mission

Preparing for the Future

Future:
Planning and Decision Making

Introduction

Core Component 2a: The organization realistically prepares for a future shaped by multiple societal and economic trends.
Core Component 2d: All levels of planning align with the organization’s mission, thereby enhancing its capacity to fulfill that mission.

Societal and economic trends influence many aspects of higher education. Forces for change create challenges at times, and at other times opportunities. With respect to changes in the University’s fiscal circumstances, the University has had to respond to multi-year cuts in the state of Michigan’s allocation to the University and to the changes in its endowment portfolio (although with far less of an impact than other universities with more aggressive spending models). As an example of stepping up to new realities, in the spring of 2009 units on campus worked quickly to produce proposals for funding available as a result the U.S. president’s stimulus package.

Information technology is another significant force of change. Students arrive on campus with ever more sophisticated information technology skills and expectations that the University must meet to continue to successfully recruit the best and brightest, while also promoting and protecting academic integrity in an increasingly digital world. At the same time, new technologies significantly expand research and creative opportunities in many departments and open doors to exciting new sources of funding.

Changing demographics is yet another example of a significant force on the University. The University has benefited greatly from the numbers of international students, especially at the graduate level, who come to the United Stated looking for advanced education—just as the University had to respond to the impact of challenges in the student visa process following the attacks on the World Trade Center. The University must also be mindful of anticipated changes in the number of high school graduates over time and must prepare itself for the time when significant numbers of faculty and staff members in the Baby Boom generation are expected to retire, which will drain a great deal of talent from the University and will require serious succession planning for who will take their places and how the work will get done.

These are a few examples of the challenges and opportunities within the structures, processes, and information analysis that help the University prepare for the future. Below is a sample of the types of planning processes that the University undertakes at various levels to ensure it can address issues in a timely way and be ready to embrace new opportunities.

Executive Planning

The section on Mission provided a brief overview of the ways in which the University, particularly the provost because of his or her role as chief budget officer, imbeds planning into the budgeting process. The president and the other executive officers (EOs) meet weekly to discuss both immediate and long-term issues and plans. These meetings are occasionally dedicated solely to strategic discussion of a long-term issue or a set of issues. In addition, the EOs hold at least one retreat per year and meet with the regents for an annual informal session devoted to a long-term view of the institution. Since the executive officers bear the primary responsibility for carrying out the University’s mission and planning for its future, their frequent meeting schedule reflects the president’s commitment to planning as an ongoing activity and the recognition that circumstances in the University environment can change quickly, calling for immediate action. Below we highlight key examples of planning activities in executive offices.

The University’s Budget System

The structure of the University’s budget system, which is called the University Budget (UB) model, is an “activity-based” system first implemented in FY 1998-99. The model reflects the University’s commitment to planning at the unit levels, which was earlier described in the section on Mission. Under this model, when units increase certain activities, the resources and costs flow automatically to the units that do the work and obtain the revenue. Units that engage in activities that produce revenue receive at least the major share of those revenues. At the same time, increased activities generally create increased costs, both directly in those units and indirectly in other University administrative areas, and so associated costs generally also rise as revenues increase.

The underlying logic behind the budget model is that schools, colleges, and research units can most clearly see the costs and benefits of undertaking various activities. For example, the question of whether a school or college should increase charges to provide resources to help the unit recruit and retain an excellent faculty can be best framed and answered by the unit’s leadership. The budget model also helps local leaders and central administrators to identify potential budget threats and to envision budget opportunities. For example, a research unit that generates large increases in sponsored research will be able to reinvest the resulting revenue in unit activities that best support and further its mission.

The administrative and public goods units are handled much differently within the University budget model. These units are budgeted incrementally to cover growth in salary, benefits, and other inflationary costs. These units must then appeal to the provost for additional funding to launch new initiatives or to expand their services in meaningful ways. This helps assure that these units perform exactly the services that the provost asks of them. Since they must request additional funding to significantly expand their services, the provost can assure that new services proposed by these units are high priorities for the University leadership and do not duplicate services that are already being performed.

In the University’s budget model, the provost retains a portion of the revenues (about 5% in a typical year) for allocation to the highest University priorities. Having this level of discretionary central funding is crucial for a couple of reasons. First, this allows the provost to support important interdisciplinary and cross-unit initiatives within the academic units for which funding might otherwise be difficult to secure. Second, this funding can be used by the provost to support new services and activities by the administrative and public goods units that often benefit the entire campus. For a more in-depth exploration of the University’s budget system, see Budgeting with the UB Model at the University of Michigan.

The provost uses the budget model to develop the General Fund budgets of both academic units and service units, representing units that generate significant revenues through their activities and units that don’t. In the budget, the provost allocates funds only to units at a fairly high level, for example, to the schools and colleges rather than to individual departments, and to the executive officers rather than to the separate offices or functions in their areas. This model embraces the decentralized approach that characterizes the institution.

The provost’s office makes special efforts to create a transparent budget structure for the campus. In addition to annual publications with budgetary information, the University has a deans’ Budget Subcommittee, a faculty Budget Advisory Committee, a student Budget Advisory Committee, and a Prudence Panel, as well as offering a Budget and Resources Academy and year-round town halls.

The University’s Endowment

In 1999 the chief financial officer (CFO) of the University created a new Investment Office under the leadership of a chief investment officer (CIO). Subsequently, the CIO established and trained a team of analysts and experts by hiring junior and mid-level analysts, and working with them to develop their expertise. Under this team’s leadership, the University’s endowment grew from $2.5 billion in 1999 to $7.6 billion in 2008. The figure below shows the uses of the University’s endowment in fiscal year 2008. Although the University experienced significant losses in its endowment during the 2008-09 economic downturn, the losses were minimized due to careful investment strategies.

operating

The endowment supports core operating expenses of the University’s primary missions in education, research, and patient care. Total endowment on June 30, 2008: $7,572M. From: Financial Report 08

Among the notable changes is the way endowment is paid out to the University. At a time when the endowment returns were high, the University changed the time span for calculating the average market value for the 5-percent payout from three years to seven years. This change was made to better shield the endowment from volatility in the market, which occurred soon thereafter. A longer-term averaging of market value smoothes the payout from year to year, minimizing the impact of volatility in financial markets, and allows University operations that rely on endowment funds to confidently plan for a fixed amount of funding each year. The move to a seven-year average was one of half a dozen deliberate strategies that the University undertook over the period 2003-2008 to increase stability in as many of the revenue and cost streams as possible, knowing that the University would also experience continued volatility in the state appropriation revenue line. These strategies are serving the University well in today’s downturn, and offer an excellent example of how the University attends to current needs and plans for the future.

Unit Assessments

The provost’s office guides a range of activities that include formal planning and informal discussions on longterm goals. In addition to the central budgeting process described above, another example of the office’s planning activities is the strategic assessment of units.

The strategic assessment process provides the schools, colleges, and key administrative units that report to the Office of the Provost with the opportunity to take stock of their strengths and weaknesses, to evaluate their strategies and goals, and to receive assistance from external groups of academic leaders within the University and from other academic institutions. Through the assessment process, each unit articulates its possible intellectual directions and identifies the most fruitful ones to pursue given its individual strengths and the strengths that the larger University can add to the unit’s own resources. The process is flexible enough to adapt to the goals and operating style of individual units.

Each year the Office of the Provost asks two academic units to conduct strategic assessments; thus, each school undergoes this form of strategic assessment approximately once every ten years. When appropriate, the unit may conduct this process simultaneously with a unit-level or accreditation review, so that similar work may serve both purposes. In addition, the provost’s office generally asks two non-academic units to conduct strategic assessments each year as well.

The dean or director of the unit leads the process. The Office of the Provost provides oversight and staff support for the relevant elements of the process, working closely to coordinate activities with the office of the dean or director and with the external groups that are involved. A standard four-stage process includes establishing an information base and a shared context for discussion, unit assessment and planning, coordinating external perspectives from within the University of Michigan and from outside the University, and discussions with central academic leadership and agreement on priorities and directions. An example report is located in the Resource Room.

Information Technology

itslogoIn April 2009, the University announced a plan to merge three campus information technology (IT) groups into Information and Technology Services (ITS), a new IT organization whose mission is to create and support the learning and cyber infrastructure that will allow faculty, staff, and students to pursue learning and discovery for the next century, and to offer a shared, cost-efficient IT infrastructure to the University. Previously, as a separate group, Information Technology Central Services (ITCS) supported the academic and educational goals of the University by maintaining a modern technology infrastructure that facilitates learning, teaching and research. Through two other groups, the University’s Michigan Administrative Information Services (MAIS) was responsible for the campus administrative systems, infrastructure, and security, and the Information Technology Security Services (ITSS) Office collaborated with individual units to develop a University-wide security strategy and to implement best practices security efforts.

A primary goal of the new organization is to build an environment that supports the way the University’s current and future students learn, communicate, and socialize. Another goal is to create a robust infrastructure that allows University researchers to pull together vast stores of data that let them analyze trends and develop new business ventures. A third goal is to create an infrastructure that allows people to search, analyze, and contribute to the University’s huge and ever-growing digital repositories. This initiative is a response to the University’s evolving role in the modern information age.

Partnerships for Planning and Innovation

We highlight statewide and regional partnerships, outreach activities that the section on Engagement will also address, because they reflect important activities with external institutions in planning for the future in ways that are integral to the University’s mission, especially in its commitment to serve the people of the state of Michigan, the nation, and the world.

  • The Michigan Initiative for Innovation and Entrepreneurship (MIIE) is a consortium of all fifteen Michigan public universities to foster a new Michigan knowledge economy based on entrepreneurship and innovation. By using the considerable resources of Michigan’s institutions of higher education, MIIE seeks to enhance the state’s economic competitiveness and stimulate growth. The consortium supports individual universities in their role as local and regional economic drivers for Michigan and encourages regional collaboration between universities, foundations, economic development organizations, government agencies, and private enterprise. Working with a grant from the C.S. Mott Foundation, MIIE is running a pilot program to fulfill its mission by leveraging university assets for economic development and supporting institutional culture change.
  • The University Research Corridor (URC) is an alliance between Michigan State University, the University of Michigan, and Wayne State University to transform, strengthen, and diversify the state’s economy. The three universities support regional economic development through invention, innovation, and technology transfer, and by educating a work force prepared for the knowledge economy and attracting smart and talented people to the state. The URC partners work to improve understanding of the vital role they play in revitalizing the state’s economy. The URC disseminates information to key stakeholders, including the business community, researchers and students, policymakers, and other investors. In doing so, the universities enhance their outreach and collaborative efforts, speed up technology transfer and development, and communicate the advantages of doing business in the state.
  • Headquartered in the Midwest, the Committee on Institutional Cooperation (CIC) is a consortium of the Big Ten universities plus the University of Chicago. Established more than 50 years ago, the CIC advances the academic missions of these 12 world-class research institutions, generates unique opportunities for students and faculty, and serves the common good by sharing expertise, leveraging campus resources, and collaborating on innovative programs. Governed and funded by the provosts—of the member universities, the CIC carries out its mandates from its Champaign, Illinois headquarters. Through collaborative projects, CIC members achieve far more than any one individual campus could ever hope to do through a growing array of programs that expand educational opportunities, advance research, enhance efficiency, reduce costs, and amplify the CIC’s impact in the wider world. Collaborations exist in library collections, technology, purchasing and licensing, leadership development, course sharing between campuses via video conferencing, and study abroad. Through CIC groups, University of Michigan senior administrators meet periodically with administrators from other CIC campuses to update each other about activities, explore best practices, and discuss future challenges and opportunities in such areas as institutional research, information technology operations security, libraries, university relations, and accreditation.

 

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