Universities globally are under increasing financial strain. Government funding is decreasing, competition for students is increasing, tuition is rising and the true value of higher education is being questioned by students, parents and politicians.

How do you balance academic values and market forces?

The paper below, written by William F. Massy, Professor Emeritus and Former Vice President for Business and Finance, Stanford University, provides a conceptual overview that can help explain the issues and point the way toward their resolution in today’s financially challenging environment.

We are constantly asked by academics about the value of our University Management and Predictive Models. Academics tend to be focused on the value of education and research, they are concerned about the greater good and not as concerned about the cost aspect.  I tend to agree that high quality education and research are vitally important. Professor Massy will explain in his paper the concept of Love/Pain and Net Cost/Net Revenue, where Love relates to Mission Attainment (conversely Pain relates to activities that detract from the mission) and Net Cost or Net Revenue, depending on whether the activity makes or loses money, relates to the financial aspects.

A very important point that Professor Massy explains is that when a university struggles financially, mission attainment (Love) doesn’t matter and only proposals that promise to make money will be funded.  However, if an institution can better manage and understand their costs, ensure a much closer collaboration between the CFO and CAO to balance costs and missions, then they will achieve a competitive advantage in the marketplace without sacrificing academic values.

Please download the full paper – Massy, William F., “Academic Values and the Marketplace,” Higher Education Management and Policy, 21:3 (September, 2009)

here: http://www.pilbaragroup.com/Portals/0/Acad_Values_and_Marketplace_Massy.pdf

2014 Chief Academic Officer Survey

Although Professor Massy’s paper was written in 2009, a 2014 Gallup survey of Chief Academic Officers for Inside Higher Ed, indicates that these issues are still very much relevant. The survey can be found here: http://www.insidehighered.com/news/survey/pressure-provosts-2014-survey-chief-academic-officers 

In Summary,of all the CAOs surveyed:

• 58% disagree that the economic downturn that started in 2008 is effectively over at their institution
• 87% agree that financial concerns (revenue, market opportunities, profit etc.) are prevalent in their institution’s discussions about launching new academic programs.
• 66% agree that most new funds their institution will have to spend on academic programs will come from reallocation rather than new revenues
• Only 29% believe they are very effective at controlling rising costs for students and their families.