Responsibility Center Management gives colleges more control

With Kent State’s budget shifting to empower deans with their colleges’ own money, two of those deans agree verbatim: “The devil will be in the details.”

University officials have been making final plans for the move to Responsibility Center Management, which essentially divides control of Kent State’s more than $470 million budget starting July 1.

Until then, Gregg Floyd, vice president of finance and administration, said it’s hard to foresee what details will need to be tweaked.

How does it work?

“What (RCM) does is it essentially takes a bit of the business world cost-centered approach to financial statements and financial reporting and financial allocations,” Floyd said.

Translation: The deans of eight Kent State colleges – the “responsibility centers” – will receive a share of revenue based roughly on that college’s enrollment. From there, they balance their own earnings and expenses and pocket any extra.

This model gives deans an incentive to increase their enrollment and operate more efficiently.

“We’re trying to be efficient and smart about what we’re doing,” President Lester Lefton said. “Under RCM, because the deans get to keep the money that they don’t spend, you will see them being a lot smarter.”

This is different from the current model, Incremental Budgeting, in which administrators distribute university revenues from a central pool.

Why is it a good idea?

RCM relies on a fundamental principle that deans know more about their expenses than high-level executive officers do.

In 2006, Lefton asked then head of finance David Creamer to look into ways Kent State could make up for the declining portion of state funding. He recommended RCM as one of the efficient means.

RCM, or similar models, are already in place at schools such as Harvard, Syracuse, Ohio State and Indiana University, where Floyd formerly oversaw finances.

“As state money has decreased, we have to be more efficient and more careful,” Lefton said. “That doesn’t mean everybody has to make money, but it does mean you have to look at all of your programs and all of your services and say, ‘Is this the best way that we can spend our money?'”

Verna Fitzsimmons, interim dean of the College of Technology, likes the high level of accountability RCM demands.

“It provides a systematic approach to accountability and doing what’s good,” she said. “It forces us to make those tough decisions, but it allows us to grow.”

What are the drawbacks?

Those tough decisions are tougher for some.

College of the Arts enrollment has fallen from 2,572 in 2003 to 2,082 in 2007. Lower enrollment equals less money to work with.

“RCM works best in an environment where enrollment is growing,” said Tim Chandler, dean of the College of the Arts. “With the likelihood of perhaps not having enormous enrollment growth because of the cost of coming to a university and the difficulty in the economy, I think we’re all a little unsettled about what impact that might have.”

On top of that, some colleges need more money to operate by their nature. For example, a piano class has a one-to-one teacher-student ratio, whereas a sociology lecture needs only one professor per 500 students.

“There are a number of colleges that are going to end up in the plus column, and some of us are going to end up in the minus column,” Chandler said. “The question is then, can we do some things to change that? Can we change our patterns of delivery? Can we try to become a little more efficient without undermining educational quality?”

RCM will force deans to create revenue by retaining more students and by offering more widely attended courses that can cover for the more costly ones. Kent State may also subsidize courses that make no money but are important for a university.

Lefton said he’s confident academics won’t fall victim to the business strategy but will actually become better for it.

“The truth of it is, this is going to make (academic quality) better at the end of the day,” he said. “Everyone who goes to RCM winds up in better financial shape.”

Overall, Chandler said RCM is necessary and good.

“I think it will bring good things, and it’ll foster innovation and ingenuity. I think that’s encouraging,” he said. “My only concern is that if the economy continues to go south, it’s going to make it more difficult to balance our budgets.”

Contact administration reporter Ben Wolford at [email protected].