Opportunity or Trap?

Should I consider a position with an institution facing “financial challenges”? 

The question came up during a career planning conversation at a HERS Institute this summer. I couldn’t resist thinking, “What institution isn’t?” But I could see from the face of the questioner that her concerns were more serious. 

But how serious? That’s the first question. First piece of advice: find a CFO or other financial expert whose judgement and discretion you trust, and ask for help in assessing whether to pursue the position. You will need to get information from the institution and the CFO’s help in interpreting the details.

I would also say there are three big categories of “financial challenges” -- and the first two are serious enough to warrant the term “trouble” and prompt big warning signs. You can ask institutional representatives directly about those issues. You can also probably find out much by asking your financial expert friends and by checking online for news stories. GuideStar will have some information, but the first two categories really require “the story” as well as the figures. 

Category #1: Is there evidence, or even strong suspicion, of mismanagement or maleficence on the part of institutional leadership?  If so, that represents a lack of character that can only be addressed by change of senior leadership. Unless you are going into the role of president/chancellor or CFO, then you are going to be too far from being able to solve the problem, but you will be still handling fallout. Quite literally, I wouldn’t go there. 

Category #2: Has the endowment been compromised by poor investments or continued spending to cover revenue shortfalls? That represents bad judgment, although it happens even among smart and ethical people. It is possible to get this “challenge” righted, but to know whether that’s in the works, you need quite a bit of information. What was the reason for the loss, the length of time this has been the case and the damage done?

Then you need to know: What has been done about the reasons for the loss? What is the trend of improvement and the current state of the endowment? Essentially, you need to know whether the endowment is clearly on the way to being a source of financial stability or whether rebuilding it is going to pull resources away from other critical institutional priorities. Again, if you are not going into a senior role yourself, you have to be convinced the people in such roles have the institution back on track and your efforts will be adding value to a solid plan. 

Category #3: If the institution you are considering does not fall into either of these categories, then what are the financial challenges? Any other challenge may sound upbeat compared to the first two, but there are still many financial situations that are serious and require both careful planning and sustained action. Even then, not all institutions of higher education that face financial challenges will survive. It’s best to ask lots of questions and get help in interpreting the answers. And remember that in these situations, you have to be ready to ask questions at three levels: financial, organizational and personal.   

Financial Questions

What is the level of serious, but not catastrophic, financial “trouble”? Is the institution meeting its budget with revenues? What is the trend line: over five years, how has the situation changed -- for the better or the worse? Does the institution have a reasonable revenue-generation plan, and is it so far showing success -- or at least improvement in covering all expenses?

What is the condition of the endowment? Are contributions being made to the endowment? If you know there is a revenue shortfall, and it’s being not being met from endowment, where are resources being drawn down? Protecting the endowment is good. But the action is short-lived if the new revenues don’t allow for eventual additions to the endowment. 

Has the institution made significant investments for programs, facilities or partnerships that are resulting in revenue shortfalls or unanticipated expenditures? How are those shortfalls affecting other activities and priorities at the institution? Will that change?

Organizational Questions

What is the institution’s capacity for sustaining the effort to generate new revenue? It may be generating new revenue with a grant or gift. That provides welcome benefit in the short-term and is even better if that source has covered “start-up” costs. But does (or will) the budget support the continuing staff and facilities costs? If the revenue is the result of new enrollments or new customers of campus-based services, are there long-term prospects that such “customers” will continue? (Serving the community in special situations is positive but should not be confused with “new markets.”)

What is the capacity to make the additional changes needed to support the new activity? Whatever the institution has started doing to create new revenue, it will also have to invest in making this activity an integral part of the campus.  For instance, if the institution is serving a new target group of students  --  that means anyone they have not directly and deliberately recruited in the past -- then either they have not provided services this group will need or have not thought intentionally about how the current activities will need to be communicated and executed differently.  If the institution is providing its curriculum or services in a different way -- online, off-site, in a new partnership -- does it have the staff members and facilities to increase capacity as the program grows? 

What is the capacity for the deeper structural shifts that are needed at most institutions today? The focus on the campus right now is probably on the immediate challenge, with at best some attention to how the impact of the needed changes will affect the institution further along. But the real work is ahead. As the institution looks to the future, each area that it examines is really an opportunity to rethink larger systems. All colleges and universities are facing the financial challenge of a significant shift in funding sources and business models to support our missions. Leaders of all campuses must be asking, what reorganizations will bring more revenues so that we can continue to provide high-quality academic programs. Your question will be: what will the institution stop doing in order to free resources to sustain itself going forward? 

Personal Questions

What is your personal capacity for seeing through the many organizational changes involved in meeting these financial challenges?  Those, of course, are really challenges to the capacity of the institution to serve its academic community with high quality programs and rewards.

If you are still reading, then you must see some hope for immediate and long-term financial stability at this institution and want to be part of finding that solution. Let’s start with the immediate personal challenge we would all like to avoid. Rarely does anyone step into a job wanting to “make big cuts.”  You want to listen, engage everyone, find a place for all the skills in the group. You will need to do all of those and -- unless someone has done it before you arrive -- you will also have to be ready to cut activity and lay off staff if you find that’s required. 

That is the point at which some advisors would say, “Grow a thick skin!”  I admit I hate that advice. Regardless of what it is supposed to mean, “thick” skin usually is translated as being hardened to the feelings in the situation -- yours and those of others. Cutting yourself off from sources of emotional intelligence is really poor leadership behavior. 

I would suggest instead, “Expand yourself for ambiguity.”  Nothing being asked of you in these situations is clear and unambiguous. 

You have to be ready to make choices and carry out tough decisions, while also being sympathetic to the pain of the individuals involved. That’s the start. Can you encourage both creativity and accountability? Can you support risk-taking on the part of others, knowing that you may have to face the negative consequences?  Can you convey confidence without promising -- or expecting -- certainty?

As you grappled with the immediate situation and think ahead to broader implications, can you help the community understand the difference between an emergency and urgency? An emergency is a set of circumstances that requires an immediate response, even if it’s clearly temporary. Urgency is the understanding of the seriousness of a situation that motivates work for a long-term solution.  

As you build the capacity of those around you, can you help a group under stress shift from “win or lose” to “winning through learning”? Can you convince senior leadership that such a strategy is part of sustainability -- despite the pressure (maybe the need) for immediate positive results?

As you end each day, can you distinguish between second-guessing -- the endless loop of questioning whether you should have done something differently -- and self-reflection -- the capacity to see what is and is not working and make changes? Can you encourage learning that leads to acknowledging negative results:  mistakes, misjudgments or just surprises? Then can you engage colleagues to move on to finding improved strategies and actions?

Finally, can you tackle the challenges ahead -- financial, organizational and personal -- as a leader of collective action, rather than as a hero who expects to save the day alone? If you can commit to this one, you will be on the track to building the capacity you, your new colleagues and your new institution need. They will be fortunate to have you. All the best with the challenges ahead!