Measuring What MattersKey Performance Indicator Dashboards and

Benchmarking for Higher Education

Nicholas J. Wallace, CPACapin Crouse LLP

AGENDA

Introduction – The Case for Communication

Principles of Effectiveness• Dashboards• Benchmarking

The Case For Good Communication

"NEW TUITION CHALLENGES AT MANY U.S. PRIVATE UNIVERSITIES” Moody’s Investors Service 2009

“FINANCIAL CLIMATE CHANGE” NACUBO Business Officer, January 2010

The Case For Good Communication

"TIME TO REGROUP” NACUBO Business Officer, January 2010

“BUFFETED BY ECONOMIC HEADWINDS” NACUBO Business Officer, March 2010

The Case For Good Communication

The Chronicle of Higher Education• From the issue dated June 12, 2009

“More Than 100 Colleges Fail Education Department's Test of Financial Strength”

5 schools have actually closed since that time

The Case For Good Communication

• “61% Have Less Than 3 Months of CashMonths of Cash Available”.

“Of the 61%, 12% have no cash available. What constitutes a healthy amount of ready cash varies depending upon an organization’s business model and then reliability of its revenue streams.”

Source: Nonprofit Finance Fund Survey: America's Nonprofits Brace for Tough 2010

The Case For Good Communication

“WEATHERING TURBULENT TIMES” Michael Townsley, NACUBO 2009

“Turnaraound, Leading Stressed Colleges and Universities to Excellence” Martin and Samels Johns Hopkins 2009

The Case For Good Communication

“These colleges reported rising debt loads, continuing deficits, shrinking net assets, falling enrollment, switching investments into fixed assets, and dwindling amounts of cash leading up to their demise.”

The Case For Good Communication

“ These conditions are major factors in either the CFI scoring system or in other basic financial measures…If they had tracked their financial trends using these ratios, it would have been apparent that their financial and marketing strategies were failing miserably”

WEATHERING TURBULENT TIMES” Michael Townsley, NACUBO 2009

Dashboards • What they are:

– Summarized management information– Designed to highlight key performance indicators– Arranged in a graphic (sometimes digital) format – Designed to highlight pending problems so that diving

into operational details can be avoided — if there is a problem, it will be highlighted

“You see, but you do not observe.”- Sir Arthur Conan Doyle (1859 - 1930), A Scandal in Bohemia (Sherlock Holmes)

Dashboards• What they are not:

– Comprehensive reports– Indicative of qualitative measures– Tools allowing broad conclusions on key issues

“They are ill discoverers that think there is no land, when they can see nothing but sea.”- Sir Francis Bacon (1561-1626)

– Provide concise analysis derived from available data.

– Narrow the focus to important issues and key areas.

– Explain trends, benchmarks, and targets clearly.

– Demonstrate the impact on decision making.

– Stimulate questions that explore issues beyond the data alone.

Ground Rules for Dashboards

Understanding the contextPerceiving the data

Making it understoodPresenting the data

Getting the right dataProcuring the data

Steps for Effective Dashboards

Understanding the Context

Without sufficient context, more data does not equal more understanding. Three key questions to ask when collecting data:

1. What are the high priority functions critical to the success of the success of the institution?

2. What types of measurement (volume, timeliness, customer satisfaction) are most important?

Understanding the Context

3. Are there any measurements that in the past have produced some “surprises” and should be included?

Context Suggestion

• In front of each report, supply a narrative that explains:– The significance of the data and the trends in

the data– How the data and related trends tie to strategic

planning objectives– Problems or opportunities the data is

highlighting and actionable steps that are being considered or recommended.

Getting the Details Right

Closely linked to mission and strategic plan

Resolves unansweredquestions

Relevant to their level of responsibility

Accurate and timely

Longwood University

Data is closely linked to the mission and strategic planGetting the Details Right

Resolves Unanswered Board-Level Questions: Ratio MapGetting the Details Right

ResourceSufficiency &

FlexibilityOperating Results

Financial Assets

Debt Mgmt.

Are resources sufficient and

flexible enough to support the mission?

Do operating results

indicate the institution is living within available

resources?

Does financial asset

performance support the strategic direction?

Is debt managed

strategically to advance the mission?

PrimaryReserveRatio

NetIncomeRatio

Returnon NetAssets

ViabilityRatio

Getting the Details Right• Resolving Unanswered Questions

– Are we solvent?• Cash flow adequacy• Working capital• Primary Reserve

– Are we efficient?• Net operating margin• Discount rate• Student faculty ratio

– Are we sustainable? (I do not mean green)• Endowment per student• Debt per student• Deferred maintenance

MARCH MEETING • Student Placement Data • Satisfaction Survey Results

OCTOBER MEETING• Student Enrollment • Student Quality (SATs, Average GPA) • Student Diversity (Racial, Geographic)• Diversity of Faculty and Staff • Retention

DECEMBER MEETING• Strategic Indicators • Financial Ratios

MAY MEETING• Faculty Salaries • Staff Salaries

Courtesy of Rick Staisloff, College of Notre Dame

Getting the Right DataData is accurate and timely

Presenting Data

Adapted from Guide to Board Information Systems by L. Butler (AGB).

DESIGNPRINCIPLES

Use graphicdisplay.

Spotlightkey

information.

Avoid jargonand “budget

speak.”Provide a

comparativecontext.

Tell astory.

Deciding What to Measure• Six Approaches:

– Outcomes– Mission as Spine– Strategic Initiatives– Drivers of Success– Risk Factors– Service/Resource MatrixCourtesy of The Nonprofit Dashboard: A Tool for Tracking Progress by Lawrence M. ButlerAvailable from www.boardsource.org

Deciding What to MeasureMission as spine example:College x is a challenging and supportive community

whose members take responsibility for lifelong inquiry, transformative learning and meaningful service.

• Supportive Community – Support score on student survey• Lifelong Inquiry – percentage of graduates in post – graduate

work• Meaningful Service – Percentage of graduates in serving

professions (Teaching, nursing, etc.)

Deciding What to MeasureStrategic Initiatives Approach:(See NACUBO Performance Measurement Toolkit)1. Retain high quality, diverse faculty Metric Potential Sources Percent of faculty tenured IPEDS Competitive salaries CUPA;AAUP Faculty and student surveys HERI;NSSE; CCSSE

Faculty diversity statistics CDS, IPEDS

Deciding What to MeasureDrivers of success approach:– Admission/Acceptance rate– Matriculation rate– Retention rate– Student/Faculty Ratio– SAT scores of entering freshman– Faculty compensation– Faculty degree status (percentage with Phd)– Graduation rates– Discount rate– Endowment per student– Alumni giving rate– Composite Financial Index

Deciding What to MeasureDescription of Performance Indicators Used by the University of Puget Sound

Indicator Puget Sound Comparison Institutions

Average Class Size Average size of regularly scheduled courses since fall 1986

Distribution of class sizes during the most recent fall semester

Student/Faculty Ratio Ratio of annual student FTE to faculty FTE since 1990-91

Ratio of estimated student FTE to faculty FTE for the fall semester

Admission and Acceptance Rate

Percentage of applicants that were accepted and percentage of admitted applicants that enrolled since fall 1990

Percentage of applicants that were accepted and percentage of admitted applicants that enrolled for the most recent fall semester

SAT Scores of Entering Freshmen

Average verbal and math scores of entering freshmen since fall 1990

Average verbal and math scores of entering freshmen for the fall semester

Financial Aid Recipients

Percentage of students receiving financial aid from all sources since 1979-80

Percentage of students receiving need-based financial aid

Student Financial Need

Average financial need and award for financial aid recipients since 1983-84

Percent of financial need met by financial aid

Student Ethnicity Percentage of undergraduates from ethnic minorities since fall 1976

Percentage of undergraduates from ethnic minorities for the most recent fall semester

Deciding What to Measure

Primary Reserve Ratio Expendable net assets / Total expenses Provides a measure of an institution’s expendable or liquid resource base in relation to its overall operating size.

Net Income Ratio Change in unrestricted net assets / Total unrestrcited revenue

Provides a direct measure of an institution's profitability or ability to operate within its means

Equity Ratio Modified net assets / Modified assets Captures an institution's overall capital structure and also measures the ability to borrow. The ratio provides a measures of the amount of total resources that are financed by contributions or accumulated earnings.

DOE Financial Responsibility Ratio

Presenting Data: Common Pitfalls

• Cool trumps useful – Be sure that the actual business use remains the primary focus.

• More is better – Fewer key performance indicators are better than more.

• Lack of relation between strategy and action – Keep the data focused on information users can actually act upon.

• Misunderstanding the difference between real changes in data and reporting anomalies like timing of data.

A purposeful comparison against an internal or external individual or group.

The comparison is qualitative, quantitative, or both.

It is based on the desire to be “typical,” “better,” or “best.”

What is Benchmarking?

Maintain financial viability Demonstrate accountability Operate strategically

Plan realistically Allocate resources appropriately Support decision making Assess outcomes

Participants in CIC/AIR/NCES Management Institute, 2002-2004

Key Challenges Facing Most NPOs:

The Need for Benchmarking

• Costs– Time, money – Organizational friction

• Benefits– Mission focused– Frame for reflection– Fact-based function– Comprehensive view– Reinforces performance– Reality based– Historically valid

Cost vs. Benefit

• Competitive situation – Financial viability at risk – Money and donors scarce– Sales and services competitive

• Complex environment– Accountability– Transparency– Raised public expectations

of leadership

Why Benchmark Now?

• Audit your situation• Select measures• Form groups • Collect data• Monitor outcomes • Use results• Adjust process

Steps in Benchmarking

• Primary Factors– Demographics– Location/region– Financial structure– Relative size

• Secondary Factors

– Religious affiliation/ownership– Program functions

Selecting a Comparison Group

• Is there a proven track record of success for this benchmark?

• Are the results sustainable?

• Can the idea or practice be replicated in your context?

• Does it help you achieve your mission?

From Benchmarking for Nonprofits: How to Measure, Manage, and Improve Performance by Jason Saul (Fieldstone Alliance Publishing Center)

Guiding Principles for Best Practices

• CIC (Council of Independent Colleges) Financial Indicators Tool (FIT) and Key Indicators Tool (KIT)

Current Examples Used

Current Examples UsedRANK 07-09 CFI CFI RECOMMENDATION

1 6.9 2 6.4 3 5.8 focus resources to4 5.6 compete in future state5 5.5

UPPER 6 5.3 QUARTILE 7 4.8

8 4.4 9 4.3

10 4.2 11 3.7 12 3.7 13 3.6 direct resources to

14 3.6 allow transformation15 3.5 16 3.4

Current Examples Used

Institution Survey Most Critical Indicator RankingsMost frequently used measures from the APC

project group's independent research how the category ranked (most critical to report) on the NACUBO performance measurement survey

• Selectivity Measures • Enrollment Statistics • Quality of Educational Experience

Current Examples Used

Academics Fall 2005 Fall 2006 Fall 2007 Fall 2008 TargetPercent of full-time faculty with terminal degrees 80% 76% 76% 73% 85%

Fall 2005 Fall 2006 Fall 2007 Fall 2008 TargetAverage undergraduate teaching load to budget load 87.7% 89.8% 88.7% 85.2%

Fall 2005 Fall 2006 Fall 2007 Fall 2008 TargetNumber of faculty producing scholarship 55 60 54 58 65

Fall 2005 Fall 2006 Fall 2007 Fall 2008 TargetNumber of faculty engaged in service to campus or community 63 56 56 80 90

Fall 2005 Fall 2006 Fall 2007 Fall 2008 TargetNumber of courses with 9 or fewer students 97 94 85 70 68

Fall 2005 Fall 2006 Fall 2007 Fall 2008 TargetPercent of courses taught by part-time faculty (policy max 25%) 22.6 22.3 22.5 23 23.3

Data for Trustee Dashboard Fall 2008

The Dark Side

•Measurement error•Misinterpretation of data•Incorrect definition of needs•Make sure your report is designed for your

institution rather than an a copy of someone else’s•Over reliance on the numbers (you need supplemental data when questions arise•Over reacting to the numbers

Are You Ready?• Quick reality check questions:

– Are your board and top management satisfied with the information they currently receive?

– Do the board and top managers feel they need more meaningful measures of performance or mission effectiveness?

– Do the board and top management know what these measures should be?

– What kind of data is currently being compiled, and could it be used to address these needs?

– How difficult would it be to provide the data to fuel the desired dashboard measures?

Resources• The Nonprofit Dashboard: A Tool for Tracking Progress by

Lawrence M. Butler (Boardsource)• Key Success Factors Track Health of the University of Miami, Mary

M. Sapp, M. Lewis Temares and David Lieberman• Performance Measurement Toolkit, NACUBO• Using Performance Measurement to Improve Public and Nonprofit

Programs: New Directions for Evaluation by Kathryn E. Newcomer (Jossey-Bass)

• Financial Planning and Evaluation for the Nonprofit Organization by Anthony J. Gambino and Thomas J. Reardon (National Association of Accountants)

• Benchmarking in Higher Education: Adapting Best Practices to Improve Quality by Jeffrey W. Alstete (Association for the Study of Higher Education Report no.5)

“Governance is decision-making, and decisions can be no better than the quality of information available to inform them.”

Preface to Strategic Indicators for Higher Education: Improving Performance by Barbara E. Taylor and William F. Massy

Conclusion