Quality, Productivity and Budget: 
It's Performance That Counts
John V. Lombardi
[Draft for Today 12/96]

Quality and productivity in universities come from focus, commitment and alignment of budgets and purpose. We who live by the discovery of research and by education often resist conversations about budgets. Money, we think, is a necessary evil. Budgets, we see, are unpleasant constructs like plumbing -- best left out of sight and maintained by someone else. Our avoidance of money and budgets stems not from disinterest -- for all of us worry about finding the resources to support our programs -- but rather from a misunderstanding about the relationship of resources to academic success. University people have no difficulty identifying exciting ideas, creative initiatives, quality instructional enhancements and essential materials in books, laboratories and computers that enhance institutional quality. If we weed out all the bad ideas, using the most rigorous criteria possible, we still end up with more creative, high-quality ideas than we can manage. These ideas span every curriculum and college, reach every academic discipline and touch every university constituency. They share one common characteristic: all of them require resources (translate to money) to succeed. The University of Florida is a fully employed university. Like most quality places, we have no resources standing idle waiting for a project. So, to succeed in growing our quality, supporting faculty, staff and student initiatives and enhancing our utility and value to our many constituencies we must generate new resources.

New resources come from many sources. We seek revenue from state and federal governments, we increase tuition and fees, we identify foundations and corporations eager to fund academic projects, we commercialize our patents and we raise private funds through gifts to our "It's Performance That Counts" capital campaign. Each of these sources of additional revenue requires us to develop a performance-based plan that meets some objective of the supporting agency. With persistence and commitment we work in each of these areas to increase the university's revenue. In almost every case, our success in finding new money for projects is more than balanced by the extra cost of the projects. These funds come to us not to maintain and enhance existing quality but most often to initiate new programs, create additional opportunities and expand existing academic projects. In almost every case, additional revenue provides us with only a part of the cost of fulfilling the objective: the state funds only part of the cost of a new student's education, the federal government funds only part of the cost of a new research project and private gifts fund only part of the cost of starting a new program. Each new resource offers both an opportunity for the future and a challenge for the present.

These new resources represent the leverage we need to succeed in our relentless pursuit of ever-higher quality. They also force us to confront the issues of productivity. To succeed quality-wise, we must find additional savings from within our own shop to balance new project costs, enhance continuing programs and renovate and support existing plant, equipment and people. This may appear obvious to those who work in market-driven environments, but public universities are still learning how to construct real budgets that reflect institutional purpose and reward productivity and quality.

Public universities serve many masters and live only partially in a market economy. Their internal and external economies provide conflicting and ambiguous signals. If we say we want productivity but reallocate most productivity savings to other units, if we insist on the importance of quality but reward individuals for longevity and if we focus on our outside competition but respond to our own internal political dynamics, we have problems generating the productivity and quality that our future demands.

Over the past few years, the University of Florida has experimented with an analytical process designed to determine the principal elements of our internal economy and link them to the major indicators of our quality and success. Gathered under the name of the Florida Quality Evaluation Project, this comprehensive effort brings all of the university's revenue and expense streams into one matrix that links the productivity analysis to systematic benchmarks of quality. Two principal products have come from this effort. The first is an annual report that captures each unit's past year's resources and expenditures in a standard format, provides a series of productivity measures related to resources and expenditures and measures each major academic unit against a quality benchmark every three years. The second product is a series of specialized reports on various topics related to performance. Called "Measuring University Performance," this series addresses teaching, research, state funding, financial aid, students and other quality and productivity topics using a quantitative method that expands our ability to engage in data-based conversations about our quality and performance.

This process of analysis, discussion and understanding leads to implementation of a budget process that retrospectively analyzes last year's work and directly links it to this year's budget and performance objectives. This spring the University of Florida will discuss and implement a budget model that brings together in one place all of the university's revenue and expenses, focuses on the university's two principal missions of teaching and research, balances income and expense related to the performance of those two primary functions, delineates the costs of administration and other support services to each of the academic units, displays a net balance of each college's surplus or deficit and illustrates the cross subsidies that sustain every university. Construction of this budget requires many decisions about the relative and appropriate cost of teaching different disciplines at different levels of study from undergraduate through the doctorate. These decisions need to be fully discussed within and among the colleges. The conversation is likely to be intense and focused since a budget driven from this model affects every college's resources.

There is no absolute science in this process for universities do not have direct linkages to markets that respond fast enough to drive a budget. Instead, we must create our own systematic and effective expectations for productivity and quality, and then we must operate our budget to conform to those expectations. By creating an explicit budget model for this purpose, the University of Florida connects our values to the distribution of our resources. We may find that the model overvalues some activities and undervalues others, in which case we will revise our budget model to reflect our values.

As we learn more about this budget, we will immediately see how changes in our various units' productivity produce the savings we need to enhance quality and sustain development of new programs. Continuous improvement requires continuous data-based reference to performance, and our faculty, staff and students enhance their creativity only if they see the results of their initiatives and share in the benefits of their improved performance.

Throughout the nation, most of our major competitors are engaged in similar efforts. At the University of Florida we have the advantage of having started earlier and, we think, of doing it better. The challenge is to maintain this advantage while we revise and implement the new model. It will take all of us -- faculty, staff, students, alumni and friends focused on quality and productivity -- to succeed. This focus on performance will keep us in the top tier of America's public universities well into the 21st century.

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1996