The Higher Ed CFO Survey: For Whom the Bell Tolls

Last week, Gallup and Inside Higher Ed released a fascinating and troubling survey examining the opinions of CFO’s on the state of American higher education.

CFO’s from 438 colleges and universities responded to the survey. Researchers found that two-thirds of CFO’s questioned believe that higher education is facing a financial crisis. While 23 percent of CFOs at public colleges/universities and 26 percent at privates believe they can sustain their business model over the next five years, only 11 percent of CFOs at publics and 15 percent at privates think their model will hold over the next ten years.

Perhaps the word that best describes the reaction to their collective view is “yikes.”

Researchers then questioned what steps the CFO’s planned to reduce budgetary pressures ensuring the sustainability of their model. Interestingly, less than 25 percent planned to ask senior faculty to teach more students, outsource academic programs, revise tenure, offer early retirement or cut funding for intercollegiate athletics.

So where can they go? The answer is to focus on where they might have influence and control, especially on the administrative side. Despite growing pressure to improve retention, graduation rates, employment at graduation, and respond to heightened state and federal regulatory demands – all labor intensive additions to staff — most looked to areas like eliminating underperforming academic programs, reducing administrative positions, and outsourcing administrative services, among other options.

To do so, the CFO’s survey supported academic and administrative cooperation with other institutions as the best strategy to cope with the financial crisis. What isn’t clear is how they might collaborate, where these savings might accrue, how they would be redirected, or when colleges would see the savings translate to their bottom line.

Among the players, CFO’s do not believe that faculty understand the scope of the crisis. Among those surveyed, about two-thirds thought that trustees were realistic about the looming financial crisis, while 75 percent agreed that most senior administrators understood the issue.

The CFO survey, released in time for the annual meeting of the National Association of College and University Business Officers (NACUBO), offers important longitudinal insight into the state of the American college and university community. Where it breaks down, however, is in the focus on tactics over strategy.

There are a number of “unstated” facts masquerading as inference. It is clear that in shared governance, CFO’s are unlikely to turn to the faculty as equal partners to solve the financial sustainability question. Additionally, the steps they proposed – led by unspecified increased levels of collaboration – are incremental at best. And yet the window for change identified – five to ten years at most – does not support a graduated approach to sustainability. This conclusion may come partly from the questions asked by the researchers and the wide variation in the strength and severity of conditions faced among institutions.

Finally, turning inward to other senior colleagues or volunteer boards of trustees — arguably the weakest link in shared governance at colleges and universities – may produce a range of reactions from inertia to chaos in governance. While trustees may appreciate and advocate for change, they do not uniformly understand how higher education works. Accepting a clean audit does not mean that the board fully comprehends, for example, the level or depth of financial stress at an institution.

We all recognize that the American higher education system has origins that date to the founding of the country. And there is truth to the belief that higher education has survived the give-and-take that built America. But there will be winners and losers in a world shaped increasingly by technological innovation and changing workforce needs. If the financial underpinnings do not support the current structure, then parts of the building will collapse of their own weight.

It’s time for the leadership of American higher education to become activists in their own future. The faculty is well intentioned and the most conservative contributors to shared governance. But in the end they are not stupid, lazy or unable to handle bad news. Leadership – presidents, board chairs and faculty senates – must see a crisis and react innovatively, prudently and with confidence. Trustees who lead volunteer boards of trustees must operate without agenda and become far better educated about the business and culture of higher education.

Ultimately, it’s not the job of the CFO to find incremental solutions to systemic problems eating away at the financial sustainability of American higher education. Collaboration like that proposed by CFO’s in the recent survey is important. But it is at best a tactic.

What is most needed is coordinated leadership, experimentation and innovation, collaboration, and most important, a new strategy for putting the pieces of the financial puzzle together in a different way. The problem is the strategy and not the tactics, beginning with a need to imagine the financing of American higher education in sustainable ways.

If not, we have a problem from which higher education cannot hide and which will not go away by increments. The CFO survey offers a warning to American higher education. Beware of for whom the bell tolls.

4 thoughts on “The Higher Ed CFO Survey: For Whom the Bell Tolls

  1. This article left me incredibly frustrated, for the same reason discussions of this in real life leave me incredibly frustrated — it doesn’t tell me why there is a crisis or where the money is going. How can anybody participate in solving a problem when the details of it are hidden away?

  2. I must confess to some healthy skepticism about this survey and its ominous warnings. As an historian of the pre-1917 Russian labor and revolutionary movements I learned to distrust the claims I found in police archives of the growing power and danger of that movement, because the police had a vested interest in exaggerating the threat they were funded to oppose. Similarly, it hardly surprises me that CFO’s are also quick to cry wolf; their vested interest is in perpetuating an environment in which their own role takes on excessive importance.

    In fact, this survey tells us precious little about the actual financial situation in higher education; it tells us only about how that situation is perceived by a certain hardly impartial group, a group, I might add, members of which independent investigations frequently find guilty of hiding assets and claiming “financial exigency” without justification. What makes these CFOs concerned about the future? Is it the state of public funding? Is it the size of endowments? Debt ratios? Who knows; they don’t tell us. It’s just, well, we’re the experts so, trust us, we’re worried. Given this, it’s hardly surprising that the survey essentially repeats the “conventional wisdom,” a set of tired media memes with which we are all too familiar.

    Actually, even when the survey reports something more specific, the views of these CFOs are often debatable at the least. Take, for example, the contention that “Health care costs are weighing increasingly heavily on the minds of campus business officers.” I’m sure that’s true, but what is not recognized and should be pretty important given that the survey reports concern over the future, not the present, is that, in good measure owing to Obamacare, there has been a noticeable decline in the rate of increase of such costs, a decline that is highly likely not only to continue but perhaps intensify.

    Or take this statement from insidehighered’s report on the survey: “A solid majority of CFOs (57 percent) agree or strongly agree that new spending at their institution will come from reallocated dollars rather than new revenue.” But that’s a self-fulfilling prophecy. If administrators don’t seek out new revenue, if they don’t join with faculty and others to fight for expanded public funding of higher education, than this may well be the case. But why rule it out in advance?

    In short, I, for one, am hardly convinced by Jane Wellman’s claim that “People who know what they’re talking about think we have a problem down the road if some things don’t get fixed.” As I read it, “People who have a vested interest in convincing us we have a problem see a problem that may or may not exist down the road.”

  3. Pingback: 2014 Through the Academe Blog: August | The Academe Blog

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