Thought Leadership Series: Budgeting For Innovation (Part 2)

Series Overview

‍Setting budgets is one of the most important responsibilities university leaders must shoulder. Budgets serve as the practical manifestation of a university’s mission and goals, so pursuing the process thoughtfully is critical to driving innovation the right way at any institution. There is a lot more to budgeting than the numbers on the page. Successful senior leaders recognize it is one of the primary instruments they can use to shape  change, both now and in the long-term across campus and beyond.

Recently, Vinay Ganti, Senior Vice President, Strategy at Noodle, sat down with Richard (Rick) Matasar. Rick’s career spans four decades, where he served in senior positions both in central administration (10 years) and as a law school dean (20 years).  Most recently he was the Senior Vice President of Strategic Initiatives and Institutional Effectiveness at Tulane University, and before that as the Vice President for University Enterprise Initiatives at New York University. His time as a law school Dean included stints at the Chicago-Kent College of Law (Illinois Institute of Technology), the University of Florida Fredric Levin College of Law, and New York Law School.

He brings to the table considerable experience developing revenue-generating programs, discovering new ways to do traditional programming, and leveraging existing assets.  Vinay and Rick discussed the state of universities and the need to evolve given our rapidly changing society. 

Today is the second in a five-part series that will provide a comprehensive approach to how to do budgeting in a way that promotes innovation and growth in higher education. In today’s article, we will focus on establishing the right organizational culture to promote budgeting. The full series will be as follows:

• Mindset: Chart a Vision and Plan for Budgets that Drive Innovation and Growth (July 17th)
• Culture: Understand an Institution’s Culture and its Impact on Budgeting (Today)
• Revenue and Investment Capital: Fund Your Institution’s Mission (August 14th)
• Expenses and Priorities: Spend Strategically for the Long Term (August 28th)
• Leadership: Align Stakeholders to the Budget’s Vision and Establish Protections for the Vision (September 11th)

Part II: Culture: Understand an Institution’s Culture and its Impact on Budgeting

‍This is the second of a five-part series of discussions with Richard Matasar, who deeply understands the administration of universities and the steps that need to be taken for them to flourish. If you are new to this series you may want to start with Part I, which focuses on establishing a budgeting mindset that will drive innovation and growth.

How does the culture of an organization affect the budgetary process?

‍Firstly, many universities look the same on the surface. Anytime you come to the university from the outside, you have to adopt the mindset of an anthropologist. Among the things to understand are the mores of the institution: how faculty see their relationships to each other, to their department, to their school, and then to the university. Further, it is important to examine how senior administrators view their responsibilities. Is it fiscal responsibility? Is it a responsibility to a mission? Is it value driven? Is it profit oriented? Once inside a university, look where the stratification of the university lies: what is important and what has a lower priority. 

Surprisingly, nobody is thinking consciously about culture. “Culture” is sort of an antecedent for most people who come to an institution and it is taken as a given by those who are new, coming in and trying to change things. We have to think in different terms about what drives people and how we can help those people embrace values that are different from the ones they currently have. Often, it’s moving from a culture of non-experimentation to one of experimentation; moving from a culture of non-innovation to innovation; from a place that is not student-centered and is research-oriented to a student-centered place. These are all things that need a conscious strategy. 

Senior leaders owe it to a university on the way in the door to say, “Here are the things I believe.” Then, while at the university, they need to maintain those principles yet be flexible enough to adjust what they have discovered and be loyal to the history of the institution. 

One example of this is Johns Hopkins University. Twenty years ago, people would have said that, at the core of the university, was a great medical school. These days it’s really an all-purpose institution that is delivering a great undergraduate experience. USC is another institution that illustrates this point. It was a rich kids’ playground and now it is a top-notch, internationally recognized research facility, as well as being highly innovative. NYU used to think of itself as a local New York institution, and has now become a truly global university. Some of these changes were the result of strong top-down leadership, such as in the case of USC and NYU. Such changes can also be a bottom-up initiative because of dean, provost, and senior vice-president turnover. A leader can hire mid-tier administrators who will embrace the values that are emerging at the school. Young faculty can be brought along, as well as senior faculty who have been hoping for change and will support the transformation. It is coalition building based on leadership. 

What are drivers to incentivize change? 

‍One framework for change is called the “Four F’s”: fortune, fear, fame and fun. In academia, only a couple of those levers will work. We don’t have a lot of money to entice people to change. Fear does not work too effectively. While there is a tenure system, there are lots of faculty that don’t have long-term career status. But there are performance standards and people who don’t support the changes will ultimately feel isolated and leave (or can be helped to depart). However, fame and fun can really be effective motivators. Most faculty members would rather receive accolades than be richer. Thus, fame can be a significant factor. It could be the idea of being a part of a changed culture, moving the institution from being considered a mid-tier to being an upper mid-tier organization, becoming well-known in a subject area, or being the university with students whose SATs have doubled. While fame is a powerful motivator, fun is better. If you are going to be part of an institution, better to be part of a “winning” institution than a “losing” one. That can even encompass a winning football team that makes people feel proud of their school. 

Does professional development play a role in culture change?

‍Professional development is pretty unorganized and geared toward lower-level personnel. Further, there is little tradition of promoting highfliers at the university level, though it sometimes occurs at the school level. It really is not part of the university culture. The challenge is that we actually hire deans who have never managed anything. This demonstrates that organized leadership training is missing. While there have been situations where senior deans groom baby deans, we have mostly abandoned that tradition. Now we coddle young faculty to provide protection so they can work on their scholarship, but we don’t challenge them to be institutional players. 

What are ways to evaluate the effectiveness of culture development (or transformation) at a university? 

‍One interesting set of questions to determine the success of culture development and leadership skills is to examine how many provosts around the country have come from a particular university. The same question can be asked for the number of deans or people taking leadership positions at other institutions. This is an indicator of the power of culture at a particular institution. If it is a highly functioning institution, you could say it’s “proselytizing.” If it’s a poorly functioning place, numerous people may be leaving. 

‍Loyalty of your students is another interesting measurement of your school’s culture. For example, it might be the percentage of donors. If it’s low, it may be useful to ask alumni why they are not donating, and whether/how the institution’s culture has affected their perceptions. 

‍If you have a dysfunctional culture, there is no way to hide it. Alumni were influenced by little things when they were students, whether it’s the speed of communication on important issues or the responsiveness to problems. Unfortunately, these types of things are too low-level for senior administrators to focus on during their daily activities. Further, universities tend to protect underperforming longtime staff in ways a business would not do. Thus you need to find administrators who can fix anything that the university can control. 

‍Scott Bass wrote a book entitled Administratively adrift: Overcoming institutional barriers for college student success, in which he encourages the development of a “chief student experience officer” just as many hospitals have a “patient experience officer”. One example is Dr. Robert Grossman, CEO of NYU Langone Health and Dean of the New York University School of Medicine. He enacted one of the greatest institutional cultural transformations in recent times. First, he researched the hospital system to become acquainted with the existing culture. Soon after, he fired a tremendous number of individuals. He then went unit by unit and asked what were the measurements of success in those units. He then had dashboards built, and reviewed them every day. It might be “cost per patient stay”, “number of days in the hospital” or “number of patients per physician”. If he could not get a specific unit’s leaders to establish metrics, they were ushered out. As a result of this new data-based culture, NYU has risen into the top 10 medical schools. The healthcare system is also more attentive to patient needs than its peers, more efficient on medical records, and the leader in many more indicators. It has become a customer-centric medical care facility. 

‍Tulane University has also transformed its culture. Tulane was previously considered the top “party” school in the country. The fact that it was in New Orleans was the primary brand positioning. But a new set of leaders wanted to change the culture. They asked “what makes Tulane unique?” They collected an enormous amount of data and developed a dashboard of administrative services. They talked to admissions. They talked to the faculty. They also asked deans: “How do you want to be assessed?” Among their discoveries was the fact that they were admitting students before they ever applied. Nor did they have an early-admissions program. Just changing those two practices had a significant impact on the university. As a result, Tulane has now become a regional powerhouse with beachheads in public health, especially infectious diseases, tropical storms, and disaster preparedness. Being located in New Orleans is now only of secondary importance in their marketing and branding.

How will a university’s culture be affected in a world where a lot of the student experience will be digitized? How does a student choose where to study online?

‍At present, there is a bias for regionally well-known places that are close to where potential students are located. But it may also be the color scheme of the website, the type of hypotheticals, the use cases, or a simulation that depends on the cultural aspects of a specific community. In addition, online students get to come to the school for graduation. Students get swag. Collectively, all of these things provide a sense that one is part of a unique community. Just as Tulane chose to close the university over Mardi Gras, it could choose to close the online portal.

‍In essence, you are balancing two things. You can lower the cost of tuition to create differentiation at a generic institution. In contrast, a prestigious institution—or one with a particular expertise—can command a premium price or lower marketing costs. 

What is the impact of unconscious and conscious culture on budgeting? What is that difference?

‍One must consciously build culture into a budget. One must incentivize faculty and deans to make the experience feel differentiated and distinctive. In the “old world”, the culture was unconscious. In the “new (digital) world”, one needs to consciously and deliberately tell people to think about the creation and maintenance of a distinctive culture, and one needs to spend money to test out new ideas that can strengthen the culture. 

One challenge is that universities are good at writing mission statements, but they don’t pay attention to them. Furthermore, most mission statements look alike. However, if you ask, “What are the core values of this institution?”, this requires deeper introspection into what academics care about concerning the student experience. Each core value becomes an opportunity for a discussion of distinctiveness. 

For example, post-Katrina, there developed a sense that Tulane has a responsibility to its surrounding community—a relationship with the community. Tulane University became more public interest-oriented, requiring things like community service. Senior leadership said we care about the community so much that we will redevelop Charity Hospital and make a huge investment in building the downtown presence of Tulane. This is a real demonstration that the university has created a real relationship with its city. NYU and Penn have also built strong bonds with their communities. Each university has undertaken economic impact studies, which are important to build a sense that universities are not different from the city in which they are located. At Tulane, we say: “We are the city”. New Orleans and Tulane are inseparably connected to each other. Unfortunately, higher education does not do a good job of telling its story externally. This is an opportunity for change.