenses allocated for instruction.

• A proportional funding shift toward administrative, research, and compliance expenditures poses challenges for the higher education industry.

• The lack of integrated information systems hinders operational and strategic decision making.

• Budget planning is often centralized and follows historical processes, leading to inefficiencies and a disconnect between faculty and administration.

• Effective academic cost stewardship involves collaboration, transparency, faculty engagement, and alignment of information systems to link academic expenses with stated learning outcomes.

Top 10 Questions for the Cabinet

1. Do institutional and academic leaders understand how much it costs to educate a student at the institution? What information informs this understanding?

2. Do instructional and academic support expenses align with the academic discipline generating these expenses?

3. What metrics do the executives use to determine whether an academic program is doing well from a financial perspective?

4. When and how are investments made in growing academic programs or are academic programs sunset due to societal changes in demographics, technology, and economics, no longer fulfill the institution’s mission?

5. What are academic leaders’ perceptions of how resources are allocated or reallocated?

6. What mechanisms are in place to address unexpected enrollment increases and decreases during the academic year?

7. What incentives are in place for academic leaders and faculty to grow programs and serve as good stewards of financial resources?

8. Do academic leaders and faculty have a clearly articulated pathway for securing additional funds for growing or developing innovative programs?

9. How are institutional data maintained, accessed, and integrated at the institution?

10. Are there managerial reports available that compare budget expectations with actual expenditures?

Answering these top 10 questions is not merely an academic exercise; it is a crucial step toward developing a strong working collaboration between cabinet members. Ultimately, the mutual goal is to ensure the financial health and sustainability of the institution. It is imperative that leaders not only ponder these questions but also act upon them in a proactive and united manner. By fostering a culture of transparency, accountability, and strategic planning, the institution should not only survive but thrive in an increasingly complex and challenging educational landscape.