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:
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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.
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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.
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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.
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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.
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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.
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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).
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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.
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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.
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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.
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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.
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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.
More Resources
The University of Auckland's Blueprint for Improving Administrative Efficiency
Understanding the revenues and costs of UK universities
