Balancing Vision and Viability: A Strategic Framework for Long-Term Financial Planning

Today’s higher education landscape is marked by change and uncertainty. Shifting enrollment, an unpredictable funding landscape, and pressure to demonstrate institutional value have prompted colleges and universities to prioritize long-term planning to better prepare for the future.  

That planning must incorporate a range of factors, taking into account external forces, such as state and federal funding and enrollment fluctuations, as well as internal efforts, such as new programs and initiatives. This kind of integrated planning can help institutions be more surgical in addressing challenges so they can develop resilient and responsive long-term plans, even amid policy-induced instability.    

To lead effectively through uncertain waters, higher education leaders must embrace long-term planning as a dynamic process that incorporates both financial strategy and operational insights across all institutional levels. 

The case for integrated and adaptive planning

Traditional planning approaches often fall short, especially as colleges and universities face rapid changes in enrollment trends, tuition discounting, indirect cost recovery, federal research grants, and state-level funding. Modeling these changing factors in multiple scenarios can be time-consuming and complex, particularly in programs such as Excel.  

In this climate, leaders need a more integrated approach that prioritizes: 

• Interconnected financial and academic planning 

• Clear assessments of both viability and risk 

• Flexible resource use and reallocation 

• Effective communication with leadership and governing boards to demonstrate impact 

Combining top-down and bottom-up strategies 

Successful long-term planning must incorporate both a top-down and bottom-up approach. Top-down planning allows leaders to move quickly using known institutional assumptions and broad forecasts. However, this view is incomplete without the bottom-up input of departments and operational units that understand the details and nuances of resource needs, program demands, and capacity constraints. 

An effective strategy leverages both perspectives, enabling leaders to model assumptions and initiatives, and then validate them against real-world, unit-level realities. 

Structuring the planning framework 

A comprehensive, long-term planning model should incorporate the following elements:

1. Base information: The institution’s current positioning, grounded in audited financials or current budget 

2. Drivers: External forces and assumptions such as enrollment shifts, labor costs, or economic conditions projected over a 5- to 10-year horizon 

3. Initiatives: Strategic moves the institution may make, such as launching new programs, increasing online offerings, or enacting cost controls 

4. Scenarios: Combinations of drivers and initiatives that allow institutions to test the financial impacts of various strategic paths 

This approach equips leaders to simulate best- or worst-case scenarios, as well as the complex trade-offs between various growth strategies and their financial impacts, allowing them to be more precise in developing effective strategies.  

Example: Managing uncertain funding 

In the current political and economic environment, colleges and universities may be particularly interested in modeling and planning for potential reductions in government funding. With an integrated planning approach, leaders can input stagnant state appropriations and declining grants as their institution’s financial drivers, allowing them to assess impact on margins as well as categories such as private fundraising and auxiliary revenues. 

Then, the institution could evaluate targeted initiatives, such as adjusting staffing in auxiliary services. With the right solution — such as Strata’s Axiom^® Strategic Financial Planning — leaders can avoid looking at these potential reductions as blanket cuts, but rather as actual adjustments in terms of compensation per staff member. This allows decision-makers to assess whether such a reduction would offset the revenue decline and to understand its downstream effects on the balance sheet. 

Example: Planning for capital investment 

As institutions contend with enrollment changes, leaders may want to model the potential pros and cons of investments in capital improvements, such as the construction of a new dormitory designed to help the institution attract more students. With Axiom, higher education leaders can input drivers such as enrollment shifts and various funding structures — including debt and philanthropy — under different interest rate assumptions. 

From there, planners can model overall financial impact, accounting for both tuition revenue and new expenses from expanded facilities and staffing. This comprehensive view allows the board to evaluate the long-term return on the capital investment, rather than just the upfront costs. 

Planning at the speed of change 

As colleges and universities face economic shifts, state budget cuts, fluctuating interest rates, and enrollment changes, higher education leaders need a complete picture of how policies and projects will affect balance sheets today and years down the road.  

With Strata’s Axiom Strategic Financial Planning, colleges and universities can quickly input variables, test multiple outcomes, and adjust assumptions in real time. This empowers leaders to adapt to sudden policy and economic changes, so they can create a plan to confidently guide their institutions forward.  

To see Axiom Strategic Financial Planning in action, request a demo.