As Colleges, Universities Face More Financial Pressures, CFOs Express Concern About Sustainability of Current Business Models, Says New Kaufman Hall Survey
Cited as keys to the future are adopting new business models, grounding financial goals in reality, using financial planning and analysis to drive improvements, and modernizing systems and tools to enable informed decision making
CHICAGO – January 24, 2019 – A new report from Kaufman Hall shows a striking 66 percent of higher education finance professionals today say their current business models are not sustainable for the next five to 10 years. Yet two-thirds are very or somewhat confident their organizations can adapt to the new realities, according to 2019 CFO Outlook: Performance Management Trends and Priorities in Higher Education.
When asked to rank their top five challenges, financial resources took the top spot by a large margin. In fact, more than half (51 percent) placed it as No. 1 on their lists. Concerns about vision and strategy, which ranked second at 14 percent. Other areas receiving mentions were information data and technology/tools, and internal politics, which tied at 12 percent, and lack of defined processes at 11 percent.
“The pressures facing institutions of higher learning today are not temporary problems or something their leaders can try to ‘ride out’ until things ‘get back to normal,’” said Tony Ard, vice president of higher education, Kaufman Hall. “What we’re seeing now is likely the new normal. Finance leaders will need to partner with their administrative and academic leadership to manage costs and seek new forms of revenue. Improved use of data will be critical in helping them steer their institutions through the difficult years ahead.”
Learning to adapt
When questioned about their institutions’ ability to adapt when business circumstances change, which is seen as the key to surviving continuous disruption in any industry, only 18 percent of finance professionals and 36 percent of non-finance professionals were very confident in their teams’ abilities to quickly and easily adjust to strategies and plans. At the same time, 48 percent of finance professionals and 56 percent of non-finance professionals were somewhat confident, bringing the overall numbers to 66 percent and 92 percent, respectively.
Critical to any leadership team, especially in today’s environment, is the ability to use data to gain a better understanding of the issues facing the institution. Yet when asked about their most significant financial reporting challenges:
- 70 percent said they needed better dashboards and visualizations
- 63 percent wanted to be able to pull data from multiple sources into a single report
- 57 percent cited the need for access to clean, consistent, and trusted data
- 52 percent wanted to be equipped to deliver meaningful ad hoc reporting for end users
(Respondents were given the instructions to check all that applied.) These requirements are all core reporting functions, indicating that considerable improvement to address financial reporting challenges will need to be made at many higher education institutions.
Identifying the opportunities ahead
When competitive landscapes begin shifting, proactive leaders focus on initiatives and opportunities that enable course corrections now for stronger positions in the future. The Kaufman Hall report identified four such opportunities in higher education:
- Start with the business model. Diversifying or changing program offerings is being considered by 90 percent of the respondents’ institutions. However, if the core business model doesn’t appear sustainable, as will be likely for many institutions, emerging models and partnerships should be explored.
- Ground financial goals in reality. The top priority for respondents in 2019 is reducing the institution’s expenses, which was cited by 73 percent. Robust data and analytical tools will be required.
- Use financial planning and analysis to drive improvements. Long-range financial planning, which 42 percent of respondents say their institutions are not seeking to improve, will be particularly important in providing a complete picture of how financial performance will support institutional strategies.
- Modernize systems and tools to enable transparency and informed decision making. Currently, 56 percent of respondents say their higher education institutions do not use KPIs to measure and communicate financial health, up from 42 percent in the 2017 report.
The second annual report is based on data from an online survey completed in September and October 2018 by more than 250 finance and non-finance professionals from a range of higher education institutions. To download a copy of the 2019 CFO Outlook: Performance Management Trends and Priorities in Higher Education, click here.
About Kaufman Hall
Kaufman Hall provides management consulting and software to help organizations realize sustained success amid changing market conditions. Since 1985, Kaufman Hall has been a trusted advisor to boards and executive management teams, helping them incorporate proven methods into their strategic planning and financial management processes, and quantify the financial impact of their plans and strategic decisions to consistently achieve their goals.
Kaufman Hall services use a rigorous, disciplined, and structured approach that is based on the principles of corporate finance. The breadth and integration of Kaufman Hall advisory services are unparalleled, encompassing strategy; financial and capital planning; cost transformation; treasury and capital markets management; and mergers, acquisitions, partnerships, and joint ventures.
Kaufman Hall software includes the Axiom Software Suite, providing sophisticated, flexible performance management solutions that empower finance professionals to analyze results, model the future, and optimize organizational decision making. Solutions for long-range planning, budgeting and forecasting, performance reporting, capital planning, and cost accounting deliver decision support, reporting, and analytics within an integrated software platform. Kaufman Hall’s Peak Software empowers healthcare organizations with clinical benchmarks, data, and analytics to provide a higher quality of care for optimized performance and improved patient outcomes.