Historically, higher education has focused on the need for a close relationship between the chief financial officer and the chief academic officer—and for good reason. We believe, in today’s higher education environment, the relationship between the CFO and chief enrollment management officer (CEMO) deserves equal emphasis and, on the operational side, should be a top priority. In fact, there may not be a more important relationship on campus today because so many private institutions depend heavily on student tuition and fees.
At Loyola University Maryland, approximately 73 percent of our revenue comes from tuition, with another 18 percent from auxiliary operations, includ-ing food service and housing. In other words, 91 percent of Loyola’s annual operating revenue comes from student enrollments. That dependency places enormous pressure on enrollment management to meet or exceed annual enrollment and revenue goals.
At the same time, finance sees a significant percentage of the operating budget dedicated to institutional financial aid, a necessary investment to meet enrollment and revenue goals. Of Loyola’s proposed $280 million budget for FY16, about 25 percent of the expenses are financial aid and reflect Loyola’s mission- and market-centric commitment to attracting a diverse, academically excellent student body.
Undeniably, financial aid is a large expense, and institutions often focus almost singularly on managing and controlling the financial aid discount rate. Rather than look at that number exclusively, we’ve made a conscious choice to focus on net, or “expendable,” revenue. At Loyola, we simply must enroll the right number of students, at the right financial aid discount, to generate the net revenue required to pay employee salaries and other operating expenses—and also have money to fund strategic priorities.
Establishing a sustainable, winning partnership between the CFO and CEMO requires collaboration, and ours began at our first meeting. Four years ago, when one of us had just begun working at Loyola, we conversed candidly about Loyola’s enrollment management goals, processes, and results—including the university’s financial aid strategy and policies, their impact on net revenue and, thus, the ability to fund budget priorities. The positive early interactions inspired us to learn more about one another’s areas and goals; maintain open and ongoing communications; and forge a strong, mutually respectful partnership. Here’s how that has played out in practical terms:
- A deeper understanding. While we each bring our own responsibilities, experiences, and needs to the table, as senior officers we are charged with putting the institution’s priorities ahead of our respective division’s priorities. During the initial months of working together, we met regularly to talk about admission and financial aid strategies and choices, all of which affected the budget and Loyola’s student-body composition characteristics. We also talked about our individual roles within our professions—the responsibilities, the pressures, and the challenges that define our jobs.
Those informal education sessions helped build the CEMO’s appreciation and respect for the life of a CFO—and vice versa. Now, for example, the CEMO sits in on finance’s meetings and phone calls with Moody’s and S&P. Conversely, because of participation in meetings to discuss financial aid strategy and trade-offs, the CFO is much more aware of any flexibility that exists within enrollment targets and projected revenues or aid expenditures, when proposing and balancing the annual budget. Knowing more about one another’s operational areas positions us to contribute to campus conversations and answer questions, particularly about the budget, without becoming defensive.
- Shared information. In enrollment management, we often say—only half-jokingly—that when we come to the table asking for new budget dollars, we don’t ask for nickels. Requesting another $1 million in financial aid or $500,000 for a recruitment initiative is not insignificant, and that request should be a justifiable investment that can survive budget scrutiny. Enrollment management must be able to demonstrate to the business office and other senior officers the results of those investments.
At Loyola, we track how much revenue each source of student inquiry, such as high school visits and college fairs, generates. For example, we can show that for each dollar we invest in our direct marketing campaigns, we get more than $5 back in return.
The abundant data related to enrollments and revenues, and the budgetary investments that enable those results, are shared with finance through our frequent one-on-one meetings, as well as cabinet and various institutional shared-governance meetings. Similarly, finance shares information regarding financial trends and benchmarks, such as results from NACUBO’s annual tuition discounting study.
- A unified approach. Our ongoing interaction and cross-education have put finance and enrollment management on the same page philosophically and operationally. Year after year, Loyola’s board of trustees hears the same message from both of us about the interplay of enrollment management and finance data and initiatives, and how they impact the university’s ability to fund its financial priorities.
The positive impact on the board relationship shouldn’t be underestimated. In years past, enrollment-related topics often dominated the agenda in finance committee and full board meetings, draining board members’ time, focus, and skills away from other strategic-level topics. Five years ago, Loyola created an enrollment management committee of the board, which in its early years met jointly with the finance committee once or twice a year. This structure educated a broader sample of the board about the interplay between enrollment management and finance. Today, many more board members understand the sophistication and strategy underlying the financial aid allocation and student revenues in the annual budget, as well as their implications for multiyear planning and forecasting.
Having seen how closely we work together, the healthy dialogue we engage in, and the track record of accurate forecasting, the finance and enrollment management committees rarely require joint meetings anymore, and the full board operates at a more strategic level in its agenda topics and discussions. Rather than hyper-focusing on undergraduate admission applications data or the first-year class discount rate, the board now understands the importance of net revenue and the short- and long-term vision for Loyola’s enrollments.
Despite the many challenges faced by higher education since 2008, Loyola has met or exceeded its enrollment goals and maintained a financial aid discount rate that’s within budget and below national and competitor norms.
Increased tensions between revenues versus expenditures; increased calls for cost containment, affordability, and access; and required assessments and innovation to improve on the educational experiences of students—these are today’s higher education realities. And, they aren’t likely to ease in the foreseeable future.
Loyola’s successes in enrollment management have improved finance’s ability to identify and implement best practices, ultimately strengthening the financial underpinnings of the institution. Collectively, enrollment management and finance have been performing at a level expected, if not required, and delivering the news the board and university community at large want to hear. We have every intention of continuing to do so.