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A Build-Anew Budget

May 2015

By Jessica Davenport Williams and Sayma Riaz

An enrollment downturn caused Columbia College Chicago to analyze core needs and true costs of academics and administration. Scrapping its incremental model, the institution turned to zero-based budgeting to build a cost structure directly related to the classroom.

Do any of the following situations sound familiar?

Seven years ago, Columbia College Chicago was experiencing “all of the above”—and more. Academic departments, for example, continued to replace positions, despite declining enrollment, and limited their collaboration and resource sharing; across the college, redundant services and courses were often offered. Addressing these issues called for a different approach to budgeting, one that would enable us to identify the institution’s core needs and evaluate the true cost of instruction. 

In our case, the introduction of zero-based budgeting helped people realize which expenditures actually contributed to instruction and also gave them a bigger say in how revenues should be spent. 

Tuition revenue has traditionally driven 90 percent of the budget at Columbia, which is one of the nation’s largest private, nonprofit arts and media colleges. That high dependency on tuition was supported by growth in the number of students (undergraduate and graduate), which reached 12,464 in 2008. 

Between 2010 and 2013, however, total enrollment fell to 10,100—a drop of nearly 19 percent. The college wasn’t completely prepared for the reductions we needed to make. Because we used an incremental budget model, the cuts were initially a set percentage across the board, regardless of a program’s or department’s needs.   

Fortunately, by the second year of decreased enrollment, we already had underway a comprehensive review of our curriculum, student advising model, and budget practices. That put us in a better position to adjust both curriculum and the budget to reflect enrollment realities and create a more sustainable financial model for the future. But getting to that point took time and more than a few cultural changes. 

The Way It Was 

Using the School of Fine and Performing Arts as a pilot, we began our strategic resource assessment in 2010 by looking at the existing organizational structure and financial practices of the academic and administrative units. At the time, nothing was centralized—a procedural relic of an earlier time, when Columbia was much smaller and had only one school rather than three.  

Historically, the department chairs simply made incremental additions to their budgets from the previous year, without accounting for any changes in programs, number of students, or staffing levels. Then, acting much like deans, they’d take their budget request directly to the provost or the chief financial officer and engage in a bit of bargaining. Whoever made the best case would receive more money. 

Also, the department chairs were accustomed to getting approval any time they liked for new courses and programs to be offered the next academic year—without thoroughly considering the financial impact. This often occurred after the budget for the next year had been finalized, leaving the financial administrators to fix the problem. 

We undertook a thorough financial analysis to understand both the sources of revenue and the type of expenses for each unit. It revealed that more than 88 percent of the school’s annual budget was allocated to personnel costs—salaries, wages, and benefits. And many of those costs stemmed from curriculum-related decisions, such as hiring part-time faculty and student employees.  

Using five years of data, we also compiled performance statistics and spending trends for each unit. These included revenue, expenses, percent of budget expended, full- and part-time faculty and staff counts, average class size, enrollment, student credit hours, the ratio of credit hours to faculty, expenditures per credit hour, and expenditures per head count.

It quickly became apparent that the incremental budget model was not serving the institution well. For example, no one could provide a rationale as to why one department spent five times more per year than another. Nor could the college fund programs with high growth potential while it continued to support the status quo. 

We decided to start from scratch, scrapping the rollover-budgeting model built on historical assumptions in favor of a zero-based approach that looked at true costs. In addition, we centralized all financial functions in the administrative office, to streamline operations and enable us to identify wasteful practices. 

Because academic decisions drove the vast majority of revenue, as well as most expenses, it was imperative to review academic policy at the same time we reconfigured the budget model. Fortunately, this approach had the full endorsement of the school’s then-dean Eliza Nichols and then–associate dean William Frederking. (Both are still at Columbia College Chicago, Nichols as a professor of humanities, history, and social sciences, and Frederking as an associate professor of photography.) They understood that creating efficiencies and containing costs could happen only if we aligned budget and curriculum. 

Working Both Sides

Frederking and Nichols did their part by forming an academic committee within each department to audit existing courses and program requirements and compare them to best practices nationally.

To create transparency among administrators, chairs, and deans, we widely shared the statistics we compiled, such as year-to-year change in enrollment, credit hours, and class size; and personnel costs as a percentage of instructional expenses. The expenses-per-credit-hour calculation proved the most surprising to nearly everyone. 

These statistics helped raise awareness within a department of its performance and the financial implications of program decisions. We could say, for example, “Your enrollment and credit hours are down, yet your staffing hasn’t changed and your expenses have gone up. Is that the most beneficial way to support students?” 

In communicating this information, we often relied on Frederking to be our “translator.” As a faculty member himself, he had insight into how his colleagues thought and operated; he helped us phrase questions, instructions, and suggestions in ways that faculty would readily understand and respond to. 

Data for All

Transparency did help build trust. In the past, budgets had been combined into one lump-sum budget per department. Instead, we provided breakouts so everyone in a department could track revenues and expenses for specific majors, such as graphic design, fashion design, and musical theater.

Sharing financial information garnered departmental buy-in and contributed to a sense of ownership: Administrators and faculty quickly realized the number of existing programs and services exceeded the funds available. For example, one department discovered it spent more than $45,000 annually just to hire substitute teachers. Such data, analyzed on a holistic level, helped chairs identify priorities, as well as programs needing reinvestment to remain sustainable.  

For the first time, the chairs also saw program budgets, staffing, and spending levels for other departments. In their initial meetings with the dean, some chairs used the information to air complaints: Why is that department spending so much on marketing? How come this department gets so many visiting artists? Although tense at times, the conversations were also healthy because they revealed prevailing misperceptions of how other departments operated. Because they’d never seen the data before, the chairs didn’t understand the challenges experienced by other departments.

As business officers, our job was to explain the numbers and emphasize that no department was hoarding money or being favored over another. We immersed ourselves in an area, attending staff, curricular, and operations meetings; and visiting labs and classrooms to gain a better understanding of a department’s needs. And we challenged them: What do we need to keep? What can we discard that isn’t valuable to the student experience? But we always stayed on the financial side and left the curricular work to the dean; we never said what a department should or shouldn’t do with a program.  

Hold, Grow, or Go?

During the first year of the zero-based budget exercise, the dean put a freeze on approving new programs and revising existing programs in order to keep the focus on evaluating what already existed. The conversations weren’t about only saving money, but also how the current curriculum could be used more strategically to satisfy students’ needs and expectations. In consultation with the dean, for example, the departments identified which programs and services to place on moratorium, phase out, or expand. All details were forwarded to the provost. Then, once the curricular decisions and course scheduling for the next academic year had been finalized, the zero-based budget began to take shape. 

The academic and administrative units were instructed to develop their annual budgets, with our leadership, and include a rationale linked to curriculum. For the first year, however, all review and approval of financial expenses had to be vetted through our administrative office as a control measure. For example, we reviewed and approved faculty and staff stipends, purchasing orders, procurement card purchases, substitution pay, and requests for new and replacement staff positions. 

Among the budget requests we received, a number related to updating classrooms. That prompted us to create a technology committee to assess classrooms and space allocations on campus. Again, we shared the results with department chairs, most of whom had never considered using other physical areas of the college. Working together, the chairs figured out which classes could be enlarged, if relocated to different classrooms, and ways they could minimize the purchase of equipment or instruments by collaborating with one another. 

Getting in Line

Columbia College, for the most part, did not hold faculty accountable for the financial decisions and results that flow from the curriculum they develop and govern. This lack of accountability is a common struggle in higher education, but varies depending on an institution’s history and culture. Within the School of Fine and Performing Arts, we gave faculty a hand in what happens financially by aligning the curriculum with the budget. This has led to a culture shift for the school’s nine academic departments and three administrative cost centers. 

In the past, the school had a culture of entitlement: When faculty said they needed something, administrators usually took their word for it and granted the request. Now, faculty have no expectation of receiving the same budget every year. As a result, they pay more attention to completing budget requests, which now arrive in our office with detailed information and rationales to justify approval. We rank the budget requests, funding only the elements that most closely align with priority areas.  

Undertaking the strategic resource assessment process also enabled the school to:

As the sharing of resources and transparency of financial information became the norm, the “silo mentality” disappeared. Faculty no longer feel protective of their resources, because they understand that no one is hiding anything. In fact, faculty have become so accustomed to constantly revisiting program offerings and reevaluating cost-effectiveness that they are eager to share with their colleagues their strategies and lessons learned. 

Zero-based budgeting sometimes comes under fire for being time-consuming and tedious. To the contrary, we found it an effective tool for building a budget that truly relates to what happens in the classroom. We have proposed extending the same assessment to the college’s other schools; the decision rests with the president, provost, and chief financial officer, all of whom arrived at the college within the past two years. 

Whatever the budget model used, faculty, staff, and administrators need to have a broad understanding of how the institution operates and the impact a particular program has on overall finances. The only way to do that is to know your costs.  

JESSICA DAVENPORT WILLIAMS is a fiscal administrator within the central office of budget, planning, and analysis; and SAYMA RIAZ is assistant dean for budget and planning, in the School of Fine and Performing Arts, Columbia College Chicago. Eliza Nichols and William Frederking, both professors at Columbia College Chicago, also contributed to this article.


Related Topics
Finance

Because academic decisions drove the vast majority of revenue, as well as most expenses, it was imperative to review academic policy at the same time we reconfigured the budget model.

Faculty have no expectation of receiving the same budget every year. As a result, they pay more attention to completing budget requests, which now arrive in our office with detailed information and rationales to justify approval.