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How to shift your institution’s cost containment strategy from reactive to proactive

Higher education is traditionally reactive to financial pressure, implementing short-term cost-saving tactics instead of proactively pursuing long-term solutions. While short-term tactics may be necessary, they can limit or undermine long-term cost adjustments required to prepare the university for future challenges. To break this reactive cycle, leaders must impose long-term cost containment strategies alongside immediate decisions.

Below, we pair common short-term cost containment strategies with essential long-term strategies necessary for financial sustainability in three areas:

Cost Philosophy
  • “”

    Execute sweeping cuts

    Short-term strategy

     

    Across-the-board cuts seem equitable but often lead to higher costs post-implementation. Of institutions that implemented across-the-board cuts, 67% of them experienced immediate cost increases, and within the next two to three years, 45% of them incurred higher expenses than if no action had been taken.

  • “”

    Complete targeted budgetary adjustments

    Long-term strategy

     

    Evaluate areas where cuts could either help revitalize programs or funding could be redirected to necessary areas.

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    The University of Kansas

    Long-term strategy in action

     

    The University of Kansas determined a set of criteria to help make strategic allocation decisions. As a result, some units experienced moderate adjustments while others saw deeper cuts.

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    Prioritize spending through unrestricted funds

    Short-term strategy

     

    Relying on unrestricted funds can lead to budget challenges when emergency costs arise.

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    Spend down restricted funds first

    Long-term strategy

     

    Enhance financial flexibility by using restricted funds for initial expenditures and preserving unrestricted funds for unforeseen costs.

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    Furman University

    Long-term strategy in action

     

    Furman University in Greenville, South Carolina, fundraises 30% beyond the cost of construction for new buildings and allocates the 30% into two building-specific endowments.

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    Explore merger and acquisition (M&A) options

    Short-term strategy

     

    The looming demographic cliff and financial constraints are prompting institutions to consider M&A opportunities. Issues with M&As often arise when consolidating workforces and assuming the debt of another institution.

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    Create interinstitutional consortia

    Long-term strategy

     

    Form interinstitutional consortia to pool resources for shared student services and reduce costs while maintaining individual identities.

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    The Claremont Colleges

    Long-term strategy in action

     

    The Claremont Colleges—a consortia where each of the seven institutions retains its individual identity while benefiting from shared academic resources, programs, and services.

Labor
  • “”

    Initiate a hiring freeze

    Short-term strategy

     

    Labor expenses occupy 50%-70% of an institution’s budget. Freezes reduce costs but risk demoralizing the remaining staff and may lead to over-hiring once lifted.

  • “”

    Implement position control

    Long-term strategy

     

    Streamline the review of staffing decisions to align positions to the university’s needs allowing for stronger financial planning. With positions properly defined, the institution can effectively monitor salary and benefit costs, allowing for stronger financial planning.

  • “”

    Western Washington University

    Long-term strategy in action

     

    Western Washington University introduced a phased plan to implement position control on campus by July 2025.

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    Conduct widespread voluntary separations

    Short-term strategy

     

    Voluntary separations can deplete institutional knowledge and often necessitate backfilling positions, which diminishes any savings achieved.

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    Upskill talent to fill anticipated changes

    Long-term strategy

     

    Upskill staff to anticipate changes in workforce demands and keep institutional knowledge intact.

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    Utica College

    Long-term strategy in action

     

    Utica College allows for “promotions in place,” encouraging in-seat career development and upskilling.

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    Cut healthcare benefits across the board

    Short-term strategy

     

    Blanket reductions in healthcare have unintended consequences such as losing top talent and market competitiveness.

  • “”

    Evaluate current benefits to identify duplications

    Long-term strategy

     

    Audit benefits to track utilization and uncover areas of duplication. Additionally, strategize ways to share the load of coverage (e.g., spousal limits to employer-sponsored healthcare).

  • “”

    The University of Georgia

    Long-term strategy in action

     

    The University of Georgia conducted an audit of its dependent health insurance coverage and required further documentation for dependent and spousal coverage, resulting in almost $3M in savings.

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    Pause nonessential travel

    Short-term strategy

     

    Pausing nonessential travel briefly limits overspending, allowing habitual travel spending to continue once resumed.

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    Determine opportunities for hybrid or virtual engagements

    Long-term strategy

     

    Standardize virtual attendance by organizing events based on attendance costs and virtual feasibility, thus minimizing travel expenses.

Real Estate and Campus Operations
  •  Resource Card: Break lease agreements/offload space

    Break lease agreements/offload space

    Short-term strategy

     

    Exiting leases presents a lower barrier to cost savings, but once fixed-lease options have been depleted, further cost containment strategies are needed to continue the momentum.

  • “”

    Explore space optimization

    Long-term strategy

     

    Reevaluate the utilization of owned space and off-load underutilized and excess space. For continued cost containment, implement strategies such as square footage caps and “no net new” mandates—a formal policy that helps maintain size alongside enrollment changes.

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    Indiana University

    Long-term strategy in action

     

    Indiana University demolished 600K square feet of space after evaluating buildings with high deferred maintenance needs and renovation costs. The University will see a gross reduction of 1.1M GSF by 2030.

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    Make scheduling decisions to save energy

    Short-term strategy

     

    Cancelling classes or changing course hours can contribute to energy and cost savings but also can cause disruptions in the learning environment.

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    Retrofit classrooms and buildings for energy efficiency

    Long-term strategy

     

    Adjust temperature settings in low-occupancy buildings, upgrade to sensor technologies, and turn off HVAC units in unoccupied spaces. These changes achieve significant cost savings and can be made with minimal disruptions to campus operations.

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    Texas A&M

    Long-term strategy in action

     

    Texas A&M saved $500K by installing occupancy and humidity sensors alongside reducing air changes in four occupied buildings.

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    Discontinue athletic programs

    Short-term strategy

     

    Shuttering athletic programs can save millions as athletic programs traditionally operate in a deficit or break even at best. However, discontinuing athletic programs can impact fundraising, enrollment, and campus culture in the long term.

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    Revitalize the athletics portfolio

    Long-term strategy

     

    Perform annual program assessments to revitalize athletic programs by evaluating their impact on the institution’s brand, net tuition, yield, and retention.

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    Augustana College

    Long-term strategy in action

     

    Augustana College conducted a multidimensional analysis of their sports programs to evaluate sport-specific and institutional goals.

  • “”

    Ban all purchases submitted to procurement

    Short-term strategy

     

    Banning all purchases without communicated guidelines risks the continuation of excess spending behavior once the ban is lifted.

  • “”

    Centralize procurement approval above a certain threshold

    Long-term strategy

     

    Establish limits on spending above a certain threshold and require the executive committee to review any requests above the set threshold.

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