When it comes to budget planning, academic deans have traditionally sized up departments' needs, then appealed to central administration for funds. But new forms of budgeting are turning that old system upside down--and some psychology chairs are not happy about them.

In the past 15 years, close to 20 public and private research universities, including the University of Southern California (USC) and the University of Pennsylvania, have overhauled their budgeting systems so that central administrators dole out money based on the productivity and success of individual schools or departments, not on their needs and deficits.

The details differ, but the overall philosophy is the same: Hold schools accountable for enrolling students in courses and generating research dollars, and fund them accordingly. This, the theory goes, will motivate faltering schools to improve, enable top schools to shine and challenge public perceptions that academe is inefficient and out of touch.

To a large degree, this is the thinking behind "The Bank" at the University of Florida, founded in part by psychologist Elizabeth Capaldi, PhD. Over the three years it's been in place, she says it's brought impressive results.

"We've brought in more grant money and students, and we've raised program quality and faculty salaries," says Capaldi, the university's provost. "It's a very psychological system. You get rewarded for being more productive."

But over in her old home, the psychology department, some of her colleagues are concerned that the system values popularity more than quality.

"I'm in favor of rewards for good performance but not at the expense of other departments," says psychology chair Marc Branch, PhD. "I don't think cash and popularity decisions should decide how a university is run. If only the rich survived, my college would become all chemistry."

While begrudgingly admitting to the efficacy of greater budgeting accountability, many psychology chairs and faculty worry that it hurts a university's spirit of collaboration--the sharing of students and research grants across school and departmental lines.

Marrying responsibility and revenue

Responding to such charges, the founders of new forms of budgeting claim the intent isn't to inhibit collaboration. Rather, the aim of a system such as responsibility center management (RCM), the name of the budgeting approach used at USC, is to promote self-sufficiency.

"Just as corporations have learned that you can't run a complex organization from the center, so too has academe," says Lloyd Armstrong, PhD, provost and senior vice president for academic affairs at USC. "It makes sense to push the responsibility and decision-making down to the people that know their areas--the deans of the schools."

Before adopting RCM in the 1980s, for example, USC would distribute money to departments from a central pool. The university divided up the funds based on academic priorities--which departments they wanted to grow--and cost structures--how much departments spent on students and research, says Armstrong. Surplus from money-making areas, such as its Marshall School of Business, was redistributed to other needier schools.

By comparison, under RCM, Marshall now gets back what it generates, plus extra funding to reward any revenue growth. Of course, notes Armstrong, classics, foreign languages and other such liberal arts areas can't earn nearly as much as the grant-rich areas of medicine, engineering and business. To correct that imbalance, most RCM universities treat the whole spectrum of liberal arts as a single revenue center.

For example, USC's College of Arts, Letters and Sciences contains 30 departments, meaning that such grant-generating departments as psychology, physics and biology support less-endowed departments. The system has vastly improved USC's efficiency at handling an annual budget well over $1 billion, says Armstrong.

The system also promotes growth, adds Jay Morley, president of the National Association of College and University Business Officers. It brings profits to private institutions and attracts increased state funding to public ones.

"It's the American way," Morley says. "If people get to keep what they earn, they'll be more focused and willing to work."

Harsh realities

Others, though, see a darker side of RCM.

While it does a good job of encouraging productivity, "it raises questions of whether you can realistically apply market values to academe," says Margaret Miller, PhD, president of the American Association for Higher Education. And the prevailing sentiment among liberal arts faculty at Indiana University is that it can't be done, says Joseph Steinmetz, PhD, chair of the psychology department there. In a decade of operation at Indiana, he says, RCM has lowered morale in the liberal arts.

"Some faculty think RCM favors bottom-line bean counting over high-quality programs," says Steinmetz. And in his view, disciplines shouldn't be measured against one another. "You can't put a price tag on Latin," he says.

Though psychology has fared comparatively well under RCM, due to its high undergraduate enrollment and grant funding, there's no guarantee that psychology will stay popular, Steinmetz notes. Aside from such philosophical objections, the system also poses a more immediate threat to cooperation among the disciplines "at a time when collaboration is big," says USC's Armstrong.

The model urges disciplines to attract more students to their home college, and keep research grants within it. And faculty say the resulting competition can cause a number of problems:

  • Enrollment dependency. At Indiana University in the mid-1990s, enrollments dropped in the College of Arts and Sciences and shifted to its professional schools. As a result, the college had to slash its budget while the professional schools grew theirs. Now, though, enrollment has shifted back to arts and sciences, but the college is short on faculty and resources.

  • Uneven wealth. The University of Pennsylvania's business branch, the well-known Wharton School, has thrived under RCM. But while Wharton has built new headquarters using generous endowments, the psychology department's labs and research facilities have deteriorated, says psychology chair Robert Seyfarth, PhD. In fact, some psychology faculty have been forced by lack of facilities to run their research projects in the medical school, which then gets all of the funding credit. That, in turn, prompts the central administration to award the medical school, rather than psychology, more money. "It's a Catch-22," says Seyfarth.

  • Competition for majors. At USC, faculty say RCM drives schools to attract students by adding and marketing new degrees. The psychology department's main competitor is the Annenberg School for Communication because a large number of USC undergraduates choose between majors in communications and psychology.

  • Stolen courses. At some RCM-based universities, colleges have duplicated one another's courses to boost the funding they get from enrollment. The University of Florida seeks to discourage such course proliferation by requiring colleges to stay within their projected course enrollment numbers.

To offset the emphasis on productivity and scale back competition between colleges, the university also rewards colleges and departments for improvements on self-determined quality measures. Other universities, among them the University of Michigan and USC, are working to rejuvenate team spirit by setting aside a central pot of money for inter-collegiate collaboration. There remains, however, the problem of how to fairly compensate the different academic disciplines, says the University of Florida's Branch.

"Faculty aren't sure how the corporate mentality, taking hold in higher education, is going to interact with traditional academic values," says Branch. "But one thing is for sure--it's not going to go away."

"Some faculty think RCM favors bottom-line bean counting over high-quality programs."

Joseph Steinmetz
Indiana University