While the 2019 SACUBO Annual Meeting—which took place April 7–9 in Lake Buena Vista, Florida—did not promote an official theme, the overwhelming message was clear: “Prepare for and respond to disruption.” In higher education, disruption means many different things in various industry segments. The three areas we’ll highlight in this article are:
- Disaster preparedness, response and business continuity
- Financial sustainability in a changing higher education business climate
- Managing and cutting costs as the reliability of revenues from state sources declines
We’ll also summarize a few case studies demonstrating success stories or lessons learned.
The Tuesday keynote address by Andrea Weiss of The O Alliance reviewed disruption and change in industries that have historically experienced change at a glacial pace, such as retail, taxis and hotels. She pointed to the cultural economy shift from one of consuming to one of sharing. Examples included Airbnb, Uber, Rent the Runway and other similar companies that are thriving. Service providers are no longer in control. Uber’s disruption of the taxi industry was the loudest message we heard. The market value of a vehicle medallion for a New York taxi has decreased from millions of dollars to around $30,000. Feedback is now shared both ways, as the opinions of both the driver and the passenger are heard and both interests are protected. Uber has focused on the customer experience, addressing concerns around data security, providing real-time information and creating a model of efficiency. Sears, Toys R Us and the taxi industry were stuck behind an “arrogance of success” that focused on peer comparisons. Uber broke through that barrier and many others.
Higher education is another industry that has experienced change at a glacial pace. Andrea asked attendees to think hypothetically about what disruptions are coming in higher education, and then she posed the question, “How do higher education institutions avoid the dreaded arrogance of success?”
Disaster preparedness, response & business continuity
Many lessons were learned from the 2015 snowstorm that dumped 15 inches of snow on University of Kentucky (UK), along with the March 2018 EF-3 tornado that ravaged the campus of Jacksonville State University (JSU). The primary lesson was the value of a tested and effective action/response plan. UK was able to share the success of its emergency operations plan and the related emergency operations center that protected the safety of students, faculty and staff. UK’s plan included a tiered definition of “essential” staff based on the scale of the event to reduce business disruption and increase safety. UK’s plan focuses on the four functional areas in the acronym FLOP: finance, logistics, operations and planning.
JSU shared its experiences managing cash flow. Whether it was funding from the state insurance pool or disaster aid from FEMA, most of the recovery funding for JSU was paid on the reimbursement basis, which required spending substantial institutional funds before repayment could occur. JSU also encouraged institutions to consider the importance of strict adherence to federal and state procurement laws and having someone trained on FEMA’s rules and regulations to help keep the institution’s questioned and disallowed costs low.
Financial sustainability in a changing higher education business climate
Oklahoma State University Institute of Technology’s (OSUIT) speakers shared their best practice on how they used data analytics to find ways to refocus their budget. They engaged BKD to provide an interactive tool using data analytics to identify specific strategies to improve the profitability of their programs. The institution was able to make critical big-picture decisions, including eliminating or phasing out five programs and increasing academic service fees in key areas instead of raising tuition. The university is currently on track to see a $3 million increase in net income over the next three years on operating revenues of approximately $50 million per year. OSUIT submitted its practices in this area for the best practice competition and was named the Grand Finalist in SACUBO’s Best Practices Program, which showcases the best of college and university business officers’ efforts in creating better, more efficient and customer-friendly business practices. Learn more about BKD’s Program Economic Analysis tool.
Another case study on improving financial sustainability involved using consortiums as a cost-cutting measure. A group of private colleges in Virginia created a series of consortiums to manage their collective self-funded medical insurance plans, 403(b) retirement plans and perform other purchasing functions. These consortiums, especially those addressing the medical insurance component, have helped save organizations and their employees a significant amount of money. The presenters said patience was the key to creating success: It took five to seven years to create the consortium. Another factor they considered was the presence of state and federal laws that affect what is allowed in each state. Representatives from the Virginia consortium advised consideration of this factor early in the discussion stage.
Managing & cutting costs as the reliability of revenues from state sources declines
Institutions receiving state funding have seen significant declines in the last several years with some states recently increasing funding, though the amount is normally not beyond the pre-2008 highs. Fletcher Technical Community College (FTCC) experienced deep cuts and was further affected by declines in the local economy. FTCC took a hard look at many of its program offerings and asked “If we can’t be the best in this area, do we really need to offer it?” Administrators made a mental shift to focus their efforts on those degree programs that created high-wage, high-demand jobs. FTCC said transparency and communication about its cost-cutting measures was the key to success. Leadership took measures to ensure faculty and staff members felt heard. FTCC also decentralized the school’s budget development, application and monitoring processes. The business office facilitated this shift by working to educate the departments on the budgeting process, how it works and how to manage it throughout the year. By empowering the departments to make decisions within a defined set of parameters, the departments had more “buy-in” into the process and were less afraid to try new things. In addition, all employees were reminded that fundraising and philanthropy were not just the responsibility of the development department.
The 2019 SACUBO Annual Meeting was a great opportunity to share best practices and learn from our colleagues in higher education. If you have questions about the above matters or other higher education topics, reach out to your BKD trusted advisor or use the Contact Us form below.