moving forward on the continuum of financial planning in ... · operational budgeting. some...

by Charles Kim, Tony Ard, Jason Sussman, and David Woodward

Moving Forward on the Continuum of Financial Planning in Higher Education

HIGHER EDUCATION

Moving Forward on the Continuum of Financial Planning in Higher Education2 © Copyright 2018 by Kaufman, Hall & Associates, LLC

Current RealityHigher education is currently experiencing challenges on multiple fronts, including demographic shifts, flat or reduced student aid and research support from state and federal sources, traditional and nontraditional competition, new federal tax reform and immigration policies, and the vagaries of the financial markets. As a consequence, many higher education institutions are feeling the impacts of shrinking enrollment, decreasing net tuition, declining debt capacity, limited liquid assets, and aging facilities.

Given these challenges, governing boards and senior executives are increasingly concerned about how to ensure institutional sustainability in both the short and long term. Nearly half of higher education finance professionals surveyed by Kaufman Hall in 2017 expressed concern about the viability of their institution’s business model for the next decade.1 An even larger percentage of higher education trustees surveyed by the Association of Governing Boards in Universities and Colleges and Gallup Inc. in 2017—92 percent—indicated their institution needs to drastically or moderately change its business model.2

Additionally, nearly two-thirds of finance professionals acknowledged that colleges and universities lag other sectors in adopting modern financial planning practices and tools,3 and 71 percent of chief business officers believe media reports that portray higher education as being in the midst of a financial crisis.4

Clearly, it is time for higher education management and governance to pursue alternative, best-practice business models.

Examining the Planning EnvironmentWith high awareness and understanding of the financial challenges their institution faces, proactive board chairs and trustees are asking senior college and university leaders—particularly finance leaders—tough questions, including:

• What levels of operating and financial performance are required to fully support the institution’s medium- to long-term strategies?

• How do we know that the strategic initiatives we plan to pursue in the next few years are affordable and will work? How does our budget support these initiatives over the near and long term?

• What growth and cost-reduction initiatives are we putting in place to ensure the longer-term sustainability of the

institution? How are these reflected in our financial plans or forecasts and our annual operating budgets?

• How are we performing relative to our own targets and compared with similar institutions?

• How might our debt rating and access to affordable capital be changing?

• What are the institution’s sources of financial risks, and what is their magnitude? What can we do to mitigate risk?

Many CFOs of U.S. colleges and universities currently struggle to answer these questions. The core barrier may be organizational silos of financial responsibility across functions or schools that make planning and decision making regarding strategy and strategic allocation of resources difficult at best.

Many CFOs recognize the need to improve core planning functions (Figure 1), but look to improvements in annual budgeting as a means to accomplish this objective. Unfortunately, institutional budgets provide limited value as a tool for assessing access to capital, strategies, competitive position, and overall financial health, yet many institutions conduct no additional planning beyond operational budgeting. Some institutions view budgeting as an operational exercise, not as part of a financial process.

Developing an analytic and planning framework that will enable higher education institutions to advance to more mature and rigorous planning—no matter the institution’s current stage of planning proficiency—is critical. Such planning represents a strategic rather than an operational exercise.

Figure 1. Improvement Priorities of Finance LeadersSource: Kaufman, Hall & Associates, LLC: Financial Outlook: 2018 Report for Higher Education, Nov. 28, 2017.

Long-range financial planning

Reporting and analysis to supportdecision making

Operational budgeting and forecasting

Which of the following financial planning and analysisinitiatives are your institution looking to improve?

74%

71%

60%

Moving Forward on the Continuum of Financial Planning in Higher Education 3© Copyright 2018 by Kaufman, Hall & Associates, LLC

In this white paper, senior executives will find information on an approach to planning that has withstood the test of time in U.S. companies and not-for-profit organizations due to common core characteristics. A case study of a university that has successfully strengthened its institution-wide planning also is featured.

Stages of Financial Planning Maturity Experience in the field and results of the Kaufman Hall CFO survey suggest that some institutions are in the most basic stage of financial planning maturity (Stage 1). Their planning is limited to operational budgeting, which is disconnected from any sort of integrated, multi-year planning process, such as planning related to grants and tuition occurring elsewhere in the organization. Hence, the financial view forward extends only one year. In addition, the budget aims solely to balance revenues and expenses, independent of performance above and beyond a balanced budget.

Of particular concern is the fact that 40 percent of survey respondents do not consider long-range financial planning to be an area of emphasis, and 14 percent don’t conduct any long-range planning at all. Without the coupling of operational budgeting and long-range financial planning, institutions cannot gain comprehensive understanding of the financial performance necessary to support strategy execution.

Other institutions are in Stage 2 of financial planning maturity, which, like Stage 1, is operationally focused. Operational forecasts and planning may increase the horizon by quarters or years, but still provide limited longer-term visibility of the

institution’s financial health. For example, information on balance-sheet cash-flow position, the alignment of initiatives with the institution’s strategic vision, and integration with planning around grants and tuition are likely lacking.

For institutions in Stage 3 of financial planning maturity, strategic planning is connected to and supported by a robust financial plan. More than half of Kaufman Hall survey respondents indicated the primary goal of their long-range plan lies in aligning the plan with their strategic plan. However, only those institutions that have matured their processes to at least Level 3 are achieving such alignment. Operational forecasts and planning increase the horizon to multiple years and may be integrated with grants planning and tuition planning.

In Stage 4—the most mature financial planning stage—an institution’s strategic financial planning or rolling forecasting process directly connects to capital budgeting and operational budgeting. Grants planning and tuition planning also are integrated with overall institutional planning. Kaufman Hall survey5 responses indicate about 60 percent of institutions include both large capital and strategic initiatives and operating targets and ratios in their integrated plan. This leaves a concerning 40 percent that don’t do so; the maturity of these institutions’ planning processes falls under Stages 1 through 3.

Given the number and magnitude of external pressures in higher education, the need for robust, long-range strategic financial planning, conducted in tandem with rigorous capital and operating budgeting, is more critical than ever.

Figure 2 provides an overview of the stages of financial planning maturity.

Figure 2. Overview of the Stages of Financial Planning MaturitySource: Kaufman, Hall & Associates, LLC.

Stage 1 Stage 2 Stage 3 Stage 4

MaturityLevel

ViewForward

OperationalBudgeting

OperationalBudgeting+ Forecasts

Integrated Strategic-Financial Planning and

OperationalBudgeting

Integrated Strategic-Financial Planning and

Capital and OperationalBudgeting

One YearOne Year + Quarterly

or Multiple-YearForecasts

2-3 Years 3-10 Years


Progression Goals It is possible to move in increments along the planning continuum from a sole focus on operational budgeting to thoroughly integrated planning. Such planning is defined as the process whereby all planning and budgeting activities throughout every level of the institution are effectively linked, coordinated, and driven by the institution’s vision, mission, and academic priorities.6 A connected process ensures the following:

• Improved analytics and reporting to support better decision making

• Use of a uniform approach to evaluate all operating and capital decisions

• Faster and more strategic budgeting • Improved visibility into the longer-term financial trajectory

of the institution• Protection of the institution’s capital capacity at a level that

enables access to low-cost debt options

Integrated planning includes long-range strategic planning, financial planning (including grants and tuition planning), capital budgeting/allocation, and operational budgeting. Planning that incorporates all of these components enables integrated decision making that:

• Provides a line of sight from the mission of the institution to its strategic and financial plans to the ways in which annual operating and capital decisions are made

• Aligns processes through calendar-based management, standardization of tools and templates, and known, objective evaluative criteria

• Expands institutional capacity to support analytics-based decision making

The end result of integrated planning is increased institutional discipline and transparency around strategic decision making as well as visibility and accountability around actual performance.

Advancement Along the Continuum So how can finance professionals in higher education advance their institution’s planning processes? With adjustments appropriate to higher education, finance executives might consider the approach introduced to healthcare in the late 1980s by Kaufman Hall to improve the planning and budgeting process in the nation’s not-for-profit hospitals and health systems.

Similar to disruptions currently facing higher education, throughout the 1990s and early 2000s, healthcare organizations encountered significant revenue, resource, and competitive challenges. At that time, finance leaders began to consider more closely aligning their role and approach to planning with the principles and practices used by the nation’s leading companies, making adjustments needed for their mission-driven organizations.

As adapted for not-for-profit healthcare, these business principles and practices have enabled hospitals and health systems to survive and thrive in challenging environments. The planning processes and capabilities share key characteristics with the disciplined, finance-based planning used since the early 1900s by blue chip companies on the Fortune 500 list and more recently by companies such as Microsoft, Amazon, Apple, and CVS Health.

A central tenet of this financial process is the following:7

Financial performance must be sufficient to meet the cash-flow requirements of the strategic plan and, at the same time, maintain or improve the financial integrity of the institution within an appropriate credit and risk context.

This principle requires institutions to use a planning process that integrates strategic, financial, and capital planning analytics and decision making. Unlike what is occurring in some colleges and universities, it does not rely on the operating budget as the foundation for financial planning. Rather, the process involves:

• Identifying the strategies best able to achieve the institution’s mission

• Ensuring the funding of such strategies through debt, reserves, fundraising, or other sources

• Conducting solid risk assessment and scenario analysis related to the viability of each strategy and the overall portfolio of strategies to ensure effective deployment of resources

• Directly and aggressively supporting selected strategies with needed capital and resource allocation

For some institutions, the planning process involves a strategic plan that is then linked to a financial plan; in others, the planning process results in one integrated plan. Either approach is appropriate if the planning process includes five interrelated functions:


1. A strategic financial planning process that balances an institution’s mission-based and market strategies with its financial capabilities. The strategic plan identifies strategic initiatives for coming years. The financial plan quantifies potential capital and operating requirements of such strategies and establishes the annual financial performance targets needed to generate appropriate funding for the proposed strategies

2. Capital structure management that is appropriate to the institution’s current financial and credit position

3. A capital and resource allocation process that enables the institution to prioritize capital spending and other resource allocation decisions related to all institutional investments

4. An annual operating budget that reflects the first year of the multi-year strategic, financial, and capital plans and therefore becomes a strategic implementation tool

5. Ongoing monitoring and control functions that accurately assess whether strategic, financial, and capital targets and overall performance requirements are being met

The key output of the planning process should be a fiscally sound business plan that provides the platform for both

long-term and day-to-day decisions, enabling staff at all levels to respond to opportunities and challenges in a flexible, coordinated manner. The plan should outline the institution’s strategy and how and when initiatives are to be pursued, funded, and monitored. Having an established plan with finite performance targets and success measures maximizes outcomes while reducing the business risk of failure and maintaining a sustainable level of financial performance.

Figure 3 illustrates the overall planning framework, from development of mission-based strategies through capital and operating budgeting. Of note is the existence of an institution-wide feedback and control system at the center. This system is designed to monitor and connect the planning pieces and provide a mechanism for the institution’s continued evolution. The feedback and control system requires access to data-rich, high-quality analytics and reporting tools and operates most effectively within a disciplined institutional structure that has feedback and control responsibility (i.e., a committee or intradepartmental function). This structure enables high-quality decision making in and between every component box of the planning framework.

Figure 3. Overall Planning FrameworkSource: Kaufman, Hall & Associates, LLC.

Spending limits, deployment decisions

Feedback and Control Throughoutt

Inventory and quantification of initiatives

Debt structure, liquidity targets

Mission-BasedStrategies

Operating Budget

Capital andResource Allocation

CapitalStructure

Multi-yearFinancial Planning

Operating impact of approved capital

Operating targets (exisiting divisions, programs, and new

initiatives)


Building an Analytic FoundationThe current state of analytic capabilities in higher education, as reflected in two recent surveys, is not nearly as strong as it needs to be. Eighty-seven percent of senior finance executives responding to Kaufman Hall’s survey say that more insightful data related to their institution’s performance would result in better decisions.8 Additional information on program costs was cited most frequently (37 percent of respondents) as the top data element that would help drive better decision making.

Chief business officer respondents to a survey by Inside Higher Ed say their institution lacks the data and information it needs to make informed decisions about the performance of various programs, work units, or resources on campus.9 For example, only 40 percent of business officers strongly agree or agree that they have the necessary information to evaluate the performance of each administrative unit on campus. Just over 50 percent strongly agree or agree that their institution has the necessary data to make informed decisions on the efficacy of specific academic programs and majors.

The Priorities

From these survey responses and based on experience in the industry, it seems clear that the first priority for higher education leadership teams is to build a framework that will improve analytics and reporting to support best-practice decision making across the overall planning framework. Access to relevant and timely data will ensure disciplined approaches to and between each planning function and will support institution-wide transparency.

Decision makers need access to clean, consistent, and trusted data to decide among various spending alternatives, fund selected initiatives, and monitor progress toward performance targets. For improved reporting and analysis, finance leaders also need the ability to pull data from multiple data sources and drill down into reports and understand details. Better dashboard and visualization tools certainly can assist in this regard. At this point, 65 percent of finance leaders say they struggle to pull data from multiple sources into a single report; 55 percent struggle to drill down into reports and understand their details.10

These pain points are commonly experienced due to factors such as non-standardized definitions, siloed reporting, and the limitations of spreadsheets. To reduce these challenges,

finance leaders should:

• Obtain agreement on data definitions and terms to ensure consistency of data

• Put tools and processes in place to capture high-quality data at the source and cleanse the data, as necessary

• Identify key trends and their drivers • Add analysis-based insights to the reporting

Building an analytic framework does not necessarily require an expansion of staff. While some skill sets differ between budgeting and planning, streamlining the annual budget process and coordinating this process with planning processes can yield staff resource efficiencies.

The Process at Quinnipiac University

Advancing to a more robust analytics and business intelligence platform is not an overnight process; it could take several years. Continuing to provide all stakeholders with concrete examples of the utility of data and analytics is key, according to Mark Varholak, Vice President of Finance and Chief Financial Officer for Quinnipiac University. Initiatives undertaken by Quinnipiac’s multidisciplinary team to build an analytic framework provide a solid example of the types of issues that need to be addressed in all institutions.

First and foremost, university leadership support and backing were critical to Quinnipiac’s effort. A strong vision of what could and should be accomplished was communicated by leaders across the institution.

The goal of an enhanced analytic platform—to promote the financial stability of the university through transparent and consistently used data and metrics—was clearly articulated from the start. Disparate, silo-based reporting was occurring, so standardization of data and integrated reporting were required. Identification of critical data sets and how to obtain them were among the early steps in the initiative.

Varholak built a team at Quinnipiac comprised of professionals with a diverse skill set, including computer science/IT, budgeting/economics, and finance/accounting. This cross-disciplinary team focused on enabling data to “tell the story” for informed decision making throughout the institution.

The team began working with university leadership toward data governance, standardized reports, and unified/consistent definitions across the university. To socialize such


standardization, leaders chartered data stewards, who met and continue to meet with all departments and help ensure use of consistent definitions.

Tools Used by Quinnipiac University

New integrated planning and budgeting software was critical to data standardization and streamlined data sharing. Trying to obtain information from people across the university, aggregate that data, and then share it with key stakeholders using spreadsheets just didn’t work, Varholak says. New metrics can be in development, but trying to calculate and modify those metrics with spreadsheets was like “chasing yourself around in circles,” he says.

In the early 2010s, the university began looking for a flexible planning and budgeting tool that could support data-based decision making and transparency. The ideal tool also would be built in partnership with a solutions firm and customized to the university’s liking. A partnership with Kaufman Hall ensued, and the university began to use Kaufman Hall’s Axiom Software solutions.

“All the planning pieces are falling into place as our combined financial planning-analytics-budgeting team added multi-year financial planning to our planning process,” Varholak says.

Results

Use of data to tell a story brought Quinnipiac’s leadership team on board with the analytic framework that has been constructed to date. Data are used to show the whole story—behaviors occurring, modifications made, and results achieved.

For example, with data and metrics, the controller’s team was able to pinpoint the most advantageous time to refinance the university’s $500 million debt portfolio. The team closely monitored relevant data and used chart-based analytics around fixed- and variable-rate debt indicators in the taxable and tax-exempt markets to identify the right moment to refinance, saving the institution millions of dollars.

Additionally, new visibility into significant growth in salary and benefits expenses enabled identification of inefficiencies in the hiring approval process. Following thorough data analytics, improvements to that process were introduced through a position management plan, and the university experienced a double-digit reduction in the annual growth rate of labor expenses, again saving the university millions.

Best-Practice Planning CharacteristicsEfforts to move to more integrated planning can be accelerated by understanding the nature of the planning environment, as developed by the institution’s leaders. Institutions that have built a solid analytic foundation and start progressing toward a more advanced stage of planning typically share four characteristics:

• A disciplined leadership-driven and team-based process• Growth viewed as an innovation process• A data-driven approach with structured decision making• Rigorous goal setting and performance monitoring

A Disciplined, Leadership-Driven, Team-Based Process

Disciplined planning starts with an engaged board of directors, president, provost, and chief financial officer. They set the tone for the institution, establish management expectations, engender broad participation, and ensure that the institution makes a real, disciplined commitment to planning. “Every study we’ve ever done underscores the powerful, differentiating role of discipline—disciplined people who engage in disciplined thought and take disciplined action,” comments educator and author Jim Collins.11 “The sequence is important; there is no disciplined action without first having disciplined people.”

Vigilance of leadership also is critical. Leaders of successful organizations are “hyper-vigilant about threats and changes in their environment, developing worst-case scenarios and contingency plans, assuming that conditions will turn against them,” Collins says.12

The subject of considerable study through the decades, finance-based planning used by many of the nation’s top companies is a top-down mandate from the board, with management beginning the planning process by setting goals.13 In this construct, all business/program units use the same rigorous planning process, with clearly identified milestone activities and timelines.

A bottom-up process based on an understanding of competitive position at a more micro level is used to identify growth strategies to achieve strategic and financial targets. Strategic plans roll up from sub-business/program units to business/program units, divisions, and then institutional plans.


Although each participant in the planning process brings specific functional expertise to the table, silos in best-practice planning institutions are regularly ferreted out and broken down.

Eight managerial issues assume prime importance with the best-practice finance-based approach (Figure 4). To fully address these issues through the institution’s planning process, it is likely that some level of education will be required for the participants. This education should focus on both the integration concepts as discussed earlier and the fundamental financial characteristics of the institution. It is only with an enhanced financial knowledge base that effective application of metrics and targets can be achieved.

Understanding culture and change management. Each university and college has a culture that is unique to higher education and differs from businesses in other industries. To successfully change planning processes, leaders first must understand the culture of their institutions. Culture—the institution’s attitudes, perceptions, beliefs, values, systematic behavior, and traditions—will make or break the ability to engage relevant planning stakeholders and build buy-in for a revised planning process. Some institutions

Figure 4. Eight Core Managerial Issues and Behaviors in Top Planning OrganizationsSource: Kaufman, Hall & Associates, LLC (from the Extending the Role of Finance ebook).

have a culture of achieving targeted results; others do not. Desired planning processes, therefore, may require changing an institution’s culture.

For example, some leaders find it easier to make unilateral decisions about the deployment of capital, which can exacerbate institutional politics and damage prospects for a team-based approach to planning. Because transparency and accountability are embedded in the best-practice planning process, administrators are required to “own their businesses” in a way that may be new to many.

Integrated planning design and redesign efforts must incorporate relevant perspectives from existing processes and culture. However, it also is vital that the redesign approach include learnings and experience from industry best practices and traditional business finance techniques (Figure 5).

Growth Viewed as an Innovation Process

A second attribute that defines best-practice planning institutions is their recognition of growth as a process involving innovation and reinvention. An institution’s capital capacity must grow each year to fund its strategies, optimize access and service debt, and generate required financial

Managerial Issue Behavior

Strategy and Capital The powerful link between resources and strategy is actively managed

Cost Constant cost management, not cost control

Goals and Objectives Board sets quantitative goals and objectives

Accountability Direct and unambiguous executive accountability for results

Measurement Operating results are constantly measured against articulated goals and objectives

Calendar Management Rigorous attention to calendar and process management

Allocation of Resources Capital and other scarce resources are allocated carefully and scientifically

Protect the Balance Sheet When things get difficult, the first instinct is to protect the balance sheet


reserves. Active management of debt capacity provides the institution with increased flexibility to meet industry changes and deliver resources when and where they are needed to achieve strategic objectives. This ultimately protects the institution’s competitive performance and overall health.

The current challenge for colleges and universities is to be creative and innovative in finding ways to make up for revenue shortfalls and achieve growth. College and universities have options. The goal is to determine, based on solid facts rather than intuition, which potential strategic opportunities to pursue and—perhaps as important—which not to pursue.

According to a recent survey, 7 out of 10 chief business officers are taking steps to address revenue shortfalls by increasing overall enrollment and launching new revenue-generating academic programs.14 Half or more of respondents also indicate their college will explore collaborative opportunities for academic programs with other institutions, launch new master’s degree programs, and eliminate underperforming academic programs.

Of course, some growth opportunities may require subsidies, so institutions need to assess and understand the relative risks and rewards of a selected portfolio of opportunities. Identifying and evaluating opportunities that will enable the

institution to grow successfully and sustainably best occur within an integrated strategic financial planning process.

A Data-Driven Approach with Structured Decision Making

A third attribute of best-practice planning institutions is their use of a data-driven, structured approach to assess and select the portfolio of opportunities worthy of investment. These institutions solidly establish the quantitative fact base required to guide strategic decision making, as described earlier.

Data-rich assessments should be focused on the institution’s current position in the market, the competitive arena, and the institution’s strengths and weaknesses related to the programs it wishes to provide. Data and analytics support idea generation and decision making on a foundation of solid evidence.

Decision making at best-practice planning organizations is structured and calendar-driven. Specific planning and review tasks occur in specific months of the year and culminate with key decisions related to program strategies, financing of those strategies, strategic allocation of capital and other resources, and implementation of allocated resources through the annual budgeting process. In a best-practice process, these activities occur throughout the year in a known and consistent order with transparency and resulting accountability (Figure 6).

Managerial Issue Behavior

Strategy and Capital The powerful link between resources and strategy is actively managed

Cost Constant cost management, not cost control

Goals and Objectives Board sets quantitative goals and objectives

Accountability Direct and unambiguous executive accountability for results

Measurement Operating results are constantly measured against articulated goals and objectives

Calendar Management Rigorous attention to calendar and process management

Allocation of Resources Capital and other scarce resources are allocated carefully and scientifically

Protect the Balance Sheet When things get difficult, the first instinct is to protect the balance sheet

Figure 5. Relevant Perspectives in the Planning Process Design/Redesign EffortSource: Kaufman, Hall & Associates, LLC

Industry“Best Practices”

TraditionalBusiness Finance

Techniques

ExisitingInstitutional Processes

and Culture


Structured decision making related to strategies that will meet mission, program, and financial goals is key. For example, in one institution’s strategic planning process, the structure for making investment decisions involves scoring and ranking the opportunities based on their contribution to the institution’s three big-picture goals. The intent is to select the optimal mix, or portfolio, of projects that advances the institution’s agenda while attaining financial performance targets (e.g., operating income, margin, and cash). Ideas brought forward that are not consistent with these objectives are not eligible for funding, no matter how interesting the idea.

Because poor decisions around resource and capital allocation can overwhelm an institution’s financial resources, the leaders of best-practice planning institutions take extra steps to ensure they understand the risk, expected return, and exit strategies associated with major investment decisions. They incorporate risk analysis in their long-term planning to evaluate upside and downside potential. Sensitivity analysis enables managers to better understand the range of possible outcomes for individual initiatives and the interplay of initiatives.

Rigorous Goal Setting and Performance Monitoring

The boards of financially successful institutions govern around explicit performance expectations and metrics (both financial and academic) and are guided by an attitude that senior management will deliver expected results on a consistent basis.

In establishing financial targets, managers of financially successful institutions set goals according to national standards for similarly rated institutions or institutions in a desired rating category. They base financial targets on credible projections that reflect a healthy balance between top-down expectations and bottom-up realities and are built with plausible and defensible assumptions. Assumptions are in line with past actual performance and industry benchmarks, adjusted for known future changes.

Each year, senior executives should set targets that encourage managers to stretch toward breakthrough thinking. Stretch goals are negotiated, but leaders need to set a high bar. All institutional functions and departments should have

Figure 6. The Integrated, Calendar-Driven Planning ProcessSource: Kaufman, Hall & Associates, LLC.

Strategic planning

Long-rangefinancal planning

Short-termmargin targets

Capital constrant/available capital

Capital requests

Review and evaluation

Allocation and recommendation

Review Review

Finalization

Capital budget

Integrated operating/capital budget

Board approvalBoard approval

Incrementaloperating impact

of capitalapprovals

Baselineoperating budget

development

Incrementalimpact of

new initatives


targets. Based on the principle that what gets measured gets accomplished, all targets should be monitored with the same rigor. Information on the targets and performance toward meeting them must be available and shared widely as an integral component of the planning and management process.

Broad strategic objectives and goals may remain the same for a number of years, but actionable initiatives to achieve these goals should be revisited and updated annually. Specific individual visibility and accountability for each initiative through defined targets and monitoring of success in meeting the targets are key to the institution’s ongoing success. Supporting this vital evolution in institutional decision making are defined metrics for each target and dashboard scorecards that are maintained for both long- and short-term initiatives (Figure 7).

Institutions that manage a best-practice planning process define specific and quantifiable strategic success indicators, measure performance against these indicators, and devise and implement plans to respond to less-than-anticipated performance. After new initiatives become fully operational—defined as a complete year after a project achieves full-

functioning status—leaders should assess whether the initiatives are achieving both qualitative and quantitative expectations as defined in the business plan. Examples might include a new program or facility. Based on this evaluation and the parameters included in the business plan, modifications can be developed to enhance the project or deploy exit strategies, as needed.

Concluding Comments Boards of directors and executives must ensure the colleges and universities they direct increase knowledge-based self-awareness and position the institution to successfully respond to change and shape their future.

Great leaders have the capacity to achieve what Jim Collins calls the “genius of the AND,” which is the ability to embrace two opposing ideas at the same time, avoiding the “tyranny of the OR,” which pushes people to believe things must be either A or B, but not both.15 These leaders can embrace:

• Dedication to mission and financial stability• Creativity and discipline• Consistency of values and response to change

Figure 7. Example Dashboard ScorecardSource: Kaufman, Hall & Associates, LLC.


• Zooming in to implement empirically sound business/program recipe changes and zooming out to assess a change in the environment and adapt to the unexpected

• A focus on cost and quality • And on and on and on

Planning is all about increasing institutional self-awareness of “the genius of the AND” through systematic, disciplined learning and communication. Planning data and analytics enable college and university leaders to gain a clear view of the current reality and the actions needed to shape that

References1. Kaufman, Hall & Associates: Financial Outlook: 2018 Report for Higher Education, Nov. 28, 2017. www.kaufmanhall.com/event/financial-outlook-report-higher-education

2. Association of Governing Boards of Universities and Colleges and Gallup, Inc.: The AGB 2017 Trustee Index, 2017. www.agb.org/reports/2017/the-agb-2017-trustee-index

3. Kaufman, Hall & Associates (2017).

4. Jaschik, S., and Lederman, D.: The 2017 Inside Higher Ed Survey of College and University Business Officers. www.insidehighered.com/booklet/2017-survey-college-and-university-business-officers


6. Rylee, C.: Integrated Resource and Budget Planning at Colleges and Universities. Ann Arbor, MI: Society for College and University Planning, 2011.

7. As first articulated by Kaufman, Hall & Associates in 1985.


9. Jaschik, S., and Lederman, D.: The 2016 Inside Higher Ed Survey of College and University Business Officers. www.insidehighered.com/booklet/2016-survey-college-and-university-business-officers

10. Kaufman, Hall & Associates: 2017 CFO Outlook: Performance Management Trends and Priorities. www.kaufmanhall.com/resources/2017-cfo-outlook-performance-management-trends-and-priorities/thank-you?industry=Higher%20 Education&token=qpOJQYZCmsCWO1hQEZvyMYHAtoSf0igs3n6ZPmBXLIU

11. Collins, J.: “Great by Choice: Building Great Enterprises in Uncertain and Chaotic Times.” Kaufman Hall Report, Winter 2012.

12. Collins, J. (2012).

13. GE Capital Corporation: “The Plan Ahead: Creating an Effective Financial Planning Process.” 2012.

14. Jaschik, S., and Lederman, D. (2017).

15. As defined in Jim Collins’ books Built to Last and Great by Choice.

reality to a better future. Planning provides the road map to guide exploration of new ventures, respond to external changes, sustain competitive performance, and ultimately achieve the institution’s mission. Rigorous, institution-wide planning is a “must have” prerequisite for future university and college success.

Kaufman Hall extends special thanks to Mark Varholak, Vice President of Finance and Chief Financial Officer for Quinnipiac University, for his generous contribution of the evolution-of-planning example included in this whitepaper.

http://www.kaufmanhall.com/event/financial-outlook-report-higher-education

http://www.agb.org/reports/2017/the-agb-2017-trustee-index

http://www.insidehighered.com/booklet/2017-survey-college-and-university-business-officers

http://www.insidehighered.com/booklet/2016-survey-college-and-university-business-officers

http://www.kaufmanhall.com/resources/2017-cfo-outlook-performance-management-trends-and-priorities/thank-you?industry=Higher%20Education&token=qpOJQYZCmsCWO1hQEZvyMYHAtoSf0igs3n6ZPmBXLIU

http://www.kaufmanhall.com/resources/2017-cfo-outlook-performance-management-trends-and-priorities/thank-you?industry=Higher%20Education&token=qpOJQYZCmsCWO1hQEZvyMYHAtoSf0igs3n6ZPmBXLIU


About the AuthorsCharles Kim is a Managing Director of Kaufman Hall and Director of the firm’s Higher Education division of the Financial Planning and Capital practice. Mr. Kim consults on a national basis with healthcare systems, academic medical centers, and institutions of higher education. Mr. Kim’s expertise includes preparing financial and capital plans, acting as financial advisor for bond issues, advising on merger, acquisition, and divestiture transactions, and providing training and support on the Kaufman Hall Axiom Higher Education Suite. [email protected]

Tony Ard is Vice President for Higher Education for Kaufman Hall, Axiom Software. Mr. Ard works with the firm’s Higher Education clients to improve their financial performance. Mr. Ard’s most recent experience centers on designing and delivering software solutions for enterprise performance management, including budgeting, strategic planning, capital planning, forecasting, and profitability management, and developing business intelligence and business analytic solutions. [email protected]

Jason H. Sussman, a Managing Director of Kaufman Hall, directs the firm’s Strategic Financial and Capital Planning practice. In addition to his management responsibilities, Mr. Sussman provides financial and capital planning and financial advisory services for private, not-for-profit, and public entities nationwide. His areas of expertise include strategic financial planning, capital allocation, mergers and acquisitions, financing transactions, and management software. [email protected]

David Woodward is a Vice President of Kaufman Hall’s Higher Education division. Mr. Woodward’s particular areas of focus are financial planning, budget process and reporting, and financial system design. His recent experience includes directing the design and implementation of a consolidated Budget Center at Tufts University and leading the development of Axiom Software as the university’s system for budgeting, forecasting, and grants planning. [email protected]

About Kaufman HallKaufman Hall provides management consulting and software to help universities and colleges realize sustained success amid changing market conditions. Since 1985, Kaufman Hall has been a trusted advisor to boards and executive management teams, helping them incorporate proven methods into their strategic planning and financial management processes, and quantify the financial impact of their plans and strategic decisions to consistently achieve their goals.

Kaufman Hall uses a rigorous, disciplined, and structured approach that is based on the principles of corporate finance. The breadth and integration of Kaufman Hall

advisory services are unparalleled, encompassing strategy; financial and capital planning; treasury and capital markets management; and mergers, acquisitions, partnerships, and joint ventures.

Kaufman Hall’s Axiom Higher Education Suite provides sophisticated, flexible performance management solutions that empower university leaders to analyze results, model the future, and optimize decision making. Configured for higher education, solutions for strategic financial planning, reporting and analytics, as well as budgeting and forecasting are delivered on an integrated software platform, managed in the cloud.

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