Monday, October 13, 2025
This blog addresses the factors that constrain a college president from constructing an efficient and effective system to achieve its mission. This paper aims to help presidents understand the factors that stymie operational strategies and plans, and how to mitigate these constraints to improve their chances of achieving the college’s mission.
According to Peter Drucker, a noted author on management, the purpose of a manager is to provide efficient and effective management in accomplishing the goals of an organization(1). Efficiency in a college means that the process of producing a degree is at the lowest cost, as cost directly impacts tuition charges. Effective management involves choosing the best options to deliver an efficient outcome. O. E. Williamson, a noted economist of organizations, said that efficient and effective performance is not a simple task of pulling the right levers. According to him, organizations are inefficient and ineffective when common economic factors impede operational decisions.
In higher education, these obstacles are compounded by the inherent conflicts that flow from dual or shared governance of a college.
1. As O.E. Williamson, a distinguished author on organizational failure, has pointed out, a limited audit of academic and administrative programs can improve an effective process for the production of a service when those processes are regularly audited. In this case, he is not referring to financial audits but to audits of policies, procedures, and delivery systems.(2) The administrative systems, in particular IT systems, should be part of operational auditing because they control so much of the basic administrative work and the delivery of instructional services. Internal audits of academic and administrative performance are rare. Accreditation reviews are insufficient because they tend to be formulaic and fail to dig deeply into academic and operational performance.
One way to improve academic and operational efficiency is to conduct annual audits of both services that review in detail, policies, program designs, and operational performance. These audits should conclude with recommendations on how to improve efficiency and effectiveness for academic programs and IT services.
2. Assessment of outcomes, like auditing of the delivery of services, is necessary to determine if the outcomes are the ones that a) the college intended to deliver, and b) the outcomes that graduates wanted. Too often the assessment of outcomes simply involves a count of graduates which can at least show the trend in graduates in absolute numbers or the trend in the percentage of graduates over time. This type of assessment does not get at the quality of the product, such as whether students are learning anything and whether they are building successful careers based on their academic experience. There are numerous ways to examine the question of quality, but written surveys may not be the best because they cannot question a graduate in depth about their degree. It seems that a better approach would be to interview random sets of students over time to get at their understanding of how college contributed to their lives or their success in their careers.
3. Failure to estimate the cost per student or credit hour, and the cost of delivering a course, an academic program, or graduating a student. Deeply examining cost data requires that most business offices revise their chart of accounts, which are used to assign expenses. Too many charts excessively aggregate accounts. For instance, most charts do not precisely differentiate expenses between undergraduate versus graduate programs. It is the rare chart that even considers separating expenses by academic program, let alone by course.
The first level of a cost report should be the direct costs of delivering academic services to students, such as instruction, student services, and academic support. The next level of analysis is to estimate and apply administrative costs to direct costs. It is at this level where cost assignments become challenging. Revenue Cost Models (RCM) have worked with this problem for several decades. The difference between RCM and cost analysis is that the latter does not attempt to match revenue to expenses.
This data is critical if a college intends to manage its cost of operation. Since so few colleges have precision charts, it makes it difficult for a college to compare its costs with its competitors. As a result, the assessment of detailed costs must depend on the good judgment and experience of the president and the other chief administrators.
There are several requirements for establishing a cost estimation analysis:
4. Too many colleges are slow to match the outcome of their programs with changes in the prospective student markets. As a result, colleges lose opportunities to increase enrollment or worse find that enrollment slips as prospective students look elsewhere for programs to provide them with marketable skills. Since the COVID pandemic and the onslaught of the demographic crash, many colleges are becoming more adept at responding to their prospective student markets. Regrettably, too many colleges have waited to take even elementary steps to change their programs or worse they stubbornly ignore that their prospective student market has changed what it wants from a college degree.
Dealing with matching the student market to a college’s programs and its outcomes is made more difficult because many presidents too often fail to:
5. The use of monetary incentives in colleges is a sticky wicket, because they are contrary to the non-for-profit rule that profits cannot be distributed to employees.(3) However, many colleges have dodged this restriction with fancy legal footwork, but the issue remains a risk due to the college facing substantial tax issue, if the IRS rules that a bonus violates the non-distribution rule.
Because colleges generally avoid broad stroke incentives for lower-level employees in its organization, they have a difficult time targeting employees or groups to improve performance. In addition, incentives to individuals, even when it does not take a monetary form, can upset the culture because team members may look on the incentive as an undesirable change of status for a member or unwanted pressure on the team or other teams. This can often result in resistance leading to counterproductive results, such as; a lowering rather than increasing productivity.
There are alternatives to singling out a single person for an incentive, for example, incentives for team, or benefit for groups involved in a certain tasks like admissions, registration, and student advisement. Presidents who want to provide incentives to improve efficiency and effectiveness need to carefully design incentives to avoid unexpected consequences.
Dysfunctional decision-making often takes place at the interface between the administrative hierarchy and the faculty senate, which represents faculty peers. Cohen and March described the problem of leadership, where the leadership side is weak and the faculty side is strong as being enmeshed in ambiguous internal forces that confound rational decision-making.(4) Ambiguity of leadership describes why college presidents are unable to optimize decision-making but depend on arbitrary events to hopefully maneuver toward a productive decision. Although the ‘ambiguity of leadership’ paradigm superficially describes decision-making, it leads to piecemeal solutions and not coherent strategic action. Regrettably, the split between presidential leadership and faculty governance is an indicator of inefficiency and ineffectiveness in achieving its mission and serving its students. Unfortunately, leadership game playing leads to substantial delays or lost opportunities to improve efficiency and effectiveness.
Cohen and March’s paradigm suggests that ambiguity at the interface between the hierarchy and the faculty senate often forces the president into becoming a game manager who must become adept at waiting for infrequent opportunities to shape academic change.(5) This game even has a rule book – the faculty handbook – which is commonly written by the faculty, whose interest it directly serves.
Under these circumstances, presidents are unable to respond effectively to small changes in the market or student markets, and governmental regulations could damage the fiscal integrity of the college in the long run.
As a final note, the organizational failure that is evident in the interface between the presidential hierarchy and the faculty peer group will depend on the following:
Endnotes
[1] Drucker, Peter (1973); Management Tasks. Responsibilities. Practices; Harper; New York; pp. 47-48.
[2] Williamson, Oliver (1975); Markets and Hierarchies: Analysis and Antitrust Implications; The Free Press, Division of Macmillan Publishing Col; New York; pp. 146-147.
[3] Gibbons, Robert and John Roberts, editors (2013); The Handbooks of Organizational Economics; “Ownership and Organizational Form”; Harry Hansmann; Princeton University Press; Princeton; p. 908.
[4] Michael Cohen and James March (1974); Leadership and Ambiguity; Harvard Business School Press; Boston; pp. 199-229.
[5] Ibid; pp. 199-229.
