Monday, January 12, 2009

They say timing is everything...

Presidents (CAOs) must be prepared to make hard choices this fall. There is a little hope—the smoke has not cleared enough to determine if the fiscal outcome is good for the university or just another mirage. All campus leaders are hoping the winter is mild and the significant increase in energy costs will be marginalized to a manageable number, though it is still too early to count on this savings. Next in line is the Obama incentive funding programs, a long shot, but helps many campus leaders sleep at night. Most leaders have worked with state governors and Washington lobbyists to ensure their university gets a fair amount of the funds available. Early reports suggest the Presidents (CAOs) have listed all the building programs that are ready to build and are awaiting funding. In addition, the leadership has developed a list of all the deferred maintenance which has accumulated in the past decade. It is quite possible the number the Obama incentive tallies will be staggering, and when weighed against the job creating (non-university) projects, universities will be dismayed in the final distribution.

A truly innovative university would take quite the opposite approach. I would be interested in identifying any plan to invest in innovative new programs that would provide the country visible forward-looking leadership that is clearly charting a new direction whose results would provide answers to private industry and government. (Don’t hold your breath on this one). It could be a university reinventing itself to establish relevancy with the public, it could be a new model of offering degrees that make sense and really tackle today’s problems in medicine, education, and environment. Another idea would be innovative funding for research, such as the goals of NIH to fund translational medicine. Problem is all of the above are long shots, and the university needs revenue today to continue paying the faculty, investing in student scholarships, and paying staff. In addition, rising costs of facilities are unmanageable.

This leads us to where the President is going to identify the revenue required to maintain the university. The problem is all normal funding streams are receding or just not offering any hope. State budgets are declining at unprecedented levels – it is not uncommon to be asked to cut state funds 10% per year. Few states are in the position of West Virginia or Arkansas that have a state surplus. Even the states’ rainy day funds are depleted, and budget cuts are often and deep. Problems with the endowment funds declining are causing institutions like Harvard to reevaluate how to fund academic programs. What alternatives does a President have remaining to assist in managing across this fiscal perfect storm?

An area that has always proposed to be the tool to manage the university is the campus Enterprise Management System (ERP). It is time to reap the benefits of the multimillion dollar investments. CIOs have justified the ERP application on two returns. The first savings was to make information available to departments to make informed decisions. This is a measurable outcome, and the CIO needs to show university leaders examples of this working. If not, the CIO must be prepared to justify continued investments in ERP applications. The second promise of ERP savings was the reduction of staff. With information being input one time and used many times, the university should be more efficient. Again it is time for the CIO to identify the amount of savings for the university. If the ERP application has not provided this reduction, many across campus will remind the administration the funding for the ERP application might have been better spent investing in more faculty or upgraded classrooms.

Today it looks like the initial budget cuts are going to come from the traditional lines in the budget: reduce operational expenses and cut staff. After many years of using the same tools, the university is at the point of not being functional in important areas (more about this later). To complicate the issue further, students and faculty are demanding the technology tools they are personally purchasing be connected to the university computing systems. Consumerization is new to many CIOs, and the options available to integrate faculty and student devices (iPod, iPhone, Blackberry, etc.) marginalize the CIO’s ability to control his community of interest. Technology could be one of the innovative tools used to assist the President in transforming university funding models. Technology unchanged will become an albatross. The CIO will not be able to justify further funding and will often be required to undergo a significant budget cut.

Cisco’s John Chambers (Cisco CEO) states that in times like this you can do one of two things: retrench until capital is available to finance future projects, or you can identify certain areas that can provide you a competitive advantage and invest heavily while others are not. A perfect example of this is the current Disney investment in a new theme park in China. So your CIO should be able to offer your alternatives today, they should reflect one of the two methods Chambers cites above. At that time the President must decide if his vision for the future of the university is the same as the CIO’s or decide if it is time for change.

No comments: