Financial Growth Strategies For Higher Ed podcast with Dr. Drumm McNaughton and Rob Hartman. The CFO of a higher ed institution is a strategic leadership position that requires a mixture of talents. Not only must they have a strong financial background, but they must also be able to look across the spectrum of the operations at an institution, and sometimes that includes security and financial aid. The role requires looking at an institution from a 30,000 foot perspective vs. a day-to-day task position which is how a controller should be looking at an organization, e.g., accounts balanced, etc.
One of the reasons that it is critical to have a CFO who can look at long-term impacts of finances, is that of deferred maintenance which currently has a $2 trillion price tag in higher ed. One of the great things that Columbia is doing under Hartman is upgrading plant equipment. This is where a good understanding of numbers and projecting in the future is critical – Columbia has come up with a creative way to trim down its $10 million deferred maintenance bill by swapping out all its plant equipment. Through the savings in utility costs plus the rebates which they have gotten, they have been able to replace their old equipment and the savings has paid for the new physical plant. Also, they have a written guarantee from their contractor that the savings realized from replacing their old equipment would pay for the new equipment.
Many institutions nowadays are including maintenance in the fundraising / development monies raised and financial growth strategies for higher ed institutions. Columbia is in the middle of a fundraising drive for $10 million for a new building, and in a major gift from one of their board members, they have included 15 years of maintenance costs for the building.
Over 70% of higher ed CFOs are reporting they have less faith in the sustainability of institutions, and institutions need to rethink how they’re doing things. An example of this is that academics are not changing, because they are not preparing their graduates to step into the job market.
One area of concern for faith-based institutions is the ability for their students to get federal financial aid. Given the current political challenges coming out of Washington, there is no telling what the new Higher Education Act will look like, which puts into question the ability of students to obtain federal financial aid to attend college at faith-based institutions. Some institutions are moving forward on their own with innovative solutions, e.g., Grove City College and Hillsdale College, but others need to follow suit.
The Role of Shared Governance in Financial Growth Strategies For Higher Ed
Higher ed shared governance has morphed into something different than it was intended to be, i.e., many faculty believe that they should have a say in how a college is run. The intent of shared governance was that faculty were the experts in curriculum and research. However, faculty often resists competency-based education (CBE) and the courses that they are developing do not meet the needs of the businesses that are hiring graduates. So they should take input from other resources to ensure that graduates have the skills that are needed in today’s workplace.
Financial Growth Strategies For Higher Ed Key Points:
Understand the difference between a CFO and a controller. Your CFO should have a strategic 30,000-foot level perspective and a strong operations background on top of financial acumen.
- Look at creative ways to upgrade your plant equipment. There are companies out there who will give you a guarantee that the cost savings realized through replacing your equipment will pay for upgrading the equipment.
- Include deferred maintenance costs in the gifts that donors give to your institution.
- Faith-based (and all) institutions should aggressively pursue new avenues for assisting students finance their education. There are a couple of institutions out there who are doing a great job of this, e.g., Grove City College and Hillsdale College.
- Shared governance has gone too far in that faculty believe they should have a say in everything. When it comes to curriculum, they are the experts, but as far as how to run an institution, no.
- Institutions must rethink how they are delivering education and creating an environment for learning. Graduates are coming out of University unprepared for their first jobs, and faculty should be consulting with businesses to ensure that the curricula they design meet future employers’ needs.
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