Budgeting for Higher Ed Innovation in 4 Steps

May 16, 2024

For most organizations, budgeting is a by the numbers exercise. But when you budget for innovation in higher ed, the dollars in and dollars out mindset doesn’t offer the grace for entrepreneurship, creativity, and innovation higher ed institutions need to stay relevant in a rapidly changing market. Instead, innovative institutions reframe how they have budgeting conversations and make space for new ideas.

4 Step Process to Budgeting for Innovation in Higher Education

For-profit organizations can be overly-focused on every penny because their end-goal is to generate profit. But non-profit universities serve a higher mission, not a higher profit margin. 

How does that change budgeting processes? Success or failure isn’t determined by how many more dollars a university brings in than it spends. Success or failure is determined by student outcomes and their impact on the world. To that end, universities need to reevaluate their budgeting processes with a focus on higher-level strategy than in-the-weeds dollars and cents.

  1. Build a culture of innovation and collaboration
  2. Chart a vision and plan for innovation and growth
  3. Identify long-term expenses and priorities
  4. Develop a plan to fund new innovations

1. Build a Culture of Innovation and Collaboration

Whether you’re actively fostering one or not, your university has a culture. It’s in how your faculty view themselves inside your university hierarchy and what your senior administrators prioritize their time and energy focusing on. And your culture determines how you spend your money. You can’t just add a line item for “innovation” and say you’ve budgeted for it. 

You need to build a culture of innovation within your university before it ever makes it onto your balance sheets. This means fostering a spirit of experimentation, entrepreneurship, and collaboration among your faculty and administrators. 

Johns Hopkins University, USC, and NYU are all living proof that building cultures of innovation is good for the bottom line. Johns Hopkins used to be a great medical school. Now it’s known for delivering great undergraduate experiences across schools. USC used to be a rich kids’ playground. Now it’s an internationally recognized research facility. NYU used to be just a New York institution. Now it’s a global university.

None of these changes came about by chance. They needed a conscious, well-executed strategy that embraced change instead of running from it. How?

  • Explicitly tell students, staff, and faculty about the culture changes you want to make
  • Don’t be afraid to spend money to test out new ideas to strengthen your culture
  • Dig deep into your core values as opportunities to distinguish your institution

2. Chart a Vision and Plan for Innovation and Growth

Innovation and growth look very different from institution to institution. But there are a few core truths:

  • senior university leaders need to be transparent about their priorities
  • all decisions should drive a larger university mission and strategy
  • university branding drives more value than branding for individual schools

Senior university leaders strategize and prioritize at a higher-level than Deans and other school leaders. They’re focused on selling an educational experience that combines social, emotional, cultural, and educational aspects so learners remain engaged during and after their undergraduate programs. But they’re also concerned about how much value their learners add to the world once they leave the hallowed halls of their institutions. The greater the value a learner brings to the market, the more credit a university receives with industry leaders and future learners. For them, individual schools take a back seat because of the ebbs and flows that naturally occur in the market. 

This is especially true as new industries appear in the market and certain programs no longer have real-world applications. Some programs get prioritized over others because of their demand among students and businesses.

The other consideration involved in the prioritization of budgets is the adoption of online programming. Some programs are well-suited for online programming and can scale at a much faster rate than those that struggle to make the jump to online. 

There are so many moving parts that senior university leaders have to manage and assess when building their budgets that Deans don’t. Clear, consistent communication and a culture that operates with a “what’s good for one is good for all” mentality make it easier to provide opportunities for entrepreneurial leaders who want to provide new and innovative experiences for their learners. 

3. Identify long-term expenses and priorities

Every budgeting season brings its own set of challenges and risks. How do you know you’re spending your money wisely? How do you avoid getting sidetracked by the new, shiny toy? You protect your essentials and plan for your future. 

Universities need a clear planning process for when and on what money should be spent by working with schools and departments to establish what is a necessity versus a “nice to have” expenditure. Those should all be described, recorded, and woven into a short-, medium-, and long-term vision for the future for the school and university. 

Not only does this allow you to plan for additional funding to make those aspirational expenses a reality, but it also keeps all eyes focused on the future goals for each school. The byproduct? Deans are less likely to get sidetracked with the latest toy. Instead, they’re more likely to consider the outcomes and application of a new strategy or tool prior to implementation and stay focused on providing exceptional outcomes for your learners. 

4. Develop a plan to fund new innovations

Now that you’ve agreed with Deans and other senior university leaders on what expenses are necessary, which are wants, and which will drive innovation in the long-term, you can start to develop a plan for funding your new initiatives. 

There are two kinds of new funding in the higher ed world: “one-time” and recurring funding. “One-time” new money can be useful in the short- to medium-term to cover extraordinary expenses, unfunded capital expenses, and seed money.  But it can wreak havoc on your future budgets if it’s treated as a stable source of funding. 

“One-time” fundingRecurring funding
Government grants
Alumni donations
Seed funds
Increased net tuition from program growth
Long-term corporate partnerships

Recurring funding is the gold standard and comes from relatively permanent forms of surplus, generated from net tuition growth from increased enrollments and increasing the size of the endowment. These types of surpluses should always be seen as a way to fulfill your university’s mission and goals, as opposed to unaccounted for monies that decision-makers can spend on a whim. 

But just because you want recurring funding to support your new innovations, doesn’t mean you can’t get a little creative and use a mix of one-time and recurring funding to get your innovation off the ground. 


Budgeting for innovation in higher education has little to do with watching pennies come and go, and more to do with fostering a culture that encourages and embraces innovation. From there, you can start prioritizing how you want to spend your funds with an eye on delivering high-quality outcomes for learners, and how and when you need to find additional funding sources to make your future innovations a reality. 

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