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

More Than Dollars and Cents

Executive lessons for budget model design

Budgets are “the surest single indicator” of what a university is committed to doing. Beyond simply allocating revenue and costs, budgets can reinforce and even define an institution’s priorities and commitments.

Yet many institutions’ budgets fail to do so, reinforcing the wrong objectives, or no objectives at all. In too many cases, university budgets lock in damaging cost structures, underfund strategic priorities, or create harmful campus incentives. It is imperative that institutions think critically about how their resource allocation choices reinforce (or obstruct) their priorities.

To build a more intentional budget model, institutions should consider how individual elements of their budget process can be redesigned to incentivize revenue growth and cost control, set performance targets, and fund strategic priorities. To help lead more productive conversations, this section details four lessons for designing institutional budget models.

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Budget Design Principles

Lesson 1: Let Institutional Goals Drive Revenue Allocation