“Higher ed makes glaciers look speedy”: 6 insights from CBOs on financial resiliency

As financial challenges hit a fever pitch in higher education this spring, we convened 36 chief business officers (CBOs) in EAB’s D.C. headquarters for our annual CBO roundtable, where we discussed pathways to financial resiliency. The agenda was wide-ranging, from AI’s potential in higher education to a teaser of EAB’s forthcoming administrative maturity index. However, financial resiliency took center stage, with CBOs agreeing that long-term sustainability hinges on overcoming the industry’s deep-seated resistance to change.

Here are six takeaways from the discussion on fostering financial resilience, each paired with teachings from the CBO roundtable.

1. Culture is the greatest obstacle to large-scale cost-containment efforts

Faculty and staff often misunderstand university finances, slowing or even halting essential cost-cutting efforts. While effective communication is crucial, many CBOs struggle to gain support for essential financial strategies due to fundamental misunderstandings about university budgets.

EAB identified four common myths fueling opposition to campus-wide cost containment:

• “I don’t see a problem!”: Faculty and staff often lack understanding of institutional finances, such as the difference between restricted and unrestricted endowments or the purpose of centralized reserve funds.
• “It’s not my problem”: Siloed units view central administration as solely responsible for financial outcomes.
• “There’s nothing in it for me”: Stakeholders traditionally rewarded for revenue growth rarely receive benefits for cost savings and efficiencies.
• “I don’t know how to solve it”: Faculty or staff often lack the financial context necessary to make strategic cost reductions and/or accurately evaluate budgets.

2. Transparent communication—within and outside the finance office—is crucial to combat university budget misconceptions

CBOs need allies in other leaders: if messaging about financial strategy comes solely from the finance office, it loses its power. EAB profiled six examples of how institutions used different communication strategies to successfully grow campus buy-in and understanding.

Proactive, intentional communication can be the difference between the success and failure of large-scale initiatives. For example, in the two years leading up to their transition to a new RCM model, Drexel University’s provost met with each administrative and academic unit at least once to discuss the initiative in depth, securing buy-in well ahead of implementation.

3. Distill complex financial information into one or two key takeaways

Instead of overwhelming audiences with complex financial data, highlight one or two key data points that clearly illustrate how unit-level decisions impact the university’s overall financial health. William Patterson University’s provost chose to elevate just one metric: student count per FTE faculty. The provost shared charts with each department, illustrating that faculty FTE count has remained steady despite a sustained decline in enrollment. By sharing data at the heart of what faculty care about in easy-to-analyze graphics, the provost made funding gaps understandable and urgent, building faculty support for long-term sustainability.

Howard University’s CFO presents the table below to summarize the institution’s financial plan. Each row distinguishes between factors Howard feels confident in, factors they have less confidence in, and downward pressures (e.g., known expenditures). It also maps those factors out across a range of scenarios, from worst case to best case. The middle-case scenario is the conservatively optimistic one. Lastly, this table tabulates how each scenario compares to the target of hitting a $25 million target for debt service purposes.

The value of this table is condensing complex analyses into an accessible, need-to-know format. It also corrects the tendency to focus on bottom-line optimism and signals the need for vigilance.

Howard University’s summary of financial interventions and potential outcomes

4. Institutions need robust, predictive financial models capable of scenario planning

Regardless of financial standing, attendees emphasized the need for financial sustainability amid enrollment pressures. CBOs discussed plans to move from one- to five-year budget plans to better evaluate the potential impacts of forces like international enrollment caps or cuts in state funding, but they often lack the tools, data management, and capacity to project beyond five years.

EAB created a new infographic visualizing Five Levels of Financial Performance to support conversations around long-term financial planning. It offers a maturity scale ranging from “stewardship” to “existential threat” alongside tailored cost management strategies for each level. Once they’ve identified their current state, CBOs can not only ensure they pursue the most effective cost management strategy but look ahead to the strategies they may need to implement if things worsen.

By anticipating potential downturns and determining an institutional response in advance, institutions avoid the unintended consequences of reactive decision-making, ultimately laying a solid foundation for long-term sustainability.

5. Institutions are pushing hard to build the financial acumen of their staff, particularly those in finance functions

Given the decentralized nature of many universities, finance leaders often find the financial acumen of staff (in both centralized and decentralized administrative roles) to vary. Staff frequently develop siloed expertise and informal, ‘mom and pop’ processes that complicate scaling and reorganization. By comparison, progressive institutions aim for more professionalized services with greater consistency in what jobs are performed and how processes are completed. However, it takes significant work to enhance the skill set of financial staff across campus.

The University of Wisconsin-Madison offers a professional development program called Finance@UW for any employee involved in finance. Cohorts of up to 25 staff members join a three-hour weekly workshop for a month, learning broad higher education and institution-specific finance principles. The four workshops are Principles of Institutional Finances, Revenue@UW, Accounting@UW, and Budgets@UW. Each session is co-hosted by the program manager and a senior financial expert. So far, 50 staff have completed the program.

6. Despite challenges to generating buy-in, CBOs are hungry for examples of transformational cost containment efforts

In an industry heavily constrained by financial pressures and political scrutiny, CBOs shared a burgeoning creativity, daring to reimagine university operations and structures. Attendees got serious about ‘doing less with less,’ revealing plans to deploy shared services in decentralized settings and consolidate satellite campuses at flagships.

Notably, CBOs—particularly at regional institutions—acknowledged that they were more open to considering mergers and acquisitions, even with former rivals. (That interest took the form of being both the acquirer and acquiree, though determining which role one occupied often coincided with a potential deal deteriorating.)

While attendees shared many approaches to transformational cost containment, the most impactful of them reduce complexity and focus on core operations. The University of Auckland implemented a functional transformation to improve administrative efficiency and effectiveness, consolidating transactional activities and organizing staff by functional area (e.g., finance, communications, etc.), regardless of where they sit on campus.

Employees assigned to a given function spend at least 80% of their time on functional responsibilities, reducing extraneous work. Each functional area is overseen by a function lead who is responsible for operational capability, multi-year planning, and boosting the efficiency of the function rather than day-to-day management. For distributed roles, like faculty-based finance staff, the senior-most finance staff member retains a reporting line to the central organization.

As part of the transformation, they consolidated 1,000 unique job descriptions to 42, decreased transactional activity by 20%, and increased the number of internal vacancy fills by 22%.