Knowing & Communicating Economic Facts About Academic Programs

Thoughtware Article Published: Apr 01, 2018
Group of Students sitting around a bench looking at laptops

Gary A. Olson was provost and vice president for academic affairs at Idaho State University. He is well-versed on communicating to higher education governing boards, administration and faculty. He wrote in a July 23, 2009, Chronicle of Higher Education article:

The key to genuine shared governance is broad and unending communication. When various groups of people are kept in the loop and understand what developments are occurring within the university, and when they are invited to participate as true partners, the institution prospers. That, after all, is our common goal.

Communication—keeping everyone “in the loop” and aware of developments occurring within the university. It’s a worthy goal, but when it comes to facts and details about the economics of academic programs, many schools fall short of clearly communicating those facts. Why is that?

In our work with dozens of schools, it appears they lack the tools in their accounting and reporting systems to generate meaningful reports that communicate an understanding of net revenues earned by academic programs and their related direct costs.

Most accounting systems do a decent job of identifying departmental direct costs for instruction, student services, academic support and research. They don’t do a very good job of allocating revenues earned from tuition and fees along those same lines. The result is very little information about how certain academic programs are doing from an economic viewpoint. This isn’t the only viewpoint that matters—it is, however, more important today than it has ever been due to stagnant or declining enrollment and increasing discounts yielding less and less net tuition to work with in the face of rising costs.

What are schools doing to maneuver around this roadblock? Some schools have built complex spreadsheets. Some have purchased powerful data analysis tools from either their enterprise resource planning (ERP) providers or third-party software firms. Tableau and Microsoft Power BI are examples of this. Our experience with schools that took these steps tells us while these tools have been made available in some cases, they’re still not effective in generating reliable information in a timely manner. We’ve even heard stories about years of trying to provide this information only to find staff ran out of the time, patience or both to arrive at a solution.

BKD works with more than 100 colleges and universities nationwide. Through our work, we’ve noticed this issue and have dedicated ourselves to finding a solution. Last year, BKD’s Higher Education Center of Excellence conceptualized and rolled out Financial Sustainability Services. The first of these services is a tool called Interactive Margin Analysis that can yield precisely the information schools seek to clearly communicate about the economics of academic programs. A key feature of that service is the reports that are available. They come in graphic form, which allows a high degree of visualization. Visualization is what helps everyone grasp the complex issues. We deliver the reports on our secure server in a 10- to 12-week time frame, and we aim to make it affordable for even small private universities.

What have we found as we rolled this out?

The following summarizes some of the points our higher education clients, colleagues and friends made about the initial condition they find themselves in:

  1. We’ve been trying for two years to gather this information without success.
  2. We’re using a complex set of spreadsheets, but still haven’t generated the right kind of information that will help us make informed decisions.
  3. We’re struggling to get all the players (academic and administrative) on the same page … enough to tackle this issue.

As clients have advanced the agenda and worked with the BKD Big Data & Analytics team and our higher education advisors, they’ve made us aware of the following regarding the process of doing this work:

  1. Starting with a small cross-disciplinary team works best, especially when it takes the time to understand the data, its sources and its definitions.
  2. The data is suitable for inclusion in a larger university programs review when ready.

But is this having an effect on strategic decisions? We’re hearing the answer to that is yes.

  1. Seeing the trend data allowed us to see the direction our prior strategic directions were taking us.
  2. We gained a supported understanding of the need to expand alternative revenue sources, including additional programs, contributions and alternative revenue sources.

What were the final conclusions based on the observations of schools that have implemented this study?

  1. The first review of three years is just a starting point. We were able to make some initial decisions, but we need to review the data for a longer period of time.
  2. We were able to turn the corner. This crystallized our thinking on what was needed.
  3. We really needed this jumpstart to get decisions made.
  4. Real data from an objective third party, e.g., BKD, was what it took to gain acceptance on the data on campus.

Keeping everyone knowledgeable about the condition and trends of the institution’s financial health is critical to long-term success. What are you doing to advance that agenda?

Gary Olson was right when he said “The key to genuine shared governance is broad and unending communication. When various groups of people are kept in the loop and understand what developments are occurring within the university, and when they are invited to participate as true partners, the institution prospers.”

Contact Nick  or your BKD Trusted Advisor™ to discuss how BKD's financial sustainability services can help you communicate this complex data and prosper as an institution.

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