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Strategic Planning and Strategic Budgeting in Higher Education

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Rational Planning for Static Institutional Models ... Budgeting Is a Process Through Which Organizational Values Become Manifest and ... – PowerPoint PPT presentation

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Title: Strategic Planning and Strategic Budgeting in Higher Education


1
Strategic Planning and Strategic Budgeting in
Higher Education
  • Presentation at
  • International Symposium on University
    Administration Methods and Models
  • Moscow, 15-16 April 2002

Aims C. McGuinness, Jr. Senior Associate National
Center for Higher Education Management Systems
(NCHEMS) Boulder, Colorado, U.S.A.
2
National Center for Higher Education Management
Systems (NCHEMS)
  • Private Nonprofit (NGO)Policy Center Established
    in 1969
  • Mission To Improve Higher Education Management
    at Institution, System and State Levels
  • Focus Use of Information to Shape Public,
    System, and Institutional Policy

3
Rethinking Policy Tools to Effect Change
From
To
  • Rational Planning for Static Institutional Models
  • Quality Defined Primarily in Terms of
    Resources/inputs (Such As Faculty Credentials,
    Libraries, Space, and Time)
  • Strategic Planning for Dynamic Market Models
  • Quality Defined in Terms of Outcomes and
    Performance As Defined by Clients (Students,
    Employers, Government, and Others)

(Continued)
4
Rethinking Policy Tools (Cont.)
From
To
  • Centralized Control and Regulation (Such As
    Tightly Defined Missions and Financial
    Accountability)
  • Financing Focused on Inputs and
    Cost-reimbursement
  • Deregulation and Decentralized Management and Use
    of Policies (Incentives, Performance Funding) to
    Stimulate Response to Public Priorities
  • Financing Focused on Return on Investment,
    Performance and Public Priorities

5
Strategic Management Cycle
Strategic Management The Allocation of Resources
to Programmed Activities Calculated to Achieve a
Set of Goals.
6
Strategic Management
  • Definition
  • Allocation of Resources To Programmed Activities
  • Calculated To Achieve a Set of Goals.
  • Characteristics
  • Dynamic Ever Changing
  • Integrated Planning, Assessment, Resource
    Allocation
  • Iterative
  • Takes Place Over Time
  • Involves Continuous Interaction Among
    Institutional Levels

7
The Management Cycle in a Public Institution
State
Planning
Institution
State
State
Resource Allocation
Assessment
Institution
Institution
8
Planning
  • Making Decisions About Organizational Priorities
    That Specify What Changes in Intentions,
    Competencies or Behaviors That the Organization
    Will Pursue
  • The Mechanism To Affirm Organizational Values and
    Methods By Which They Are Identified

9
Approaches to Planning
  • Long Range Planning
  • Market Driven
  • Strategic Planning
  • Linear
  • Adaptive
  • Interpretive

10
Approaches to Planning
Defined Goals
Linear
Goals Are Market-Driven
Adaptive
Defined Goals
Interpretive/ Strategic
11
Strategic Planning
  • Planning Must Result in DECISIONS
  • Planning is Fundamentally a CHANGE PROCESS

12
Strategic Planning
  • Objectives
  • Make Decisions (Now) Concerning the Desired
    Future
  • Develop Optimal Relationship Between the
    Organization and Its Environment
  • Provide Unity and Direction to All Organizational
    Decisionmakinga Context for Operational Decisions

13
Institution - Environment Connection
Institution
Environment
Image
Competitive
Values
Climate
Demographic
Facilities
Programs
Technological
Strategic Decisions
People
Legal
Economic
Social
Finances
Values
Political
14
Strategic Planning Levels of Strategy
Level I Strategic Themes
External Environment Opportunities Threats
Mission Clientele Program Mix Comparative
Advantage Assets
Mission Clientele Program Mix Comparative
Advantage Assets
Strategic Themes
1. Do we want to change? 2. Must we
change? 3. Can we change?
Organizational Culture
Match
Internal Environment Strengths Weaknesses
WHO WE ARE
WHO WE WANT TO BE
15
Levels of Strategy (Continued)
Level IITactical Themes
Level IIIOperational
Behavioral Outcomes
Financial Enrollment Admissions Organizational Hum
an Resources Facilities
Development of Strategic Plans - Academic
Units - Support Services
Financial Enrollment Admissions Organizational Hum
an Resources Facilities
What Concrete Changes Will Result?
Planning Guidelines
Who will do what? How is it carried out?
16
Focus of This Presentation
  • Level I - Strategic Planning Leading to Strategic
    Themes
  • Linking Strategic Themes to Strategic Budgeting

17
Focus Use Information to Distinguish Among
Realities
Aspirations
Myths
18
Strategic Decision Areas
Basic Mission Clientele Program/Service
Mix Comparative Advantage Assets Objectives
Basic Purposes of the Enterprise and its Guiding
Principles for Behavior Target Audiences of the
Institution Program Offerings and Priorities of
the Institution Differential Advantage
Sought Over Other Organizations Engaged in
Similar Activities Changes Needed in Human,
Physical, Information or Intangible Assets of the
Enterprise What the Organization Must Accomplish
in Order to Move from Existing to Desired State
of Affairs
19
Strategic Plan
WHO WE WANT TO BE
WHO WE ARE
External Environment
Opportunities Threats
Mission Clientele Program Mix Comparative
Advantage Assets
Mission Clientele Program Mix Comparative
Advantage Assets
Strategic Themes
1. Do we want to change? 2. Must we
change? 3. Can we change?
Organizational Culture
Match
Internal Environment
Strengths Weaknesses
20
Strategic Analysis Paradigm
Environmental Opportunities, Threats, and
Constraints
STRATEGIC VISION
  • Mission
  • Clientele
  • Program/Service Mix
  • Comparative Advantage
  • Assets
  • Objectives

Organizational Strengths and Weaknesses
MatchingProcess
Organizational Culture
21
External Environmental
  • Threats and Opportunities

22
Major Types of External Forces
  • Economic
  • Social
  • Technological
  • Political/Legal
  • Demographic
  • Competitive
  • Educational
  • Institutional Priorities

23
Internal Environment
  • Institutional Strengths and Weaknesses

24
Internal Resource Categories
  • Human
  • Financial
  • Physical
  • Programmatic
  • Image
  • Climate

25
Criteria for Evaluation of Program/Service Mix
  • Quality
  • Mission
  • Quality of
  • Faculty
  • Students
  • Library Holdings
  • Facilities and Equipment
  • Centrality to Mission

26
Criteria for Evaluation of Program/Service Mix
  • Need
  • Cost
  • Present Student Demand
  • Projected Student Demand
  • Demand for Graduates
  • Location or Comparative Advantage
  • Cost/Revenue Relationship
  • Other Costs/Benefits

27
Organizational Culture
  • OpennessSharing of Information
  • Decisionmaking Styles
  • Institutional Characteristics/Behaviors
  • Common Responses to Environmental ForcesTypical
    Strategies
  • Decisionmaking Processes

28
Critical Questions
  • Do We Want to Change?
  • Are We Forced to Change?
  • Can We Change?

29
Strategic Themes Product of Strategic Planning
Process
Characteristics
  • Organization-Wide Issues
  • Cannot Be Addressed by a Single Unit
  • Cannot Be Identified by Finding Common Elements
    in Unit Plans
  • Long-TermCannot Be Resolved in a Single Year
  • Require Responses Through Basic Organizational
    ProcessesAre not Programmatic Add-Ons

30
Important Distinctions
  • Distinguish Between University-Level and Unit
    Level Strategy
  • University Level Focus on Primarily on Ends -
    What
  • Strategic Themes Developed at Level I
  • Tactical Themes at Level II
  • Unit Level (Faculties, Departments and Other
    Units) Focus on Means - How at Level III
    (Operational)

31
Distinctions (Continued)
  • Plan in the Large But Implement in the Small
  • Strategic Planning Should Provide a Framework for
    a Multi-Year Change
  • Actual Changes Take Place Through Thousands of
    Small Decisions Consistent with the Strategic
    Themes Taken By Individuals and Units in Highly
    Decentralized Environment

32
Budgeting
  • Definition and Overview

33
What Is Budgeting?
Making Decisions That Distribute Resources To
Enable Action
34
What Is Budgeting? (Cont.)
  • The Budget Is the Primary Device by Which an
    Organization
  • Carries Out Its Plans
  • Signals Its Priorities
  • Other Mechanisms Include
  • Organizational Alignment
  • Regulation/procedures
  • Accountability
  • The Budget Is the Primary Means for Creating
    Positive Incentives for Change

35
Strategic Management Cycle
Strategic Management The Allocation of Resources
to Programmed Activities Calculated to Achieve a
Set of Goals.
36
Linking Planning and Budgeting
  • In the Absence of a Planthe Budget Is the Plan
  • If a Plan Exists and It Is Not Closely Linked to
    the Budget, the Budget Is Still the Plan
  • Therefore, If a Plan Is to Be Implemented, There
    Must Be a Strong Linkage Between the Plan and the
    Budget

37
Basic Points About Strategic Budgeting
  • Point One
  • Efforts to Change or Improve Are Affected by
    Resource Allocation Approaches
  • Used by the Institution Itself
  • Employed by the State and Other External Revenue
    Sources

(Continued)
38
Basic Points (cont.)
  • Point Two
  • The Approach to Resource Allocation Is the
    Strongest Lever for Change Available to
    Decision-makers Either Inside or Outside the
    Institution

(Continued)
39
Basic Points (cont.)
  • Corollary
  • All Approaches to Resource Allocation Create
    Incentives for Particular Kinds of Behavior
  • Central Question
  • Do These Incentives Encourage or Impede the
    Changes Desired?

40
Basic Points (Continued)
  • Point Three
  • Strategic Budgeting is Not Only About Money. The
    Most Important Decisions About Related to the
    Institutions Assets - Especially Human Resources

41
Strategic Versus Operational Decision-making
Strategic Decisions Focus on the
  • Creation and Maintenance of Institutional
    Capacity
  • Utilization of that Capacity in Ways Designed to
    Accomplish Specified Purposes

Operational Decisions Focus on the
42
Basic Budget Trade-Offs
Costs
Revenues
Revenue Sources
Unit Cost
Total Rev
Total Cost
Quantity
Quality
Utilization
Student Fees State Budget Govt. Grants Private
Gifts Endowment Sales Services Other
Revenues Reserves
Assets Personnel Facilities Equipment Collection
s Students Finances Program Consumables Servic
es Supplies Utilities Contingency New
Initiatives

43
Key Points
  • Many Universities Only Attempt to Increase
    Revenues (Right Side of Chart) and Do Not Address
    Need for Fundamental Creation and Maintenance of
    Assets (Left Side)
  • Major Changes in Asset Structure Are Rarely Made
    in the Short-Term But Require Step-By-Step
    Changes Over Several Years

44
Key Points
  • To Ensure A Link Between Strategic Planning and
    Strategic Budgeting, Funds Should be Budgeted for
    Contingencies and New Initiatives (Right Side of
    Chart) Linked to the Strategic Themes for Change

45
Summing Up
Strategic Planning Making Decisions on
Organizational Priorities That Specify What the
Organization Intends to Do or Be. Planning Is a
Process Through Which Organizational Values Are
Affirmed and Methods Expressing Them Are
Identified.
46
Summing Up
Strategic Budgeting Making Decisions on
Organizational Capacity That Specify How
Resources Will Be Distributed. Budgeting Is a
Process Through Which Organizational Values
Become Manifest and Opportunities for Expressing
Them Are Created.
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