Breaking the Trade-Off Between Cost and Quality Study
Sustaining mission in an era of constrained resources
The era of “quality at any cost” has come to an end in the face of declining state support and flattening net tuition revenues. Our briefing outlines how academic leaders can continue to enhance quality by reallocating resources from lower impact activities to higher impact, mission-aligned priorities.
An unsustainable financial model
Revenue growth at most colleges and universities has slowed significantly since the recession, and revenues are actually declining at a growing share of institutions as a result of state budget cuts and pressures on net tuition revenue.
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59%
of Chief Business Officers are not confident in the sustainability of their institution’s financial model
While cuts to administrative costs are necessary to get back on the path to financial stability, they won’t solve the problem on their own. Universities—even those with strong finances—must find ways to continue to enhance academic excellence and student success despite limited new funds.
The cost-quality myth
A major barrier to adjusting to the new financial reality is the belief that any reduction in academic resources must necessarily reduce quality. Excellence in instruction and scholarship clearly require significant investments of faculty time and other resources, but the relationship between costs and quality is not linear.
Excess spending on the proliferation of courses, specializations, and programs spreads resources more thinly across a broader array of activities, reducing quality by diverting funds from institutional priorities while at the same time producing a level of complexity that creates barriers to student success. Reallocating resources from activities that are not aligned with student success, academic excellence, or institutional mission can improve outcomes even without additional revenues.
"The savings potentially achievable from systematic, comprehensive, and cooperative pursuit of even a fractional reduction in waste are far higher than from more direct and blunter cuts in care and coverage.
"Berwick and Hackbarth, 2012
Reducing proliferation to enhance quality
EAB research has identified five primary drivers of academic costs and capacity: section offerings, course offerings, course completion rates, curricular complexity, and faculty course loads. These areas offer the greatest opportunities to realign academic resources while maintaining or enhancing quality.
Analyzing the “microeconomics” of academic units in each of these areas can often identify targeted opportunities to realign costs in ways that can avoid the negative impact of across-the-board budget cuts or the elimination of entire academic programs.
Academic decision support
Better data on the cost, capacity, and quality of academic programs should be used to supplement, rather than replace, the judgment of academic leaders. Providing academic decision makers (especially deans and chairs) with improved data enables them to better understand the trade-offs and the opportunity costs implicit in every resource allocation decision.
Achieving this goal, however, requires overcoming the limitations of existing data systems as well as providing incentives to reward academic units for improved performance. This is an incremental and ongoing process, however, not a short-term solution. The slow pace of change at universities makes it even more critical that every decision be made in the light of its long-term implications for quality and financial sustainability.
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