Higher education institutions are confronting a host of external pressures, including changing demographics, heightening competition, and increasing affordability and value concerns. These pressures are compelling finance teams to perform more—and more complex—financial activities. Three examples of ways in which finance team’s responsibilities are evolving are listed in the graphic below. First, finance teams are broadening the focus of cost and efficiency initiatives beyond administrative units to academic programs. Second, finance teams are more granularly analyzing the financial implications of new strategic investments before committing funding to new initiatives. Finally, finance leaders are sharing more detailed, longer-range financial forecasts in response to increased scrutiny from boards and banks.
Pressures require transformation from operational to strategic functions
University finance functions need strategic teams to conduct these expanded financial activities. However, most finance units were not built for strategic financial planning. Instead, higher education finance functions have historically focused on operational work, such as processing transactions in accounting and accounts payables. Finance leaders understand the need to build strategic finance functions that operate in parallel with these operational processes, but three systematic challenges have slowed their progress:
- First, inefficient processes and transactions consume staff time. As a result, they lack capacity to perform more value-add services.
- Second, institutions do not use data to its full potential. Despite expensive investments in new ERPs and other data tools, data is unreliable, and staff do not know how to access and analyze data to support decision-making.
- Third, staff skill sets have not kept up with current needs. Institutions require staff with both technical skills to conduct more financial planning and data analysis and professional competencies to explain complex financial information to non-financial stakeholders on campus.
Five hallmarks of effective strategic finance functions
Finance leaders need to overcome these three barriers to position their units to effectively support institutional strategy across the next decades. Specifically, the Business Affairs Forum has identified five characteristics—or hallmarks—of effective strategic finance functions, introduced in the graphic below. These hallmarks describe finance units with optimal strategic data infrastructures, staff profiles, and organizational structures.
Next, Check Out
Hallmarks of Higher Education's Most Strategic Finance Functions