Higher Ed's New Crisis Managers

If your college isn't already feeling financial strain, it probably will be soon. The wealthiest and most-selective institutions may be insulated from the worst financial turbulence, but many colleges that must compete for a limited number of traditional-age students are falling short of enrollment and revenue goals.

A cadre of college-finance experts have come to specialize in parachuting into struggling institutions to stop the bleeding. Those experts are busier than ever.

Interim chief financial officers can be a godsend for an institution drowning in red ink, says Charles M. Ambrose, a senior education consultant at Husch Blackwell Consulting, a company that works with colleges, and a former college president. An interim chief financial officer can come in and take stock of the situation unbeholden to the institution and without worrying about protecting their jobs for the long term, he says. They can break bad operational habits and get an ailing college on the mend. "Certain interim CFOs can come in and translate prior experience to current needs," Ambrose says, "as if they've never missed a beat."

An interim chief financial officer is seldom a permanent solution. Many are prevented by their contracts from accepting permanent positions. But an institution's finances can change so much for the worse that a temporary measure becomes a longer one.

As more colleges face tough financial challenges — and the job of the chief financial officer becomes more complex — demand for interim financial officers is rising and becoming more sophisticated, according to survey and survey data and interviews with those in the field.

Covid-19 was a turning point for chief financial officers, says Ruth A. Johnston, vice president for finance of the National Association of College and University Business Officers, or NACUBO. Before the pandemic, higher education was doing well financially. Afterward, many colleges that had been struggling financially were suddenly in even more dire straits.

Changes to the economics of college athletics, the ongoing unpredictability of federal policy under the Trump administration, and the decline in the traditional college-age population are all adding to the pressure on chief financial officers.

The role of the chief financial officer has also grown more complex. A finance officer was once expected to handle accounting and payroll; now chief financial officers are expected to be involved in strategic planning, data analytics, enrollment decisions, and facilities management, among other areas.

With chief financial officers under increasing pressure and turnover high, demand for interims is up, says The Chronicle.

When interim financial officers arrive on campus, especially at ones that are struggling, they may only have days to diagnose the institution's problems and put together a plan to address them.

"A lot of situations, you don't have the whole picture until you're there and you're in the middle of it," says Mary Hinkle, a managing director at the higher-education consulting firm Huron Consulting Group.

It takes thick skin to do the jobs that are sometimes asked of you.

Some colleges suffer from decisions and lapses years in the making, and have settled into patterns that make them resistant to change. At one institution Hinkle worked with, staff were doing huge amounts of manual work in spreadsheets that could have been automated with existing tools the institution already owned. When she pointed this out, she says, resistance from staff made it hard to change.

The impetus for many interims is to act quickly. A common early move is to contain costs by assuming open positions will not be filled, stopping discretionary spending, and reviewing major contracts.

Chief financial officers assess what's working and what isn't. Hinkle has a catchphrase for it: "Inspect what you expect."

Other cost-cutting strategies include renegotiating contracts with vendors, restructuring existing debt, and finding ways to run existing programs more efficiently. At some institutions, Hinkle has gotten vendors to cut their rates or otherwise change contractual terms just by asking.

Colleges also must consider their assets, says Larry Bomback, interim chief financial officer at Muhlenberg College and a consultant for colleges and other nonprofit organizations. Most colleges that have lost substantial enrollment have more space than they need. Buildings and land "are valuable real-estate holdings," he says. "Selling buildings does not solve anyone's structural-deficit problems, but it buys you time."

Interim financial officers are sometimes perceived as hatchet men, eager to slash until a college's balance sheet is in the black, regardless of the impact on the institution. But if a college's finances are untenable, it won't be able to keep operating. "It's a well-worn comment that you can't cut your way to sustainability," says Ambrose, the education consultant, "but you can spend yourself to closure."

As chancellor of Henderson State University, in Arkadelphia, Ark., in 2021, Ambrose declared financial exigency, which led to cutting 25 academic programs and laying off 35 full-time faculty members and 11 other staff members. The school survived and is now in better financial health.

For financial experts coming from the outside — and from the corporate world, in particular, where quick results are expected — shifting to a higher-education environment requires adjustment. A college is a complex institution, with programs and services touching many aspects of students' lives. Faculty members have governance rights that limit what a chief financial officer can do without extensive consultation and debate.

Holley came to higher education after years working for companies such as Coca-Cola and FedEx; he can see how those experiences have shaped his approach to his work as an interim chief financial officer. How he explains things and what he focuses on reflects his corporate background.

An interim chief financial officer often has weeks, not months, to develop trust with the president and the governing board. Demonstrating quick results, communicating clearly, and sharing one's process are important to that.

Building trust with faculty and staff members is just as important. Johnston, of NACUBO, hired several interim chief financial officers when she was vice chancellor for the New Mexico State system. She says their work was "much more collaborative and not so much the heavy hammer." How an interim proceeds is shaped by what leadership asks. "We didn't say to them, 'Go fire people,'" Johnston says. "It was more, 'We need you here for a period of time. Do the job that is needed in the best way that you can, and let's talk about it.'"

The more difficult the situation is, the more important that the chief financial officer is as transparent as possible. Employees "already suspect that you may be put in place to do cuts or furloughs," Hinkle says. Being plainspoken helps to mitigate suspicions. "Ask your campus community to help," she adds. They can offer ideas, and they will be critical for the institution's success.

Some staff and faculty members will mistrust an incoming chief financial officer no matter what. "It's a thankless job in a lot of respects," Hinkle says. "Your ability to maintain your sanity and your confidence, in the face of a lot of adversity, is critical."

Many colleges need more than a budget trim. They need to make radical changes. College leaders who think that an interim chief financial officer can act unilaterally to do what permanent employees will not need to recalibrate their expectations.

Because academic offerings are at the heart of what a college is and does, they have to be at the heart of any financial turnaround. There are only two ways to address a structural deficit: cut expenses and grow revenue. But neither is easy or quick in higher education.

Such work takes time to do thoughtfully, and leaders may expect new or interim chief financial officers to perform miracles overnight. "Suppose one of the revenue-generating options is to create new academic programs," says Rodas, of Isaacson, Miller. "The process for doing that could take two or three years, but it might not be until year two or even year three that you start to see a revenue impact." Miller, of The Registry, says the company creates "expectation documents" for each interim chief financial officer posting so that everyone involved knows what they can expect.

Ultimately, an interim financial officer is not situated to determine the long-term vision for a college. That work lies with the leaders who will stick with the institution after the interim is gone. Some colleges suffer from problems that no finance expert can finesse. "I've seen these issues time and time and time again," Hinkle says, "and I have been in situations where I could not help fix the problems."

Beckvold knows of a college that "probably has another year or two, and they will merge with a school or close." That college may be looking for an interim chief financial officer right now.