The Stubbornly High Cost of Doing Business


In the Hechinger Report’s recent story, “University Bureaucracies Grew 15 Percent During the Recession, Even as Budgets Were Cut and Tuition Increased,” reporter Jon Marcus examined the confounding trend that many university systems are showing “new resolve . . . to improve the efficiency and productivity of stubbornly labor-intensive higher education” when “statistics suggest the opposite is happening.”

Looking at a variety of public systems across the country, Mr. Marcus found that “the number of people employed by public university and college central system offices . . . has kept creeping up, ever since the start of the economic downturn and in spite of steep budget cuts, flat enrollment and heightened scrutiny of administrative bloat.” Mr. Marcus reports that this growth happened at a time when states have collectively cut their higher education spending by 18 percent. He also notes that some systems like Maine’s central office grew by 26 percent – despite an enrollment decline and budget cuts.

Larger Central Offices May Have Silver Lining

There is a silver lining according to Mr. Marcus, however, who suggests that “after years of promising to save money by streamlining operations, cutting duplicate staffs and maximizing purchasing power, some university systems have been forced by political pressure and economic realities to finally start doing it.”

In Maine, for example, Mr. Marcus found under a new “One University Initiative” in which the system consolidated the budget, legal, personnel, information technology, insurance, purchasing, and other departments from its seven campuses resulting “in a 37 percent decline in the number of administrators at the universities that will save about $6.1 million a year.”

The findings are modestly encouraging and hardly surprising. Elected officials are increasingly placing American colleges and universities – at all levels – under greater scrutiny especially at the state and federal levels.

There is, of course, an ongoing historic frustration in the higher education community when politicians – most of who are not skilled in finance and who have not run businesses of substantial scale – wade into the management of higher education.

It’s easy for higher education officials to point privately to great gaps in how the state and federal government runs and finances their own enterprises in terms of archaic, disruptive, and conflicting management practices and protocol across all levels of government.

The complaints are not often voiced publicly, of course, because colleges and universities depend on government partnerships to fund student and institutional aid.

The Incremental Inertia of Higher Education

But in the end that may not be the point. The argument still holds that America’s colleges and universities operate in a culture dominated by incremental inertia. No place is more conservative in its management practices than a college or university campus.

Smaller campuses operate on a time-worn academic cycle which can inhibit transparent decision-making when the campus powers down in the summer and during academic breaks, effectively five months a year at many colleges.

Challenge of Shared Governance

Shared governance is also a problem. The key to good governance is transparency and communication. It’s critical because key stakeholders – trustees, administration and faculty – have important roles to play. It sometimes means that everything takes longer than it would in a corporate setting or in government regulated in the days before the overuse of the “continuing resolution” by an annual budget cycle.

Decentralization Can Make Cost-Cutting More Difficult

Another problem, depending upon the institutional setting, is decentralization. In a decentralized setting without strong administrative leadership, college and university divisions, departments, and programs are their own fiefdoms. It’s impossible to create a standard data protocol because of bad record keeping and the differences among divisions like enrollment, financial aid, alumni, and advancement, or so the argument goes.

At the opposite end, the college’s adherence to state and federal regulation, its need to commit to key residence life programs, including athletics, mental health and wellness counseling, diversity initiatives, and internship and career counseling programs, as well as support accreditors’ demands for tighter accountability standards can cause administrative bloat.

One impact of the Great Recession has also been to “beef up” enrollment and advancement operations – a practice that demonstrates their importance to bottom line revenue so critical in weak admission markets. Should these programs be scaled back?

On any level, an ongoing effort to streamline to create efficiencies and economies of scale is a good idea.

But the practical dimension of the problem is that the operational model doesn’t work anymore for American colleges and universities.

Higher education cannot reasonably address the question of cost until its leadership understands that cost is first about whether the older operational models continue to serve them well.

Your comments are welcome. They must be relevant to the topic at hand and must not contain advertisements, degrade others, or violate laws or considerations of privacy. We encourage the use of your real name, but do not prohibit pseudonyms as long as you don't impersonate a real person.

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s