Welcome to Today’s Webinar September 15, 2020 Integrated Planning to Build a Thriving Academic Program Portfolio Part 2 of 3 Instructional Economics: Making Finance-Informed Academic Decisions
Presenters in This Series Dr. Antoinette Farmer-Thompson, Dr. William Massy Deputy Vice President, Steve Probst Prof Emeritus, Educational Outreach & Student Senior Partner Former CFO Services Gray Associates Stanford University Arizona State University 2
Webinar Series Overview Integrated Planning to Build a Thriving Academic Program Portfolio 1 3 2 ACADEMIC PROGRAM INSTRUCTIONAL FROM ACADEMIC PORTFOLIO PLANNING: ECONOMICS: PROGRAM DECISIONS TO MAKING FINANCE- RESULTS: PREPARING TO THRIVE INFORMED ACADEMIC BUILDING AND MANAGING DECISIONS A ROBUST PROGRAM PORTFOLIO August 27 September 15 October 1 2:00 pm EST 2:00 pm EST 2:00 pm EST 3
Agenda I. Introduction to Direct Instructional Economics II. Academic Resourcing Models (ARMs) III. Four Ways to Close a Financial Sustainability Gap 1. Prune Existing Courses 2. Resize the Program Portfolio 3. Redesign Courses 4. Launch New Programs IV. Program Importance, Market Scoring, and Learning Quality
Today’s Looming Problem COVID-19 has created big Financial Gaps for most Colleges and Universities. Financial GAP • Immediate: nasty deficits and cash flow problems • Before long: serious departures from financial sustainability The processes and models we'll discuss today can help institutions quantify and close the gap. Gray Proprietary 5
The Challenge The challenge is not just to survive financially, but to survive as the healthy institution you want to be. Typical First Responses to Budget Problems (”Squeezes, speedups, and cuts will force out dollars.") Hiring freezes, early Higher faculty and staff retirement offers, and workloads; lower quality furloughs; salary, and service levels for benefits, and expense students, faculty and reductions other stakeholders Alas, these actions just substitute one problem for another. They’re not sustainable solutions. Gray Proprietary 6
Courses and Programs Matter Changing your course and program portfolios can mitigate the squeeze and the speedup. Gray Proprietary 7
Unpacking “Courses and Programs” Some basic ideas to remember…. § Programs are market-facing activities . They are are the drivers of revenue. Program portfolio decisions determine the institution’s academic direction . - Prospective students are concerned mainly with programs rather than courses. - § Courses deliver the academic outcomes promised by programs . The demand for courses depends heavily on program enrollments (e.g., as influenced - by admission targets). - The configuration and resourcing of courses , as well as curricula and teaching prowess, help determine the quality of education. - Courses drive cost, whereas programs drive revenue . § Resizing the program portfolio can help restore financial sustainability. - Deciding which programs should grow, shrink, or stop requires the simultaneous consideration of … o Mission-driven priorities, market factors, and instructional economics. o So does the creation of new Programs. Gray Proprietary 8
The Road to Sustainability Three steps for restoring an institution’s ...and the Processes and Operational and Financial Sustainability. Tools for implementing them. Program importance C. Analyze Academic Operations and identify a Gap- (mission) ratings Closing Strategy that minimizes the impact on students, faculty, staff and the institution generally. Market scoring A. Quantify the Financial Gap and apportion it between the Academic Learning and quality Non-academic parts of the institution. Academic Resourcing Models (ARMs) B. Analyze Non-Academic Operations and identify a Gap-Closing Strategy that minimizes the impact on students, faculty and the institution. Gray Proprietary 9
The Road to Sustainability Three Steps for making the Academic ...and the Processes and Tools for Fundamentals sustainable implementing them. Program importance Analyze Academic Operations and identify a Gap- (mission) ratings Closing Strategy that minimizes the impact on students, faculty, staff and the institution generally. Market scoring Quantify the Financial Gap and apportion it between the Academic Learning and quality Non-academic parts of the institution. Academic Resourcing Models Analyze Non-Academic Operations and identify a (ARMs) Gap-Closing Strategy that minimizes the impact on students, faculty and the institution. Gray Proprietary 10
The Road to Sustainability We’ll start with Academic Resourcing Models (ARMs), which provide the data needed for good decision making. Program importance Analyze Academic Operations and identify a Gap- (mission) ratings Closing Strategy that minimizes the impact on students, faculty, staff and the institution generally. Market scoring Quantify the Financial Gap and apportion it between the Academic Learning and quality Non-academic parts of the institution. Academic Resourcing Models Analyze Non-Academic Operations and identify a (ARMs) Gap-Closing Strategy that minimizes the impact on students, faculty and the institution. Gray Proprietary 11
Academic Resourcing Models The models are rooted in " Direct Instructional Economics ." Indirect Support and Administrative Costs Accounting System Direct Shared Costs (e.g. Academic Deans) Department-Level Input Direct Instructional Economics (e.g. enrollments, classes, unit costs, tuition) Course-Level Input Gray Proprietary 12
Activity-Based Course-Level Data Direct instructional economics models produce Course-Level data on revenues, cost and margin, which is easily rolled up to Programs . $5,497 Illustrative: Direct Instructional Cost per Student Credit Hour $1,000 1 in 5 courses costs at least $531 per SCH – $900 2.5x the median $800 $700 Median course costs $600 $531 $217 per SCH $500 $364 $400 $300 $266 $217 $172 $200 $133 $104 $79 $100 $- $- Min 10% 20% 30% 40% 50% 60% 70% 80% 90% Max Course Percentile Gray Proprietary 13
Direct Instructional Economics Instructional economics are critical for virtually all academic resourcing decisions. (Hint: it's not because financial considerations should dominate decisions.) § All programs should further the university’s mission directly and/or by making money . § Making money feeds the cross-subsidy pool. § Cross subsidies support what markets won’t – advancing the mission. Contrary to the conventional wisdom in academe, close attention to margin enhances the realization of the mission. Gray Proprietary 14
Academic Resourcing Models Basic structure of the Academic Resourcing Models (ARMs ) that reduce the direct instructional economics concepts to practice. Crosswalk between Program and Course Enrollments Course Enrollments Key Variables Activity • Instructional mode • Enrollments • Credit hours Effects of changes… • Course section counts and average class sizes • Instructor type Financial • Revenue • Cost Shared courses coupled with discrete sectioning • Margin produce interactions among programs that need to be considered. Data • come from existing IT systems Gray Proprietary 15
The Road to Sustainability Three Steps for making the Academic ...and the Processes and Tools for Fundamentals sustainable implementing them. Program importance Analyze Academic Operations and identify a Gap- (mission) ratings Closing Strategy that minimizes the impact on students, faculty, staff and the institution generally. Market scoring Quantify the Financial Gap and apportion it between the Academic Learning and quality Non-academic parts of the institution. Academic Resourcing Models Analyze Non-Academic Operations and identify a (ARMs) Gap-Closing Strategy that minimizes the impact on students, faculty and the institution. Gray Proprietary 16
Academic Resourcing Models Gap Episodic Routine Closing Decisions Decisions Gen Ed Design Faculty Hires Redesign of Courses Course Scheduling Redesign of Program Curriculum Gray Proprietary 17
A Framework for Restructuring The four options for changing course and program portfolios Change the Change the Course Program Portfolio. Portfolio. Course and Program Portfolios These actions will influence (1) (2) are the main drivers of academic operations and financial results Prune Resize operations. existing existing starting next year. courses programs Cost-cutting is important, but These actions won't produce (3) (4) Redesign Create the big money lies in the results until at least the existing new Program Portfolio. year after next. courses programs These alternatives These alternatives influence influence mainly Cost. Revenue and Cost. Gray Proprietary 18
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