Strategic Planning and Budgeting of Cornell University - Essay Example

Running Head: Strategic Planning and Budgeting Strategic Planning and Budgeting Of Cornell The aim of this paper is to developa strategic plan and a budget for an academic institution utilizing different factors such as demographics, affordability, financial aid, consortiums and collaborations, intercollegiate athletics, community involvement, and standards and accountability. Introduction Corporate strategy is an organization process, in many ways inseparable from the structure, behavior and culture in which it takes place. Strategic planning is long range in perspective and should be comprehensive in breadth of scope. As Lynch & Williamson (1976) averred, “involving as it does the determination and periodic change of organizational objectives, the acquisition and use of resources required for their attainment, and the establishment of the basic policies which guide the goal-oriented activities of the organization, strategic planning is necessarily a top management function” (p. 132). With a strategic plan in place, what the organization needs is a budget – a detailed quantitative plan to guide its operations in the near future. The aim of this paper is to develop a strategic plan and a budget for an academic institution, specifically Cornell University, utilizing different factors such as demographics, affordability, financial aid, consortiums and collaborations, intercollegiate athletics, community involvement, and standards and accountability. Cornell University Cornell University was founded in 1845 by Ezra Cornell and Andrew Dickson White (Cornell University 2009). It is the “federal land-grant institution of New York State, a private endowed university, a member of the Ivy League/Ancient Eight, and a partner of the State University of New York. It has been described as the first truly American university because of its founders revolutionarily egalitarian and practical vision of higher education, and is dedicated to its land-grant mission of outreach and public service.” (ibid.) As of fall of 2007 the number of enrollees totaled 20,833 with 65% comprising undergraduate registrants. Of the total number of undergraduates (13,510), 51% are male and 49% female. A total of 31% of the enrollees come from New York, followed by 17% from Middle Atlantic origins and 10% from the Far West. The number of students receiving need-based grant aid was 6,008. In addition, 70 financially independent students received need-based aid. Of the total number of degrees granted (6,068), a total of 57% or 3,467 comprise bachelor’s degrees, followed by 1,713 or 28% master’s degrees. At Cornell, a collaborative culture is enhanced through several identified areas of excellence, to wit: Social Sciences, Life Sciences, Sustainability, Humanities, Ithaca - Weill Cornell Initiatives, International Programs, Law and Technology, and Information Science. Students are encouraged to be of service in their local community by easy access and identification of different community organizations where they can actively participate. Their history of athletics could be traced as early as the 1870s and have “been a bellwether of example by making its athletic and physical education program an integral part of the educational process without allowing its academic standards to drop one bit. Financing came from participants dues, contributions from faculty, students and alumni, and from benefit entertainments.” (ibid.) Strategic Plan and Budget To enable one to develop a strategic plan and budget, the components needed for their preparation should be available. For an academic institution, the plan almost always starts with the projected number of enrollees for the coming year as well as the tuition fee rates which would be charged to the students. For Cornell, the sources of funds come from three distinct areas: user fees (paid mainly by students for tuition, fees, room, board, and textbooks; by patients for medical services; by guests of the Statler Hotel; and by attendees of athletic events); government support (state and federal appropriations as well as almost all sponsored programs (grant and contract) activity); and private donations. On the other hand, the uses of funds or expenditures are planned based on the following: expenditures by academic units (including salaries and wages, utilities, office supplies, and the like), financial aids, administrative and support, and physical plant expenditures (for utilities and maintenance). Questions Needed for the Preparation of a Strategic Plan and Budget For the coming school year, the questions that need to be addressed in order to prepare the budget for the coming year are as follows: (1) What is the projected number of enrollees for the incoming school year based on demographics and trend of enrollment over the years? (2) Is there a need for a tuition fee increase? Are there other user fees that need to be increased? (3) From among the sources of funds, which would be affected by the current financial crisis affecting global companies? (4) Due to the financial crisis, would there be changes in the number of personnel employed by the university? Can an increase in salary be accommodated? What other costs or expenditures need to be evaluated in terms of possible reduction and cut-back? Which cost components are urgently needed to be addressed this coming school year? (5) Are there capital expenditures that need to be deferred? With the assistance of data provided by various colleges and units, the revenues for the coming school year are “projected at $2.921 billion, an increase of 4.8 percent over the forecast for the previous year” (ibid. Operating Plan Highlights, p. 6). Of the projected absolute figure for the revenues, 24% or $696 million would come from tuition and fees. Tuition fee rate per school year amounts to $36,300 for the undergraduate program. It comprised a 4.9% increase from the previous school year’s rate. On the other hand, in the expenditures side, “expenditures are planned at $2.815 billion, an in­crease of 5.1 percent over the forecast for the previous year”. No capital expenditures would be pursued in view of the global financial crisis. Salary increases would be evaluated in terms of financial performance to be monitored on a monthly basis. Administrative and support would account for 12% or $342 million of the planned expenditures for the coming school year. In this regard, the proposed plan will produce a $12.9 million net from op­erations. Conclusion Corporate strategy is the pattern of decisions that (1) shapes and reveals its objectives, purposes or goals, (2) produces the principal policies and plans for achieving these goals, and (3) defines the business the company intends to be in and the kind of economic and human organization it intends to be. (Christensen, Andrews & Bower 1978 p.125) Strategists are analytically objective in estimating the relative capacity of any organization in terms of planning and budgeting future operations and the opportunity they see or anticipate in their environment. The extent to which an organization undertakes low or high risks presumably depends on their profit objectives. Of all the components of strategic choice, the combination of resources and competence is most crucial to success. References Christensen, C.R., Andrews, K.R. & Bower, J.L. (1978). Business Policy: Texts and Cases. Richard D. Irwin, Inc. Homewood, Illinois. Cornell University. (2009). Division and Planning and Budget. Retrieved on June 17, 2009 from < http://dpb.cornell.edu/index.htm> Lynch, R.M. & Williamson, R.W. (1976). Accounting for Management. McGraw Hill, Inc. New York. Read More