Critical Financial Measurements for Strategic Planning

Financial Review and Planning is Key to Ensuring Strategic Plan Success

The act of strategic planning is critical to ensure that institutions can effectively execute against their mission, and that operational activities are correctly aligned. However, a truly effective strategic plan requires appropriate levels of financial support. Many institutions go through the process of creating detailed plans, but do not engage in the required, parallel financial review and planning. As a result, they struggle to find the funding to implement their identified priorities, which ultimately become a wish list rather than a guidepost for activities.

In this blog, we will discuss a specific set of proprietary financial indicators, developed by reknowned expert and thought leader Ron Salluzzo of Attain Partners, that are tailored to the Higher Education sector and should be leveraged at the time of strategic planning to ensure that the vision and mission associated with strategic plans can be achieved.

Strategic Financial Indicators for the Higher Education Sector

Leveraging our deep expertise in the higher education sectors, financial modelling, and strategic planning, the Attain Partners team designed a set of three financial indicators that are specific to colleges and universities. These indicators can be leveraged to measure an institution’s performance either at a point-in-time, or over a time period, to provide strategic insights into the financial impacts and requirements of activities. These indicators are further supported by a database that allows organizations to compare their performance to peers across the industry. Our proprietary indicators are: the Ratio Map (RM), the Composite Financial Index (CFI), and the Graphic Financial Profile (GFP), as described in the 7th edition of Strategic Financial Analysis in Higher Education: Identifying, Measuring & Reporting Financial Risks, co-authored by Ron Salluzzo, Attain Partners, and distributed by NACUBO.

Ratio Map (RM)

The RM illustrates the specific ratios that should be leveraged to create a baseline measure of financial health. These are computed based on audited financial statements, and include the following ratios: primary reserve, viability, return on net assets, and net operating revenue. This limited set of data was specifically developed over thirty years of strategic financial planning in higher education. While many other financial ratios exist, those included in the RM have proven to provide meaningful insights for the leadership engaged in an institution’s future planning.

Composite Financial Index (CFI)

The CFI combines the four ratios calculated in the RM to compute a single score of financial health. This point-in-time measure becomes more meaningful when historical calculations are also created, typically for the past five years, as this creates a trend that illustrates an institution’s financial progress.

Graphic Financial Profile (GFP)

The third and final indicator, the GFP, converts the four ratios from the RM into a graphical image that illustrates the institution’s health and progress over time.

Effective Use of the Strategic Financial Indicators

These indicators can be calculated at multiple levels, depending on the institution’s need. Specifically, they can target the college or university, campus, program, or individual researcher computations. When engaging in strategic planning, it is critical to review these figures to determine the financial health of each priority, identify the amount of financial support required for the associated activities, and allocate those resources. Without this step, institutions may flounder in executing on their priorities when appropriate levels of funding are not available.

Attain Partners has successfully worked with public and private colleges across the United States to both develop these figures and support their effective use in the strategic planning process. For more information or to speak with one of our experts, please contact us here.

About the Authors

Adrian B. Giannattasio, Attain Partners

Adrian Giannattasio is a Consulting Analyst at Attain Partners and has experience in change management, project management, business process analysis, data alignment, and data architecture. He graduated Cum Laude from Boston College with a major in Finance. Adrian is a Prosci® Certified Change Management Practitioner who enjoys autocross racing.

Reshma Patel-Jackson

Reshma Patel-Jackson is a Senior Principal and the Practice Leader for the Management Consulting business of Attain Partners. She is responsible for and involved in a wide range of consulting initiatives, primarily on change management, strategic planning, business process improvement, organizational assessments, project management, and research administration. Mrs. Patel-Jackson is a Prosci® Certified Change Management Practitioner who has extensive knowledge and training in the field. She has provided strategic planning, project management, change management, internal audit, compliance, and costing services for a variety of not-for-profit, Higher Education, government contracting, and commercial clients.

Diane Scott, Attain Partners

Diane Scott is a Senior Consultant at Attain Partners and possesses over twelve years of experience supporting Higher Education. She is a process improvement professional with a demonstrated history of management consulting and client relationship management. Her detailed understanding of university business helps her support client needs related to strategy, business process improvement, and change management. She holds an MBA from the Georgetown-McDonough School of Business, is a certified research administrator (CRA), and is a Prosci® Certified Change Management Practitioner.