Aligning and Governing AI to Leverage Resources and Enhance Results

The AGB Council of Finance Committee Chairs convened their January meeting with a warm welcome from Interim President and CEO Ellen Earle-Chaffee, who shared insights into AGB’s recent updating of its biennial report on strategic issues facing higher education leadership. Earle-Chaffee specifically highlighted the importance of technology, noting its perfect alignment with the council’s agenda on artificial intelligence (AI).

Following this, Andrew Lounder, associate vice president for programs, took the stage to provide an overview of this year’s National Conference on Trusteeship, noting that the March convening will include a three-hour session dedicated to fleshing out those same strategic issues that the AGB report has identified are top of mind within higher education.

The conversation then turned to the meeting’s primary agenda topic: aligning and governing AI to leverage resources and enhance results (evaluating performance using data analytics and AI; optimizing resources and enhancing responsiveness to students, among other actions).

David Capitano and Christine Smith from Baker Tilly US LLP, serving as the council sponsors, initiated the discussion. They reviewed a series of slides that defined digital transformation and outlined the benefits of AI and advanced analytics. They acknowledged the risks associated with AI but also emphasized its positive attributes and why institutions must deploy AI effectively in today’s environment.

Capitano and Smith discussed the various impacts of AI on institutional operations, including administrative support services, teaching support, learning support, and research. They recommended that institutional leadership focus on governance, strategy, and execution, emphasizing transparent, explainable goals and measurable outcomes. They encouraged the council members to actively participate in overseeing AI implementation at their institutions.

In addition to the Baker Tilly presentation, the council members also examined a brief white paper that underscored higher education’s role in advancing new business practices. This document covered the adoption of modern portfolio theory in the 1950s, the use of municipal debt in the 1960s to support cost-effective investment in facilities, and the application of proliferating computer technologies in the 1980s and 1990s.

The white paper pointed out that these advancements presented significant opportunities as well as substantial institutional challenges due to their nascent development stages. It emphasized that management needed to develop appropriate skill sets to leverage these opportunities, understand their limitations, comprehend the underlying risks, and devise strategies to mitigate them. The paper concluded that, despite these challenges, higher education’s business model and teaching pedagogy evolved for the better, contributing to the development of a new investment management industry, more sophisticated financial banking services, and the rapid assimilation of significant technological advancements.

COUNCIL MEMBER DISCUSSION

During the discussions, it became apparent that council members had more questions than answers about the short-term and intermediate-term impact of AI on higher education institutions. Reflecting on their own institutions, they expressed a need for a better understanding of the opportunities and risks and the critical areas of focus. They discussed the importance of identifying the processes for selecting AI tools for their institutions, understanding who should make institutional decisions, and learning any best practices in governance that could help manage institutional risk without stifling innovation and creativity. They inquired about existing guidelines and guardrails for managing AI in the current environment and where to find them.

The council members also recognized potential administrative savings opportunities through the application of AI, as highlighted in a McKinsey report published in June 2023, “The Economic Potential of Generative AI: The Next Productivity Frontier.” This report suggested that generative AI could significantly impact productivity in higher education, especially in areas like supply chain and operations, marketing and sales, software engineering, and strategy and finance, among others. ¹

However, the council members understood that AI’s implications extended beyond mere cost savings. They discussed how AI is already necessitating changes in how students learn and are taught, emphasizing critical thinking, problem-solving, and data analytics. They recognized the need to develop new continuing education programs to allow displaced workers to reimagine and retrain themselves to remain competitive in the market. They also acknowledged the importance of teaching students to become AI literate and equipping staff and faculty with the necessary tools to mitigate any potential negative impacts on society. The council members highlighted the need for institutional leadership to work closely with faculty to determine the best ways to integrate AI as a tool into the curriculum for students’ daily studies. Some council members expressed concerns about the impact of any AI governance framework on academic freedom and experimentation.

The council members agreed that AI comes with institutional risks, often revolving around the accuracy of data, cybersecurity, and intellectual property infringement. Other concerns included regulatory compliance, personal/individual privacy, workforce/labor displacement, and issues of equity and fairness. ²

Despite these risks, the members noted that experiential evidence suggests AI can empower people by improving job experience and productivity, aiding middle managers in making more informed decisions, and helping institutions reimagine their talent management practices. They discussed how AI can broaden faculty perspectives on curriculum development and teaching methods, open new fields of research, and transform student learning. ³

The discussion concluded with the consensus that the question is not if AI will impact higher education, but when, and whether adopting the role of a pioneer or a settler is the best approach. The members emphasized a balanced and intentional strategy as key to navigating the integration of AI in higher education, highlighting the importance of innovation, ethical considerations, and the continuous adaptation to technological advancements.

Questions Boards Should Ask

1. Given the current state of AI development, is any individual or group of individuals at our institution charged with thinking about its strategic applications?
2. If no individual or group is currently charged with examining AI’s utility to the institution’s strategic priorities and current operations, what steps are we taking to identify and bring in that expertise?
3. What level of execution relative to AI or advanced analytics is taking place at our institution?
4. Based on a holistic view of AI’s utility to our institution, what specific areas or applications should be implemented first?
5. As AI continues to evolve, should specific governing guardrails be put in place to protect the institution from potential risks? What might those be?
6. What are the risks we see associated with AI, and which ones will be crucial when it comes to oversight?
7. How confident are we in our institution’s ability to manage the transformative opportunities brought via AI and advanced analytics?

Stephen T. Golding is a senior consultant for AGB Consulting and the ambassador to AGB’s Council of Finance Committee Chairs.

With thanks to AGB Mission Sponser, Baker Tilly for its support of the Council of Finance Committee Chairs.

Notes