Financial sustainability has become a critical concern for colleges and universities amid shifting societal expectations and rapid technological advancements. Board members for educational institutions play a crucial role in driving the future for their organizations, a task often made more challenging when expenses outstrip revenue. Given the widespread financial struggles among higher education institutions — and the macro trends that affect the educational environment, such as innovative technology — strategic sustainability planning must target the areas most likely to provide the best return on investment.
In this article, we offer insights into four such areas: digital transformation, ESG reporting frameworks, professional staffing, and process improvement.
Digital transformation is not just a buzzword; it's a necessity.
Online and hybrid learning have become integral to higher education, making access to effective digital tools an imperative. But digital transformation is about more than simply keeping up with the times or adopting the latest shiny tech object. It’s about fundamentally rethinking how education is delivered and experienced, considering student outcomes in every decision.
Adapting to Changing Learning Environments
Students have enthusiastically embraced new ways of learning that challenge traditional classroom settings; it is imperative that Boards recognize the shift toward online and hybrid learning and encourage their institutions to plan accordingly. Digital platforms enable educational institutions to offer a diverse range of courses, resulting in the flexible and personalized learning experiences current and potential students prefer.
Enhancing Accessibility and Inclusivity
Improving access to digital tools can empower educators to reach a broader student population. Technologies such as screen readers, captioned videos, and speech-to-text software open new opportunities for students with special needs. Meanwhile, online courses allow students in remote or underserved areas to access quality educational opportunities from their homes. In this regard, digital tools can spur the democratization of education by giving more individuals the chance to learn and succeed.
Data-Driven Decision Making
Digital transformation can include data analytics that help improve college and university decision making on two fronts: student performance and operational efficiency.
- Educational institutions can use data related to student performance, engagement, and retention to tailor services and course offerings, which can improve student outcomes.
- Boards and administrators can use data analytics to improve efficiency, forecast potential trends, and plan for long-term growth.
Allocating and investing resources — especially financial — toward digital transformation can yield substantial benefits to both students and institutions.
ESG reporting frameworks and standards can help satisfy stakeholders’ demands for information.
Donors, funders, and student groups are clamoring for more information on environmental, social, and governance (ESG) strategies and programs, especially in certain areas:
- Overall ESG strategy and/or degree to which environmental and social impact are ingrained in growth strategy.
- Environmental impact and mitigation strategies.
- Conflict of interest policies and procedures.
- Pay structure, executive compensation and/or pay equity.
- Transparent financial information.
According to BDO’s 2024 Higher Education Benchmarking survey, 82% of colleges and universities do not have a consistent framework for measuring and reporting on ESG-related information. Interest in ESG is unlikely to diminish as awareness of initiatives increases.
By adopting appropriate ESG reporting frameworks and standards, organizations can provide a clear, comprehensive approach to reporting their ESG strategies. Without such frameworks, stakeholders could misunderstand the institution’s commitments and progress, leading to reputational damage or a loss of trust. Respondents to the 2024 Higher Education Benchmarking survey revealed some significant gaps surrounding ESG reporting, including:
- 90% reported lacking the resources needed to gather data for ESG reporting.
- 82% reported lacking adequate technology to gather information on impact.
Adoption of appropriate ESG reporting frameworks and globally accepted standards such as those provided by SASB (Sustainability Accounting Standards Board) or GRI (Global Reporting Initiative) help improve reporting transparency and can help satisfy disclosure demands from current stakeholders while clearly articulating ESG strategies for potential stakeholders.
Flexibility in professional staffing can yield strategic benefits.
Presidents, financial officers, and provosts in higher education environments face ongoing challenges in recruiting and retaining professional-level staff. Qualified personnel can significantly enhance institutional efficiency, as well as helping reduce risk, identify opportunities that may include new revenue streams, and promote the smooth operation of the financial and administration functions. Maintaining proper staffing is critical, particularly during a period of intense change or restructuring or when responding to a changing compliance landscape.
The same creativity and innovative spirit that go into digital transformation can be used to revolutionize staffing procedures to help ensure that the institution’s needs are met. Instead of relying solely on traditional staffing, board members and administrators may consider one or more of the following solutions:
- Traditional outsourcing, where third-party external companies manage certain functions.
- Managed executive services, where a third party assigns experienced executive management to provide assurance over deliverables of certain projects or functions, working seamlessly alongside employees as part of the team.
- Interim outsourcing, where a third party takes over a function on an interim basis, while providing an infrastructure assessment and recommendations for improvement that they can then enact or hand off to the new team.
- Fractional level executive management, where employees work part-time or on a project as needed basis.
- Interim temporary staffing, where external firms place employees to cover a key position until a full-time replacement is found.
- Remote working arrangements, where employees can help reduce office expenses by working from home.
Over and above typical on-campus staffing models, these methods offer fresh perspectives and innovative approaches, as well as promoting strategic use of every dollar spent.
Improving processes can affect operational efficiency.
Inefficient or outdated processes can be costly for colleges and universities and distract from their core educational goals. On the other hand, providing the support that presidents and administrators need constitutes a direct investment in the institution’s core mission and can lead to improved efficiencies, especially in several key areas including:
- Automation: Digital tools may automate processes related to student enrollment, revenue forecasting, strategic planning, budgeting, and cash flow analysis.
- Non-core activities: Re-evaluating non-core activities such as facilities management, administrative services, and IT support can reveal overspending, duplicate services, and unnecessary services.
- Core services: Enhancing student services and data governance, particularly how critical data is leveraged and shared, can boost success rates, a key component of institutional viability.
- Shared or outsourced services: Functions like IT help desk, payroll, and accounts payable may be shared internally or with outside agencies. Taking this approach can reduce costs, remove redundancies, and use resources in the best way possible.
Including oversight of process improvement in the Board’s strategic sustainability planning can enable educational institutions to use every dollar efficiently and concentrate more on educational goals.
Board members can lead the way into a sustainable future.
Planning for financial sustainability has always been a focus for the board members of educational institutions. However, the complexities and continued evolution of the modern educational environment may have shifted the focus toward new areas for addressing institutional resilience, including the four mentioned in this article.
Boards are encouraged to consider how investments by management in various evolving use cases can benefit the mission of their nonprofit organizations, particularly during times of change and changing stakeholder perspectives. BDO’s skilled finance and accounting professionals can help provide necessary resources, whether services are provided in-house or through outsourcing. Please contact BDO to see how our Non-Profit & Education, Finance & Accounting Strategic Resources and Outsourced Finance & Accounting Services teams can help.