The University of Wisconsin System (UWS) is one of the most important institutions in the state. This status stems not only from its primary missions of instruction, research, and public service, but also from its sheer size, economic impact, and effects on the lives of Wisconsin’s citizens. Because of this, the citizens of Wisconsin have a vital interest in the continued success of the UWS as it attempts to adapt to a changing fiscal environment.

The results of a survey by the Wood Communications Group indicate a deep ambivalence regarding the UWS on the part of Wisconsin’s citizens. They admire its programs, but believe the System could be better managed and more efficient. Press accounts of UW management problems have contributed to this ambivalence. These perceptions of management issues in the UWS must be addressed if there is to be a rapprochement between the citizens of Wisconsin, their representatives, and their university system.

Management issues arise within the context of the governance structure of the UWS, its enrollment history, budgets, and planning processes. The UWS governance structure has resulted in a highly decentralized system in which there is a diffuse sharing of authority among the Regents, System President, Chancellors, Faculty, Academic Staff, and Students.

The UWS budget has undergone a number of significant reductions over the last ten years, although the overall budget has actually increased mostly due to funding for cost-to-continue items such as debt service on facilities, utilities, and staff compensation. It has accommodated these reductions through enrollment limits and tuition increases. This limited availability of new funds is particularly difficult for a decentralized institution like the UWS to manage.

The UWS does not have a comprehensive, systematic, long-term planning process but, rather, it accomplishes planning functions through Regent policies, the planning activities of the individual campuses, Regent approval processes, and planning that takes place in separate programmatic areas such as promotion of diversity and other areas.

A number of obstacles to University management are identified including:

1. the University’s governance structure, characterized by overlapping authorities and extreme decentralization;
2. a management culture, characteristic of universities generally, which does not value efficiency;
3. external constraints imposed by state government;
4. internal university management practices;
5. conflict over the role of UW System administration which raises concerns as to whether state-wide educational needs are being served as opposed, or in addition, to the interests of individual campuses and their constituencies; and
6. the structure of the UWS which combines radically different types of institutions under one board.

The cumulative result of these obstacles is an impaired ability to accommodate change and to generate the internal resources necessary to maintain the quality, competiveness, relevance, and vitality of the UWS.

Although the UWS is clearly successful in many areas, it is also clear that it would be in a better position to adapt to its current and likely future fiscal environment were it, and state government, to act to eliminate or minimize obstacles to management that have been identified in this paper.

The following actions would move in that direction:

1. address the UWS’s plea for greater management flexibility and autonomy from the rest of state government;
2. review the governing statutes of the UWS to eliminate obsolete language, to provide clearer lines of authority, and to modify fiscal emergency provisions to allow staffing adjustments due to reorganizations, changing academic needs, and elimination of duplication;
3. examine faculty workload and productivity; and
4. create a separate governing board for the UW-Madison.

INTRODUCTION

The University of Wisconsin System (UWS) is one of the most important institutions in the state. It is, in fact, the eighth-largest university system in the country with twenty-six campuses. The University of Wisconsin-Madison has national and international stature and is one of the foremost research institutions in the world. The University of Wisconsin is one of the state’s premier successes. This status stems not only from its primary missions of instruction, research, and public service, but also from its sheer size, economic impact, and effects on the lives of Wisconsin’s citizens. The UW represents one third of state government in terms of expenditures (that part of state expenditures going to government operations) and has over half of the state’s employees. In a sense, state government consists largely of the UW and prisons. Together they represent 80% of all state employees funded from state taxes.

Educating the State’s Citizens. In the fall of 2004, 33% of Wisconsin high school graduates enrolled at a UW institution immediately following high school graduation. Historically, the access rate for Wisconsin high school graduates has been well above the national rate.

Critical Missions. The UWS’s missions of instruction, research, and public service are not only ends in themselves, but they also are important drivers of economic development in the state. Reduced capacity to deliver these primary missions is of fundamental concern to the citizens of Wisconsin. A healthy UWS is critical to the future of the citizens of Wisconsin.

Economic Impact. A 2002 report by NorthStar Economics, Inc. detailed the UWS’s contributions to the state’s economy.[i] Highlights of the report were:

• The UWS contributes $9.5 billion dollars to Wisconsin’s economy annually, over 5% of the state’s gross state product.
• UWS activities are responsible for over 150,000 in-state jobs, almost 6% of Wisconsin’s employed workforce.[ii]
• The UWS presence in the state generates almost $408 million dollars in state income and sales tax revenue annually; about 40% of the UWS state $982 million budget allocation for fiscal 2001-2002.
• Almost 70% of the $3.6 billion UWS revenue comes from sources other than state taxes.
• UWS employees spend over $1.0 billion in Wisconsin annually.
• UWS students spend over $1.3 billion annually in Wisconsin over and above tuition, fees, and university-supplied room and board.
• Visitors to UWS-related events spend over $726 million dollars in the state.
• Wisconsin realizes a 9% return on its investment in a UWS baccalaureate degree through higher taxes paid by UWS graduates.
• The state’s payback for educating a UWS baccalaureate student is less than ten years.
• UWS baccalaureate degree holders reap a 30% return on their education investment beyond high school.
• A UWS student’s payback period (the time after graduation that it takes for increased income resulting from a college degree to recoup lost income during college attendance) is less than three years.
• A UWS graduate will earn almost one million dollars more than a high school graduate, twice that amount for a doctoral or professional degree.
• The positive cultural and social impacts of an educated populace immeasurably enhances Wisconsin’s quality of life.

Perceptions of the UWS. A report by the Commission on Institutions of Higher Education of the North Central Association of Colleges and Schools concluded that, “It is remarkable—and a bit of a puzzle, actually—that a state of such modest size and wealth has managed to build and to maintain for so long such a truly world-class institution.”[iii]

The Wood Communications Group, a public relations firm based in Madison, Wisconsin, recently conducted a poll on public perceptions of the University.  Findings quoted in the press were that:[iv]

• 60%: Agreed the value of a System education compared to the cost is good or excellent.
• 79%: Agreed the System is doing an excellent job of providing a good education.
• 69% of Wisconsin residents: Agreed that System “campuses have more administrators than they need.”
• 50%: Agreed that system “campuses pay their faculty too much.”
• 62%: Agreed that System campuses provide health benefits to faculty and academic staff that are “more expensive and generous than the rest of us get.”
• 59%: Agreed that System “campuses don’t think they have to watch their dollars like the rest of us.”
• 72%: Agreed that System “campuses spend too much money on things they don’t need instead of concentrating on educating students.”
• 74%: Agreed they couldn’t afford to send their child to a System campus without financial aid.
• 19%: Agreed they cannot afford to give their children a System education at all.
• 65%: Agreed the System could manage itself more effectively to overcome budget cuts.
• 80% of System graduates: Believe they received a good or excellent education.

The poll reflects the ambivalence of many of the state’s citizens toward the UWS: appreciation for, admiration, and pride in the achievements of the University coupled with perception that it is not run as efficiently as it could be.

In recent years, the state of Wisconsin, along with many other states and the nation as a whole, has come up against fiscal limitations forcing a reduction in the rate of increase in state spending, or actual budget reductions. This fiscal reality, combined with competition from other budget areas such as corrections, K-12 education, and Medicaid have resulted in a decade or more of slowed budget growth for the UWS in absolute dollars and a reduced budget when inflation is considered.

Table 1 indicates the history of the UWS’s share of General Purpose Revenue (GPR) expenditures compared to other major areas of the state budget. These five areas comprised 76% of the state budget in 1975 and 80% in 2005. Since 1975, the UW’s share of the state budget has declined by 39%. Shares have increased for School Aid (81.2%), Corrections (280.7%), and Medical Assistance (97.1%). The proportion of the state budget for Shared Revenues and Property Tax Credits has declined by 68.2%. No state agency has a permanent claim on any proportion of the state budget. However, the changes indicated reflect shifts in priorities: the School Aid share, a decision to increase property tax relief; Corrections, emphasis on truth in sentencing and law enforcement; Medical Assistance, increased costs; Shared Revenues and Property Tax Credits, changes in funding of local government and property tax relief.

Press accounts have created the perception that there are serious management problems in the UWS that have undermined its support among the general public, the legislature, and the business community. Examples range from personnel management issues involving top-level managers at Madison and Whitewater, multi-million dollar personnel information technology system failures, monitoring of felons, abuses of vacation and sick leave policies, and questionable faculty hires. Press accounts of these and other instances are provided in Attachment 1 to this paper. If the University is to realize its potential to fulfill its traditional missions and its role in the economic growth of the state, it needs to continue to address issues of efficiency and management. A more fundamental issue is whether the UWS is structured in a way that impedes management in a time of limited resources. Unless these issues are addressed, it will be difficult for the University’s supporters to convince the legislature that it is time to reinvest in the University.

The sections that follow provide background on major areas of UWS management including: governance, enrollments and student profile, budgets, planning, obstacles to university management, and summary and conclusions.

UW GOVERNANCE

It has been thirty-five years since the former University of Wisconsin and Wisconsin State University systems were merged creating today’s system of two doctoral campuses, eleven university campuses, thirteen freshman-sophomore colleges, and UW-Extension.[v]  The governing statutes of the University of Wisconsin, created at the time of merger, reflect an intention to create a decentralized governance system in which the various internal constituencies, the chancellors, the faculty, the students, and the academic staff, were each assigned primary responsibility for the aspects of the University most directly affecting them. This governance structure was an outgrowth of a need to gain political support for merger, which was only narrowly approved by the legislature. The sections that follow paraphrase the statutory language defining the roles of the University’s various elements.

The Board of Regents has primary responsibility for governance of the system including: enacting policies and promulgating rules for governing the system, planning for the future needs of the state for university education, ensuring the diversity of quality undergraduate programs while preserving the strength of the state’s graduate training and research centers, and promoting the widest degree of institutional autonomy within the controlling limits of system-wide policies and priorities established by the Board.

Other extensive Board of Regents powers are enumerated including: (1) ensuring that educational programs in the system are compatible with the missions of the institutions; (2) appointing a President, chancellors and other UWS executives; (3) the allocation of funds among the institutions; and (4) setting salaries for non-classified staff—faculty and academic staff. In addition to specific powers and responsibilities, the Board is also given “all powers necessary or convenient for the operation of the system” except as limited by statute.

The President has the responsibility of administering the system under Board policies and directing a central administration which assists the Board and the President in: establishing systemwide policies, monitoring, reviewing and evaluating those policies; coordinating program development and operation among institutions; planning the programmatic, financial and physical development of the system; maintaining fiscal control; compiling and recommending educational programs, operating budgets, and building programs for the Board.

Chancellors are the executive heads of their respective faculties and institutions and have the responsibility of administering Board policies under the coordinating direction of the President. They are accountable to and report to the President and the Board on the operation and administration of their institutions. Subject to Board policy, the chancellors of the institutions, in consultation with their faculties, are responsible: for designing curricula and setting degree requirements; determining academic standards and establishing grading systems; defining and administering institutional standards for faculty peer evaluation and screening candidates for appointment, promotion and tenure; recommending individual merit increases; administering associated auxiliary services; administering all funds, allocated, generated, or intended for use of their institutions.

Faculty, subject to the responsibilities and powers of the Board, the President and the chancellor of their institution, have the responsibility for the immediate governance of the institution and have the right to actively participate in institutional policy development. The faculty have the primary responsibility for academic and educational activities and faculty personnel matters. The faculty of each institution have the right to determine their own faculty organizational structure and to select representatives to participate in institutional governance.

Academic staff, subject to the responsibilities and powers of the Board, the President, and the chancellor and faculty of the institution, have the right to be active participants in the immediate governance of and policy development for their institution. They have primary responsibility for the formulation and review of, and to be represented in, the development of all policies and procedures concerning academic staff members, including academic staff personnel matters. The academic staff have the right to organize themselves in a manner they determine and to select their representatives to participate in institutional governance.

Students, subject to the responsibilities and powers of the Board, the President, the chancellor and the faculty, have the right to be active participants in the immediate governance of the policy development for their institutions. Students have primary responsibility for the formulation and review of policies concerning student life, services, and interest. Students, in consultation with the chancellor, and subject to the final confirmation of the Board, have the responsibility for the disposition of the student fees which constitute substantial support for campus student activities. The students of each institution or campus have the right to organize themselves in a manner they determine and to select their representatives to participate in institutional governance.

ENROLLMENTS AND STUDENT PROFILE

Beginning in 1987, the Board of Regents initiated systemwide enrollment management plans. Plans were in effect from 1987 through 2006. The overall goal of the plans was to decrease enrollments so as to increase funding available per student and to lower faculty workload (student/faculty ratios). Enrollments were dramatically reduced as indicated in the chart below.

Under Board of Regent enrollment management policies, enrollments were reduced by 15,554 students between 1986 and 1996. This represented 11% of the System’s total enrollment or the equivalent of closing four campuses: Green Bay - 3,814 students, Parkside - 3,473; Platteville - 5,281; and Superior - 1,823.

The combined GPR/Student Fee (GPR refers to General Purpose Revenues—state funds—while Student Fee refers to revenues generated through student tuition) budgets of these campuses totaled $67 million, not including debt service. Because state funding does not change with enrollments, funding was not reduced. However, reductions for other reasons did occur in recent years. The effect of lowering enrollments was to increase spending per student as shown in Chart 2. An additional major effect was to increase tuition as fewer students were charged more to generate the same level of revenues as before the enrollment reduction.

The financing system of undergraduate education has undergone a transformation in the last ten years. There has been a dramatic shift in the allocation of educational costs between students and the state. From 1996-97 to 2006-07, state support per student has actually decreased going from $4,353 per student to $4,001 per student. In 1996-97, the state supported 66% of educational costs (down from the traditional 75% in earlier decades). By 2006-07, that support had decreased to 44.1%. Students are paying a correspondingly higher portion of their costs of education increasing from $2,291 in 1996-97 to $5,076 in 2006-07. State funds as a proportion of the total UWS budget has declined from 40% in 1985-86 to 24% in 2005-06.[vi]

During the period of enrollment management, the make up of the student body changed, for example, in the class rankings of new freshmen as some campuses increased admission standards to lower enrollments and other campuses lowered standards, perhaps to meet enrollment targets. In 1970, 37.7% of incoming freshmen at UW-Madison graduated in the top 10 percent of their high school class, whereas, 62.2% did in 2006.[vii] At Madison, the average class rank increased 9.0% from 1976 to 2005. Class rankings also increased substantially at Eau Claire (+7.5%), LaCrosse (+24.62%), Oshkosh (+17.9%), River Falls (+8.1%), and Stevens Point (+15.22%). On the other hand, class rankings decreased substantially at Milwaukee (-13.2%), Parkside (-12.3%), and the UW-Centers (-20.4%).

A 2004 report to the Board of Regents indicated that over the last decade, the percentage of student credit hours taught by regular faculty declined from nearly 70% in 1995 to 60% in 2004 because of budget cuts.[viii]  It was also reported that 40% of student credit hours are taught (in 2004) by non-faculty, instructional staff compared to 25% a decade ago. These declines in student contact with faculty may also have been the result of declining faculty workload at some UW institutions.

Chart 3 indicates workload (as measured by Student Credit Hours per faculty member) declines at all campuses between 1987 and 2000 with the largest decline being at UW-Madison (-23.7%). By 2004, workloads had recovered substantially, but remained below 1987 levels with the highest remaining workload decline being at Milwaukee (-19.2%). Milwaukee’s workload is 25% below Madison, 45% below the Comprehensive institutions, and 42% below the Centers. There are several major implications of these Milwaukee statistics. If Milwaukee had faculty workloads more comparable to those at other campuses: (1) significantly more students could be taught, (2) students could receive more of their instruction from faculty as opposed to non-faculty, and (3) resources could be freed for other purposes such as research.

UWS BUDGETS

The GPR budget of the UWS has increased over recent years primarily due to funding provided for debt service, faculty salaries, fringe benefits, and utilities. Increases to support programs have been modest and often offset by budget reductions. In the 2005-06 budget, for example, the GPR/Fee budget increased by $51.3 million. However, there was effectively a reduction in the University’s operating budget as demonstrated in Table 2, below.

When cost increases for debt service, utilities, staff compensation, funding dedicated to particular purposes, and revenues from self-supporting programs are subtracted, there was an actual decrease of $68.4 in funding available to support the University’s primary programs. To the state taxpayer, the University’s budget increased. To the University, it had fewer resources to accomplish its missions.

In every state budget, the UW’s cost of simply continuing its existing programs plus staff compensation is among the largest items in the budget. For the 2007-09 biennial budget, the cost of these items is $295.8 million including the Regents’ recommendation for faculty and academic staff pay increases, but not including pay increases for other staff which are approved in a separate process. This amount, which would fund no new programs, is the 2nd largest increase in the state budget after School Aids. This increase represents half the entire increase in state operations spending for the 2007-09 biennium.

Table 3 indicates base budget reductions included in state budgets 1997 and 2007. Over that period, GPR budget reductions totaled $280.4 million. These reductions were offset by tuition increases of $100.0 million leaving a cumulative reduction of $180.4 million, representing a 14.6% overall reduction from the 1996-97 budget of $1.24 billion, or an average of 1.6% a year.

The budget reductions charted in Table 3 have resulted in a budget that is $180.4 million below what the budget would otherwise have been. However, due to budget increases that occurred at the same time as base budget reductions, largely for cost-to-continue items and staff compensation, the overall UWS budget has increased by an average of 4.6% as shown in Table 4. You have, therefore, the paradox of significant programmatic budget reductions occurring within overall budget increases.

Budget reductions are particularly difficult to manage within the University context where 78% of the budget is salaries and fringe benefits, and there are restrictions on laying off tenured faculty and academic staff. In the case of faculty, tenured faculty cannot be laid off unless an entire institution is declared to be in a state of fiscal emergency, a process which takes considerable time. Non-tenured faculty and certain academic staff are entitled to multi-year notices before layoffs can occur. Sixty-five percent of the UWS budget is for faculty and academic staff.

UWS PLANNING

There is no single long-range strategic planning document or process for the UWS, rather, the planning function is reflected in a number of documents and UWS processes. Most recently, the UWS regards its document, “Charting a New Course for the UW System,” and its 2007-09 biennial budget request (“A Growth Agenda for the State of Wisconsin”) as planning documents.

The recommendations of the “Charting” document are divided into “self-help,” “state help,” and “joint (UW/state) efforts.” For a summary of these items, see Attachment 2. There are nine self-help items under which the UW System would undertake certain actions: (1) establish a pilot program at Platteville to attract out-of-state students; (2) lower nonresident tuition; (3) evaluate tuition models to influence student behavior; (4) help students more efficiently earn college credits and degrees; (5) streamline administrative services; (6) promote collaboration among UW institutions to attract federal funding and assist businesses and local governments; (7) adopt a systematic planning process; (8) support continued participation in the Wisconsin Campus Compact; and, (9) examine alternatives for increasing the number of nursing students.

These recommendations more resemble statements of short-range intentions than outcomes of a comprehensive long-range planning process. Likewise, the “Growth” document is more of a traditional biennial budget request document than a long-range planning document, although it may reflect long-range intentions. The “Growth” document, being essentially a request for funding for selected items, makes planning largely contingent on new appropriations every two years. It does not provide a basis for understanding the overall direction of the UWS or planning for the largest source of funding for new directions—the UWS base budget.

In the area of academic programs, planning is primarily an institution-based function operating within the framework of a Regent academic program approval process. While some planning functions are implicit in the Regent-approved missions of the individual institutions, and the process for Regent approval of new programs which considers whether program proposals are consistent with missions, there is essentially no state-level, long-term planning for the development, modification, or phasing-out, of academic program offerings.

Changes in academic programs are virtually all initiated at the institution level. In fact, the decentralization of academic planning extends down to academic departments. In the absence of system level academic planning, and given the decentralization of academic planning at the campus level, there appears to be no process which takes into account statewide academic program needs. Such needs are met to the extent that they coincide with the interests of faculty.

A recent article contrasted the approach of Harvard University and the University of Wisconsin-Madison[ix]  describing a Harvard process that takes place at the institution level to a much greater extent than is the case at Madison.

Individual institutions typically have comprehensive strategic plans. These, however, are not reviewed by the Regents. Neither is there a process for coordinating them with each other or with a state-level planning process.

OBSTACLES TO UNIVERSITY MANAGEMENT

When viewing the University of Wisconsin, a superficial first impression is that the term “university management” is an oxymoron when compared to management concepts in most enterprises; that is, management being the process by which resources are organized to produce a product in the most efficient manner. However, this view is based on a narrow concept of management most often applied to industrial or manufacturing environments. In contrast, there is a body of management theory dealing with organizations whose success depends on the fostering and application of creativity. Management in these organizations tends to be more decentralized with greater employee and operating unit autonomy. While attention is given to the overall productivity of the enterprise in order to ensure financial survival, there is less emphasis on the efficiency of operations per se. It is also often the case that revenues in this form of enterprise are less dependent on price competition than on unique product or semi-monopoly status.

By history, and nature of the institution, university management is decentralized: more at some universities, less at others. Clark Kerr, former chancellor of the University of California, gave this description of universities.

(Robert M.) Hutchins once described the modern university as a series of separate schools and departments held together by a central heating system. In an area where heating is less important and the automobile more, I have sometimes thought of it as a series of individual faculty entrepreneurs held together by a common grievance over parking.[x]

In the same work, Kerr also describes the university as an organization in which students, faculty, and public authority compete for power to govern it.

A recent Wall Street Journal article speaks of the tension between individual and collective performance in business organizations. The conflict is stated as:

Should you create more autonomy for the individual parts of a company in order to create more initiative, more motivation, more accountability and, ultimately, more individual performance, or centralize activity into common functions. . .

A company to some extent is only as good as its individual parts. But the individual parts can be good or bad depending on what they are gaining from being part of the whole.[xi]

The parts of the university, particularly the faculty, are autonomous to a degree that their contribution to the good of the institution as a whole is determined by the culture of the faculty and the processes by which faculty are recruited and granted tenure rather than by active management on the part of the institution.

Governance. University Governance provisions are more oriented to providing reassurance to University constituencies than to providing a coherent management structure. While the Regents have primary responsibility for the governance of the system and clearly have the authority to govern the System, each constituency is said to have “primary” responsibility for some things. The statutes create a powerful Board of Regents but, at the same time, seem to intend a highly diffuse system of governance.

The primary responsibilities of faculty and staff are subject to the responsibilities and powers of the Board, the President and the chancellors. However, the Regents are also directed to promote the widest degree of institutional autonomy within systemwide policies. The role of System President is ambiguous and ill-defined. It has no defined role in the appointment of chancellors. Chancellors are said to be “under the coordinating direction of the President.”

While chancellors are designated as the executive heads of their faculties and institutions with broad responsibilities, students, faculty, and academic staff are given “primary” responsibility over matters related to them, although limited as indicated above.

A report by the Commission on Institutions of Higher Education of the North Central Association of Colleges and Schools voiced concerns regarding the University of Wisconsin-Madison that are probably relevant to the UWS as a whole.

The Team detected repeatedly with a variety of University of Wisconsin-Madison groups and individuals what might be characterized as a muted but widespread angst and uncertainty about whether the principles and practices that have made the University great can continue to keep it great in a changing local, state and global competitive environment. The Team sees three major factors contributing to this concern. They are the continuing constriction of state funding, the high level of internal administrative inflexibility induced by both internal and external bureaucratic regulation and control, and some negative aspects of the University’s powerful (and often beneficial) tradition of reliance on individual and small-unit autonomy and initiative.[xii]

The report elaborated on the last point saying:

The University of Wisconsin-Madison is an extraordinarily decentralized institution. As one Team member put it, “Here the academic bottom line is decided at the bottom.” . . . While the Team acknowledges and agrees that this institutional style has been a major factor in establishing the University’s preeminence, the Team joins with many members of the UWM community in wondering whether maintaining this style might not come at the price of greater institutional risk in today’s climate of fast-paced change in higher education.

. . . [I]t may be helpful to observe that the University’s challenge in balancing the contending forces of individual faculty autonomy (academic freedom) and collective needs and goals at many levels from the departmental to the University level is similar to the challenges our society often faces in balancing individual rights with collective needs and authorities at all governmental levels from local to federal. In the Team’s opinion, this University would benefit from shifting that balance a bit toward the collective.

Under usual interpretations of labor law, the faculty, and perhaps also the academic staff, perform management functions because of their role in governance. Under provisions of 2007 Senate Bill 40, the 2007-09 biennial budget, proposed by Governor Doyle, collective bargaining rights would be extended to faculty and academic staff. However, the bill would maintain the rights of faculty and academic staff to continue to exercise management rights under existing governance provisions. The already confused and overlapping governance provisions of the UWS would be exacerbated with employees being both management and employees.

The net effect of the fragmented nature of UW governance is that leadership faces overwhelming obstacles to change and innovation. The sheer effort required to deal with the governance structure is often sufficient to stifle any impulse to change and the exercise of leadership. This environment makes it difficult to recruit top management staff.

Management Culture. Efficiency, as measured in business, is not a predominant value in higher education. Success in higher education could even be said to be measured by how high a level of inefficiency can be achieved: that is, lower student/faculty ratios, higher expenditures/student. University managers are reluctant to reallocate funding with the result that new infusions of funding are viewed as the primary means to deal with change or to implement decisions.

A well-known observer of higher education, Howard R. Bowen, has suggested a “revenue theory of cost” in higher education from which he derived several “laws” of higher educational costs including:[xiii]

1. The dominant goals of institutions are educational excellence, prestige, and influence.
2. In quest of excellence, prestige, and influence, there is virtually no limit to the amount of money an institution could spend for seemingly fruitful educational ends.
3. Each institution raises all the money it can.
4. Each institution spends all it raises.
5. The cumulative effect of the preceding four laws is toward every-increasing expenditure.

Bowen elaborates on the last point saying,

The incentives inherent in the goals of excellence, prestige, and influence are not counteracted within the higher education system by incentives leading to parsimony or efficiency. The question of what ought higher education to cost—what is the minimal amount needed to provide services of acceptable quality—does not enter the process except as it is imposed from the outside. The higher education system itself provides no guidance of a kind that weighs costs and benefits in terms of the public interest. The duty of setting limits thus falls, by default, upon those who provide the money, mostly, legislators and students and their families.[xiv]

The above perspective is probably more applicable in times of public sector stability or growth when there is more capacity for governments to allocate increasing resources to higher education. The challenge for public higher education institutions today is how to fulfill their missions in the face of constant or declining resources in organizations that are highly decentralized and that have depended on ever-increasing resources to overcome barriers to change and innovation.

University responses to what appears to be its long-term funding environment, characterized by limited new funding and the need to reallocate resources, have been limited due to internal and external constraints on managers in the UWS as well as a reluctance to acknowledge the reality and long-term nature of the University’s funding environment.

External Factors. The University has, on a number of occasions, identified state controls that it believes are either unduly restrictive or which result in additional costs to the UWS. Among the changes suggested by the University are:

Modify the state’s capital building program process to: expedite projects, allow the UWS to decline Department of Administration project management and construction supervision services; permit flexible bidding processes; require the government and the Department of Administration to sign documents more quickly; and allow the UWS to issue program revenue-supported bonds.

1. Modify state procurement processes to permit the UW to purchase goods and services outside of the state’s purchasing contracts and allow the UW to engage in sole-purchasing without approval by the Department of Administration.
2. Allow the UWS to withdraw certain funds now managed by the State of Wisconsin Investment Board and allow the UWS to invest them and retain earnings now credited to the state General Fund.
3. Allow the UWS to select banking contracts apart from the state.
4. Allow the UWS to retain proceeds, now credited to the state’s budget stabilization fund,  from the sale of buildings or land acquired or built with non-state funds.
5. Allow the UWS to create employee positions funded from certain non-state sources.

The items listed above are generally related to achieving greater efficiencies, shifting revenues from the state General Fund to the UWS, or shifting the locus of control from the Department of Administration to the UWS, or all of these goals. Similar UWS proposals in the past have not been viewed favorably by the executive branch due to skepticism regarding potential savings, a desire to maintain control, and opposition to shifting revenues from the state General Fund to the University.

The potential benefits of making the changes are whatever hoped-for efficiencies and cost savings are actually realized. Depending upon one’s viewpoint, the shift of control from the Department of Administration to the UWS is either positive or negative. In the final analysis, however, if control were shifted to the UWS, with appropriate safeguards to protect the state’s interests in the event of failure, the UWS would be both responsible for its successes or failures and the institution and its students would have to live with the consequences.

Internal Management Practices. Many of the criticisms of the inappropriate nature, slowness, and inefficiency of state government procedures pertain also to internal UWS practices and procedures. Examples subject to press attention are contained in Attachment 1 to this paper. The more salient of these were: the failure of a $28.4 million payroll information system project; the controversial appointment of a temporary faculty member who publicly claimed that the 9/11 attack was conducted by the U.S. government; the threatened closure of Madison’s only fertility clinic because of the failure to resolve a personnel dispute; a slow response to the issue of the employment of felons in sensitive positions at the Madison campus; inappropriate handling of a personnel issue with a UW-Madison Vice Chancellor which involved back-up appointments for administrators; research fraud by a UW-Madison Assistant Professor of Genetics; and, controversies regarding expenditures by several deans at UW-Whitewater.

Too much can be made of these isolated problems that have been identified at the Madison and Whitewater campuses as they do not seem to be widespread. A few cases among tens of thousands of employees are to be expected in any organization. When the Regents became aware of them, they responded to address the underlying concerns. However, the autonomy of campuses and chancellors, and the faculty governance structure have not proven to be well-suited to addressing the types of issues raised by these cases.

Another example of UWS policies that make it difficult to manage in times of fiscal constraints are those regarding protections against layoffs for faculty. The University of Wisconsin System Administrative Code allows for the dismissal of faculty for cause and under fiscal emergency. However, fiscal emergency must be on an institution-wide basis. There is no provision to reduce faculty due to lack of enrollments in specific programs or elimination of duplicative programs.

The Role of UW System Administration. There are differing visions of the role that the UW System administration should play. One view, common on the campuses, would maximize decentralization to the point where the System administration would be essentially responsible only for some external relations and certain housekeeping activities. In this view, campuses would act as semi-autonomous entities operating within broad Regent policies. All program initiatives would come from the campuses. Planning would be completely a campus function, rather than one primarily done at the campus but also encompassing statewide concerns. Apart from monitoring compliance with Regent policies, System administration would have no role in campus management. Arguably, we are closer to this view than at any other time in the history of System administration.

An alternative view, would assign vital, statewide functions to System administration. In a way, it is the classic view that the whole should be greater than the sum of its parts. In the absence of statewide academic and fiscal planning, promotion of best practices, funding allocations based on policy directions and equity considerations, statewide concerns will be neglected because they may not be the concerns of any individual campus. Likewise, without a significant System administration, every campus is on its own. There is no capacity to manage within fiscal limitations or to direct resources to meet statewide education needs.