Strategy & Finance in Higher Education

Journal of College Student Development, Nov/Dec 1998 by Quick, Jerry

Strategy & Finance in Higher Education

William F. Massy and Joel W. Meyerson (Editors)

Princeton, NJ: Peterson's Guides, 1992, 109 pages $29.95 (hardcover)

Strategy & Finance in Higher Education is a 1992 publication of Peterson's Guides. This book is an edited work by William F. Massy and Joel W. Meyerson, Directors of the Stanford Forum for Higher Education. It contains an introduction by the editors and chapters written by seven authors under three broad headings: The Strategy Process, Approaches to Planning, and Monitoring Change.

Richard Chait, University of Maryland, wrote chapter 1, "The Role of the Board." Chait points out that "a board of trustees is (or should be) the organization's DNA. It carries the genetic code that transmits the institution's values, beliefs, heritage, and defining characteristics" (p. 26). Chait further points out that the board should be very visible and fulfill several different roles in the strategy envisioning and monitoring phases, but should be off in the wings during implementation. He advocates that board members should provide leadership in "growth by substitution" (p. 33) as opposed to incremental budget growth. He challenges boards to "place a governor on the motor that drives the expense side because most academics seem genetically disposed to overspend and to budget for miracles on the revenue side" (p. 33). He further points out that "many boards are a tad too timid in this regard and approve deficit budgets that would not be tolerated in a for-profit environment" (p. 33).

Chapter 2, "The Role of the President," was written by Nannerle O. Keohane, President, Wellesley College. She identifies three hurdles presidents must overcome to be effective planners. She also relates the Wellesley experience with strategic planning and points out that her campus had been "spending a lot on programs and not enough on maintenance of buildings." (p. 47) Her essay is a classic case study about her Plans and Priorities Committee that resulted in a successful $150 million capital campaign. One clearly recognizes the importance of presidential leadership in the outcomes achieved at Wellesley.

Michael Finnerty, Chief Financial Officer (CFO), Yale University wrote chapter 3, "The Role of the Chief Financial Officer." Finnerty outlines a planning process at Yale that started with an assessment of the investment needs for facilities. The process identified a $500 million facilities renewal program. Finnerty also points out that the chief financial officer must be a key partner in the planning leadership of the institution. He illustrates the difficulty in managing the decentralized academic programs as contrasted to the centralized financial operations. Further, he states that the CFO must be perceived as an ally of the academic leadership and also seen as a protector and supporter of academic quality.

Gilbert R. Whitaker, Jr., Provost, University of Michigan, wrote chapter 4, "The Michigan Experience." Whitaker outlines in his essay the process that resulted in a planning report entitled "Enhancing Quality in an Era of Resource Constraints." The task force, Provost's Advisory Committee on Excellence, focused on academic units, attempting to allocate both costs and revenues. The concept they suggest is called "conscious net support" (CNS) and was necessary to address reduced state support and the resultant budget reductions. The essay also outlines efforts to charge units for space, previously a free good. A summary of Michigan's TQM effort is also presented.

Chapter 5, "The Stanford Experience I: The Administrative Process," was written by Susan M. Schaffer. Chapter 6, "The Stanford Experience II: The Financial Process," was written by Timothy R. Warner. Both essayists are from Stanford University. These essays summarize the very difficult financial problems faced by Stanford in the early 1990s and the challenging process of restructuring and reducing budgets. By 1993-94 Stanford reduced its $365 million annual budget by $43 million. During this time Stanford University suffered $150 million damage from an earthquake and were cited for overcharges on federal contracts. These two essays are a classic case study that all higher education administrators must read.

Chapter 6, "Market and Credit Perspectives," was written by Ann L. Sowder, Senior VP, Standard & Poor's Ratings Group. This essay was selected by the editors to answer the question whether the financial credit quality of higher education institutions has improved or declined. Sowder points out that the credit ratings of higher education have not declined. She believes colleges and universities have anticipated declining growth and retrenchment and are managing effectively. Her essay includes a table showing the Standard and Poor's rated private colleges and universities and their rating at the time of publication.

SUMMARY

This book is recommended for all university administrators who participate in the planning process of their institution. The editors and the essayists have done an excellent job of succinctly outlining various techniques for strategic planning, budget administration, budget reductions and substitution growth. While most of the essays are timeless, there are a number of new resources available through the 1998 Spring and Summer National Association of College and University Business Officers Publications Catalog. (Communications Department, NACUBO, 2501 M Street, NW, Suite 400 Washington, DC 20037) Also, a number of universities have adopted the responsibility center budget management model. One textbook is available on this topic. (Whalen, 1991) Accrediting agencies have also insisted that higher education institutions incorporate effectiveness and assessment techniques into their overall strategic planning process. Those involved in planning need to review the latest literature related to effectiveness and assessment. This book, however, remains as a valuable resource on the bookshelf of this reviewer and is recommended for other higher education professionals.