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Most stories about the financial challenges that higher education institutions face are told from the perspective of the president or chancellor. After all, these individuals have the final responsibility for the financial health of an institution. That said, I think there is much to be learned from the perspective of the chief academic officers who must steer the academic program through difficult financial times.
After serving more than two decades as provost or vice president of academic administration in both permanent and interim appointments, I have experienced a broad spectrum of financial challenges. What follows are my thoughts on those challenges and some questions that I suggest other provosts consider.
Why are so many institutions in financial distress?
It has been my experience that most colleges exist along financial fault lines. The forces that meet along those fault lines can vary, but they usually include falling enrollment and/or dwindling net tuition revenue, overspending and over-borrowing, expansive and rapid growth of academic program offerings, and unrealistically optimistic views of what the future may hold. These forces are constantly shifting and applying pressure on one another, and if you don’t feel the tremors—either because your institution has enough resources to dampen the stress for a while or you are in denial that the issues are present—you will very likely be surprised by a financial earthquake. As a provost, you need to be constantly aware of such forces and the impact your decision-making may have in creating greater tensions among them.
Can you do it, or should you do it?
As I’ve mentioned, one of the potential financial fault-lines is the expansive and rapid growth of academic programs. College leaders often hope that “if we offer it, they will come” as their institutions compete to attract students. In addition, bright and talented faculty members bring a great deal of enthusiasm and advocacy for growth in academic program offerings.
Faculty interest and enthusiasm must be tempered, however, by market-driven and student-driven interests. A fundamental question that a provost should ask is not, “What can we do?’ but rather, “What should we do?” The “should” in that question is usually a much higher bar when deciding on when to create new programs or expand existing ones.
For example, faculty members often pitch new programs with the promise they won’t incur any additional cost to the university—so, theoretically, you can go ahead with them. In my experience, however, that’s rarely the case. That doesn’t mean that the new program should be denied, but it does mean that you must develop realistic budget projections for it. A realistic budget will help with answering the “should” question.
The same holds true for the pursuit of grants or gifts that provide bridge funding for new faculty positions. Securing the grant is certainly something that you can do, but, again, if you don’t have a solid plan for absorbing the faculty line into the budget once the funding support is over, it may not be something that you should do. Adding bridge-funded faculty lines without a good long-term budgetary plan can easily create a structural deficit in the future.
Negotiating salaries for new faculty members also can be a point where you as a provost need to consider can versus should. Several years ago, I was trying to recruit a faculty member whom I knew would be an outstanding addition the university. That person had already received multiple offers from other institutions and was asking for a salary that was $20,000 more than what I had paid equally qualified faculty members that year. While I had the financial resources to match that offer, I did not feel that I should do it. To do so, would create salary equity issues and, potentially, longer-term budgetary challenges. I ultimately told the person that, while I could match the offers, I felt that I shouldn’t for the reasons I just described. In the end, they accepted my offer.
No one likes to be told no, but if you are considering the financial well-being and long-term best interest of the institution, the answer may need to be just that— however difficult that may be.
Should financial distress impact the mission?
In October 2020, I accepted my first interim appointment as a provost at Henderson State University, which had significant financial challenges. I had dealt with financial challenges of varying degrees at my previous institutions, but none as urgent and severe. At my previous institutions, I often would pose the following question to my senior staff colleagues: “What if, in the pursuit of financial stability, we had to fundamentally change the mission of the institution? Would we consider that a win?” Of course, I always assumed—or hoped—that the answer was no. That answer would have placed some firm guardrails on what needed to be cut and what might be safe.
My experience at Henderson State has caused me to think about the question of mission differently. I now ask myself and my staff members: “What if the long-standing mission of the institution no longer meets the needs of the region it serves? And, if so, could that be a contributing factor to the financial instability?”
For example, Henderson State traditionally focused on being a public liberal arts institution. As someone who profoundly supports the value of a liberal arts education, that mission was one of the elements that attracted me to the university. Yet I came to understand that, at least at that point in time, it was not a mission that fully met the needs of the students in the region that the university served. Through the financial exigency process we used to address the financial crisis at Henderson State, virtually all the arts, sciences, and humanities departments—all of which are essential to a liberal arts education—were eliminated. As painful and difficult as it was to make those decisions, they may have been the right ones as the institution evolved to meet the changing needs of the region it serves—at least, for now.
What about restructuring?
Most likely, any attempt you make to rectify a difficult financial situation at your university will involve a restructuring of the ways in which the academic programs are administered. The goal of restructuring typically centers on creating greater administrative efficiency at a much lower cost. This process is often referred to as a flattening of the administrative structure. While is it true that restructuring can provide some financial relief, I recommend that you consider the following if you embark on that process.
Assume that the existing structure had some value, or it would not have persisted for many years. In any restructuring, something very likely will be lost. You will need the knowledge and expertise of the individuals currently holding leadership roles, so be careful not to dismiss or marginalize them too quickly. You should strive to create a transition plan that acknowledges and values their past contributions, as well as keeps them engaged during the transition.
Recognize that there is no perfect administrative structure. You will need to manage and continually modify whatever structure you develop. You must be willing to make changes when gaps in communication or support arise. In short, you need to decide on a new structure, build as much consensus around it as possible, and then always be willing to adjust when necessary.
Know training will be essential. If the restructuring involves appointing potentially inexperienced individuals to administrative roles, they will need guidance and support to do their work well. For example, if the restructuring involves the elimination of deans’ positions and moving more responsibilities to department or program chairs, you should not assume that those chairs possess the knowledge and skills necessary to do those jobs well. You need to find ways to prepare them for their new roles and responsibilities—either with on-campus resources or with the numerous external programs that currently exist.
Establish clear lines of communication. Students rarely care much about the administrative organization of academic programs. What they do care about, however, is who to talk with when they are having difficulty. In a traditional academic structure, a student with a problem in a class would be expected to talk with the faculty member first, then the department chair, then the dean, and then perhaps the provost. If that line of communication has changed, you should bring clarity to it and communicate it to students as soon as possible.
Financial exigency—the best path forward?
The American Association of Colleges and University Professors (AAUP) defines financial exigency as “a severe financial crisis that fundamentally compromises the academic integrity of an institution as a whole and that cannot be alleviated by less drastic means” than the termination of tenured faculty appointments. In the two years leading up to the declaration of financial exigency, Henderson State had pursued a few “less drastic means”—such as reducing the number of adjunct faculty, eliminating sabbaticals and professional travel, and furloughing staff members—but none of those attempts yielded the results needed to address the financial crisis.
It is probably also true that such efforts were probably too little and too late to address the severity of the problem. A former senior staff member once said to me that the university may have avoided the “financial wildfire” if the previous administration had been more diligent with “controlled burns.”
As a provost, you have a responsibility to constantly manage the revenues and expenses of the overall academic program and to collaborate with your senior colleagues in making sound financial decisions for the institution—including taking the step to declare financial exigency. Declaring financial exigency is better than closing the institution, but it is an extremely difficult and painful process, and determining whether or not it will save the college or university in the long term is always a question.
If you find yourself as provost in a situation where you will need to lead the academic program through a financial exigency process, here are a few things to consider.
- Adhering to existing and agreed-upon institutional policies is essential to fairness and can help to buffer against potential future litigation. In my experience, most faculty handbooks have policies and procedures that mirror the AAUP guidelines, and you should follow them.
- Most financial exigency policies involve the participation of a faculty committee in making recommendations regarding program and/or faculty reductions. It should not be surprising that faculty committees have a very difficult time making recommendations that will impact their colleagues. You should not expect this to be an easy process. I suspect that when most of these policies were put into place, no one imagined that they would ever have to use them.
- In terms of employment, it will be the existing faculty and staff who will who pay the ultimate price for the financial missteps of the institution. That will be particularly true for non–tenure-track faculty and/or staff, who likely will have their positions eliminated almost immediately, while more-senior and tenured faculty typically receive a one-year terminal contract. Unfortunately, these are usually individuals who did very little to contribute to the financial situation. To the extent that you are able, strive to protect their worth and dignity as they transition out of the university by providing as many severance considerations and positive recommendations as possible.
In conclusion, whether you are a new or experienced provost, you should acknowledge that the financial health of the institution you serve must always be in the forefront of your thinking and planning. The academic program should be the primary enterprise of the institution and will need careful management to sustain financial viability. Stressful financial situations rarely develop overnight, and the origins of those situations may have begun many years before your arrival. Even so, however, you must deal realistically with the financial situation you face today and always put the long-term best interest of your institution in the forefront of your planning and decision-making. This approach may be difficult, but it is an essential element of the position.
