User:Sam1807/Strategic planning and higher education

Strategic planning and higher education
Nearly all post-secondary educational institutions engage in processes of strategic planning. The planning processes are varied, though most institutions employ methods similar to Bryson’s (1988) model. This process involves defining a mission and values statement for the organization, followed by analyses of the internal and external environment. Based on the information produced in these first steps, strategic issues are identified and strategies are devised by which the issues can be addressed. An action plan follows which will guide the decisions and activities of the organization over the next period of time. Finally, monitoring, feedback and re-evaluation are essential components of any planning process.

The University of Minnesota (U of M) is a large, public research university, with four campuses and a total student enrollment of approximately 50,000. U of M has a high degree of “autonomy derived through the state’s constitution” (Hearn, Lewis, Kallsen, Holdsworth and Jones, 2006, p. 295). We chose to examine the University of Minnesota for its exemplary planning history and its current strategy. The institution has been engaged in strategic planning since the early 1970s (Simsek and Louis, 1994, p. 677).

U of M’s strategic planning process in the late 1970s to the mid-1980s has been characterized as a good example of a “paradigm replacement process” (Simsek and Louis, 1994, p. 683) within an institution. The paradigm introduced as part of a new leader’s strategic plan was used in part to address “anomalies that emerged from the old paradigm” (p. 685); for example, “whereas the old paradigm praised the quantity [of academic programs] that resulted in inflated size, the emerging one attempts to reduce it” (p. 685). Simsek and Louis argue that during this period, the strategy was successful—the University of Minnesota underwent “radical change in the ways that faculty in a large, public university view the nature and purpose of their institution…within a relatively short period of time (approximately a decade)” (p. 686). The authors note that this planning period “saw the beginning of a paradigmatic shift away from loose linkage and organizational anarchy and toward more trimmed down/coordinated structural arrangements” (p. 690).

A key aspect of the planned changes at U of M involved implementing a revised budget model. Like most other North American universities, U of M has been subject to declining state funding and had attempted to deal with these cuts by undergoing program planning, where “[c]olleges were given enrollment projections and expected resource targets and told to plan accordingly” (Heydinger, 1983, p. 4). The decisions made at the program planning stage were followed by the budgeting process. In the mid-1990s, however, the institution “restructured itself and revamped accounting, purchasing, and budgeting systems” (Hearn et al., 2006, p. 295). Specifically, U of M chose to introduce a tailored version of an incentives-based budget system (IBBS) that the institution termed "Incentives for Managed Growth" (IMG).

The basis for the IBBS comes from the corporate world, where many companies have implemented budgeting and planning based on a "profit centres" model. Like U of M, other post-secondary institutions have employed models based on this idea of breaking the organization into smaller units, each individually responsible for planning as well as for generating revenue and covering costs. Johnson (2006) describes the "responsibility centre" models used at three other schools. The emergence of new budgeting and planning systems at these institutions was not coincidental, but rather a response to the financial realities facing universities. Johnson argues that the budget shortfalls being experienced by many schools are long term problems created by the creation of new programs without the elimination of older programs to make resources available. To deal with this situation, universities are adopting budgeting systems more responsive to market forces.

IBBS represents a model that moves away from centralized, top-down planning and management processes, distributing the responsibility for planning and budgeting more to individual departments (Hearn et al, 2006). As such, it is ideally more responsive to the environment and better-suited to prepare organizations for the future. Essentially, IBBS returns revenues generated by individual academic units to the units, but also makes them responsible for certain costs. Thus, if a unit brings in strong revenues, it will be rewarded with greater funding. On the other hand, funding will be reduced in departments which generate lower revenue.

The decentralized approach to financial management intrinsic to IBBS demands a decentralized planning approach. Planning under an IBBS system becomes a two-tiered process. At the central administrative level, missions and goals for the institution are devised. These are then reworked into a system of rewards and consequences based on departmental performance. The rewards and consequences steer the departments in the direction desired by the institution as a whole without micromanagement of their particular strategies. A second tier of planning then occurs within the individual academic units. These units must develop strategies and action plans based on the goals set for them by the institutional administration. The action plan developed within the department is designed to maximize the probability of positive returns in terms of the rewards offered, while minimizing the likelihood of negative consequences.

How has IBBS fared at U of M? In terms of ease of implementation, Hearn and colleagues indicate that IBBS was integrated easily into U of M for two reasons. First, budgetary allocations at U of M were not strictly defined by set formulas ingrained into the culture of the institution, prior to the initiation of IBBS. This made it easier to introduce reward based models. Second, the university has a "compact" planning process wherein local planning goals and initiatives (which were also commensurate with the same for the university as a whole), were determined for each unit and conveyed to the provost. This transparent process made it difficult for a given unit to optimize itself financially at the expense of the institution's identified planning goals -- a criticism often leveled at IBBS based planning systems (Hearn et al., 2006). Has IBBS made a difference at U of M? Hearn and colleagues attribute 20% of the difference in the university's budget in the year of implementation of IBBS, directly to IBBS, but argue that this is two-fold higher than similar changes in budget allocations in other institutions that adopted an IBBS system (Hearn et al., 2006). The authors also claim that IBBS systems affect the hierarchy of information acquisition that is important in decisions and in planning (akin to environmental scanning), by indicating that this information is now made relevant to the local level, allowing for more meaningful local level decision making and planning (Hearn et al., 2006).

While Hearn and colleagues conclude that incorporating IBBS into planning exercises is still very much in flux, and that no hard benchmarks for success have been identified, they believe the system makes a difference in bridging what they describe as the "iron triangle" of access, quality and efficiency. The key reason for this is that the system is inherently transparent, allowing for visibility of local revenue generation and budgeting, and for a comparison of the same to identified planning initiatives. However, this transparency is also viewed as a major criticism of IBBS, as it inherently brings more players into the budgetary process, which, after a threshold, may hinder budgetary planning, especially in a political manner. Nevertheless, Hearn and colleagues argue that productivity and efficiency have increased with U of M's IBBS planning model, but outcomes over time and comparisons to other large public educational institutions are still pending and required to allow for an appropriate judgment of planning exercises incorporating IBBS (Hearn et al., 2006).

References:

Bryson J. (1988). “A strategic planning process for public and non-profit organizations”. Long Range Planning, Vol. 21, No. 1, pp. 73 - 81.

Hearn, J., Lewis, D., Kallsen, L., Holdsworth, J., Jones, L. (2006). “Incentives for Managed Growth”: A case study of incentives-based planning and budgeting in a large public research university. The Journal of Higher Education, 77(2): pp. 286 – 316.

Heydinger, R. (1983). Using Program Priorities to Make Retrenchment Decisions: The Case of the University of Minnesota. Southern Regional Education Board. Retrieved from http://eric.ed.gov/ERICDocs/data/ericdocs2sql/content_storage_01/0000019b/80/2d/fe/c9.pdf on November 23, 2007.

Johnson, J. (2006). Budget planning at three schools within an urban university with decentralized budgeting. Dissertation Abstracts International Section A: Humanities and Social Sciences, 67(3-A).

Simsek, H. and Louis, K. (1994). Organizational Change as Paradigm Shift. The Journal of Higher Education, 65 (6), pp. 670-695. Retrieved from http://vnweb.hwwilsonweb.com.myaccess.library.utoronto.ca/hww/jumpstart.jhtml?recid=0bc05f7a67b1790e7bf10c279ef10e1eb2b991e03d6a43eb8cedcd9d4e508dec04be099dde5d9af2&fmt=C on November 23, 2007.