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Financial sustainability takes discipline, rigor and culture

Flat net tuition revenue and reduced public financial support, intensified competition for enrollment, the difficulty of affordability, the struggle to control or reduce costs, the digital transformation of both internal operations and modes of teaching, and shifting demographics all challenge the financial viability of many institutions.
OnCourse: Financial sustainability takes discipline, rigor and culture
Faced with these and other issues, leaders in many colleges and universities are necessarily turning a greater part of their attention to finding a way toward solid, long-term financial stability. Even institutions with strong financial results are concerned about the long haul, and those already in financial straits must move with haste to regain financial health and avoid the risk of closure.

Long-term sustainability and mission achievement depend on optimized operations. For a higher education institution to be successful, it must adhere to a strategic business plan based on a thorough examination of its mission and underlying business model. If performance seriously falters, it is critical that the institution act promptly to effect changes to operational models, strategies and resources. Hard choices are essential in areas such as academic programs and delivery, administration, technology, facility usage and construction, fundraising and community services. Activities will need to be identified as probable contributors to financial stability and growth, and worthy of investment for more effectiveness, or as no longer making sense and therefore expendable. Resources for investment in strategic activities will need to come either from those funds no longer needed for discontinued activities or new revenue sources.

For any institution, making the choices and directing support to activities that serve the mission and contribute to financial well-being will require discipline, rigor and, often, a more forward-thinking culture.

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Focus on priorities in mission and financial health
Optimization takes discipline, collaboration and a degree of single-mindedness — a concentration of efforts on activities most essential to mission without compromising finances. An implementation team of informed colleagues and advisers can be of great assistance; the team’s support can serve as fortification to stay focused on key areas — establishing overall strategy, rationalizing and streamlining activities, procuring accurate data for cost/revenue analytics (see Utilizing Data Analytics to Improve Performance by Grant Thornton LLP’s Mary Foster, Anthony Pember and Matt Unterman), analyzing reserve requirements and making employment decisions, etc.

Maintain momentum through rigorous thought, action and oversight
Encourage and reward improvement in each program and activity to raise revenue to sufficient levels and cut enough costs to make a real difference. Resist complacency about programs that seem to be working well; further efficiencies could be possible. Examine, evaluate, strengthen and monitor every activity.

It is valuable to schedule efforts like periodically reviewing and reassessing investments and reductions, as well as scheduling sessions for brainstorming. This might be the time to consider options that in the past have been rejected as “extreme”; a viable choice could be affiliations with other entities, whether in higher education (see Synthetic Merger Could Be the Right Elective for Higher Ed by Grant Thornton’s Edward Kleingluetl, Jennifer Neill, Mary Foster and Larry Ladd) or in the private or public sector (see Meet Your Revenue Challenges with New Strategies by Grant Thornton’s Brian Page).

Take all stakeholders on your culture journey
Many institutions underestimate the importance of a strong team spirit among leadership. Mutual trust will be more important than ever; build it by keeping appropriate stakeholders apprised of progress and setbacks, and the long-term efforts that will be required. Acceptance of change and sacrifice come more easily with a clear understanding of purpose, obstacles and goals, and how they are shared by all. Build a sense of community with stakeholders by communicating regularly; reach an agreement that only a financially healthy institution can achieve its mission. Work with administration and faculty (see Engaging Faculty Improves Financial Performance by Grant Thornton’s Larry Ladd) toward consensus on a sustainable vision — you will gain some of your most effective supporters this way.

Address interdependencies to reach sustainability
Making fundamental changes in operations, strategies and tactics takes focused action, but much more than that, it requires a vision of a sustainable future, and an understanding that the status quo is not sustainable and new ways of thinking are the way forward. Shaped by disciplined and rigorous work with the community of stakeholders, this vision of an enduring institution will enable the collaborative spirit required to allow you to move toward financial sustainability.    

PRINCIPLES OF PERFORMANCE OPTIMIZATION
Focus on the end goal — long-term sustainability, growth and bottom-line savings
Consider change management from the beginning — the most critical driver
Realize achievability is determined by the institution — not by benchmarks   
Establish and monitor improvement targets — with sensitivity to culture and mission
Require participation not only of finance, but also of the entire community — faculty, staff and students
Establish inclusive participation involving hard decisions — have everyone at the table
Create a cultural commitment to permanent, ongoing value — not to a shelved report
Larry Ladd
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National Industry Specialist
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Matt Unterman
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Bradley Chadwick
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Scott Davis
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