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With Clarity for All

March 2014

By Howard Teibel and Gail Gregory

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Use a process of leadership, alignment, and interactive communication to ensure that senior colleagues understand the financial implications of institutional priorities—and the decisions required to stay clear on a shared strategy.

Tackling transformational priorities while upholding the institution’s mission, core values, and strategic goals is becoming Job No. 1 at most colleges and universities. Such big changes are bound to bring about pushback from various stakeholders. 

Before any real change can happen, campus leaders need to make sure they are speaking the same language as their colleagues, and that all who are involved in the change initiatives develop a collective sense as to what needs to be accomplished. 

In our work with senior leaders at colleges and universities of various types and sizes, we’ve observed that at the heart of influencing others toward positive outcomes, it’s not so much about what you say or do, but how others interpret and act on the information you share. (See sidebar, “Lift Communication to a Strategic Level.”)

The big issues can’t be solved in isolation. Affordability, value, and sustainability need to be understood, discussed, and developed into a shared leadership strategy. As the chief business officer of your institution, solving these seemingly intractable challenges requires improving the way you communicate outside the confines of the business office. It begins with taking responsibility for ensuring that there is a solid grasp of the issues among three key leadership groups—faculty, administration, and the board.

From Traditional to Tactical

We’ve seen in recent years that while the traditional responsibilities of the CBO that focused on the mechanics of the finance side of the house—managing cash, debt, and receivables; paying bills; and balancing the budget—are still critical functions to ensure a strong and sustainable institution, today’s requirements are much broader. CBO roles often include being an excellent manager of people, translator of complex financial information, and innovator of department restructuring for greater efficiency. 

The more-limited financial role of yesterday only touches the surface in today’s volatile higher education market. At the same time, a more expansive role almost by definition means that responsibilities cross division and campus lines, requiring the kind of close collaboration and contact to keep the air clear and the vision sharp. 

Our work, along with recent interviews with institutional leaders, provides insight into methods of strategic communication that are key to establishing and implementing shared priorities.

Splitting the Difference

A strategic partnership between the chief academic officer (CAO) and the CBO is increasingly seen as critical to the success of a college or university. (For examples of effective CAO-CBO efforts, read “A Solid Front,” and “Data Point the Way,” in the March 2013 Business Officer.) These two roles have broad responsibility across campus, and the tenor of the relationship can have significant impact on how well the cabinet or executive team functions together. Yet, differing styles, skill sets, and communication techniques must often be navigated to reach an understanding about respective responsibilities—and, ultimately, to the kind of mutual trust that makes for strategic leadership. 

Bridging communication styles at Emory University. Referring to the CBO-CAO relationship at Emory University, Atlanta, Michael Mandl, executive vice president for business and administration, says, “The two of us have a shared understanding of Emory’s mission and vision, including what we are trying to accomplish as an institution.” Agreeing wholeheartedly, Claire Sterk, Emory’s provost and executive vice president of academic affairs, adds: “We bring together our individual expertise, and collectively accomplish what individually we could not.”

A focus on mission. This ability to have an outward focus on the institution’s mission is a critical component to breaking down a silo mentality. Emory’s mission is “to create, preserve, teach, and apply knowledge in the service of humanity.” In keeping with its philosophy to achieve its mission while meeting high standards of integrity and excellence—and believing that each person and every level of scholarly activity should be valued on its own merits—Emory aims to support scholarship with the following:

Certainly, in addressing such goals, CBOs and CAOs have unique expertise as well as different priorities within their own areas. Yet, the work of each division has impact campuswide. A lack of regular communication between the administrative and academic areas can lead to a lack of sharing the necessary data for informed decision making. 

In these times of increased competition, programmatic reviews, and changing student demographics, no one can afford to make decisions without all the relevant information. Decisions that appear to reside in academics, such as eliminating or adding a program, can have profound financial impact. Conversely, decisions that appear to reside in finance and administration, such as facilities outsourcing, also impact the academic or student experience. Recognizing these overlaps and making sure both sides understand the details of these initiatives is key to anticipating a positive or negative outcome. 

Focusing on the collective good also requires rethinking resource allocation. Mandl explains, “We work hard to put all the resources on the table and come to an understanding of how they should be best deployed across divisions to better achieve the goals of the institution.” By keeping the focus on the mission, rather than justifying or holding onto scarce resources, Emory’s leadership is able to conduct a more transparent dialogue about complementary and competing needs across campus. 

How does this collaborative relationship begin? For Mandl and Sterk, it starts with mutual trust and respect. This ultimately leads to creating a collaborative atmosphere with frequent dialogue. The two leaders schedule regular as well as impromptu meetings, both formal and informal. They touch base regularly to solicit input and to make sure they aren’t missing any critical piece of information. Both conduct frequent joint meetings with other stakeholders, as well as a weekly breakfast. 

This collaboration is not lost on those who report to them. Sterk believes that being a role model at the top positively influences the overall sense of collaboration across their organizations. Additionally, there are several positions at the VP level that report jointly to both of them. 

Formally, the vice president for information technology and the vice president for research administration both report jointly to the provost, the executive vice president for business and administration, and the executive vice president for health affairs. For this approach to be successful, the individuals have to bring people together from across the entire institution, while at the same time supporting forms of a decentralized management structure. The reality is that joint reporting gives great influence to the people involved as well as strength across their domains. This is because, says Mandl, the key leaders—regardless of where they sit—are talking to each other in advance. Even those in positions that do not have joint reports are encouraged to treat other senior leaders as key partners and constituents. 

Mandl and Sterk feel that these joint reporting relationships work well because the individuals involved can see that senior leaders are approaching Emory’s mission in similar ways.

Focus on shared goals. What about those leaders in your institution who are resistant to moving the relationship forward toward a more strategic partnership? Sterk and Mandl believe it all goes back to the common mission. Focus your efforts on the goals you share. Reset the belief that there is competition between and among divisions, and emphasize that it’s in the best interest of the institution to establish a shared vision between academics and administration. 

Sterk and Mandl admit they don’t always agree. Collaboration is important, but that doesn’t equate to 100 percent consensus. Both observe that healthy conflict and disagreement only reinforce trust. When they can’t find common ground, both defer to the person with expertise in the particular area under debate. In those situations, they realize the importance of showing a willingness to listen to those on the ground who may understand the issues better. 

For example, notes Sterk, when units with a strong academic mission, such as the museum or the library, present a mix of academic and infrastructural needs, an effective approach is to balance such needs in a comprehensive way. As a result, developing alignment in both domains drives priorities.

Counselor to the President

A key part of the CBO’s world is to identify perceived risks, and help the president mitigate such vulnerabilities. The president in turn needs the CBO to play an active role in communicating relevant facts to internal and external audiences, while displaying positive energy, creativity, and leadership. The CBO must use language that all stakeholders understand and focus on communicating facts to motivate and drive change.

Building a common language. Jack Rainey, vice president for finance and administration at Caldwell College, Caldwell, New Jersey, points out that in spite of President Nancy Blattner’s background as an English professor and his as an accountant, they have made a conscious effort to forge a common language. As a result, Rainey has reduced his reliance on financial jargon when communicating complex financial data to the president and her cabinet.

Blattner explains that these senior leaders bring varying levels of financial acumen, with one person a certified public accountant, while others bring less financial expertise. Because the cabinet makes decisions on a consensus basis, it is the president’s expectation that Rainey present financial information such that everyone can understand it and come to an informed opinion. 

In a similar way to Emory’s leadership team, Blattner and Rainey emphasize the importance of mutual respect and trust. Rainey is confident that his colleagues on the cabinet feel a comfort level with his financial reporting that allows them to ask for additional clarification until they understand the issues at hand. And cabinet members acknowledge that collaboration does not imply unanimous, continuous agreement. The process does, however, prevent disagreement from becoming contentious.

A challenging time. Blattner and Rainey forged their partnership during a very challenging financial situation, which came to a head within days of Blattner’s arrival at Caldwell, on July 1, 2009. 

A small private school with approximately 1,600 undergraduates and a modest endowment, Caldwell had been hit particularly hard by the financial crisis of 2008, a situation made even worse by a variable-rate bond issue that created further negative impact. On June 30, 2009, Caldwell received a “below standard” financial ratio score from the Department of Education (ED). On a scale of –1 to +3
(where 1.5 or better meets standard), Caldwell received a score of 0.5. In addition, the June 12, 2009, issue of the Chronicle of Higher Education published an article listing 114 schools they considered to be fiscally insolvent. Caldwell was on that list, based upon the Department of Education’s financial ratios.

Blattner approached the crisis with transparency and collaboration. On her fourth day in office, she and Rainey (who had met only once before, during Blattner’s recruitment) sat down with the board chair and vice chair. They informed the trustees of the ED’s score, the Chronicle article, and the fact that they anticipated a $1 million operating budget deficit. They then committed to submitting a balanced budget by the first board meeting in the fall. 

Blattner and Rainey met repeatedly over the summer with the cabinet to determine how to solve the financial problem, with Blattner also meeting individually with each board member to apprise him or her of the situation. In the fall, Blattner and Rainey met with faculty and staff to inform them of the college’s precarious financial situation. They focused on what the financial data meant and the measures that were going to be taken to balance the budget. After people had an opportunity to digest the information, additional meetings allowed for further questions and answers that continued to clarify the details. 

Some of the questions voiced in the meetings included the following: Is Caldwell really facing a financial crisis? Will there be a reduction in force? Will academic programs be cut? Is the college going to declare financial exigency?

Ultimately, the college took the following actions: established a salary freeze during FY10 and FY11; took a reduction in force of 15 staff members; reduced pension contributions from 8 percent to 3 percent (with contributions fully restored to 8 percent on Jan. 1, 2014); reduced accrued vacation and sick pay; and sequestered special project funds from multiple departments. 

In retrospect, Blattner and Rainey acknowledged that the situation was unimaginably difficult, but in the end they felt that communication, transparency, and collaboration were key factors in Caldwell’s ultimate rebound (they expect their latest ED financial ratio score to be 2.2). Along the way, the board was supportive and members acted as true partners. “There is no way to describe how difficult this was to live through,” says Blattner, “but the campus really pulled together to get it right. In talking about it again, it reaffirms our belief to continue being transparent.”

The strategic communication and collaboration around stabilizing Caldwell’s finances has had more far-reaching effects. In December, the State of New Jersey approved the college’s petition to change its official name to Caldwell University. “As the culmination of almost a two-year process, changing our designation and name … is the fulfillment of a vision that many on the campus have shared for the past few years,” says Blattner. “Our new name signals the academic excellence for which Caldwell has become recognized. This new designation will be officially celebrated in 2014 during the institution’s 75th anniversary.” 

The change in designation reflects Caldwell’s offering of a breadth of undergraduate degrees and the required number of graduate programs at the master’s and doctoral level to meet the state definition for a comprehensive university. Offering graduate programs for more than 20 years, Caldwell began its signature doctoral program in 2009. Furthermore, the institution’s faculty credentials, library holdings, and resources dedicated to graduate programs are in alignment with expectations of a university.

The Board and CBO

Another critical role that requires a high level of “smart communication” is between the CBO and the board. Being responsible for fiduciary oversight of an institution’s strategic direction, the board both gives and takes direction. Many board members have sophisticated corporate finance backgrounds, and this serves both as an asset and a challenge to institution CBOs. The board members understand the need for positive net revenue but often are mystified as to why it’s so difficult to make structural and cost-effective saving decisions. 

At the heart of demystifying this challenge is the CBO’s ability to speak the language of governance, while educating board members as to the layers of decision making that typically characterize higher education.

Board and CBO perspective. James Stalder, chairman of the finance committee and vice chair of the audit committee at Carnegie Mellon University (CMU), Pittsburgh, knows the challenges of governance all too well. Since the 1970s, he has served on more than 50 boards, for private, public, and charitable institutions. 

The university’s vice president for finance and chief financial officer since May 2013, Amir Rahnamay-Azar, is gaining perspective in his new role, but brings with him many years of business and finance experience at previous institutions. 

In Stalder’s experience, one commonality trumps all others in serving effectively on the board: the monitoring of the entity’s ongoing financial viability. This poses the challenges of (1) ensuring the quality and accuracy of the financial data, and (2) effectively communicating this financial information to a diverse group of trustees. 

In referring to his dissertation in support of his doctorate in higher education management, earned at the University of Pennsylvania, Rahnamay-Azar adds further nuance to the question of how to run an institution like a business, while maintaining the integrity of an academic focus. While written a number of years ago, this dissertation excerpt still reflects Rahnamay-Azar’s thinking:

“Costs are escalating, funding resources are flat, and consumers expect even more of higher education but voice concerns about affordability. Concurrently, they expect academia to remain pure, free of any businesslike characteristics. In short, there is an anticipation that universities will remain preeminent for quality but unsullied by successful industry practices. They are to go forth and be fiscally prudent, but not in a way which places economics before academics. This is no small challenge. Nor is it anything new. Educational institutions have struggled for decades to better manage resources without becoming so bottom-line focused that they impair their mission of providing the best of academia.” 

For Rahnamay-Azar, this is at the heart of the CBO challenge and speaks to what it means to be of service to mission. 

Engaging with numbers. With boards often made up of 20 to 40 or more members with a broad range of backgrounds, skills, and interests, it is unrealistic to expect that all board members will have an equivalent understanding of the financial drivers of the institution. “It’s just a reality that nonfinancial folks don’t necessarily like engaging with numbers,” says Stalder. “There are even some presidents who don’t sufficiently understand the importance of deconstructing the numbers and analyzing them strategically.” It’s all the more important, then, for the CBO to ensure that all board members have a clear appreciation of how strategic choices affect the financial standing of the institution.

The multifaceted CBO. When it comes to facilitating effective governance, the formula for the “perfect” CBO is simple yet difficult to find in one individual. This person must be part CFO, COO, and organizational human resources consultant. He or she must possess exceptional financial skills; be an effective communicator in writing and speaking; and, most importantly, demonstrate the intangibles of being able to influence stakeholders to reach agreement on all matters that could have a significant financial impact on the institution.

Given the broad nature of these competencies, Rahnamay-Azar approaches this challenge from the point of view of partnership. It starts with building trust and transparency, and is the mind-set that gets him to spend more time getting to know faculty, deans, staff and board members on their own turf. “I can’t sit in my office, think alone, and hammer it out,” he says. “That’s a recipe for failure.” 

Tone at the top. Stalder’s experience shows through in this statement: “I have a very strong belief that the financial or business officer must be a critical part of the leadership team of any successful organization. If the president is uncomfortable with that person at his or her right hand at all times, it’s the wrong person in that role. The teamwork between president and CBO is critical. Consistent with corporate America, it’s all about ‘the tone at the top.’ To make the CBO effective, it must be clear to all relevant parties that he or she speaks for the president.”

Because finances are critically important to almost every strategic decision, both Stalder and Rahnamay-Azar believe the CBO needs to be present and participate in all meetings that have strategic financial impact. A mistake that can easily be made is to launch an initiative where the financial consequences are not completely understood by all board members. It’s the president who creates this environment that ensures the CBO is present in strategic conversations that have material financial consequences. 

What role should CBOs play in helping the board be effective stewards? First, CBOs should participate in conversations and be knowledgeable about all new initiatives that have strategic importance so they can analyze and evaluate these projects from a strategy/financial perspective. 

Secondly, CBOs need to clarify the technical and financial challenges associated with strategic investments. For example, in October 2007, the Connect Africa Summit (a United Nations development project) recommended the establishment of five Centers of Excellence in each subregion of Africa. These centers would support the development of a critical mass of science and technology skills required for the continent’s development.

As part of the effort to fulfill this ambitious goal, the Government of Rwanda strategically targeted Carnegie Mellon University to establish and operate a master’s degree–granting program in Rwanda because of the institution’s strong culture of research and innovation. The CBO (Rahnamay-Azar’s predecessor) played a critical role in outlining for the board the financial risks and rewards associated with such initiatives. 

Looking ahead, Rahnamay-Azar notes that Rwanda is just one example of the global set of initiatives in which Carnegie Mellon is invested. When it comes to ensuring the financial viability of complex—and often international—programs, his view is that people “on the ground” must display their entrepreneurial talents to move these projects forward. “There will always be an appetite for more resources than we have available.” he says. “My job is to help our leadership prioritize and manage what is consistent with mission, while making sure these projects remain financially viable over the long term.”

When a significant investment is being contemplated, setting the right expectation is key for the board to stay positively engaged in the execution of these “big ideas.” At the same time, major initiatives need to align with the university’s vision: “Carnegie Mellon will meet the changing needs of society by building on its traditions of innovation, problem solving, and interdisciplinarity.” 

Finally, chief business officers should actively reach out to each board member to assess that individual’s knowledge and comfort level with, for example, the complex issues of enrollment, tuition discounting, retention, capital planning, and cost management. By reaching out to individual board members, the CBO will also find out what professional skills each board member can bring to the table. Having this knowledge allows the CBO to leverage the board members’ skills in critical areas where they apply. Stalder described a trustee with a very successful human resources consulting business, who was able to share with a CBO some expertise surrounding a sensitive personnel issue.

“Ultimately,” says Stalder, a first-class CBO “needs to be a dynamo and go out of the way to help his or her board members understand the complexity and importance of the financial issues likely to have a major impact on the financial health of the organization.” Rahnamay-Azar agrees, noting that “an exceptional CBO must invest sufficient time to determine the individual needs and understanding of the members and accept this challenge as an integral part of the core responsibilities of running the financial operations of the institution.”

Persuasive Words

As explained by these senior leaders, achieving initiatives and goals aligned with the institution’s strategic mission involves candid and clear communication with and by the CBO from the discussion’s outset. That dialogue begins with building strong understanding and consensus among the cabinet or vice presidents prior to approaching the trustees about any given issue. Decisions go dramatically better when the board observes that the president, CBO, and other VPs are on the same page regarding the challenges facing the institution.  

The CBO plays a central role in translating for the president, faculty, administration, and board the risks and opportunities inherent in each scenario. By recognizing the different tone, use of language, and level of detail required for each constituency, skilled CBOs tailor their messages to each audience and show a genuine interest in stakeholders’ respective points of view, while demonstrating a commitment to move initiatives forward. 

Although the process may resemble repeated polishing of the same smudged glass, the ability to move your messaging from opaque to transparent can rally the influence of those at the top—bringing clarity to the larger community such that all may more easily see how to pull together and be part of the strategic solution. 

With a common goal, the various stakeholders can actually leverage their differences to arrive at a better outcome. As Emory University’s Sterk puts it, when talking about her work with Michael Mandl, “We push each other’s creativity. Our different perspectives trigger different ways of looking at issues, a process that we welcome.” 

HOWARD TEIBEL is president, and GAIL GREGORY is senior consultant, Howard Teibel Inc., Natick, Massachusetts. 

Related Topics

In these times of increased competition, programmatic reviews, and changing student demographics, no one can afford to make decisions without all the relevant information.

Many board members have sophisticated corporate finance backgrounds, and this serves both as an asset and a challenge to institution CBOs.

The CBO plays a central role in translating for the president, faculty, administration, and board the risks and opportunities inherent in each scenario.