One of the more memorable—and perceptive—comments in the interviews of more than two hundred college and university board members, presidents, and faculty that formed the basis of AGB’s white paper, Shared Governance: Changing with the Times,1 came from a university president who said, “A crisis is a really terrible time to find out your shared governance system isn’t working.” As one might expect, many of the crises that have arisen on the nation’s campuses have involved finances, and the declaration by the president and board of financial exigency.2
The condition of financial exigency can arise from any number of circumstances, ranging from fundamental structural imbalances in the institution’s budget (i.e., the institution is doing too much with too little), to declines in enrollment (and thus net tuition revenue) that might be attributable to the changing demographics of the prospective student pipeline, competition from institutions (often in the form of increased merit aid), erosion of reputation or ranking, or to the fact that the institution’s programs are increasingly disconnected from student interests and/or career aspirations. Or, as the current pandemic and the 2009 global financial crisis have demonstrated, financial exigency can be the result of unanticipated external circumstances that can have a devastating effect on both revenue and expenses.
The first response of boards and presidents must focus on identifying the root causes of the situation, and on developing strategies to address them. Elimination of faculty positions—the heart of the academic enterprise—should be last on the list of solutions.
Unfortunately, many institutions are finding that the elimination of programs and positions is the only option that will rescue them from an existential threat. Sadly, the manner in which those decisions have been handled from a shared governance perspective often has caused long-lasting harm to both the institution itself and to many of its faculty. As Steve Bahls notes in his landmark book on shared governance:
Program elimination is likely to put more stress on shared governance than any decision a university makes because of the impact on faculty jobs, future students, and the perceived erosion of mission.3
To this point, it is important to acknowledge that decisions arising from financial exigency that entail elimination of positions and programs will be excruciatingly painful, and in many cases heartbreaking, not just for those directly affected, but for the campus community as a whole (and for relationships with alumni as well). In addition, when decisions related to program reduction or closure are based on enrolment demand, many institutions will discover a complicated and often unresolvable conflict between enrolment data and institutional mission, e.g., when a liberal arts college4 considers the elimination of classics, philosophy, and foreign languages because of low student interest.
In addressing financial exigency, there are a number of factors regarding the structure, practice and culture of shared governance that can maximize the chances that: (1) there is a collective acceptance of the fact that there is a problem to be solved;5 (2) the right decisions are made; (3) there is a legitimate sense of shared input and shared accountability among the stakeholders; (4) there is a collective commitment to the outcomes; (5) there is the least amount of harm possible to individuals and to the fabric of the institution.6
A collective understanding of and commitment to the institution’s shared governance structure and practice
For a shared governance structure to be effective, particularly when faced with the necessity of making critical decisions that determine the institution’s future, it is essential that all parties to shared governance7 have a nuanced understanding of the decision-making process and their respective roles in that process. To that end, those principles of practice should be codified in the institution’s various “foundational documents,” e.g., bylaws, handbooks, and policy statements.
It is equally important to periodically step back and review the institution’s governance practices in the absence of the need to make urgent decisions. Such a review both ensures that the system is healthy and still appropriate to institutional mission and values and serves as a “refresher course” for all involved. The governance documents should provide detailed and explicit guidelines regarding the faculty’s role in program discontinuance and/or elimination of faculty positions. More broadly, an increasing number of institutions are finding value in creating a decision matrix that identifies all categories of decisions and identifies the roles that each stakeholder plays in the process.8 Developing and agreeing on that matrix can minimize the likelihood of disagreements over roles when confronted with the reality of a particular decision.
Strategic and anticipatory
Boards and presidents who are truly strategic and anticipatory in their thinking are rarely surprised by what happens on their campus, though they may sometimes be surprised by when it happens. Jim Collins, in his book Great by Choice,9 suggests that those who succeed in adverse, changing circumstances are “paranoid pessimists,” that they assume that everything that could go wrong will, and they know in advance how they will manage it. In essence, what he is describing is scenario planning. The odds of successfully resolving a crisis are substantially increased when there is a plan to deal with it before it happens, and to minimize the chances that it happens.
From a financial perspective, useful scenario planning should focus on a series of questions, such as: What is our response if our revenue is reduced by 10 percent? By 15 percent? What categories of expenditure would be among the first to be reduced or eliminated? What categories would be the last? How would we make those decisions and who would be involved in making them? Are there immediate opportunities for increasing revenue? Is the reduction in revenue short-term with the expectation of a return to normalcy, and can be addressed with short-term responses, e.g., use of reserves, freezing of salaries and hiring, staff furloughs, etc.? Or is it the result of a budget model that is truly unsustainable due to changing conditions that are unlikely to abate?
Being strategic also means understanding that every decision to address an immediate challenge will have long-term consequences. For example, while the elimination of programs and/or faculty positions may solve an urgent budget problem, it may well damage the institution’s reputation in ways that will make it more difficult to attract students and future faculty.
Transparency and engagement
Faculty are justified in responding with concern to finance-related decisions (particularly those that affect positions and programs) when the institution has not been appropriately transparent regarding its budget and finances on an ongoing basis, and when the process that led to those decisions was not reflective of the faculty’s roles and responsibilities in the shared governance structure.
There are many complementary strategies to address this issue. Institutions can post their audited financial statements and other related reports online. Semi-annual presentations for campus stakeholders on the institution’s finances by the chief financial officer, focusing on the current year’s budget, assumptions about the future and identification of issues of concern are powerful tools for transparency (accompanied by the posting of the presentation on the institution’s web pages accessible to the campus community). These presentations must be thorough and candid; if there is concern about developing financial problems, it is essential that faculty are aware of that concern, and that there are appropriate opportunities to involve them in the search for solutions before the situation becomes acute.
Many institutions have budget advisory committees comprising faculty (usually elected) and sometimes staff, who can provide useful input to the administrative leadership, as budgets are developed and critical financial decisions are made, and who can serve as conduits of information to their respective constituencies. It is also increasingly common for institutions to create ad hoc cross-sector working groups, or task forces, focused on specific issues (including financial challenges) to gather and analyze information and make recommendations on options to senior administrative and board leadership.
Some institutions have found that including the chair of the faculty senate in the president’s cabinet is a highly effective opportunity for faculty input into the institution’s deliberations, as well as for building trust in a collaborative shared governance model. In addition, roughly 30 percent of independent institutions and 20 percent of publics have faculty representation—split evenly between voting and non-voting—on their boards and board committees.10
It is also important to address the fact that many—if not most—of the campus’ stakeholders outside of the senior administrative team may not have a sufficient level of knowledge and understanding regarding institutional finance to provide helpful input to the decision-making process, or to have informed responses once decisions are made. Efforts should be made to provide opportunities for stakeholder education (online modules can be a particularly effective strategy), especially for those who are directly involved in various advisory roles.
A healthy shared governance culture
Financial exigency is the most disruptive challenge that an institution can face, for it threatens the academic integrity of the institution, the well-being of its employees and, perhaps, its very existence. While formal shared governance structure and practice as codified in foundational documents are essential, the effectiveness of an approach to addressing financial exigency with the maximum chance of success and a minimum of damage to the fabric of the institution depends ultimately on the institution’s shared governance culture. That culture must be informed by trust, collaboration and frequent communication among the board, senior administration and faculty, and characterized by transparency, inclusiveness, honesty, integrity, good will and a strategic alignment focused on shared goals. The maintenance and enrichment of that culture is an ongoing responsibility of the board, the president, and faculty leadership.
David Maxwell, PhD, is president emeritus of Drake University and an AGB senior consultant and senior fellow. He is currently chair of the Board of Trustees of Grinnell College.
Endnotes
- March 2017
- For several decades, the operative definition of “financial exigency” in higher education was “a financial crisis that threatened the very existence of an institution.” In 2013, in the AAUP report entitled, The Role of the Faculty in Conditions of Financial Exigency, the term was redefined as “a severe financial crisis that fundamentally compromises the academic integrity of the institution as a whole . . .”
- Bahls, Steven C. Shared Governance in Times of Change: A Practical Guide for Colleges and Universities. AGB Press, 2104, p. 68.
- And, recently, the University of Vermont.
- One of my mantras in decades of senior administrative responsibilities, has been, “Don’t present people with the solution to a problem they didn’t know they had.”
- See also the “threshold conditions” for effective shared governance in Shared Governance: Changing with the Times, p. 12.
- The formal parties to shared governance, as identified in AAUP’s Statement of Shared Government of Universities and Colleges (1966) are the board, the president and the faculty, though many institutions are finding ways to involve the voices of staff and students in the conversations surrounding important decisions.
- See Bahls, p. 87 for an example.
- Collins, Jim. Great by Choice. Random House Business. 2011.
- Policies, Practices and Composition of Governing and Foundation Boards 2016. AGB Press, 2016. p.22.
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