Dr. Dennis. J. Bava, Ed.D., MBA Tecnologico De Monterrey, Campus Santa Fe

What Is RCM?

RCM Is a Financial Management Philosophy

• Key Characteristics Of RCM:

– RCM Focuses On Operational Decentralization.
– RCM Is Designed to Support Achievement Of Primary Academic Priorities.

• Under RCM:

– Budget Formation Follows Planning Priorities.
– Authority Is Aligned With Responsibility.
– “Full Cost” View Of Academic Operations Is Created.

RCM vs. Traditional Financial Model

Traditional Financial Model Characteristics:

• Authority Vested In Executive Management.
• Income Controlled At University Level.
• Resources Allocated By Executive Management.
• Executive Approval Required For Movement Of Resources.
• Executive Management Deals With Surpluses/Deficit.

The RCM Model

• Operational Authority Is Delegated To Major Academic Units:

• To Make Progress Towards Achieving Academic Priorities, And
• To Maintain Financial Balance Over Time.
• RCM Places a Premium On Institutional Planning.

Financial Model Under RCM

Income And Expenses Within an Academic Unit:

• Income:

– Academic Unit Receives All Income Earned.
– Academic Unit Receives an “Allocation” Of Government Support From Executive Management.

• Expenses:

– Academic Unit Incurs All Direct Expenses.
– Academic Unit Incurs a Share Of Support Unit Costs.

Roles And Responsibilities

• Budget Discussions Change.

– RCM Fosters a More Open And Free Exchange Of Information.
– Budget Discussion Is More Likely to Focus On Audits Of Academic But Not Financial Goals.

• Relationship To Governmental Funding Agencies May Be Improved.

– RCM Provides a Sharper Picture Of How Governmental Resources Are Achieving Academic Objectives.
– RCM Helps Universities Demonstrate Competent Stewardship Of Resources Entrusted By Society.

Purposes Of the Study

The Purposes Of This Study Were To:

• Examine And Describe the Purpose And Characteristics Of RCM Systems. • Describe the RCM System Used.
• Examine And Analyze the Implementation Of RCM.
• Identify the Advantages And Disadvantages Of RCM Systems.
• Examine And Describe the Impact Of the RCM System On Various Constituencies.
• Provide Data Which May Assist In Determining Whether Or Not to Institute a RCM Model.

Significance Of the Study

This Study Provides Information:

• To Institutions Of Higher Education That Are Interested In Implementing a RCM System.
• To Institutions That Want to Gain Insight Into How RCM Impacts the Decision-Making Process.
• To the Understanding Of the Efficacy Of the RCM Process As a Decentralized Budgeting System.
• To Private And Public Institutions Of Higher Education That Are In the Process Of Applying RCM Principles.

Sample

• Subjects For This Study Were Selected From the Faculty And Administration At Each Institution:

– Graduate School Of International Business At Institution A;
– School Of Collaborative Education And Professional Studies At Institution B.

• Subjects For This Study Were: – Provost At Each Institution;

– Chief Financial Officer (CFO) At Each Institution;
– Dean Of Each School; – Three Faculty Members From Each School;
– The Total Number Interviewed Was 12.

Data Collection Procedures

A Total Of 12 Interviews Were Conducted.

• Interviews Were Semi-Structured.
• Respondents Were Asked Questions About Their Perceptions Of the RCM Implementation Process.
• Interviews Were Tape Recorded With the Permission Of Each Respondent.

Data Analysis Procedures

• The Researcher Developed 12 Content Analyses:

– Two Provost Content Analyses;
– Two CFO Content Analyses;
– Two Dean Content Analyses;
– Six Faculty Content Analyses.

• The Researcher Developed Two Case Studies:

– One Case Study Between Faculty And Administration At Institution A;
– One Case Study Between Faculty And Administration At Institution B;
– One Cross-Case Summary Derived From the Case Studies.

Research Study Results

( a) Examine And Describe the Purpose And Characteristics Of RCM Systems At Each Institution.

• Administrative Subculture Systematically Failed to Provide Adequate Recognition To the Power Of the Cultures In Which Academic Planning Occurred.

• If Attention Was Paid To Those Cultures, Administrators And Faculty Were In a Position to Improve the Budget Process And Its Implementation.

• If the Administrators Helped to Establish an Institutional Culture With a Shared Vision, They Gained Access To the Efforts Of All Campus Participants In Transforming the Institution.

• Academic Planning And Budget Implementation Became Part Of Daily Life On Both Campuses.

• Substantial Gains Were Available Through New And Expanded Modes of Communication Within the Decentralized Budgeting Process.

• Each Person Or Office May Assume Different Roles Depending On the Stage Of the Process, But Stable Environments Facilitate Good Planning And Performance.

(b) Examine And Analyze the Implementation Of Responsibility Center Management At Each Institution.

• Four Faculty And Six Administrators Reported That They Could Be Responsible And Accountable Only If They Acted Upon Accurate And Timely Information And Were Able to Perform And Monitor Transactions Easily.

• The Efficacy Of RCM Systems Depended On One's Perspective And Role In the Organization.

(c) Identify the Advantages And Disadvantages Of RCM Systems At Each Institution.

• Tension Between the Interests Of Faculty And Administrators.

• RCM Systems Had the Potential to Lead To Dramatic Changes In Efficiency And Reallocation Of Resources, But It Was More Difficult At Smaller Institutions.

(d) Examine And Describe the Impact Of the RCM System On Various Constituencies Affected By Implementation Of the Process At Each Institution.

• Frustration Caused By the Fact That Information Usually Flowed Downward In the Authority Hierarchy.

• The Inadequacy Of the Amount Of Information Flowing Downward To Deans And Faculty As Feedback. As a Result Information Imbalance Existed.

• More Information Was Collected Than Could Be Used.

• Underestimation Of the Information Needs Of Those Lower In the Hierarchy. Effective Feedback Channels Were Not Structured.

• The Planning Processes Helped Both Faculty And Administrators Anticipate And Effectively Manage Change.

(e) Provide Qualitative Information Which May Assist Institutions Of Higher Education In Determining Whether Or Not to Institute a RCM Model.

• Planning Processes Provided a Mechanism For Translating Long-Term Goals Into Measurable Short-Term Objectives.

• No Substitute For Strong Academic Administrators Or Faculty.

• Concern Was That RCM Systems Incentives Could Undermine Academic Priorities And Teaching Quality.

• RCM Could Lead To Systemic Changes In the Organizational Relationship.

• According To Campus Administrators, They Had Delegated the Decision- Making Authority And Empowered Academic Deans And Faculty Of Responsibility Centers.

• Widespread Consensus That RCM Was More Flexible And More Rational Than Traditional Fiscal Management Systems.

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