1. . Applying a Business Model Lens to the Academic Portfolio Association of Jesuit Colleges and Universities Finance Officers Conference Baltimore, MD April 28, 2016

2. rpkGROUP. All rights reserved.  This session will provide a deeper dive into finance and the academic portfolio. By the end of this session, you will be able to:  Define elements of the higher ed business model and how it is changing  Understand how analysis of the academic portfolio can be utilized by senior leadership to strengthen the business model  Explore the CAO/CFO partnership on portfolio analysis  Discover how strategic finance relates to your change models and institutional culture Session Objectives and Outcomes It’s Really About You: What would you like to get from our session today?

3. rpkGROUP. All rights reserved. Preserve Access AND Drive Attainment Move from Spending to Investment Change infrastructure and culture then we must get a better return on investment from current resources through understanding levers to change the business model… If we are to preserve access and increase attainment, in a world of constrained resources and fewer students… which will require a strategic approach connecting financial practice with institutional change models. Need to Shift the Frame: from Cost Cutting to Maximizing Return on Investment Why Talk About Business Models?

4. rpkGROUP. All rights reserved. What Do We Mean by “Business Model” Value Proposition Degree Production Career Advancement Social/Economic Value Resources People, technology, academic programs, facilities, equipment, partnerships Margins for Reinvestment Pricing Cost Structures Margins Throughput Processes Governance, budgeting, planning, professional development Adapted from Jane Wellman, Strategic Cost Management in Higher Education

5. rpkGROUP. All rights reserved. Value Proposition Degree Production Career Advancement Social/Economic Value Resources People, technology, academic programs, facilities, equipment, partnerships Margins for Reinvestment Pricing Cost Structures Margins Throughput Processes Governance, budgeting, planning, professional development We have made the protection of resources and processes (the “stuff” and the way we’ve always done things) our value proposition, preventing us from reimagining how we might address the needs of students more efficiently What’s the Problem? Adapted from Jane Wellman, Strategic Cost Management in Higher Education 5

6. rpkGROUP. All rights reserved. Efficiency In Producing Completions Has Varied Over Past 10 Years  Public institutions—particularly community colleges—became more efficient after the recession: producing more credentials per dollar spent –Cost efficiency at public 4-year institutions ticked up modestly since 2008 –Community colleges showed the most improvement, averaging nearly 3 credentials per $100,000 spent in 2013, an increase of.5 credential compared to 2008 –Private nonprofit 4-year institutions became slightly less cost efficient over the decade

7. rpkGROUP. All rights reserved. Continued Need to Reduce Cost and Increase Efficiencies 7

8. rpkGROUP. All rights reserved. Past Spending and Budget Balancing Future Return on Investment Need to Redefine the Goal

9. rpkGROUP. All rights reserved. Understanding Next Best Investment Tracking/Accountability Sustainability Value to Stakeholders Job To Be Done Creating a New Tool Box to Adopt a Return on Investment Lens 9

10. rpkGROUP. All rights reserved. Scorecard Based Approach  Academic Portfolio Review –Mission/Qualitative Indicators –Demand –Yield –Outputs  Retention  Graduation Rate  SCH contribution  Degree Production –Net Revenue

11. rpkGROUP. All rights reserved. High # Prospects/Low YieldHigh # Prospects/High Yield Low # Prospects/Low Yield Low # Prospects/High Yield SOCISOCI High 1234 Low 4 CHEMCHEM THEATHEA SUVMSUVM FNCEFNCE PUBHPUBH CISCCISC ARTAARTA MCOMMCOM HISTHIST ALHEALHEBIOLBIOL LANGLANG CJCRCJCR INTDINTD APLSAPLS ITAFITAF ANTHANTH GLGYGLGY ElevateYield Elevate Yield Maximize DIGMDIGM MGMTMGMT PEDUPEDU PSYCHPSYCH ACCTACCT SPEDSPED MATHMATH ECDVECDV DHYGDHYG NURSNURS BGSDBGSD ECONECON ENVHENVH PSCIPSCI Median # Applicants 78 Median Yield 48% High 90% WMSTWMST Low 25% SOWKSOWK MKTGMKTGENGLENGL ENTCENTC HSCIHSCI MUSCMUSC SALMSALM PHILPHIL HSERHSER GEOGGEOG PHYSPHYS Sample Reallocation Strategy Analysis

12. rpkGROUP. All rights reserved.Computing Psychology Math Math History Nursing English Physical Education Management Chemistry Biology Sociology Art 15027 11277 6635 7048 11425 12687 10785 17376 7111 6937 6764 6125 5% 8% 3% 7% 3% 6% 5% ANTH GEOG MUSC ECON PHIL All other programs Total undergraduate SCH Other 36 programs = 48% Core 8 programs = 27% Anchor 4 programs = 25% Sample Student Activity Compression Analysis - SCH

13. rpkGROUP. All rights reserved. Top 12 programs account for 57% of undergrad degrees Physical Education Allied Health Interdisciplinary Studies Management Nursing Psychology Accounting Criminal Justice Mass Communications Biology Social Work Marketing 106 94 70 78 94 97 90 300 90 71 60 4% 14% 4% 3% 4% 3% 5% 3% 5% 4% ARTA HISTENGL CHEM MUSCPSCI PUBH Core 7 programs = 25% Other programs = 43% 5 anchor programs = 32% Sample Student Activity Compression Analysis – Degree Production

14. rpkGROUP. All rights reserved. Overlaying Net Revenue – A Final Check  Analyze net revenue to ensure that the institution does not: –Grow programs that are heavily subsidized –Eliminate programs that contribute significant net revenue

15. rpkGROUP. All rights reserved. Key Efficiency Lever – Faculty Throughput 15 577 SCH  Faculty “throughput” – the total annual student credit hours (SCH) per FTE faculty – is highly variable and within institutional control  Throughput is twice as high at 2-year institutions than at highly selective research universities

16. rpkGROUP. All rights reserved. 16 Approximately 32% sections less than 75% filled Based on institution’s definition of maximum capacity by section. Key Efficiency Lever – Fill Rates – “Flying the Planes Full”

17. rpkGROUP. All rights reserved. Benchmarking Academic Cost Structures 1.Question - Are departmental costs higher or lower than the benchmark group? Metric - Cost per unit - Direct Instructional Expenditure per FTE Student 2.Question – Is the department more or less efficient? Metric - Throughput – Student credit hours generated by each faculty member

18. rpkGROUP. All rights reserved. Sample Metric - Direct Instructional Expenditure per FTE Student National Norm +$12,000 +$10,000 + $8,000 +$6,000 +$4,000 +$2,000 -$2,000 -$4,000 -$6,000 -$8,000 -$10,000 -$12,000 BioBio BusBus EDUEDU NursingNursing PsychPsych CommComm ChemChem EnglishEnglish MusicMusic HistoryHistory ForeignLangForeignLang Rel Study StudyRel PhilosPhilos ComputerComputer Health Phy Ed Health More efficient than market standard Less efficient than market standard MathMath Source: CND Delaware Instructional Cost Study 18 Source: Delaware Instructional Cost Study

19. rpkGROUP. All rights reserved. Cost Effectiveness  Once they determine the relative cost effectiveness, institutions can identify departments for additional focus and drill down to determine why cost structures vary.  Key areas of focus for the drill down include: –Labor Costs as a % of Total Department Costs –Mix of Full-time and Part-time faculty –Mix of faculty rank –Average SCH taught by FTE faculty (throughput) –Average class size

20. rpkGROUP. All rights reserved. Sample Metric - Student Credit Hours per FTE Faculty National Norm + 45 +30 +15 -20 -50 -80 -110 -140 -170 BioBio BusBus EduEdu NursingNursing PsychPsych CommComm ChemChem EnglishEnglish MusicMusic Comp Sci HistoryHistory ForeignLangForeignLang MathMathRel Study StudyRel PhilosPhilos ArtsArts Health Phy Ed Health Source: Delaware Instructional Cost Study 20 More efficient than market standard Less efficient than market standard

21. rpkGROUP. All rights reserved. How Can We Jump From One Curve to the Next? Incremental Improvement Innovation Harvest Resources to…. …Invest in Innovation Now Next Future Awareness Data/Metrics Reallocation Net Revenue Portfolio Assessment Shared Future Vision 21

22. rpkGROUP. All rights reserved.  This session will provide a deeper dive into finance and the academic portfolio. By the end of this session, you will be able to:  Define elements of the higher ed business model and how it is changing  Understand how analysis of the academic portfolio can be utilized by senior leadership to strengthen the business model  Explore the CAO/CFO partnership on portfolio analysis  Discover how strategic finance relates to your change models and institutional culture Wrap Up Let’s Check In: How did we do in achieving our goals for this session?

23. rpkGROUP. All rights reserved. To continue the dialogue...  Rick Staisloff, Principal rpkGROUP rstaisloff@rpkgroup.com 410-591-9018 23