Other parts of this series:
For many years, higher education institutions have seen expenses increase faster than revenue. This wasn’t a sustainable model before COVID-19, and the situation is likely to get worse as institutions dole out refunds, states slash budgets, and students demand discounts for virtual fall semesters. Stimulus funding is but a drop in the bucket of what institutions need in order to cover their costs associated with COVID-19.
How can institutions reallocate available funding to sustain and improve mission-critical services?
There is no easy solution to this, and the many reasons for these challenges are too complex to address in a single blog. We can, however, focus on a couple of concepts that many other industries have embraced to quickly drive down administrative costs.
A Budgeting Reboot
The line-item or “incremental budgeting” that universities typically use simply won’t stand up in a time of COVID-19. The entire operating model of the university has been upended; how funds are directed needs to change, too. Incremental budgeting would not rise to the challenge of cutting or redirecting resources (e.g., how do you incrementally cut 10 or 20 percent of the cost base – or fortify your digital/virtual infrastructure while reducing cost to support the physical infrastructure?). The zero-based mindset may provide universities a proven approach to avoid the pitfalls of incremental budgeting.
Given the financial stress imposed by COVID, there is a need to reevaluate where resources are allocated and identify cost-consumption patterns that create value vs. those that erode it. Zero-based spend (ZBS) involves a forensic analysis of expenditures and zero-based organization (ZBO) examines the allocation of resources to the workforce, including span of control and layers of hierarchy.
Using this thinking, universities would be able to:
- More clearly understand how costs are assigned today and their trends using analytical and artificial intelligence (AI) tools to examine expenditure data at a granular level
- Move beyond a cost focus and use performance data/KPIs as part of zero-based diagnostics
- Understand cost category components and trends against benchmarks, especially in areas of overhead
- Prioritize a list of opportunities to reduce or redirect costs and identify ways to improve how work is organized and completed
- Use ZBS and ZBO diagnostic findings to form a budgetary “gap closing” strategy and/or cost transformation agenda for the institution
Trying to centralize decision making and streamlining administrative processes across a campus is like squeezing a balloon. Pushing on one department, process or purchasing decision often results in bloating elsewhere. The decentralized governance on most campuses has resulted in authority on back-office decisions being made in multiple places with different objectives. Among the results: duplicative functions, shadow teams and universities not using their overall scale to drive down costs. I often share an experience of a multi-campus university being unable to buy a single type of toilet paper across campuses because they couldn’t agree on the toilet paper dispensers.
This challenge isn’t unique to higher education. Many companies across all industries have de-centralized governance models. Thinking that we can quickly move to a more centralized model in higher education overnight is not likely achievable. I will address this point in a later blog as we look to different business models for the industry. However, even in a decentralized environment, process automation can bring quick wins for universities seeking opportunities for cost savings.
There is a common misunderstanding that a university should have a cutting-edge cloud solution to implement automation capabilities. While such solutions can make it easier, they are not required to make incremental improvement. Automation tools can sit alongside an ERP system and take out manual steps performed by humans. This capability, often referred to as robotic process automation (RPA), can drive significant value at a lower-than-expected cost. The ROI on such initiatives may typically achieve in a short period of time.
Implementing RPA is not just a technology deployment. Where we have seen the most value is when you hold design thinking sessions with your business users to identify their common pain points. Spending time with these users will enable you to prioritize the high-impact areas to automate. Remember, the robotic capability would sit alongside the users – eliminating waste in the processes and freeing them to focus on higher-value activities.
The concepts of zero-based budgeting and process automation have seen resistance within the industry for differing reasons. We can no longer point to the uniqueness of higher education’s mission as a reason to say “no.” It’s time to explore these processes and capabilities in order achieve the benefits many others have realized.
In our next post, Samantha Fisher will explore the need for a fluid and frictionless student experience. In the meantime, visit our Higher Education page or reach out to me via LinkedIn or Twitter to continue the conversation.
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