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As you approach the midpoint of the traditional academic year, you are likely to be thinking about your institution’s budget for the future. This work is especially important since, as we all know, higher education is facing significant challenges. Board and senior leaders need to determine if their institution is on track, requires minor adjustments, or requires more significant transformations.
Boards should be strategic thought partners in the budget process—ensuring that the short-term budget aligns with long-term priorities.
Ensure alignment: Most institutions spend considerable time outlining and detailing strategic plans that focus on the future. It is also important that boards provide oversight on short-term budgets to ensure they are grounded in reality and contain elements to support future needs. It is essential that boards require pro forma financial statements for both immediate and longer-term priorities.
Why this matters: Higher education is facing a deluge of change and new challenges. Colleges and universities need strategically engaged boards that keenly understand their unique role in the budget process. The boards should provide oversight and ask questions so the institution focuses on what matters most.
- Institutional viability is so important that AGB prioritized it in Top Strategic Issues for Boards 2022–2023.
The board advantage: Consequential, effective boards contribute significantly to strategic budget conversations because board members take the long view with external and, one hopes, unbiased perspectives.
Consider these recommendations:
Engage the whole board. Board members who are not financial experts should be engaged in overseeing the budgeting process to bring fresh, unique perspectives. They may ask the most consequential questions.
- In addition, the entire board should feel ownership of the budget.
Don’t rush the process. Start early. Governing boards that have multiple opportunities to weigh in, ask strategic questions, and become familiar with the budget will usually generate and drive more meaningful outcomes.
- Moreover, recognizing that budgets can be complex and difficult to understand, boards should review and ask hard questions about budgetary drafts at meetings before they are asked to approve the budget.
Develop and regularly review financial dashboards. Once a budget is approved, dashboards and top-line summaries make it easier to translate operational details into strategic outcomes. If the link between budget and outcomes isn’t clear, boards need to question and discuss if and how the budget will advance institutional priorities.
- More importantly, now is the time for institutions with financial challenges to examine whether they should engage in a merger, an affiliation, or other type of strategic transformation.
Consider how the budget strengthens student success. Student success is a strategic national imperative. When reviewing the budget, understand how the budget process illustrates the student success imperative.
- AGB recently launched an interactive toolkit, with support from the Bill & Melinda Gates Foundation, to help board members understand their responsibilities for overseeing student success. Information about how boards can connect student success to budget and strategic plans can be found here.
NIFO (noses in, fingers out): Before approving the budget, board members have the responsibility to ask questions about it and provide suggestions to senior administrators, and they need to respect the role of management versus oversight.
Go Deeper: Access AGB’s extensive library of practical tools and resources to help your board navigate its budget responsibilities.
- Grappling with change: Consider reviewing AGB’s Higher Education Business Models Under Stress: Achieving Graceful Transitions in the Academy, which lays out the metrics, strategies, and consequences that boards can use to measure financial strength.
- For those looking to reimagine their institutions, consider registering for AGB’s upcoming webinar, Seizing the Transformative Moment: Board Responsibilities in Leading Strategic Transformation, or working with one of our expert consultants.
- Many institutions are examining their real estate footprint. AGB has a podcast episode and an upcoming webinar to help board members understand how real estate fits into the strategic plan, and what is possible in a world of hybrid work and education.
Strategic Questions
Questions for Board and Committee Chairs
- Does the board have the requisite skills, perspectives, and acumen to oversee the financial future of our institution?
- How can our board best achieve collective “financial literacy” while recognizing that not all board members need to be financial experts?
Question for Board Members
- Is our board focused on broad, long-term, strategic issues rather than on narrow, short-term operational concerns that are more tactical in nature?
Question for Chief Executives and Leadership Team Members
- Do we need to build more time into the budget planning process so board members can offer strategic insights and perspectives?
The bottom line: The budget is a reflection of your institution’s priorities. Owning the responsibility for providing strategic oversight makes board members consequential contributors to the strategic budget planning and development process.
Thank you for your dedication to advancing higher education. My door is always open to you and your colleagues. I welcome your questions, thoughts, and suggestions.
Here’s to a peaceful conclusion to 2022 and an exciting 2023!
