October 25, 2011 — A new method of financial management that will better align the University of Virginia's resources with its core missions of education, research, patient care and service, while promoting transparency and entrepreneurship, is taking shape.
Creating and instituting a new internal financial model has been one of President Teresa A. Sullivan's highest priorities since she took office in August 2010. With implementation planned for the 2013-14 fiscal year, the new model "will encourage entrepreneurship among deans and the faculty while also creating greater accountability," she said.
With support from the Board of Visitors, she set forth three guiding principles for the new internal financial model: transparency, incentives and stewardship. The new model must:
• allocate resources in a manner that is transparent and in support of the University's mission and goals;
• provide incentives for academic excellence, collaboration, innovation and reduced consumption;
• preserve the core identity and values of the University, and protect core resources such as the libraries, the Grounds and traditions.
Under the leadership of John Simon, executive vice president and provost, and Michael Strine, executive vice president and chief operating officer, a steering committee comprising 20 faculty and administrators has been developing the new model.
Simon and Strine provide details in the following Q&A. A website has additional information, including a schedule of town hall-style meetings and question-and-answer opportunities.
Q: Why is a new financial model critical to U.Va.'s capacity to teach, discover and serve the people of the commonwealth?
Simon: It's important to align the academic capital of the University, which is embodied in its deans and faculty, with the financial resources of the institution. The new financial model will empower individual academic units to be innovative, effective and collaborative, because incentives will be built into the system to encourage and reward such work. These models are attractive to the highest-quality faculty, donors and students who value entrepreneurism, transparency and accountability.
I have lived in a similar responsibility-centered management system and I saw new collaborative and cross-disciplinary programs launched because the incentive structure within that system encouraged such innovation. So I'm a firm believer in this. It enables the deans, who understand their schools, to work with their faculty and capitalize on strategic academic opportunities.
Q: What's different about this new financial model from our budget process today?
Strine: The new model shifts the budget conversation from a focus on financial control to resource planning. It will transform our current traditional, appropriations-based budgeting to a more effective resourcing process that engages a broader community to make collective, strategic and informed decisions about shared priorities.
Our new model will better align the cost and quality of services in support of academic goals. Deans and faculty will be more engaged in the budget conversation and, in doing so, be guided by transformative values such as incentives, transparency, accountability, simplicity, innovation and quality as they define it. We've learned from similar models operating in universities like ours across the country, but we'll have to adapt those models to create one that works for us given the unique qualities of this University.
Q: Why now?
Strine: There are both academic and financial imperatives for this change. It's harder than ever to support the teaching, research and service that makes this University great. Donors, the state, parents and others who make investments in what we do expect greater accountability and transparency. We will need them to achieve our goals, so we'll need to hold ourselves to standards of performance and effectiveness that match or exceed their expectations. This budget model also allows us to take fuller advantage of the authority and responsibility that the state invested in the University through the restructuring legislation. I know we'll all look forward to a day when we more fully own our own destiny.
Q: Can you give an example of how the new budget model will change the conversation for deans and faculty about providing resources to the institution's mission?
Simon: The new budget model is already changing our conversations as the deans are currently working together with the steering committee, sharing their own perspectives on the opportunities and perceived risks of this new way of working. These are conversations of trust and collaboration. But beyond that, I'll give you a practical example.
Under the new internal financial model, if a dean wants to explore a new program, the conversation will begin with them and their faculty and staff discovering where the resources come from to launch a new opportunity, whether by partnering with others, reallocating resources, raising funds or other ideas, and then weighing the payoff of their collective decision. I've watched humanities come together and form institutes that launch fellow programs because the incentive structure within the system allowed that to happen. I've watched new degree programs, disciplinary and interdisciplinary, get formed.
Michael Strine and I will be communicating regularly with groups across the Grounds to gather comments and answer questions, and encourage involvement.