The New Finance and Enrollment Partnership
The vast majority of independent, private sector, higher education institutions are more than 80 percent dependent on tuition and student fees—the exception of course being that small cadre of elite, well-endowed institutions that comprise a small portion (less than 10 percent) of private schools. Even most of the nation’s public colleges and universities are increasingly dependent on tuition revenues and often student headcount affects the allocation of state support.
Inside Higher Ed’s 2012 survey of college and university business officers reflects the top-of-mind importance placed on both the market limitations in ability to raise fees and rising discount rates. The topics are No. 1 and No.2 on the list of issues business officers are paying more attention to than they did five years ago. To no one’s surprise, increasing net tuition revenue outdistanced all other potential strategies for raising overall institutional revenue. This was especially the case for private master’s and baccalaureate institutions.
Bond rating agencies Standard & Poor’s and Moody’s are regularly weighing in on the state of the higher education industry, particularly as it relates to tuition discounting and steady enrollment streams. With these very unambiguous statistics and factors, it would make sense for the chief financial officer and the chief enrollment officer to be joined at the hip. The former’s major responsibility is in creating a budget that maximizes the institution’s ability to fulfill its mission. The latter is the institution’s major revenue generator. But close working relationships and partnerships between these two positions play out much less frequently than logic would suggest.
Needed: Two Seats at the Table
Institutional history and tradition, regardless of sector, have always had the chief financial officer “at the table,” and typically very close to the head of the table, right next to the president. In contrast, the chief enrollment officer was often found further down in the organization reporting up through a dean, provost, or vice president of academic or student affairs.
Enrollment projections, financial aid budgets, and net tuition revenue estimates were, at best, channeled up through superiors representing, often ineffectively or incompletely, the challenges and opportunities of the current budget proposal. At worst, the senior team, led by the chief financial officer, would set the budget to meet the agreed-to needs of the institution and then set price levels and enrollment goals accordingly to cover the budget. The latter exercise is the most dangerous for the institution as it means price, net price, and enrollment goals are entirely budget driven and may not reflect marketplace realities.
As the higher education marketplace has evolved from a sellers’ market to a buyers’ market, the need for more joint planning, better data tracking and analysis, and more precise projections (e.g., using econometric modeling and simulations) and mutually agreed upon, shared goals, has begun to emerge. Also, the partnership between finance and enrollment management has begun to strengthen.
This partnership must fundamentally be based on mutual trust and respect. The chief financial officer can’t be viewed or cast narrowly as interested only in maximizing revenues at all cost. The chief enrollment officer can’t be perceived as never seeing a scholarship program he/she did not love. The shared goal between finance and enrollment is net tuition revenue, or, for some residential institutions, net tuition and room revenue.
Mike Frandsen, vice president for finance and administration at Albion College (Mich.), reflects back to the first time he, as CFO, was part of a discussion on setting base level merit awards which were a few years old.
In today’s higher education buyers’ market, the need for more joint planning and shared goals has emerged.
“What became obvious quickly (and probably should have been obvious for a long time) was the importance of balancing enrollment headcount, net revenue/discount, and student quality,” he says. “These became a regular part of my discussions with the VPEM and soon became part of the conversation at the president’s cabinet meetings.”
With 80 percent of Albion’s revenue coming from student payments—including tuition, fees, and room and board—the importance of pricing is key. Frandsen works with the enrollment management head to set a packaging strategy at the beginning of the enrollment cycle, and merit awards are monitored throughout the cycle. (Albion has rolling admissions.) “Once we start doing complete packaging—merit plus need—in the spring, we monitor awards weekly,” he shares. “We have only done this for two years and it will become more valuable as we collect more history.”
“The value to me, and to all of Albion College, is that it helps keep focus on a small set of key performance metrics,” Frandsen adds. “It has helped us have an earlier view of our expected revenue, making budget decisions more timely and more accurate.”
Of course, sharing information regularly, collaborating and coordinating strategies and activities toward reaching shared goals, and joint problem solving across finance and enrollment divisions won’t happen without leadership.
Gettysburg College (Pa.) Vice President for Enrollment Management Barbara Fritze, indicates that the partnership with the CFO “needs to be every enrollment manager’s number one priority. Successful enrollment managers know the value of collaboration.” It’s a collaboration that, Fritze believes:
- Engages faculty, students, parents and alumni in the admissions program;
- Educates key campus constituencies on the enrollment traditions and future challenges, and
- Enables college committees and boards of trustees to understand enrollment policy decisions.
However, she adds, “there is no stronger partner and co-collaborator than the chief financial officer. In today’s challenging economic environment and changing higher education landscape, every enrollment manager needs the strategic thinking, insight, and partnership of a CFO.”
… building a five-year enrollment model outlining projected discount rates without having the CFO’s support.
… changing financial aid packaging parameters or merit scholarship levels without understanding the impact it would have on the budget.
… balancing total enrollment, off-campus enrollment study abroad costs, and upperclass retention rates without engaging the CFO in dialogue.
… navigating the economic downturn without considering external market assumptions from the financial markets.
‘Successful enrollment managers create a collaborative partnership with their CFO from day one.’—Barbara Fritze, Gettysburg College
As for the CFO perspective, Fritze says, imagine…
… recommending next year’s tuition increase without consulting the enrollment manager.
… undertaking a major campus renovation without the consideration of the impact on enrollment programs and admissions visitation schedules.
Of course, none of the above would work. “Successful enrollment managers create a collaborative partnership with their CFO from day one,” Fritze says.
At Gettysburg, the vice president for enrollment and educational services and the CFO are both part of an Enrollment Management Committee, which has representatives from registrar, admissions, financial aid, the budget office, college life, residential life, and academic advising to handle many of the above issues.
But, the collaboration goes well beyond this committee structure, Fritze explains. “The CFO and enrollment manager also collaborated on key presentations for the community and the board of trustees, [with] topics ranging from planning for disruptive change to exploring alternate revenue sources. Creating a collaborative working relationship not only benefits the college but also demonstrates to others how important institutional topics should be viewed through the lenses of both experts.”
Summing Up the Relationship
Critical elements of the finance and enrollment partnership include:
- Starting with mutual trust and respect.
- Having the right people at the table: CFO, director of budgets, chief academic officer, chief enrollment officer, director of financial aid, and institutional research.
- Utilizing subcommittees to advance work between meetings (e.g., pricing, retention projections).
- Sharing and owning goals.
- Collaborating on short-term and longer-term needs.
- Creating a five-year, trend-based, net tuition revenue model that is annually updated based on actual results and anticipated marketplace change.
- Managing the board’s expectations once the senior team reaches agreement.
It should be an institutional imperative to get this right.