What Are Our Dashboard Indicators and Benchmarks?*

As noted previously, a critical element of a successful strategic planning process is the need to establish performance benchmarks, or dashboards, for an institution as well as key performance indicators (also known as KPIs) for each of its business units. This conversation about how to measure performance via metrics and benchmarks is a crucial step to ensure organizational alignment with the institution’s strategic goals and objectives. The established targets can then be measured to ensure progress toward goals over time and can be expressed either through a specific performance objective or as a period in which an activity or objective should be achieved. Benchmarks may measure financial and/or operational performance of the entire institution or a specific business unit related to key strategic business outcomes. A leading practice is to integrate the two dimensions to provide the board members and senior leadership with a comprehensive data set to assess institutional risk exposure and therefore provide an early indication as to when a midcourse correction might be required.¹

Industry professionals, when asked about the value of an institutional dashboard, explicitly emphasized that rather than fixating on any one absolute number, monitoring data trendlines over time could have much greater relevance to assessing an institution’s financial health and operational sustainability. They further observed that institutions with robust benchmarking capabilities had close working relationships among the chief financial officer (CFO), chief academic officer (CAO), and chief information officer (CIO).²

Measuring an institution’s progress toward achieving strategic goals and objectives with respect to operational and/or financial health can entail two different types of benchmarking exercises, though both are essential discussion topics for boards and senior leadership interested in ensuring the long-term viability of their college or university’s business model. A financial benchmark, such as a composite financial index (along with others³) offers boards and senior leadership the ability to measure an institution’s financial health by analyzing the institution’s operating performance and balance sheet (see “Composite Financial Index” below).⁴ It allows governing boards and presidents to set target performance ratios and provide guardrails—risk tolerance vis-à-vis operating and capital budgets and expectations for an institution’s annual financial performance, while providing the ability to assess the sustainability of an institution’s financial performance over time.

Composite Financial Index

• Primary reserve ratio: Does the institution have sufficient resources to carry out its mission?
• Viability ratio: Does the institution practice strategic debt management to carry out its mission?
• Return on net assets ratio: How well do the institution’s physical and financial assets perform financially in supporting the mission?
• Net operating revenue ratio: Is the institution able to carry out its mission without spending reserves?⁵

Operational benchmarks uniquely tailored to the institution are typically included in summary performance dashboards (see “Model Dashboard—Operational Benchmarks”), which are usually developed collaboratively by the CFO and CAO in consultation with the president and senior leadership before being reviewed with board committees and the full board. Through these discussions, the value of each benchmark to understanding the business model’s operating performance and alignment with the institution’s strategic planning goals and objectives is collectively reviewed and agreed upon. This collective understanding of what is being measured and why is an essential element of a dashboard’s utility and acceptance.

Former industry colleagues who read earlier drafts of the “Collaborative Leadership for Higher Education Business Model Vitality” report—presidents, board members, CFOs, and provosts—noted that some key considerations should be kept in mind by college and university leadership when building dashboards and using benchmarking data. They pointed out the necessity for leadership and stakeholder buy-in to the process of building the matrix. A requirement that the data be relevant to the operations of the institution’s business model—aligned with a college or university’s peer group, achievable within the available resources, verifiable, and the process transparent if its use is to have value in any institutional decision-making process.

These industry professionals underscored the need for a robust institutional research function with IT capabilities, a close working relationship with the CIO to ensure good data analytic skills and tools to help collect, analyze, and disseminate the information generated to support sustainable business practices. They pointed out that the underlying drivers to the numbers needed to be understood—for instance, direct, and indirect costs, revenue assumptions by category, new program investments, changing market demographics, and so forth—to be able to assess what the benchmark indicators are communicating regarding operating performance. Finally, these former colleagues observed that while each of these is a determinant for success, they are also reasons benchmark matrices fail.⁶

*This blog post is adapted from Association of Governing Boards of Universities and Colleges, Baker Tilly, the Council of Independent Colleges, and the National Association of College and University Business Officers, Collaborative Leadership for Higher Education Business Model Vitality: Strategic Conversations for Small College and University Governing Boards and Administrative Leaders, (Washington, D.C.: AGB, 2023), 21-24, with special thanks to Stephen T. Golding, AGB subject matter specialist.

Notes