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Taking a hard look at what drives instructional costs

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As institutions restate their mission in updated strategic plans and sharpen their identities, their focus is on enhancing academic offerings, facilities and student outcomes. These strategic areas require investments wholly or partially funded by ongoing operations. Given limited ability to raise tuition and fees, along with declining federal/state funding, institutions must focus on ways to free up funds through strategic cost reductions and reallocations.  

In reallocating financial resources to meet these strategic needs, institutions must scrutinize the cost of academic departments to gain a full understanding of what is driving instructional costs. This self-examination is vital; colleges and universities in general spend about half their budgets on instruction, according to the 2014 Delta Data Update of the American Institutes for Research.1

Cost control is a continuing concern of higher education administrative management and provosts. Widely acknowledged, this concern has been confirmed in surveys and studies tracking higher education trends. Of all the potential solutions, simple cost-cutting is not one. Reducing administrative spending and slowing down new faculty appointments are not enough to achieve true cost control. Operations need to be restructured so that long-term financial sustainability, along with spending in new strategic areas, can be achieved.  

Analyze the primary cost drivers: Faculty, facilities and instructional tools

For many institutions, the organizational design of academic departments creates silo authority that fosters inefficient use of faculty and facilities, erodes an institutional approach to sizing classes and investing in instructional technology and resources, and strains technological support. A collaborative approach to analyzing and understanding costs and the possible solutions to sustainable cost control can reduce silo decision-making. The framework outlined below works best when all academic departments/schools have a shared voice in the analysis and solution design.

To shed light on the cost of instruction and academic support at your institution, and to identify opportunities to reduce redundancies and inefficiencies, analyze the data and activities associated with curriculum development and delivery, and use of technology, classrooms and labs.

This 10-step framework can be your guide.
  1. Establish a baseline of each major’s cost. Activity-based costing tools will assist in capturing all costs — including those of the facility — by school, academic department and major. To fairly compare costs across academic units, develop costing principles for shared faculty, classrooms, labs and overhead costs (i.e., administrative/service costs).
  2. Determine if new programs are eroding enrollment in existing programs. As your institution plans for new programs, identify existing programs and courses that may be affected, and establish their enrollment baseline. Develop a series of steps to be taken if enrollment in existing programs drops below specified levels (course erosion). To determine possible erosion, establish a period of time (number of semesters) for tracking enrollment in both new and existing courses. Ultimately, some existing courses/majors will be replaced by the new ones.
  3. Count how many academic units are teaching the same subject. Although it is the norm to have academic departments, schools and colleges within a larger university establish their own curricula, the result has been course redundancy. Take an objective look at reducing the number of academic units offering the same subject, and allow the school or unit with the most expertise to deliver the course.
  4. Find out how many online course platforms are being used. Move to a universal online platform to simplify support, training and maintenance activities — and reduce costs. Balance the cost-effectiveness of platforms with expectations of learning and achievement outcomes, so all academic units are satisfied that the instructional tool meets their quality standards.
  5. Align new classroom teaching technology and class size. As more academic units combine lecture, online curriculum, hybrid course delivery and peer group sessions, the proportion of students to faculty can increase without sacrificing educational quality. A varied learning environment tailored to the subject matter’s advanced or basic level can enrich learning and allow for a more flexible mix of full-time and adjunct faculty, guest lecturers, graduate assistants and teaching fellows.  
  6. Identify opportunities to leverage e-books and online portals. Minimize use of textbooks and simplify distribution of curricula and lessons. Technology can save dollars and time in ordering, procuring and updating materials, and in supporting faculty teaching activities.
  7. Scrutinize development costs of new programs. An important part of quality programs is faculty and provost time spent on developing and reviewing curriculum and instructional materials for new programs and enhancements to existing programs. However, open courseware, open educational resources and shared programs are becoming increasingly critical elements in new curriculum design. Everything does not have to be invented by the institution. Save faculty and provost time, increase flexibility and open up new avenues for multidisciplinary and cross-institutional collaboration.
  8. Optimize use of classroom and lab space. Traditionally, academic departments and schools have controlled their own block of classrooms and labs. New buildings often have been constructed while existing space is underutilized. The efficient use of academic space has a significant impact on facility costs. With needs increasing for investments in classroom and lab technology and multidisciplinary programs, facility use must be optimized. As a starting point, address inconsistent class start times and class duration across academic departments and schools. Determine the teaching space needs of each school as a whole and establish a centralized classroom reservation system. Consider how control over specific classrooms by academic departments reinforces silo authority.
  9. Map out administrative staff structure in academic departments. In many cases, administrative staff is added to academic units in response to institutional compliance mandates, changes in administrative policies and procedures, and operating procedures. Coordinate a collaboration of institutional and academic administrations for an understanding of the needs so that implementation of these new policies and procedures can be streamlined.
  10. Analyze the impact on facilities and technology of programs of an older demographic. Measure costs of programs for part-time and nontraditional hours or predominantly online instruction separately from costs of more traditional full-time programs. It is important to establish baseline cost data against which enrollment growth can be measured. To do this, extract from the system the cost of faculty, facilities, technology and academic support for the nontraditional student and compare it with the cost per student of the traditional programs. It is also important to identify new students’ support services offered to the nontraditional demographic and online student.

Results of your analysis can guide your institution in decision-making about resource allocations that support strategic initiatives and the financial sustainability of your institution.

Back to The state of higher education in 2015

1 Desrochers D. and Hurlburt S. Trends in College Spending: 2001–2011, A Delta Data Update, p. 11, Figure 6. See www.air.org/resource/trends-college-spending-2001-2011 for the full report.