In the following research paper, I intend to explore the variety of models of responsibility centered management that have been successfully inculcated the various major universities across the globe would discuss both the merits as well as the demerits of this model to the financial sector of such institutions. The wholesome evidence co notates that the model of the RCM has brought much more positive financial impacts to such institutions.
At these times of great economic upheaval, the overall costs of management and operations are taking a worrying trend of tremendous increase in different public universities. This in effect John and Parsons put it in their book, has prompted these institutions to find means and ways of reducing such discretionary costs by adopting some well informed and researched strategies of cutting down costs. One of these profound strategies is the responsibility centered management. This method has in most cases been successfully implemented by these major universities across the globe. Those who support this model puts forward a strong argument that this model boosts efficiency and more so it enhances the planning that is deemed to be long term (John, & Parsons, 2005). To this effect is believe that the model has superior characteristics that are evidenced by the qualitative evidence that have been so far brought forward by the universities which have implemented the model. Various studies that talks about the responsibility centered management however purport that in as much as the model allows proficiently for long term scheduling; this stance is still very difficult to achieve (Barr, & McClellan, 2010).
Those in the opposition of this model on the other hand strongly believe that the primary motive of profit maximization of this model may substantially cause the units offered to be far much bulky and very tricky and difficult to with. This in effect would water down the quality of the education system. To this point, they believe that the responsibility centered management should at all cost be abandoned.
In this paper, I instinctively explore some of the merits and demerits of the CRM models. In particular, the department based model, hybrid model and lastly, the college based model. I would also, in detail, explore two universities that have implemented this model. And these are, Iowa State University and the University of Minnesota. I tend to scrutinize the financial competitive advantage that the RCM model has brought to these institutions and the different ways in which they have responded to the flaws that comes with it.
The responsibility center management models
The responsibility centered management ahs in very many occasions been implemented in different stances in different institutions. The incentive based budgeting, the cost center management, the revenue center management and many other forms the fundamental tenets of the responsibility center management (Chatterji. 2014). This entails each and every department given the mandate as well as responsibility over the costs and the revenue that accrue to such department. It is for this reason that the personnel in such areas will be held responsible for every costs and revenues that accrues to such department. Here the budgetary authority of each faculty, department or College is charged with the responsibility (Springer.2014). The control of the university expenses are succinctly aligned to the on the ability of each person held responsible to utilize fully the local resources of services and goods in accomplishing each and every task allocated. To this effect, the income thereof includes the calculation of tuition fees and matching them with the receipts granted by the cashier who receives these cash at the departmental level. The models are as explained below.
Institutions based model;
Looking at the Iowa State University and comparing it with the other universities, in the light of management of resources, this university in most cases gives less authority and power to the heads at the departmental level. Instead distribute such revenue and cost centers to the basic and primary units of the created within the resources. The basic units include fourteen resources centers and eight main administrative units (Chatterji. 2014).
On the contrary to the general fund focus of the past, the incorporated budget development will include most of the funding sources. The mandate of preparation of the entire college budgets will be shared among the various arms such as the unit administrators, and the committee of advisors. The revenue budgeting will also be done at the resource center level and this will demand for the inclusion of various administrators such that they will be at a position to give their comments on the matters of revenue forecasting (Barr, & McClellan, 2010).
Here again the resource fund flow from one responsibility center to the next. And here it moves to the excellence fund and various cost centers that always reflect various support functions. The institutional funds are always injected into the institution at the full discretion of the top officials like the president. This fund’s main aim is to improve the overall wellbeing of the institution. With this model in place, each and every individual will be responsible for the reason for authorization of such funds (Ennals, 2014)
Department based model
When (IUPUI) brought in responsibility center management system, the school of science developed a model that was different from other schools. Peculiar to the school of science, the model of RCM forms the platform for devolving a substantial share of financial decision making to the relevant departments. At this school, the decision making authority is shared between the departmental heads and the dean of the school in such a way that the departmental heads have the decision making authority over each and every spending in each department (Ennals, 2014). To this effect the responsibility of budgetary controls is not centered under one docket but numerous dockets. This happens even as the dean has now the responsibility of looking at the budgeting at its whole level and at each department unit.
In this school, the model dictates how the funds will be allocated and this happens in various steps. The first step discerns the kind of faculty to be filled and the positions as well. Here a committee is formed to look into this matter and come up with the different positions that are to be filled and the different departments that are to be formed. Next is the removal of the funds that appear to be fixed in nature to the institution in terms of expenses from the general fund. This is to be able to get the locatable fund. Then from this we remove the base set asides i.e. the funds like those paid for hiring faculty chairs, building repairs, and renovations (Millot, 2013). The dean then will be responsible for the allocation of the remaining funds which is at his discretion subject to the decisions made by the departmental heads. The departmental heads then have the mandate of using the funds allocate to them by the dean and hence this forms a responsibility center at the very basic departmental level.
Advantages and disadvantages of responsibility center management
The responsibility center management model employed in each and every institution contains both sides of the coin, that is, the bad and the good. Those persons who stands strong for it, views it as a tool that evidently tries to maximize profits in a more productive way by giving the mandate, responsibility coupled with authority to those individuals and departments that form the fundamentals of the institutions (Chapman, 2014). The big wigs who oppose it comes out strongly to reveal that it does not at all cost make the long term goals come true and that it is a tool for derailment of academic excellence. This comes at a time when the educational excellence is paramount to each and every individual in the current world. The following are some of the arguments for and against this model.
The proponents of this RCM model explicates that the responsibility center management tends to encourage a more proficient financial efficiency by forming different performance incentives to the individuals at different work level (Chatterji. 2014). This becomes possible by charging each and every individual in the departments with the revenue and shortfalls that accrue to them in their area of jurisdiction. This in effect supports in a great deal the long term financial planning. In a research conducted in Minnesota a vicariate correlation study shows that over the period 1993 -1994, to 1996-1997 the vicariate correlation between sponsored awards and indirect cost recovery averaged 90 for academic units (Chapman, 2014). Over the later years with incorporation of RCM the correlation averaged 99. It clearly indicates that the initialization of this model to the university, the unit’s enrolment and the research performance directly affected the financial status of the university in the earlier year (Ennals, 2014). Moreover a committee at the Indiana reviewed this and came up with the conclusion that among other things in the university policy making, the RCM model has a formidable incentive for the departmental units in monitoring their performance, with the main aim of improving their efficiency and effectiveness
The RCM model requires the institutional departments should be self sufficient and for that matter have independent that allows them to make different decisions (Springer.2014). In to this, departmental heads are at a position to modernize and innovatively restructure the way they carry out different activities, this will in turn make the academic value of such institutions that embraces the responsibility center management substantially increase at this point in time, the departments will be able to reschedule their tasks appropriately that will considerably reduce the costs by exploring more saving techniques (Barr, & McClellan, 2010) According to Strauss and Curry the significance of autonomous correction is that the enrolment variances are followed by their corresponding revenue from tuition, the author explains that there have been complaints that the less number of the courses needed has led to the delay in the graduation date (Chapman, 2014). The universities such as Minnesota have so far reported that after the implementation of the responsibility center management into the institution there has been no delayed graduation again. Thus I take this stance to affirm that in terms of programming of the institutional activities it is beyond reasonable doubt that RCM has helped many universities achieve this.
The RCM model in most cases is deemed to address the ambition and quick stances of achieving objectives and goals. To this effect it tends to lower the education standards of an institution. With the main aim of completing tasks given, the departmental heads will in most cases try misuse the authority they are given to become better performers at the expense of the quality of education being provided (Millot, 2013). The institutions will be deemed to be making money by providing graduates. The units offered per semester go a notch higher and the student lecturer ratio tends to increase. This in effect leads to provision of poor quality education being offered at such universities. In the long end potential students will be discouraged by the deteriorating performance of the university. In effect, the reputational image of the university institution will be compromised in a great deal if this is allowed to occur. Consequently this has a long term financial effect of continued reduction in revenue in terms of tuition fees paid to the institution by the students. Minnesota University projects that if not tamed and treat with utmost care, the general performance of the students will go down gradually with the inclusion of the RCM model into their system (Springer.2014).
In RCM the departmental heads are given autonomous mandate to make informed decision and judgments at their discretion. It is to this effect that most the universities come up with different crash programs in abide to accomplish their objectives quickly (Chapman, 2014). This has led to redundancy in terms of offering of units and this has also substantially affected the timetabling of such activities as lecturing. The lectures are being crushed and this tends to reduce the quality of education down. It is now upon the respective universities to ensure that they incorporate measures that would ensure the mitigation of the over ambition that can be depicted by such cases of autonomous decision making.
In summary the responsibility center management has different models with which different institutions can adopt. The models such as institutional and departmental based forms a formidable foundation in terms of management. Owing to the research conducted in Minnesota and other universities, there is a substantial importance in implementing the model such as the increased financial efficiency and gain which takes an upfront lead; there is also proper scheduling of work. Notwithstanding the different challenges that it has such, as the fear of not meeting the future financial goals, from this research, I have come to acknowledge that it is quite imperative for every university in the United States to embrace and implement the responsibility centered management. They should as well proceed with moderation as this would at times cause a conflict of interest for profit maximization and educational excellence.
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