Have you played hide-and-seek with a young child? As you begin to count down, you can hear them scamper off to another room. You inevitably find them barely hidden, but in their mind, if they cannot see you, you cannot see them. We play along with the game despite reality. This may be acceptable when playing with a 2-year-old, but it is not a game we should play with our school finances. Often, leadership teams are faced with daunting problems and pretend they will work themselves out. We create plans that rely heavily on hope. Leaders cannot “kick the can down the road” without facing consequences. Instead, we need to create actionable plans grounded in reality and informed by institutional data. The impact of inflation, recruiting and retaining staff/faculty, salary and benefit costs, enrollment pressure, and discount strategies creates significant financial stress. We cannot hope to just cover our eyes and still win the game. We need a new strategy.
FORVIS hosted a panel discussion on November 14, 2022 with Ben Sells, president of Ouachita Baptist University; Dr. Bill Path, president of Oklahoma State University Institute of Technology (OSUIT); Jim Smith, vice president of fiscal services at OSUIT; and Kevin Honigford, vice president and chief financial officer at Franklin College. The theme of the discussion centered around each institution’s use of Program Economic Analysis (PEA) to assist them in being the best stewards of their resources today and in the future.
The time is now. We cannot expect to wait this one out. Finding a path forward through data-informed decisions is “not a question of if,” stated Honigford, “but when.” Honigford and his institution are measuring academic margins and trend data to make strategic decisions. They decided to act now rather than wait until it is too late to make meaningful decisions.
Prior to FORVIS’ Program Economic Analysis, it seemed that we made decisions by throwing darts at the wall. Now we can make precise data-informed decisions.” – Dr. Bill Path, OSUIT
Confidence in Data
Path opened the conversation by saying, “We didn’t know what we didn’t know.” This is a common phrase expressed when addressing the cost to educate students. Through FORVIS’ data collection and cross-functional collaboration with the OSUIT team, Path and his institution have confidence in their economic data and can share it with internal and external constituents. Sells continued by sharing how the Ouachita leadership no longer relies on anecdotal information when it comes to decisions and has confidence in discussions with faculty regarding programs.
The panelists affirmed that institutional data presented in the PEA has created confidence and transparency and educated staff, faculty, and trustees on the cost to educate students. Honigford shared how neither FORVIS nor the administration make program and course decisions seeking to improve margins. He shared how “academic leaders make the decisions on the data; we just placed a tool into their hands.” Therefore, creating cross-functional teams and working groups to extract the data, define methodology, and then use an academic task force helps drive strategic decisions. Administrators may initiate the PEA process and set overarching goals, but the real work and traction occurs with the deans and academic leadership.
Mission Is Critical
A common theme among higher education institutions is mission integrity. Understanding and evaluating program economics is a key pathway to protecting the mission and helping it thrive. Path and Smith agreed that mission creates guardrails on program decisions. As a technical and two-year institution, OSUIT’s programs have “a direct impact on our state, while some programs are challenged, mission maintains these programs.” Sells stated that some mission-critical programs have declining margins but having the right data provides an opportunity to solve problems and recognize that something needs to change. At Ouachita Baptist, the PEA is helping them protect and strengthen their mission.
The financial element is just part of the data; it doesn’t give us the answer—but it is part of the overall discussion.” – Kevin Honigford, Franklin College
A holistic approach to program economics helps leadership maintain focus on mission. Not all programs produce the same margin dollars or margin percentage. Programs that require lower student-to-faculty ratios, higher equipment costs, or a larger percentage of full-time faculty will inherently have lower margins. A program with lower enrollment does not always equate to negative margins. By evaluating each program or course in relation to the university mission, leadership can make effective adjustments to course offerings or allocation of resources. Each institution shared how it has empowered academic leaders to set specific margin goals and monitor progress annually.
Lessons Learned
Prior to implementing PEA, Path shared how faculty decisions were like “throwing a dart at the wall.” Now, the university can make decisions with “surgical precision” based on accurate and agreed-upon metrics. It is important to remember that the PEA does not tell leaders what to do—judgment is required. Honigford agreed and shared that at Franklin College, the program economics is “part of the data and is part of the overall discussion” among academic leaders. This process is now part of the fabric of campus conversations at Ouachita Baptist.
The PEA also is shedding light on the impact discount rates have on academic programs. FORVIS’ tool helps institutions monitor the direct impact that scholarships have across academic majors and courses. Academic margins for undergraduate, adult, graduate, and online programs vary significantly due to scholarships. As schools look at the impact of athletic and academic awards on specific programs, it is a part of the narrative and strategic planning required to balance mission and margin.
Return on Investment
If you want your institution to thrive, you must be willing to do the homework and present data in a way that provides a call to action. The panelists shared that each school has positive returns on the time and resources required to conduct the analysis. OSUIT shared that it has seen cumulative improvements up to $18 million over the life of the analysis. As a result, the university provided salary increases, invested in new innovations, and now has the courage to make meaningful decisions. The financial impact at the school has renewed energy and confidence among staff and faculty, state representatives, and the local community. Instead of the school having a $40 per credit hour loss, it now has a $40 per credit hour gain, allowing for these new investments.
Ouachita Baptist found tremendous margin improvement through evaluating course offerings and electives. Data visualization prompted the deans and faculty to recognize that multiple course sections and electives were spreading students across too many courses. Honigford shared that they are beginning to realize improvements through an evaluation of right-sizing enrollments and faculty through retirements and have the right data when evaluating new faculty needs. The data is providing the transparency necessary to inform decisions as a “compass for which direction to go.”
Do you know which direction your institution is going? Establishing strategies to address affordability and the cost to educate students is the right path forward that can provide tangible results.
Gain more insight and watch the archived version of the webinar, “Analyzing Your Program Economics: Lessons from Leaders.” Ready for help in leveraging your institution’s data to make strategic decisions based on which programs are making money and potentially result in significant savings? Visit our Program Economic Analysis webpage to learn more and schedule a demo.
If you have questions or need assistance, please reach out to a professional at FORVIS or submit the Contact Us form below.