Finance Models

“Colleges and universities that compete locally and with public institutions face the largest challenge; how to articulate value in an environment of cost reduction, family financial stress, and rising competitiveness with peers.

“At Moody’s, colleges are telling us about tactics they’re using to get through the year, but not about long-term strategies to get through the recession and the beyond, especially as demographics change the landscape in most parts of the country.”

Roger Goodman
Vice President and Financial Team Leader, Higher Education Team
Moody’s Public Finance Group
Quoted at 2009 Summer Seminar

Institutions try, with varying degrees of success, all sorts of data modeling.  Live modeling is one of Hardwick-Day’s strong suits.  For institutions smart enough to think beyond June 30th of each year, the firm offers a variety of custom finance models:

• The Full Budget Model: enrollment and revenue modeling across the entire student population.
• The Resource Optimization Model: empowers presidents, chief financial officers, and chief enrollment officers to raise strategic thinking to the institutional level.

Full Budget Modeling (Enrollment & Revenue)

To project the impact of financial aid strategies on net revenue and budgets for an entire student body, Hardwick-Day develops an equation to predict attrition rates, programs a model that packages each student cohort consistent with that class’s freshman award strategy, and then projects net revenues under different assumptions about retention, graduation rates, and financial aid policies.

Resource Optimization Modeling

The Resource Optimization Model stands out as an option that helps with decision-making at an institutional level rather than a program level.

The Resource Optimization Model allows campus leadership to raise strategic thinking and planning to a higher level by:

• Allowing colleges to anticipate the impact of current decisions on future activities and budgets;
• Providing decision support by identifying trade offs, vulnerabilities, and opportunities for leverage; and
• Allowing colleges to project the impact of a particular event or decision well beyond one year.

The Model is interactive and demonstrates scenarios in real time. With it, leadership can test and answer all those “What if?” scenarios, such as:

• What if new student enrollment varies higher or lower? If higher, does that trigger additional costs or is it all bread and butter? If lower, what kinds of adjustments in retention, discount or transfer enrollment would offset that?
• What is the financial leverage of increased retention?
• What is the long-term impact on the economics of the institution associated with a relentless compensation policy that pursues an “above the median of our peer group” position?
• What’s the impact of a change in housing policy, such as the number of semesters to be lived on campus?

Data-Informed Decision Making

For presidents, the Resource Optimization Model allows them to see the whole Chipotle burrito, so to speak. It provides decision support for the president and cabinet as well as an opportunity for them to engage with the entire institution. It’s a tool that allows presidents to force line officers to understand how their ideas (usually for spending money) would affect the entire institution.

For the chief financial officer, this is the solution that goes beyond the budget to determine the impact of decisions years into the future.

For chief enrollment officers, the model allows them to determine the impact of decisions into the future and to understand impacts of discrete decisions. So much of a college’s budget is built on enrollment success—for better or worse—so it’s invaluable for admissions officers to see enrollment and not just freshman class.

The Resource Optimization Model is customized for each college or university and helps leadership determine the optimal use of institutional resources, including:

• facilities;
• finances;
• human resources;
• employees; and
• students.

This allows you to consider, compare, and set targets for:

• faculty size;
• student body size;
• discount rate;
• comprehensive fee; and
• revenue and expenses.

The Resource Optimization Model is not a budget development tool; it illustrates the resources your institution will need to accommodate scenarios at the macro level.

The Model was designed by Sal Ciolino, associate vice president for enrollment and education services for Gettysburg College, and refined in collaboration with Kenyon and Concordia Colleges.

Contact Jim Day or Nathan Mueller.