The Challenge

Universities globally are facing new challenges in the 21st Century, increasing competition, brand differentiation, budget pressures, the marketised environment, benchmarks are international no longer local or national, globalization means standards are rising, and increased private sector partnerships all impose on University leadership a requirement to become more managerial and business focused and to create an agile organization that can adapt readily to these challenges. A fundamental component to this overall agile organization is an underlying, flexible cost and performance management solution and Activity Based Costing (ABC)  is an appropriate fit to help University Leadership meet the challenges of the 21st Century.

The Solution

We have created a solution specifically for Colleges and Universities that can be customized and implemented at any Institute of Higher Education. This allows a University to rapidly implement an ABC solution and specifically to target some key pieces of Management Intelligence like the fully burdened cost per student per unit or the overhead costs associated with research.

Once the cost per student has been calculated, then this can be combined with Revenue per Student per Unit to calculate the Margin per Unit. This is certainly not done with the intent of closing down units with minimal margins or those that are a cost burden, rather to increase margins by either:

• Increasing student numbers in high margin schools
• Cut costs in low margin areas
• Calculate the break-even point (unit is no longer a cost burden after X students) and focus on attracting the appropriate number of students to each unit to achieve appropriate margins.

We can provide a full turn key solution including software, methodology, training, implementation, data analysis and reporting. All of these services can be provided or just portions of it.

We can provide:

• Strategic Direction
• Development of methodology / business rules
• Implementation services
• Business modeling
• Software implementation / creation
• Report / dash board requirements definition and development
• Predictive models requirements definition and development

Our primary experience has been in the Government and Not For Profit arena, hence we are well versed in the issues confronting both types of organizations.

We can draw on this experience to ensure the implementation is rapid and addresses the requirements of University Administrators.

Within the University environment ABC can be implemented and cost analysis performed on a number of different University products or services such as:

• Research undertaken;
• Commercial contracts;
• Regional engagement; and
• Teaching Curriculum.

Research Funding

Research funding in most universities is now subject to being charged the prerequisite overhead costs that are incurred by universities researchers. This is an ongoing analysis for Universities and Colleges in the United States but in Australia tertiary institutions are yet to fully understand and grasp the realities of accounting and paying for the overheads attributable to undertaking research.

ABM Technologies Australia and Pilbara Group can provide a full "turnkey" solution for managing an ABC model to account for your research overhead costs.

The Software

	ace is our cost and performance modeling application.  ace is a very flexible and robust web-based modeling solution that can scale from small proof-of-concept implementations to large enterprise-wide models. ace is available as an on-premise installation or is available on-demand.
	We are Cognos partners and Cognos is a perfect reporting, analysis and dash boarding solution for ace models. Cognos is the world leader in business intelligence (BI) and performance management solutions. Cognos serves more than 23,000 customers in more than 135 countries.

The Approach

Following is a summary of our approach, a more detailed white paper will be written and will be available for download from the Research area of this website.  Starting with the ace template, the implementation team would investigate the available source systems with the objective to source and load as much data as possible from these existing systems, preferably with an automated and easily repeatable process. There are five basic systems that a Higher Education Institution would expect to draw data from to build the model.

• Finance / Accounting
• Payroll / Human Resources
• Asset management / depreciation
• Student Enrollment / Curriculum
• Time Tabling (Units delivered when, where, by whom, in what format) 

The following diagram outlines the basic structure of a generic ABC University model, simply click on the image to enlarge it in a new window.

 Unfortunately not everything can be sourced from these basic systems or automated, so the following categories of data would be sourced manually.

• Academic Staff: The academic staff provide the backbone of the institutions core products - Training and Research. The accuracy of the model is dependent on assigning the activities correctly for the Academic Staff.  The first decision that needs to be made is how much time is split between research, teaching and administration. This can be achieved through staff surveys or pre-determined business rules. Once this has been determined then teaching time needs to be allocated to subjects/units being taught.
• Non- Academic Staff: Non-Academic staff make up a large portion of a University's staffing requirements and their workloads cannot be determined from student or time tabling systems. Two mechanisms that can be used to determine the appropriate allocation of Non-Academic staff time would be staff surveys or a more appropriate (and less burdensome mechanism) would be an automated allocation to standard activities based on their location in the organizational structure and possibly even position title.
• Activities: Once all resources have been assigned to an appropriate activity the activities need to be assigned to either products or other activities. This is often the most manually intensive part of the model building process, along with any staff surveys. There are basically two sets of rules that need to be established:
  • What is the default assignment for each area within the organizational structure.
  • What is the default assignment rule for each activity

 Once the ABC model has been implemented then the following analysis can be performed immediately:

• Research by program type, funding source and school etc.
• Courses by faculty, school, location, student type, delivery method etc.
• Subjects by faculty, school, location, student type, delivery method etc.

ace Screens 

The following screen shots have been taken from our sample University model. The ace application is very flexible and allows for a wide range of customization to suit the individual needs of the University. Please click on the following two images for a larger view.

 

Quite a bit of analysis can be performed inside the ace application itself without having to build cubes, reports and dashboards. Views can be created to display any item of value in the model. These views can also be "calculated" so that key measures like margins can be calculated immediately and displayed in the standard model structure, which is sometimes easier to visualize than inside a data cube.

One of the challenges facing the modeling team for a University implementation is the issue that an individual's salary may come from a variety of sources. ace can accept data from a wide variety of sources and allocate all these various sources of salary to the individual in question, based on sophisticated drivers and pre-defined business rules.

Advanced Analysis

In the example below, a fictitious university faculty’s cost components and course fees have been examined through an ABC model. The resultant data has enabled the break even point to be determined at which units taught by the faculty are profitable. The data also helped calculate the point at which the entire campus was profitable.