No Escaping the Need to Rein in Labor Costs
Facing increasingly tighter budgets, colleges and universities are exploring any and all principled methods to control costs. Clearly, labor comprises the vast majority of costs at all institutions, often 60% to 70% of operating budgets. So, while there are other meaningful cost savings opportunities, few institutions will be able to significantly impact costs without addressing labor.
The Danger of a Reactionary Approach
While many colleges and universities are under acute pressure to realize labor savings, a reactionary approach to current financial challenges can leave institutions even more vulnerable. Responding to shortfalls as they occur leaves institutions without the lead time required to plan appropriately. Instead, executives are forced to deploy the tactics that can be implemented most quickly, not those that promise the most savings.
Further, one-time labor cuts often do not ultimately achieve the intended savings. At roughly two-thirds of institutions that cut labor, labor costs grow faster in the three years following the cut than the three years before it.
For many institutions, this vicious cycle repeats when finances worsen and another round of tactics is needed. This often leads to executives reneging on earlier promises (for instance, a promise of no layoffs or no changes to health benefits), deflating recovery efforts, and potentially drawing negative press.
Resources to Identify Immediate Savings Opportunities
Rather than reacting to tightening budgets with one-off labor cuts, institutions should create a contingency plan that proactively identifies and sequences labor savings opportunities based on potential financial scenarios. This publication offers two resources to help business executives. The first resource is a compendium of 100 tactics offering immediate, sustainable labor savings. The second resource provides guidance for creating a well-defined labor savings action plan.
Download Our Related Infographic
Our infographic provides 100 cost rebasing tactics to help institutions find principled and sustainable ways to reduce costs without painful and often ineffective labor cuts.
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Current State of Higher Education Labor Spending