August 31 2012

First, a confession: My career involved a good deal of time in the manufacturing world before I entered higher education.  As a result, I tend to draw parallels between the manufacture of electronic equipment and the process of educating students.  My warning to you is that this has the potential of being excessively boring.  Nonetheless, I’d like to share with you all a project that is just now coming to completion, with the hope that it might spur some thoughts about measuring productivity in our world.  In the end, the goal is to shed some light on an area that might not be very visible in our institutions.  So, here goes. In manufacturing, a product is apportioned a cost for direct labor, a purported reflection of what is expended in human effort to transform parts and pieces into a finished good.  Direct labor is personified by the folks on the line, assembling various components, supervising automated equipment and directly inspecting and testing finished goods.  In higher education, it seems right to consider this function to be performed by our faculty in their role as teachers of courses. Indirect labor was typified by various functions that, while needed, were not product specific.  The fellow who swept the floor or the woman who distributed parts from the inventory cage; even the production supervisor were all collected in the bucket of indirect labor.  This became connected to factory overhead, encompassing various facility and manufacturing equipment costs.  For higher ed, support processes that surround the classroom comprise this.  Everything from tech services to housekeeping combine to make the classroom more effective, even though they are not tied to specific classes. All of this seemed so wonderfully logical until some innovators recognized the value of direct labor’s suggestions toward improving manufacturing efficiency, product quality, design and/or worker happiness.  Indeed, there appeared to be reason for line workers to participate in a broad array of discussions, all aimed at continuous improvement and the hope of less than one defect in a million iterations (six sigma).  I recall a good friend, a service technician actually, who traveled to Japan and Germany for Xerox, meeting with product engineers and designers to make sure that effective and efficient service could be baked-in to new product.  Few would argue the benefits of such collaboration. Higher education has tended to be ahead of the pack when it comes to collaborative work.  Full-time faculty are expected to advise students, participate on committees and to develop courses, even whole programs, for the benefit of their discipline and the institution.  Some may cast it in the same vein as indirect labor but I’d like to think it is more akin to six sigma-style practices where those who make the product have a great deal of influence on how the product is designed. While we applaud all manner of cooperative endeavors, the reality of our primary production function cannot be lost.  That is, we stand the chance of dedicating too much time and effort away from the classroom, reducing our direct labor in favor of activities that are more properly classified as overhead.  In today’s academy, this change appears to be manifested in a proliferation of what we call release time.  By solely presenting classroom load hours as the denominator of the student to faculty ratio, the cost burden associated with extensive release time winds up being masked.  Some then categorize release time as administrative or staff labor, inflating those areas, to the consternation of trustees who wonder why our overhead has ballooned. For those who are interested, please know that I lack the ability to divine or even suggest an ideal level of release time.  No two institutions would report, either in load hours or as a percentage of teaching hours, the same level.  What is necessary nonetheless, is a mechanism to quantify this practice so that its numerical influences can see the light of day and be given due consideration as productivity and escalating costs are carefully reviewed. If your institution is like those where I have served, information about faculty loads is a well-kept secret.  We know that Dr. Joe or Prof. Linda is a full-time faculty member and serve in the English department.  What we (at least on the financial side) are not always privy to is the amount of teaching that these two engage in, versus other assignments that make up their total load.  The contracts are in the CAO’s office, as is (purportedly at least) the oversight of such matters. Gratefully, our CAO endorsed an endeavor we have called “The Load Project” whereby the entire activity of a faculty member is now being captured by our course database.  That is, if they are assigned to teach various courses, those course hours and load hours (generally the same) are entered. A specific series of course numbers (9XXX) were assigned for the various kinds of release time that a faculty member could be assigned.  There were quite a few, actually.  The idea was to have in the same database all the information that makes up what a faculty member is doing contractually.  As an aside, the assignment of load credit did not always correspond with course credits, necessitating another field. You may ask why this approach was taken.  In essence, we wanted the same kinds of reporting to be available for release time as was possible for teaching loads.  In that vein, it will tell us exactly how many hours in total this animal called release time is attracting.  It will also allow us to see how many hours of the different kinds of release time that we deploy.  Hours (and costs) of release time by department, school and rank can be analyzed as well.  The possibilities are quite significant, even to the point of auditing contractual loads. Now, I’d be happy to report out all that we’ve gleaned from this exercise but reiterate that this was just implemented for this fall.  The data is forthcoming and, we believe, will influence areas where we may be tempted to invest more and those where we think enough (or too much) has been invested.  The point is that we will be armed with data that is not typically collected for this kind of activity.  Ideally, the information will then inform decisions. So, there you have it.  Indeed, “direct labor” informing other processes is considered a best practice in manufacturing.  It should surely be encouraged in higher education, but at the same time, subject to some form of accountability.  With the assignment of course numbers to release time and the ability to analyze the data every which way, we think we’re better equipped to be better informed as we apportion load hours (and dollars) to this category.  I’d like to know what you think about this. Next time, I’d like to share with you how we apportion faculty salary cost to departments and programs; courtesy, again, of the manufacturing world.  Until then, keep up the good work.
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Jeff Spear has served as CFO for Mount Vernon Nazarene University (OH) since 2007.  His higher education experiences include CFO and Professor of Accounting at alma mater Houghton College (NY), participation as a finance specialist on visitation teams for the Middle States Accreditation Association, Board membership of ABACC and the CCCU's Commision on CFOs along with service to various institutions and organizations as an independent consultant. Recently, he completed a term on the NACUBO Small Institutions Council and speaks frequently to various trade groups about quantitative and analytical issues. Currently, Jeff is serving on a joint NACUBO-AGB task force on tuition and discount reporting issues. Prior to Houghton, Jeff was co-owner of an Eastman Kodak spinoff, Controller of an investment banking firm, CFO of a public company, and began his career as an audit and tax specialist at Peat Marwick. Outside the office, Jeff is treasurer and program volunteer at the Winter Sanctuary, a shelter for homeless persons in Mount Vernon. He also serves on the economic restructuring committee for the region. Jeff's wife Janine works at Mount Vernon Nazarene University as well and they have three grown children (on three continents), two grandchildren, two cats and a yellow GTO.  

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