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How to Lead through Budget Cuts

Budgets and Finance

How to Lead through Budget Cuts

As the pandemic rips through university plans and budgets, many of us in positions of leadership are called upon to make significant budget cuts. Not the slow, incremental kind, but significant cutbacks that will affect everyone. Often these are not efforts to cut excess with surgical precision but cuts made across the board, hitting the healthy and the weak in equal measure. The trend is to push responsibility for making these cutbacks down to lower levels—from the provost to the deans, program directors, and department chairs. The message: “Work with your numbers, and come back to us with a budget that is xx percent less.”

These cuts often seem unfair and unsustainable. They may even cut into the organization’s muscle and bone. Deans and other middle managers cringe at the thought of presenting these cuts to their people, especially knowing that personnel costs are such a big part of the university budget allocations. Those of us in positions of responsibility really have little choice but to try and work within these constraints. In fact, some say that now is when we really earn our administrative salaries.

So how to proceed? Step one is to be realistic. Do not exaggerate or minimize the impact that cuts may have on your unit. Go too far in one direction—“these will cause so much damage I don’t see how we will survive”—and you basically doom your efforts while generating resistance that will spread ill will among faculty, staff, and especially students. Go in the other direction—“I think we may be able to move some money around in order to handle this”—and it may be hard to create a sense of urgency.

It is vital to work through the cuts in granular detail first, with a little help from a budget officer or university CFO. Figure out a realistic range of possibilities to meet the new funding goals. Don’t be afraid to lean in to these cuts. Carefully evaluate everything. There may be some programs that frankly should be cut. A good and creative activity is to ask, “How would we set up this part of the organization if we were starting over or just beginning to hire faculty and staff?”

The next step is to take responsibility as a decision maker. Some leaders try to be “transparent” as a way of passing the problem further down the line to their faculty and staff. Doing so may give them a false sense of participation or the idea that they can decide for themselves which cuts if any are justified or necessary. It is best not to be merely a messenger about the cuts (“they told me to tell you”) as this undercuts your credibility. Better to be seen as a leader and problem solver rather than a victim of circumstances. During this step it may be useful to mentally prepare by rehearsing with a coach or trusted colleague to figure out the best way to present these budget cuts to others in the unit.

Step three is to engage people. Figure out the best way to build a budget presentation and to spread the word about the cuts. Be aware of the anxieties of faculty and staff, and try to work through their concerns without being dismissive. Form a working group if it seems this will be better than a “committee of the whole,” and task its members with figuring out a different cost structure or a new model for delivering services. It is good to include key staff as well as some relatively new faculty in the working group. At this stage it is particularly helpful to keep a focus on what is best for students rather than simply preserving all existing courses and tracks in the academic program. Now is the time to carefully consider and weigh all possible alternatives—including some seemingly radical changes—since the operation in its present form may not be sustainable.

In the end it is likely there will be a budget presentation based on at least three alternatives, with different levels of resources and activities at each level of revenues and expenditures. It may be helpful to extend the spreadsheet into a multiyear budget to show the full effects of each alternative (and also to use as a base for building next year’s budget). It is important to do this to make some space for cuts that are bound to happen at some level—and also so participants can be thinking in terms of scenarios and planning more strategically.

Another option: Leading up with higher administration.

If all this feels impossible and the message is truly that these cuts may be too deep, resulting in too few faculty or staff to carry out the mission of the unit, there is always another option. If we are convinced that these reductions cannot be sustained, it is important to let higher administration know this. But don’t just join the complainers; come in with solutions—taking money from another pot, using donor or reserve funds, even considering reorganization or other structural changes. Typically a provost or VP of finance will appreciate your bringing thoughtful answers to budget issues.

Remember that leading up is an important part of decision making. Yet it is fraught with uncertainty. The university has to make cuts and balance the budget. Even a dean or head of a large unit is still basically a middle manager in a complex organization. But individuals in higher administration are not omnipotent, and those further down often have more influence than shown in the organization chart. For example, information is power. Budgetary decisions can be framed in ways that are clear (e.g., to show how cuts may actually hurt revenues) and impactful (e.g., “if we cut adjuncts, we’d be cutting access to real-world knowledge that they bring to our students”).

Ultimately, all these efforts may not accomplish much in warding off budget cuts, especially when revenues are dropping and operations cannot be maintained at existing levels. What is most important here is to show some leadership and keep the unit working together in the face of adversity. This will help now and in the budget rounds yet to come.

James Goodrich, PhD, has been a dean or associate dean in professional schools for the past 22 years. These include programs both large (Cal State LA and Pepperdine University) and small (Willamette University and Pacific University Oregon, where he presently serves as dean of the College of Business).

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