How do you balance the need for efficiency with achieving strategic goals?

by Steve Rowe

Seeking to address tightening budgets and flat tuition growth, nearly every institution has made increasing administrative efficiency a top priority. However, with the recession now half a decade behind us, most institutions are reaching the limit on how lean their central administration can get. In many cases, excessive administrative cuts are actually hampering unit effectiveness and undermining institutional priorities.

Efficiency at the institution’s expense

While administrative efficiency initiatives can achieve near-term cost savings, too many cuts can actually increase institutional costs in the long-run. All administrative units will eventually hit a tipping point—where divesting too heavily could actually cost the institution and undercut larger strategic aims. The example below illustrates how a 10% cut to Procurement’s budget at one institution led to failures in quality control, increased risk, and a drop in on-contract compliance. And unfortunately, the resulting increase in overall spend far outweighed the short-term savings.

Recognizing the Unintended Costs of Excessive Administrative Divestment

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