2. Snowdon & Associates Inc. Shifts in Income Sources and the Impact on Internal Resource Allocation Policies CAUBO Conference “Adjusting the Sails” Halifax, June 21-24 Ken Snowdon Higher Education Consultant

3. Snowdon & Associates Inc. Outline zChanging fiscal environment - revenue changes zCharacteristics of revenue change and implications zResponses to the changing fiscal environment zResource Allocation Models zLessons…….

4. Snowdon & Associates Inc. Revenue Changes - operating ($000’s)

5. Snowdon & Associates Inc. Indexed Change

6. Snowdon & Associates Inc. Revenue Distribution - operating -30% +238%

7. Snowdon & Associates Inc. Revenue Changes - All Funds

8. Snowdon & Associates Inc. Revenue Distribution -38% +200% +44% 280%

9. Snowdon & Associates Inc. Investment Income & Private Giving (All funds, selected universities, indexed change)

10. Snowdon & Associates Inc. Total Revenue Changes - by fund All funds, selected universities, indexed change

11. Snowdon & Associates Inc. Characteristics of Funding Changes zExternal restrictions - earmarked funds zSometimes ‘matching’ requirements zWorkload - tuition policy, student assistance, research, private giving, earmarked grants, preparing proposals, regulations, accountability, stewardship,…. zComplexity - linking various sources of income zUneven in terms of campus impacts (ie. de-regulated fees, research, private giving) zSometimes leads to costs in other areas - research (indirect costs), capital (operating costs), subsidizaton of enrolment expansion in certain programs, student assistance with fee increases

12. Snowdon & Associates Inc. Financial Planning Issues zCash management / investment strategy ztrying to be ‘transparent’ with increasing complex array of funding sources zfinancial planning in a more complex environment zrecognizing ‘real costs’ of new ventures and opportunity costs zinternal resource allocation - budget zsubsidies and subsidization mechanisms  links to academic planning, fund-raising, capital planning

13. Snowdon & Associates Inc. Responding to a changing fiscal environment

14. Snowdon & Associates Inc. Birnbaum’s review of Management Fads zUr- management (line item budgets, enrolment planning) zPPBS, Program Planning Budgeting System zMBO, Management By Objectives zZBB, Zero Based Budgeting zStrategic Planning zBenchmarking zTQM/CQI, Total Quality Management / Continual Quality Improvement zBPR, Business Process Re-engineering zRCM, Responsibility Centred Management etc., etc., etc., …

15. Snowdon & Associates Inc. Management ‘Fads’ - lessons “ The essential elements of most fads are commonsensical to most experienced managers in business, education or any other setting: y‘Decentralization of authority, yproducing quality products, yproviding responsive customer service, yformulating strategy in a way that takes into account distinctive internal capabilities, yrewarding performance fairly, and yrunning a socially responsible enterprise. Who could argue with such advice!’ ( Eccles and Nohria, 1992, p.5)” in R. Birnbaum, Management Fads in Higher Education, (p.241)

16. Snowdon & Associates Inc. Management ‘Fads’ - lessons  Consider with Skeptical Interest  Invest in Knowledge  Avoid the Bandwagon  Anticipate Resistance  Do Not Overpromise  Culturally Customize  Adopt Experimentally  Do Not Relax Commitment or Support  Build in Assessment There is no ‘silver bullet’

17. Snowdon & Associates Inc. Management ‘Fads’ - lessons z“Higher education does not need more management techniques. It needs more good managers.” (p.239)

18. Snowdon & Associates Inc. Current issues in budget planning zincentives for management of fiscal resources zdecentralized / centralized zcomprehensive (operating, capital, trust, vs. operating only) zdefinitions of ‘operating’ zmulti-year (rolling budget, long-term budget) vs. annual

19. Snowdon & Associates Inc. U of T - Provost Review  people and organization structure  philosophy - guiding principles  role of Deans & Principals  academic planning  budget, capital, advancement  Specific issues / policies  Academic Priorities Fund (APF)  multi-year financial plans  revenue diversification

20. Snowdon & Associates Inc. Specific allocation issues zYear-end balance carry-forward policies zSharing of ‘base’ revenue (and expense) zSharing of incremental revenue (and expense) zAccounting for ALL costs (direct & indirect) zSubsidies z“Tax backs” zAllocation of “tax backs” yflexibility funds, reinvestment funds, academic priority funds, innovation funds

21. Snowdon & Associates Inc. Related issues… z“Haves and HaveNots” z Funding Advancement/Development zFaculty/Departmental Development Plans zAccountability – reporting, stewardship of funds zComplexity of budgeting yMultiple funding sources yProcesses zInstitutional management of the funding ‘story’ yOperating, capital, fund-raising, research

22. Snowdon & Associates Inc. Summary zMajor shifts in sources of revenue zChanges in internal resource policies zGreater reliance on decentralized approach zNeed for well developed Faculty / Institutional goals zRetention of ‘institutional’ goals through central funds / central direction zthe optimum approach changes over time depending on the many factors influencing funding and institutional circumstances

23. Snowdon & Associates Inc. Lessons… zThere is No ‘silver bullet’…. zBut, there some key characteristics of well developed approaches yInstitutional Plan with objectives yMulti-year fiscal plan yBalance between ‘centralization vs. de-centralization’ yMeasurement indicators yPublic accountability