4/18/2017 @BKDHigherEd 2017 HIGHER EDUCATION OUTLOOK Leadership, Labor Cost, External Environment & Resources April 18, 2017 @BKDHigherEd 1
4/18/2017 TO RECEIVE CPE CREDIT • Participate in entire webinar • Answer polls when they are provided • If you are viewing this webinar in a group Complete group attendance form with • Title & date of live webinar • Your company name • Your printed name, signature & email address All group attendance sheets must be submitted to training@bkd.com within 24 hours of live webinar Answer polls when they are provided • If all eligibility requirements are met, each participant will be emailed their CPE certificates within 15 business days of live webinar @BKDHigherEd Nick Wallace, CPA Adam Smith Director Director nwallace@bkd.com asmith@bkd.com Kimberly Marshall, CPA Makayla Matheson, CPA Senior Manager Senior Manager kjmarshall@bkd.com mmatheson@bkd.com 2
4/18/2017 AGENDA • Review survey results & insights on the following areas surveyed Leadership Labor cost External environment Resources & allocation @BKDHigherEd ABOUT THE SURVEY • More than 230 respondents • 50/50 split of private vs. public schools • Four surveys sent throughout year About 10 questions each @BKDHigherEd 3
4/18/2017 LEADERSHIP Address Tough Decisions @BKDHigherEd LEADERSHIP – EXPECTED CHANGES & DESTABILIZATION • 62% of those surveyed agreed or strongly agreed they were going to face a period of time where significant, hard to replace faculty & staff were going to require replacement @BKDHigherEd 4
4/18/2017 SHARED GOVERNANCE • Key question – what will you do to sustain leadership needed to navigate destabilization ahead amid expected leadership changes? • One helpful scenario for navigating disruption due to key leadership changes is having great leaders who communicate & manage well together Level of satisfaction with Shared Governance System @BKDHigherEd SHARED GOVERNANCE • Private universities were more likely (60%) to have satisfactory systems of shared governance than public universities who agreed they had satisfactory systems at only 55% of the schools • But what about the other 40% – which camp is your institution in? How can you impact this issue by helping maintain a good system or getting a bad system on track? @BKDHigherEd 5
4/18/2017 SHARED GOVERNANCE Reinvigorating Shared Governance* • Questions for CFOs & their advisors What is the tone of meetings when financial information is shared & faculty are present or represented? Does timing of distribution of financial information allow time for deliberation/consultation with faculty (especially when the news isn’t so good)? Do the financial reports speak the language of the faculty? Are they understandable? Is the CFO accessible to faculty to promote good relationships & collegiality? Has the feedback mechanism for faculty giving voice to issues or concerns been thought through & tested as a successful system? * From AGB Webinar (October 7, 2016) on CFO contribution to shared governance @BKDHigherEd HOW STRONG IS YOUR BOARD? • Most believe strong boards & equally strong board committees are essential to institutional success • Results of the survey shown below demonstrate that almost half (49%) felt their board committee performance needed improvement @BKDHigherEd 6
4/18/2017 HOW STRONG IS YOUR BOARD? • Table demonstrates the survey responses regarding board selection, evaluation & retention • Key question – who will take steps necessary to improve board committee performance & board member selection, evaluation & retention efforts? @BKDHigherEd LABOR COSTS Managing Your Largest Cost @BKDHigherEd 7
4/18/2017 LABOR COST – MANAGING YOUR LARGEST COST • Pressures to control costs are at very high levels • Vast majority of institutions (72%) are intensifying efforts to reduce labor costs @BKDHigherEd LABOR COST – MANAGING YOUR LARGEST COST • Higher education has many obstacles & hurdles to control or reduce labor costs • One of the basic hurdles is having insufficient cost information • 63% haven’t analyzed academic costs Nearly two-thirds of respondents have yet to analyze their academic costs & review corresponding revenues & margins, i.e. , specific data by course, professor, program & department Key Questions: Who will take the steps to analyze academic program revenues, costs & margins? Once analyzed, what steps will you take to make changes? @BKDHigherEd 8
4/18/2017 LABOR COST – MANAGING YOUR LARGEST COST Various strategies being employed by institutions to reduce labor costs • Key Question: Salary freezes were used least to reduce labor costs • Cost & price structure of higher education is under scrutiny As you reduce labor costs, how will • you track the effect on academic Calls for greater transparency between cost & price • quality ? Significant cost differences between programs • @BKDHigherEd LABOR COST – MANAGING YOUR LARGEST COST • Of the institutions surveyed, 73% increased 2017 faculty wages by no more than 2%. No increase was given by 23% of the schools surveyed • Compensation increases have been marginal for several years & in many cases not keeping up with inflation @BKDHigherEd 9
4/18/2017 EXTERNAL ENVIRONMENT Thriving Amid Many Challenges @BKDHigherEd EXTERNAL ENVIRONMENT – SURVEY FOCUS AREAS • Job demand • Cost containment • Revenue enhancements • Negative publicity @BKDHigherEd 10
4/18/2017 JOB DEMAND – SURVEY RESULTS • 53% surveyed said the industry could do a better job providing academic programs that meet needs of today’s economy Work skills @BKDHigherEd COST CONTAINMENT – SURVEY RESULTS • 95% said that the industry was either average or needed to do better with cost containment @BKDHigherEd 11
4/18/2017 COST CONTAINMENT – MARGIN ANALYSIS • Understand true costs & revenues at various levels School Department Major Class Faculty member • Help leaders identify underperforming programs as well as successful programs • Key resource in helping to determine academic offerings, develop enrollment strategies & assist in resource allocation @BKDHigherEd REVENUE ENHANCEMENTS – SURVEY RESULTS FROM ANNUAL OUTLOOK PROJECT @BKDHigherEd 12
4/18/2017 REVENUE ENHANCEMENTS – COPING STRATEGIES • Analyzing trends – ClientLink • Traditional budget-cutting strategies may not be best option • New strategies Mission shifts – graduate programs (private universities) Expand – branch campuses Mergers Restructuring/sharing resources @BKDHigherEd NEGATIVE PUBLICITY – SURVEY RESULTS • 44% experienced negative publicity in the last 24 months • Top two areas Athletics Administration • Mitigate risk Ensure comprehensive risk assessment process in place @BKDHigherEd 13
4/18/2017 RESOURCES & ALLOCATION Finding Balance Between Financial Sustainability & Mission @BKDHigherEd RESOURCES & ALLOCATION – FINANCIAL MODELING • Does your financial model achieve financial sustainability? • 42% of respondents to our survey agree they’re confident about the sustainability of their institution’s financial model through the next 10 years @BKDHigherEd 14
4/18/2017 RESOURCES & ALLOCATION – NEW REVENUE • Are you fulfilling your responsibility to lead an intergenerational institution? • Many institutions are seeking new revenue streams. Our survey shows 59% of institutions have engaged in a search for new revenues outside of academic programs @BKDHigherEd RESOURCES & ALLOCATION – REVENUE SIDE STRATEGIES • Approximately 12% of institutions haven’t considered revenue side strategies in their business model • How will you organize & discover new revenue streams? @BKDHigherEd 15
4/18/2017 RESOURCES & ALLOCATION – PROGRAM PRIORITIZATION PROCESS (PPP) • Key questions Have you reviewed your programs or prioritized your academic programs to manage program cost? How should program prioritization be adapted on your campus for maximum positive impact? @BKDHigherEd RESOURCES & ALLOCATION – PROGRAM RESOURCES & ALLOCATING FUNDS Institutions are looking for • ways to reallocate their resources & creatively cut costs. If spending cuts aren’t the answer, what is? Of those surveyed, 90% were • looking for new resources for program budgets 72% were gaining those • resources from reallocated program budgets or from increased program revenues @BKDHigherEd 16
4/18/2017 RESOURCES & ALLOCATION – CAPITAL FUNDING FOCUS Institutions have • acknowledged the need to fund capital improvements to stay competitive Of the institutions surveyed, • 68% said they have adequate debt capacity for facilities if needed 30% anticipate the capital • funding focus for the next five to 10 years will be on new construction, remodeling existing facilities & deferred maintenance @BKDHigherEd QUESTIONS? HigherEducation@bkd.com @BKDHigherEd 17
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