Hallmarks of Higher Education’s Most Strategic Finance Functions

Committees of select senior leaders and campus stakeholders create and enforce policies and processes that drive consistent, complete, and accurate data use across campus. Senior leaders own data governance vision setting and hold unit directors accountable for executing data priorities.

Data governance, the process of creating standards for data elements (e.g., data definitions, potential values, security levels), is a fundamental prerequisite to making data-informed decisions. It promotes consistency that enables reliable data comparison across units. Many institutions, however, suffer from low accountability for data governance responsibilities and poor campus engagement in related discussions. To correct for this, institutions with effective data governance practices divide responsibilities across two committees. An executive-level strategy committee sets data governance priorities and vision, while an implementation committee executes on the priorities set by the strategy committee.

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Financial data systems are configured to generate academic cost data at a sufficiently granular level to understand program-level costs. Academic and finance leaders then use academic cost data to analyze program margins—either direct margins or fully-loaded margins with agreed-upon indirect cost allocations.

Most financial systems were not initially configured to record expenses at the level of granularity needed to analyze academic program costs (i.e., at the activity or program level). In response, some finance leaders are redesigning their institutional chart of accounts (COA) to collect more granular academic cost data. As illustrated below, COA redesigns provide the granular cost data needed to analyze academic program margins. They also reduce audit risk and make data governance more manageable, since users cannot accidentally record transactions to obsolete fields. However, full COA overhauls are time- and resource-intensive, and most universities need to hire consultants to manage the process.

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Senior leaders dedicate central staff to business intelligence (i.e., collecting, reporting, and analyzing data to make business decisions). Business intelligence staff may report through the CBO, CIO, or provost. Business intelligence staff generate reports and analyses to support strategy conversations, and leaders deploy them to support high priority unit-level decisions.

Institutions cannot fully realize the benefits of data investments without staff who can access data, analyze it, and communicate trends to leaders. This need is contributing to the emergence of a new role, the business intelligence (BI) analyst. Unfortunately, many business and academic leaders are struggling to hire new BI staff, since BI analysts are in demand across industries (and commanding commensurately high salaries). In response, institutions are creating central BI teams that consolidate BI resources and scale their skill sets across campus.

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Central finance teams generate regular reports for academic unit leaders to monitor and analyze key unit financial performance indicators, such as faculty salaries by type (e.g., full-time, contract, fees, summer pay). Central finance may create reports manually (e.g., in PowerPoint or PDF) or work with business intelligence teams to develop self-service reporting capabilities.

To maximize investments in data tools and BI teams, finance leaders need to ensure that their academic colleagues are accessing financial data and considering it in resource planning decisions. To that end, central finance teams are increasingly sharing unit-level financial dashboards with academic leaders. Most finance leaders currently create manual dashboards (i.e., created as PowerPoint presentations or PDFs) in coordination with BI talent and academic decision-makers. While automated, self-service dashboards are the end goal, many institutions will need several more years to build the BI teams and invest in the data tools to support self-service dashboarding. In the meantime, manual dashboards can serve as powerful tools to drive academic leaders’ data fluency and adoption.

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Budget and planning teams use Enterprise Performance Management (EPM) solutions to automate data consolidation and workflows, enhance reporting, and expedite planning processes.

Finance teams must meet expanding compliance and reporting demands without increasing staffing levels. Accordingly, leaders need to reduce staff’s time spent on lower-value transactional activities (e.g., data entry) to create staff capacity for more strategic work. To that end, many institutions are embracing automation solutions to decrease processing times for a variety of manual financial processes and workflows.

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Finance leaders reorganize staff and/or reallocate transactional process responsibilities to achieve scale in transactional work. By minimizing analytical staff’s routine transactional responsibilities, leaders maximize their capacity for financial analysis and planning.

Many budget and planning staff do not have capacity to perform strategic financial activities because they’re overwhelmed by lower-value transactional tasks (e.g., collecting and aggregating unit data, submitting time cards, fielding basic finance questions from their colleagues). To expand finance teams’ impact on campus, finance leaders are reorganizing staff and reallocating process responsibilities to create capacity for more strategic work.

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Central finance teams build financial models to demonstrate the financial impact of both planned strategic investments and potential future revenue risks. Models use research-backed assumptions—not straight-line forecasts—to project multiple potential future states. Finance leaders use scenario models and planning exercises to generate consensus around response plans for future operating risks.

Historically, higher education institutions have not regularly built multi-year financial plans, but today’s operating pressures are prompting more institutions to project resource availability and plan for financial commitments across a longer time horizon. Finance leaders are also creating more robust financial models to evaluate and plan for the impact of future revenue risks.

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Finance leaders revamp budget and planning functions to optimize strategic resource planning. Depending on institutional context, leaders reorganize teams to better integrate short- and long-term planning, add or elevate planning staff profiles to increase capacity for modeling and analysis, and elevate functional leadership to signal importance of planning in long-term strategy and financial sustainability.

Despite efforts to create capacity for existing staff, finance leaders often need to add roles or hire staff with new skillsets to perform more long-range financial planning and analysis. Specifically, many finance leaders are creating dedicated financial analyst roles for the first time, or hiring new financial analysts to create more capacity for necessary financial planning activities. While the scope and reporting structure of these roles vary across institutions, the skills sought in financial analyst candidates are largely consistent.

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Dedicated professional finance staff analyze academic budgets and help academic leaders use financial data in resource planning. Financial analysts may sit centrally or in the academic units, depending on degree of centrality of resource planning.

Despite the magnitude of academic budget decisions on institutional financial health, many academic leaders do not have access to professional finance staff to regularly consult on resource planning decisions. In response, institutions are introducing new roles and organizational models to expand and enhance unit-based analytical support.

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Finance leaders create formal training programs for academic stakeholders to improve financial acumen and drive better resource allocation decisions. Leaders create one or more training programs to address the skills needs of different audiences—in particular, academic budget staff and academic leaders (i.e., deans and department chairs).

Budget staff require advanced financial planning and analysis skills to perform new resource planning activities, but many current staff members lack these necessary skills. In response, institutions like the Indiana University System and the University of California, Berkeley have introduced financial training programs to address these skills gaps. These programs teach budget and planning staff how to more efficiently and effectively perform financial tasks and comply with institutional business processes.

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Finance and academic leaders define thresholds for satisfactory financial performance for each major operating unit. Leaders use dashboards or other reports to regularly monitor unit performance metrics. When unit performance falls below pre-defined thresholds, leaders promptly intervene to help unit leaders strategize cost-cutting or revenue growth opportunities.

Central finance leaders are increasing their focus on unit financial affairs, recognizing the importance of unit financial health to institutional sustainability. At many institutions, however, central leaders do not have capacity to provide intensive support to all operating units. In response, some leaders are using unit performance data to determine where to provide more support.

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Central finance leaders oversee internal teams that provide technical financial and project management support for unit initiatives. Leaders may hire new teams of dedicated full-time staff to support initiatives or may convene on-demand project teams of existing staff as initiatives arise.

Existing academic unit staff often lack the specialized skill sets required to execute strategic initiatives, like vendor evaluation, process redesign, and program launches. Many leaders instead would like to engage external consultants’ to support these initiatives, but most do not have the financial resources to hire consultants for all projects. In response, some institutions have built in-house consulting teams to provide more cost-effective expertise on specialized projects.

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