RCM Budget Models -- who wins and who loses?

[AJ_Katz]

There's talk on campus about adopting a customized RCM budget model.  There are grumblings among the faculty about how this will be bad for the department.  But it's really not clear how this will ultimately affect the department budget.  Which departments are the winners and losers under these types of models? 

It sounds like it could slowly edge out departments that struggle or are unable to obtain large grant funding or student numbers, some of which simply might not have opportunities for grant dollars or access to a large student pool.  But that remains unclear. 

If your university has gone through a shift to an RCM model, could you give some insight as to how this has affected your department or other departments on campus? 

[mamselle]

I'll confess, no idea what RCM means.

Can you expand the anagram, please?

Thanks!

M.

[ciao_yall]

Revenue Cycle Management?

I think they are pushing departments to be more aware as to how they impact the college's overall budget. So does that department generate a surplus or a deficit?

Probably no big changes - before, departments with large enrollments that generated a lot of external grant funding tended to be looked upon more favorably than ones with small enrollments and little/no grant funding.

But the actual dollars and cents associated with that knowledge will become more clear to everyone.

[marshwiggle]

Revenue Cycle Management?

I think they are pushing departments to be more aware as to how they impact the college's overall budget. So does that department generate a surplus or a deficit?

Probably no big changes - before, departments with large enrollments that generated a lot of external grant funding tended to be looked upon more favorably than ones with small enrollments and little/no grant funding.

But the actual dollars and cents associated with that knowledge will become more clear to everyone.

One thing it kind of does; if the whole university is facing a 10% budget cut, then they can't simple spread it out evenly, so a department who has made a popular program with rising enrollment doesn't have to take the same hit as another department with declining enrollment who hasn't changed anything since the Stone Age.

[Deacon_blues]

We're moving to an RCM model, but everyone is a little fuzzy on the details here.  I'm very interested in this discussion.

[onthefringe]

Responsibility center management.

The general idea is to create an understandable "bottom line" calculation where it can be determined if units are making or losing money. In the purest version, units get everything they make (student tuition etc, grants and overhead) but have to pay their expenses (salaries, materials and supplies, sometimes rent and utilities).

A lot is going to depend on how the university defines "unit". Do you need to break even at the level of colleges?  divisions? departments?

We have a slightly modifed RCM where the university takes a cut off the top and then things get passed to the college level, and then to departments. When we started it, it turned out to be great for departments like English who had lots of tuition dollars for required composition courses that were cheap to offer because they were taught by grad students, and they had faculty who were less well paid, and who only needed office space. It was hard for bench science departments because we had no grad student or adjunct taught classes (just lab sections), and many of our courses were more expensive to offer, our faculty had somewhat higher salaries, and we had to pay expensive rent and utility costs for individual faculty lab spaces, that were rarely truly covered by the fraction of indirect costs on grants that came back to the department.

This was a shock to many stem people who thought the humanities were riding our coat tails, and were horrified to learn that student tuition really drives our budget. Since then, decreasing enrollment in humanities courses (partially due to students increasingly testing out of lower level general education courses) has changed things somewhat.

The biggest drawback I've seen is that it incentivizes some really stupid things that are bad for the university and the students. Like an engineering school may want to offer their own "English" classes so they can keep those tuition dollars in the unit. Or a med school may decide to offer an undergraduate biology major that competes with the Arts and Sciences version.

[mamselle]

Ah.

So, sort of like the old retail adage, "Every tub on it's own bottom" that my bookstore manager used to quote when reviewing our weekly and monthly sales figures with us...

M.

[marshwiggle]

The biggest drawback I've seen is that it incentivizes some really stupid things that are bad for the university and the students. Like an engineering school may want to offer their own "English" classes so they can keep those tuition dollars in the unit. Or a med school may decide to offer an undergraduate biology major that competes with the Arts and Sciences version.

Yeah, we've seen that here with math courses, where other departments create "their own" in-house version. I'm not sure how to sanely control that.

[Hibush]

The biggest drawback I've seen is that it incentivizes some really stupid things that are bad for the university and the students. Like an engineering school may want to offer their own "English" classes so they can keep those tuition dollars in the unit. Or a med school may decide to offer an undergraduate biology major that competes with the Arts and Sciences version.

Yeah, we've seen that here with math courses, where other departments create "their own" in-house version. I'm not sure how to sanely control that.

There is an extremely strong economic incentive to do that. If the administration is using the budget rules to manage towards desired ends, then surely dozens of gen-ed offerings tailored to and taught be each unit must be what they want.

On the expense end, we saw charges allocated to broader units on square foot of building basis. Our cost was the same for a brand new laboratory building as for an unheated warehouse. The former probably costs 50 times as much per square foot. The incentive is to rent warehouse space for more than it costs us to own our own warehouse, but for less than the flat charge across the unit. The same effect is seen by pruning all activities with below-average value even if that value is much higher than the actual cost. The net result is a higher overall expenses and reduced capacity.

[mamselle]

Ah.

So, sort of like the old retail adage, "Every tub on it's own bottom" that my bookstore manager used to quote when reviewing our weekly and monthly sales figures with us...

M.

Just to note: I did NOT put the apostrophe in "it's." My smart-alecky, know-it-all "spell correcting" phone did.

When I last looked at it, the word was correctly spelled, as "its."

JFTR

M.

[marshwiggle]

The biggest drawback I've seen is that it incentivizes some really stupid things that are bad for the university and the students. Like an engineering school may want to offer their own "English" classes so they can keep those tuition dollars in the unit. Or a med school may decide to offer an undergraduate biology major that competes with the Arts and Sciences version.

Yeah, we've seen that here with math courses, where other departments create "their own" in-house version. I'm not sure how to sanely control that.

There is an extremely strong economic incentive to do that. If the administration is using the budget rules to manage towards desired ends, then surely dozens of gen-ed offerings tailored to and taught be each unit must be what they want.

I suppose that, in principle, an institution could engage in "course arbitrage" if they wanted to keep academic departments involved in lots of service viable. If the administration "buys" X seats in math or English at $100 ( or whatever) and "sells" them to other departments at $50 per seat, (or whatever is lower than the cost for the department to offer its own "in-house" version), then that makes it more expensive for units to do their own thing. If there were a good philosophical or pedagogical reason to do so, that could work.

[ciao_yall]

Why does this sound so... Dilbertesque?

[Hibush]

The biggest drawback I've seen is that it incentivizes some really stupid things that are bad for the university and the students. Like an engineering school may want to offer their own "English" classes so they can keep those tuition dollars in the unit. Or a med school may decide to offer an undergraduate biology major that competes with the Arts and Sciences version.

Yeah, we've seen that here with math courses, where other departments create "their own" in-house version. I'm not sure how to sanely control that.

There is an extremely strong economic incentive to do that. If the administration is using the budget rules to manage towards desired ends, then surely dozens of gen-ed offerings tailored to and taught be each unit must be what they want.

I suppose that, in principle, an institution could engage in "course arbitrage" if they wanted to keep academic departments involved in lots of service viable. If the administration "buys" X seats in math or English at $100 ( or whatever) and "sells" them to other departments at $50 per seat, (or whatever is lower than the cost for the department to offer its own "in-house" version), then that makes it more expensive for units to do their own thing. If there were a good philosophical or pedagogical reason to do so, that could work.

You are right.To make this the management tool what it should be, that arbitrage is necessary. I have found deans and provosts to be extremely reluctant to show their preferences in such a quantitative way.

This approach would also allow for the great title of "Vice Provost for Arbitrage."

[quasihumanist]

One big pitfall you have to be careful of is of ranking departments by their absolute amounts rather than their relative amounts.

Larger units are obviously going to generate larger positive and or more negative numbers, and any comparisons between units should be done on some sort of percentage or per head basis - some measure that is size neutral.

[ciao_yall]

One big pitfall you have to be careful of is of ranking departments by their absolute amounts rather than their relative amounts.

Larger units are obviously going to generate larger positive and or more negative numbers, and any comparisons between units should be done on some sort of percentage or per head basis - some measure that is size neutral.

Also some departments have "revenue" that is easy to measure, such as tuition per head. Others are more difficult to measure, such as counseling which helps keep that tuition per head coming in.

Now let's get really too sexy for our cat and think about a student who takes high "margin" classes like math which are needed to graduate in a low "margin" major like biology. So we get rid of biology and only have math majors????