Many higher education institutions have limited financial resources, with their biggest expense being payroll and related benefits. On the academic side, faculty compensation is the top expense at nearly every institution. While some administrations made the difficult decision to sunset faculty lines or do a reduction in force, others understand that the first step to help mitigate these decisions is to have a better grasp of where to allocate these valuable resources to improve efficiency and serve their students.
The Program Economic Analysis (PEA) tool from Forvis Mazars has a variety of dashboards to help you understand where to make program adjustments and help you initiate program efficiency and intentional investment to drive financial health and build a more sustainable future. Below is a brief overview of the ways PEA dashboards can help you determine the impact of your faculty lines and develop a strategic academic plan:
Course Economics
Start here, as this dashboard will provide you with margin trends for subject areas/departments. If that trend is on the decline, then it means one or more of the following:
- Revenues (likely enrollments) are decreasing and/or expenses are increasing.
- Expenses are staying the same, but revenues are decreasing.
Course Trends
Next, look at this dashboard to help you understand why your trends for a specific subject/department are headed in the wrong direction. For example, if enrollments are going down for three or more years in a row, it may indicate that expenses are not sustainable given the shrinkage in utilization.
Course Instructors
Then, use this dashboard to consider whether faculty in this program are consistently teaching fewer student credit hours than your institutional median (or expected load). If so, it is a likely sign that there are too many faculty teaching in this subject area.
If a faculty member leaves a program due to retirement or another reason, consider whether your institution could apply that faculty line elsewhere. The same dashboards mentioned above can be used to do this, as well as working in reverse.
Course Economics and Course Trends
Find the subject areas where margins are increasing. It is likely that those subject areas have growing revenue and stagnant expenses.
Course Instructors
Scan your data and see if faculty in this subject area are consistently reaching more student credit hours than would be expected. If that is the case, then it may be feasible to apply the new faculty line in this space.
Moving a faculty line will likely not have an immediate impact on your institution’s bottom line. Instead, it may mean the margin will increase for the previously low-margin subject area (Subject A) and decrease for the previously high-margin subject area (Subject B). This indicates that your institution is being more intentional with where it allocates valuable and limited resources; it also makes room for significant impacts on your margin over several years, as you avoided adding a net new faculty line (a replacement in Subject A and another to keep Subject B’s faculty above water).
This use case is one of many ways the PEA tool can help you better understand your program’s financial impact. Contact a higher education consultant at Forvis Mazars to explore how PEA can help you more strategically allocate your institution’s resources and live out your mission.