Research

Who's Worth More: the Administrator or the Professor?

Should an average salary for full professors of $102,402 be considered low compared to an average salary of $334,617 for college and university presidents and $202,048 for chief financial officers? Should institutions be concerned that the ratio of faculty and staff positions per administrator dropped from 3.5 in 1990 to 2.2 in 2012? Those are the kinds of questions posed by a new report from the American Council of Trustees and Alumni (ACTA) that encourages college leaders to contain and even cut administrative spending.

"How Much is Too Much? Controlling Administrative Costs through Effective Oversight" provides a set of baselines allowing public and private non-profit institutions to compare the ratio of their spending on administration relative to spending on instruction. The raw information was pulled from publicly available data from the U.S. Department of Education's IPEDS survey.

Instructional costs encompassed direct instructional support, as well as academic administration ("academic deans but not department chairpersons"); libraries, museums and galleries; and anything else related to supporting the institution's primary mission. The administrative costs covered those expenses tied to daily operational support, including general administrative services, executive direction and planning, legal and fiscal operations and public relations and development.

What's not included are expenses related to student services (student activities, career services or financial aid staff) and auxiliary expenses (parking facilities, housing or food services).

The result is compiled into two "dashboards," one for four-year public schools and another for four-year private, not-for-profits. Each chart breaks the ratios down by Carnegie classification and enrollment size.

The result is compiled into two "dashboards," one for four-year public schools and another for four-year private, not-for-profits. Each chart breaks the ratios down by Carnegie classification and enrollment size.
The result is compiled into two "dashboards," one for four-year public schools and another for four-year private, not-for-profits. Each chart breaks the ratios down by Carnegie classification and enrollment size.

As the report explained, "The higher a school's ratio, the greater the proportion of the institution's spending on administration relative to its spending on instruction." A ratio of 0.53, for example, means that the college spends 53 cents on administration for every dollar it spends on instruction.

Among public institutions, the smallest median ratio — 0.16 — is found in medium-sized doctoral universities with the greatest amount of research activity. The largest median ratio — 0.39 — is found within small four-year arts and sciences colleges. For private, not-for-profits, the lowest and highest ratios are found in the same types of schools, but they're higher in both cases compared to the publics. The lowest ratio is 0.21 for doctoral universities; and the highest ratio is 0.64 for the smallest four-year arts and sciences colleges.

Overall, private, non-profits tended to spend more than public institutions on administration-related expenses compared to instructional expense. Over half spend 50 cents or more on administration for every dollar spent on instruction — while schools with higher research activity have the lowest ratios.

The report, intended ultimately for institutional board members, offered an "action plan" for guiding the trustees on controlling administrative costs. At the top of the list: Get familiar with the trends in administrative spending at the schools they serve.

Then they should create and use a financial dashboard with "cost-effectiveness indicators" to evaluate when the board is asked to sign off on major expenses. The report offered this example: Trustees can ask for reporting on hourly classroom usage "differentiated by time of day and day of the week" before they approve capital projects; or before approving a new program, they should know the percentage distribution of graduates from existing degree programs.

For the sake of transparency, trustees are encouraged to insist on financial reporting practices that do expense reporting in a consistent way from year to year for the sake of reliable comparisons.

Finally, the board should "consolidate and streamline," particularly when it comes to administrative functions.

"As the policy debate continues about how to make college more affordable, it's crucial to remember that, with very few exceptions, administrative costs are inevitably reflected in tuition and net-price," said Armand Alacbay, vice president of trustee & legislative affairs at ACTA and director of the organization's Project on Administrative Costs, in a prepared statement. "Our new guide offers a missing national perspective on the crucial issue of administrative growth and provides schools with benchmarks to their peers. This will be a valuable resource for trustees looking for broader context."

The research project was funded through a grant from the Arthur N. Rupe Foundation.

The report is openly available for download on the ACTA website here.

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