Optimizing Institutional Budget Models

Strategic Lessons for Aligning Incentives and Improving Financial Performance

Topics: Academic Affairs, Budgeting, Administration and Finance, Budget Models and Cost Allocations, Debt Management, Facilities and Operations, Space Utilization, Revenue Enhancement, Tuition and Fees, Library, Research Enterprise, Strategic Planning

Lesson 3: Incorporate Performance Targets into Budget Allocations

Accounting for performance

The third lesson is to formally incorporate performance targets and institutional goals into the budget.

Through the budgeting process, leaders should agree to concrete performance targets and the funds necessary to ensure success in each of the three areas listed here.

First, although the strategic plan is the most visible expression of an institution’s priorities, the budget should refine and operationalize the strategic plan by defining tangible priorities and performance targets.

Second, budgets can enforce performance targets around student success by linking budget allocations to student outcomes or by allocating funding for performance incentives.

Third, margin targets serve to define financial performance benchmarks to protect institutional resources.

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Common Metrics for Major Expense Categories

Lesson 4: Build and Protect Strategic Reserves