Financial Performance Scorecard: Doing Things Right

Financial Performance Scorecard: Doing Things Right
Jan M. Haas, Senior Consultant www.cfocolleague.com [email protected] 267-278-4650
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Financial Performance Scorecard: Doing Things Right
Objectives
 Recognize measures in addition to just revenue and expenses
 Expand upon CFI, DOE, and traditional scorecard measures
 Develop an institution-specific financial performance scorecard
 Identify the benefits of embracing GAAP criteria  Create leadership team “buy-in”
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Financial Performance Scorecard: Doing Things Right
Doing Things Right
“Perhaps the greatest mistake I’ve seen executives make is to confuse expectations with inspection. ..……….. But, alas, too often the executive does not understand that people do what you inspect, not what you expect. Execution is all about translating strategies into action programs and measuring their results. It’s detailed, it’s complicated and it requires deep understanding of where the institution is today and how far away it is from where it needs to go. Proper execution involves building measurable targets and holding people accountable to them.”
Gerstner, Louis V. Who Says Elephants Can't Dance?: Inside IBM's Historic Turnaround. New York, NY: HarperBusiness, 2002. Print.
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More Than Just Revenue & Expenses

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Financial Performance Scorecard: Doing Things Right
More Than Just Revenue and Expenses
 Balanced Scorecard

Kaplan, R.S., Norton, D.P. (1996b). Using the Balanced Scorecard

as a Strategic Management System. Harvard Business Review, 74(1),

75-85.

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Financial Performance Scorecard: Doing Things Right
More Than Just Revenue and Expenses

Ruben, Brent, D. (1999, Fall). Toward A Balanced Scorecard for Higher

Education: Rethinking the College and University Excellence Indicators

Framework. Center for Organizational Development and

Leadership, Rutgers University.

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Are resources sufficient and flexible enough to support the mission?

Institution

Revenue
•Tuition/Fees •Endowment •Gifts •Auxiliary

Expense
•Instructional •Academic •Student Services •Institutional

Are we deploying our resources effectively?

Resource Acquisition

Tuition

Development

Resource Allocation

Physical Plant

Assets & Reserves

Government Aid

Faculty & Staff

How well are we managing our resources?

How well are we acquiring the resources needed?

Students

Enrollment

Student Profile

Retention

Are we attracting and keeping the type of students we want?

Based on KPMG’s A Closer Look at Ratio Analysis in Higher Education 7
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Expand Upon CFI, DOE, & Traditional Scorecard Measures

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Financial Performance Scorecard: Doing Things Right
Beyond CFI and DOE
 Composite Financial Index (CFI)
1. Primary Reserve 2. Net Income 3. Return on Net Assets 4. Viability
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Financial Performance Scorecard: Doing Things Right
Beyond CFI and DOE
 Department of Education’s (DOE) Financial Composite Score
1. Primary Reserve 2. Equity 3. Net Income

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Financial Performance Scorecard: Doing Things Right
Beyond CFI and DOE
 Benchmarking
• Measuring certain characteristics • Establishing that which is worthy of emulation • Creating a process to accomplish desired outcomes • Higher education must seek new benchmarks
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Financial Performance Scorecard: Doing Things Right
Beyond CFI and DOE
 30 Benchmarks for the Resource Constrained
• Commitment to healthy financial operations • Commitment to employees • Commitment to planning
Benchmarks available at: http://cfocolleague.com/free-downloads/
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Financial Performance Scorecard: Doing Things Right
Beyond CFI and DOE
“It doesn’t really matter whether you can quantify your results. What matters is that you rigorously assemble evidence quantitative or qualitative - to track your progress.”
Collins, James C. Good to Great and the Social Sectors: Why Business Thinking Is Not the Answer : A Monograph to Accompany Good to Great : Why Some Companies Make the Leap--and Others Don't, New York, NY: Harper Business, 2005. Print.
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Develop an Institution-Specific Financial Performance Scorecard
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Financial Performance Scorecard: Doing Things Right
Financial Performance Scorecard
 Why Select Dashboard Indicators
• Measure use of resources to achieve the institution’s mission
• Quantify status, sources, and uses of resources • Benchmark institutional performance • Focus planning on institution’s financial profile in
relation to vision and mission
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Financial Performance Scorecard: Doing Things Right
Financial Performance Scorecard
 Dashboard Indicators
• Types of Performance Measures:
Input – selectivity or enrollment statistics Output – graduation statistics, national exam Outcome – perceptions surveys, employment statistics Efficiency – cost per student Effectiveness – difference in entrance and exit scores
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Financial Performance Scorecard: Doing Things Right
Financial Performance Scorecard
 Dashboard Indicator Sources
• Professional organization comparative data • Accrediting organization’s institutional profiles • IPEDS Data Feedback Report • Bond ratings criteria • Internet • Proprietary products
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Financial Performance Scorecard: Doing Things Right
Financial Performance Scorecard
 Bond Ratings Criteria (S&P, Moody’s, Fitch)  Criteria Methodology:
• Industry Risk • Economic Fundamentals • Market Position and Demand • Management and Governance • Financial Policies • Financial Performance • Financial Resources • Debt and Contingent Liabilities
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Financial Performance Scorecard: Doing Things Right
Financial Performance Scorecard
 Dashboard Indicators
• Recruitment • Financial Aid • Retention • Organizational
Effectiveness
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Financial Performance Scorecard: Doing Things Right
Financial Performance Scorecard
• Dashboard Indicators
• Student Body • Admissions • Finance • Advancement • Tuition Discount • Physical Plant
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Financial Performance Scorecard: Doing Things Right
Financial Performance Scorecard
 Reporting - Dashboard Indicators
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Identify the Benefits of Embracing GAAP Criteria
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Financial Performance Scorecard: Doing Things Right
Embracing GAAP
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Financial Performance Scorecard: Doing Things Right
Embracing GAAP
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Financial Performance Scorecard: Doing Things Right
Embracing GAAP
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Financial Performance Scorecard: Doing Things Right
Embracing GAAP
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Create Leadership Team “Buy-In”
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Financial Performance Scorecard: Doing Things Right
Create “Buy-In”
 Key Success Factors
• Provide clear mission, strategic and financial context for decision making
• Overall capacity communicated early in the process • Allow adequate timeframes for completion of tasks • Implement process for ongoing feedback to
promote continuous improvement
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Financial Performance Scorecard: Doing Things Right
Create “Buy-In”
 Forecasting and Budgeting
• COMP4cast
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