Financial Tails - Academic Dogs
 

Responsibility Center Budgeting was introduced in the University during the 1970's as an accounting system.  As such it has served the University well.  Penn has avoided the financial crises that have affected many peer schools. Unfortunately, Responsibility Center Budgeting has ceased to be solely an accounting tool and has become instead the primary management tool within the University.   Under Responsibility Center Budgeting the relationship between the central administration and the schools has changed.  This has led the schools to believe that they and not the University are the owner of resources.  Unfortunately this relationship has been reinforced by the central administration.  I have heard high University administrators praise or criticize Deans based on their budget balancing performance rather than on their role in achieving academic excellence. This form of management can only lead to academic mediocrity.  Priorities for the University must  be determined by the quest for academic and intellectual excellence and not by the balance sheets of the individual schools.  A mediocre school that runs at a profit should not be rewarded for being a profit center and an excellent school that needs to be subvented should not be penalized for that fact.  Profits and deficits, after all, are due in large part to the way that the central administration allocates costs and assigns responsibilities to the individual schools. Recent decisions and discussions about department closings are further illustrations of Responsibility Center Budgeting gone amok.  The decision to close a program or a department should be one component of an overall academic plan for the School.  It is easy for an administrator to attribute these decisions to financial reasons.  However, resources are always scarce and hard choices must always be made.  These decisions must be made after wide consultation and with the ultimate goal of achieving academic excellence.  Under no circumstances should Responsibility Center Budgeting be applied to individual departments or programs.  This could lead to a diminution of academic standards in the quest for students to provide tuition dollars to balance the budget. Academic planning needs to be done by the University as a whole since many disciplines transcend the individual school. Under Responsibility Center Budgeting the five year plans of the schools have become more important than the five year plan of the University, and the Provost has become a financial ombudsman rather than the educational leader that this institution badly needs.  I have written earlier (Almanac, March 1, 1994) about the need to empower the position of the provost.  Providing the center with the resources required to exercise academic leadership should be a priority for the University. Undergraduate and graduate education also suffers from Responsibility Center Budgeting.  Our students are ill served by decisions that are influenced more by the need to retain tuition dollars than by academic goals.  The uniqueness of the University is the presence of professional schools in close proximity to arts and sciences.  We must build upon this strength rather than limiting our students' ability to take courses in schools other than their own.  It is time to return Responsibility Center Budgeting to its proper role as an accounting tool.  Decisions about Penn's future must be made on sound academic grounds  if, indeed, Penn will lead the way.