The American Enterprise Institute and the Heritage Foundation have released a new booklet of advice for university trustees. My short contribution focuses on how trustees can reduce university spending and personnel and offers nine recommendations which I summarize below.
Recommendation #1: Have a Specific and Measurable Goal
A clear, specific, and measurable goal is much better than a vague and directional goal, because it does a better job of providing direction and accountability if not met. So, a goal to reduce administrative spending by $1 million is better than a vague goal of cutting unnecessary spending.
Recommendation #2: To Cut Costs, Cut Revenue
University spending is driven by Howard R. Bowen’s revenue theory of cost, a short explanation or a full-length treatment. Since it is revenue that drives spending, this leads to an unorthodox strategy:
To cut costs, cut revenue. Since revenue drives spending, trustees could spend all their time and energy hunting down inefficiencies and redundancies and engaging in knock-down, drag-out fights to eliminate them, and it would not make any difference to the university’s overall spending. The university will simply reallocate any savings to the next item on its spending wish list …
This fruitless game of whack-a-mole can be avoided by combining a spending goal with a revenue goal… For example, setting a goal of cutting tuition by 5 percent would create the revenue reduction needed to ensure that spending cuts stay cut instead of being reallocated.
Recommendation #3: Focus on Reducing Senior Administrators or Budgets, Not Total Staff Counts
Head count targets are easily gamed and should be avoided. For example, “a university could eliminate 50 clerical or landscaping positions but simultaneously hire 20 more assistant deans,” which would succeed in reducing headcount but would actually exacerbate administrative bloat. It would be better to focus on senior staffing levels or overall budgets instead of headcounts.
Recommendation #4: Be Aware of Legal and Cultural Barriers to Change in Higher Education
Higher education has several landmines that trustees should be cautious around, such as tenure, academic freedom, and shared governance. Any imposition on these features of academia will be immediately and fiercely resisted and could derail reform efforts. As I explain,
The point isn’t that tenure, academic freedom, and shared governance are commandments handed down from on high that are untouchable. Rather, undermining them while trying to cut spending and personnel would be like trying to storm the castle and renovate it at the same time. Pick your battle and focus on what it takes to win it, which in this case means avoiding picking unnecessary fights on these matters.
Recommendation #5: Use the Pathologies of Higher Education to Your Advantage
Higher education and those who reside within it have predictable behaviors that you can use to your advantage. For example, professors love to argue and fight, so why not ensure they are fighting among themselves rather than fighting the board? For example, rather than targeting a specific department for cuts, which will induce unrelated departments to circle the wagons, announce across-the-board cuts unless faculty can devise a better plan. This will encourage faculty to “mobilize their considerable analytical and rhetorical powers to identify weaknesses in other departments to ensure their own department isn’t on the chopping block.” Similarly, faculty and staff view each other with suspicion and will easily turn on each other to save their own skin.
[RELATED: Higher Education Reforms Could Finance Half a Trillion Dollars in a Reconciliation Bill]
Recommendation #6: Know You’re a Mushroom—Kept in the Dark and Fed Manure
Most of the information available to the board will be selected and filtered through the university’s central administration. The general rule of thumb is that boards are like mushrooms—kept in the dark and fed manure. Boards would be wise to develop alternative sources of information, particularly if university leadership shows signs of resisting the board.
Recommendation #7: Anticipate Resistance
Needless to say, any effort by the board to cut spending or personnel will be met with fierce resistance. Some sources of resistance are obvious, like faculty, staff, or students from the affected areas. But resistance could also come from less conventional sources, such as accreditors.
Recommendation #8: Be Prepared for the Wallace Hall Jr. Treatment
The experience of Wallace Hall Jr. is extremely disturbing:
Wallace Hall Jr. served on the University of Texas System Board of Regents from 2011 to 2017. He played a key role in exposing several scandals at the University of Texas, including an admissions scandal in which unqualified children and friends of powerful people were granted admission spots they did not earn.
But consider what Hall had to endure to reach that point. Shortly after being appointed as a regent, Hall asked for information from the university administration, which was refused. Hall then asked to see past public records requests and made more public records requests of his own. The university refused again, claiming it would be too hard and too expensive to provide the information. At this point, the university’s allies started a smear campaign, and the media took the university’s side: “Every major newspaper in the state has either called for Hall’s head at one point or questioned his integrity.” The university’s allies in the state legislature, some of whose unqualified children were the ones admitted through the corrupt process, tried to impeach Hall. When the impeachment effort failed, the legislature censured him. Criminal charges were floated.
All of this to punish a trustee who was doing his job. The abuse and reputational damage he endured for years before being vindicated shocks the conscience.
Recommendation #9: Exploit Your Access to Nonpublic Data
Boards will have access to nonpublic data on financial, personnel, contractual agreements, confidential internal reports, and student, staff, and alumni surveys that should be used to guide decisions. For example, outsiders could only provide ballpark estimates of the cost per degree awarded for various majors. But boards can request such information on day one.
Overall, cutting a university’s spending or personnel will not be easy. But it’s not impossible either, and following these recommendations will increase the chances of success.
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