Implement Gainsharing Agreements in Your Academic and Administrative Units
Higher education business leaders can use gainsharing agreements to incentivize more prudent spending and grow central strategic reserves. Under these agreements, units split any budget surpluses with central administration. This mitigates perverse incentives for units to either amass unnecessarily large reserves or squander every remaining budget dollar at year-end.
Gainsharing benefits both units and the institution and combines the advantages of two common, more extreme approaches to surplus management—use-it-or-lose-it and 100% carry-forward.
Because units retain a sizable portion of their surplus, they are incented to find cost savings and better steward resources. Likewise, because a portion of surplus returns to the center, the institution can grow much needed funds for larger strategic priorities.
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