By Ricardo Azziz | June 11, 2013
As I previously mentioned, I have been visiting with a number of departments in our university and health system over the past few months. One of the questions I hear repeatedly is “How are we expected to grow if we do not have additional resources”?
And so I thought we would try to begin to address this important question today.
Firstly, we do have resources, although not as much as we would like or need, to seed the growth that is required. Secondly, not growing is not an option.
Because not growing in this competitive environment simply translates into decreasing competitiveness, declining size, regression, and eventual irrelevance.
And our consolidation into a comprehensive research university affords us many potential avenues of growth. We can expand our undergraduate curriculum and thereby grow our student body. With our expanded curriculum and faculty we can attract extramural funding from a wider array of funding agencies. We can attract additional students with greater utilization of residence halls, extra-curricular activities, and by becoming a destination university. And through our increased diversity, we will appeal to an expanded constituency (e.g., our cooperative agreements with East Georgia State College and with Albany State University).
But let’s look at the facts.
We are in a very competitive environment…
The student enrollments of most universities in our region are growing (e.g. Georgia Southern 17%, Valdosta State 14%, Kennesaw 15%, USC Columbia 11%, and Emory 10% from 2007 to 2011 Fall enrollment periods), and we are having to compete for the same pool of qualified applicants. Competition that has been accelerated by the introduction of online and for-profit entities whose reach into our area can be from afar.
In the arena of research, many area public institutions are also aggressively growing their research portfolios (e.g. MUSC 3%, GA Tech 26%, GA State 38%, UGA 16%, USC Columbia 10% in the past 5 years in NIH funding for FY2008-2012), competing for a decreasing pool of research dollars and funded researchers.
And in the clinical arena, competition is and continues to be ferocious, as hospitals, physician practices, and health systems are amassed into ever larger enterprises with scale and negotiating leverage.
And the availability of resources has declined.
State appropriations for our university have decreased by 50% in the past 5 years. NIH funding, the principal source of grants for our university, has decreased 22% ($4.7 billion) in constant (adjusted for inflation) dollars since 2003 and is at its lowest level since 2000 (see graph). Third party payers to our health system (mostly federal and state government) are ratcheting down on payments and fees. And not even considering the many unfunded mandates of the university (e.g., consolidation, improvements in IT, increased regulatory burden, etc.) and health system (electronic medical records, trauma care and emergency services, care of the uninsured and the increased coverage that will likely accompany the Affordable Care Act, increased regulatory burden, etc.).
So how are we expected to grow?
We should consider that there are two fundamentally different approaches to growing at our institution (and in general):
- Growth through the infusion of new resources: This approach aims to ensure maintenance of the status quo, and create new and additive growth through the infusion of new and supernumerary funding (i.e. the layering of resources on top).
- Growth through a rebalancing of priorities: This approach aims to create opportunities for growth through a rebalancing of our priorities, investments and resources, recognizing that no institution can be all things to all people and resources are not unlimited.
While growth through the infusion of new resources is by far the most popular and the most palatable, in reality it is the least common. This approach to growth is less likely to be realized, particularly in a recessive environment where the availability of new funds may be limited. Enterprises, whether universities, health systems, or any other venture, do not often find themselves sitting on a pile of cash ready and available to invest into new growth initiatives. And however appealing, this type of growth does not encourage a thorough and critical examination of current priorities and imperatives, and instead assumes that everything we are currently doing is still correct.
Alternatively, rebalancing priorities and investments is the most common approach to growth. Most industries are continuously doing this. Every enterprise, including a university and a health system, is a collection of programs, initiatives, and priorities, what we can call its portfolio. In some cases the portfolio may be correctly aligned, balanced, quality driven, fully relevant, growth promoting. In others it may be unbalanced, dated and often irrelevant, not quality oriented, and counter growth.
These actions are not a foreign notion to most of us since we rebalance priorities in our personal lives and in our households every day. Continuously. Over time families find they need to invest in new areas of growth (whether their children’s education, a new home or home upgrades, etc.). Some of these are paid through savings (i.e. cash saved for new investments) or through borrowing (not as easy as it seems in today’s market and for some enterprises such as public universities), but mostly by rebalancing how we spend our household budget. Every day, in our homes we make decisions about what we will continue to pay for (education) and not pay for (a new car).
So how are we supposed to grow?
Firstly, we are identifying new resources to help seed growth across our enterprise. These include more concerted, focused and aggressive fund-raising efforts and philanthropic support (for example, our most recent gift of $66 million to MCG to fund scholarships and faculty endowments) and new targeted investment by the state (for example, the over $4 million in our state appropriations budget for FY14 to fund the growth of existing or new academic programs, and the $45 million to build a new research building). We are, and we will continue to enhance the available sources of funding.
We should note that the operative word is ‘seed’, and that these resources are meant to create the necessary infrastructure and to assist in the development of new programs, but are not generally intended to maintain the programs long-term. Long-term support will come from increased state appropriations and tuition revenue as our student body increases, from greater indirect revenue as our research portfolio grows, and from endowments as our fund-raising increases.
Secondly, and most difficultly, we are going to have to carefully examine, over the months and years ahead, our current activities and priorities. We will have to decide, working together, what we can do and what we can’t do, prioritizing our expenditures and efforts. And we will have to optimize our performance on all fronts by sharing scarce resources and reducing external vendor spend which then allows us to redeploy within. This requires high performing, collaborative and collegial teams that unleashes the innovative spirit that should be our hallmark as a university and academic health system.
And we will reinvest whatever resources are identified into new growth areas and priorities. For example, savings from administrative costs arising from our consolidation will be reinvested in supporting and growing academic programs. And we are already working to identify unique pools of resources, for example the Strategic Academic, Research & Service (StARS) Development Fund, which will complement those resources managed by various administrative leaders across the enterprise, to seed and perhaps support new growth.
Whether our growth in a particular area comes from an infusion of new resources or from the identification and prioritizing of our assets with growth potential, we need the input and then the vigilance of a world class faculty and staff. These decisions and priorities must be jointly determined, endorsed, and supported with all our expertise and our effort.
In a nutshell, while in part we will grow through the availability of new resources that will be used to seed new programs, the majority of our growth, as for most organizations and households, will come from our ability to prioritize our investments.
Next: “As a university, what are we going to look like?”