Budget Model Redesign — Responsibility-Centered Management (RCM)

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TO: The Campus Community
FROM: Ann Weaver Hart, President
DATE: December 12, 2012
SUBJECT: Budget Model Redesign — Responsibility-Centered Management (RCM)

 

Since my arrival, I have benefitted from a number of thoughtful conversations with faculty, staff, and students regarding the great strengths and important challenges facing the University of Arizona. In the category of challenges, concerns about the institution’s approach to resource management and allocation issues have been among the recurring themes.

Naturally, I am aware of the effort under a prior administration to explore and implement a decentralized budget model, now commonly referred to on campus as RCM1. I know that a great deal of hard and thoughtful work was invested in that project, and that the decision to delay the implementation was difficult. That decision appears to have been wise since all of the internal and external factors necessary for successful implementation were not in place.

The ultimate goal remains to build and smoothly implement an incentives-based transparent budget model for the University. As Provost Comrie and Vice President Castillo indicated in a memorandum earlier this fall, I have asked them to lead a renewed effort toward this goal — an effort that is inevitably named RCM2.

I am enthusiastic about this project, because I have experience in an institution where RCM was working well, and I know it can be a beneficial force in institutional operations. I also know that it is important to recognize RCM is simply a tool to be used wisely in the hands of institutional and academic leaders. It is not a substitute for leadership, judgment or grounded academic and student support priorities. Nor is it a solution to all fiscal challenges. It is, however, an important part of the platform from which we can launch our strategic plans. It must always be seen as a tool in service of our strategies and priorities and not a driver of them.

When working well in the hands of responsible leaders and managers, a decentralized budget model can contribute to institutional quality. Its potential benefits include:

  • Encouragement and reward for revenue generation and cost effectiveness;
  • Alignment of authority and accountability at the local (unit) level;
  • Greater transparency regarding sources and uses of resources;  Greater flexibility — improved responsiveness to change;
  • Enhanced ability to plan with a better sense of future resource flows.

Such models are complex, and the institution is never static. There can always be unintended consequences that need to be addressed. And, even when a budget model appears to work well, it should be subject to periodic review and adjustment. We must continuously learn from our experience.

To begin, we can learn from our experience with RCM1, on which we have considerable useful feedback, including a thoughtful memorandum from academic department heads. RCM1 focused solely on areas related to Academic Affairs, whereas RCM2 will include a University wide view. We will utilize a Steering Committee and Sub-Committees with wide representation across the University and a mandate that includes frequent and meaningful two-way communication. We will take care to devise an implementation plan that includes sufficient time for testing, and mechanisms to smooth the runway to change. Every effort will be made to pick the right time to implement; e.g. to avoid, if possible, implementation in a year when material budget disruptions are in play. We will retain outside consulting assistance throughout the project. Some aspects of the RCM1 model may be adopted without alteration in RCM2, but we can make no assumptions at this stage regarding the extent of any similarity. A fresh look will be taken at everything.

In preparation for the project launch several task forces are already at work on subjects that need to be resolved as prerequisites to RCM2. These include issues around graduate assistant tuition remission, the Outreach College, and fringe benefit rates and accounting. Andrew Comrie and Milton Castillo will Co-Chair the RCM2 Steering Committee, and Jim Florian will assist in the project and provide staff support to the Steering Committee. I expect to receive their recommendations by the end of this semester for 12-15 people to serve on the Steering Committee so that the group can begin its work early in the next semester. I will expect to see wide representation on all relevant dimensions so that many points of view are brought to bear.

It is premature to set a deadline for completion of the project, but a possible timeframe would call for me to receive a Report and Recommendations from the Steering Committee by Fall 2013. This allows for testing and implementation planning in 2013-2014. While we are eager to complete this transition for the long-term benefit of the institution, we know it will require a great deal of hard work and time to ensure a thoughtful, open process and desirable outcomes.

You can expect to receive regular updates on the progress of RCM2, and I encourage you to offer feedback to the Steering Committee throughout the process.