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Feb 20, 2009

How to lose $240,000 in 30 days

On Jan 14, which is actually 36 days ago (30 just sounds better in the title), I sent this e-mail to one of UNC administrators:

If we "supersize" our Elementary PB cohorts to 30 people in each, can we also pay instructors a little bit more for the large classes? For example, if we assume 25 students is the maximum normal size, then each student is 4% of the load. So, we would like to add at least 4% on top of maximum pay ($1500 per credit) for each student above 25. 26 people would be 1560 per credit, 30 people will be 1800 per credit. We will use a similar formula to increase coordinator's stipend. […] I know it is complicated to keep track of, but extra 15 people will bring in an extra quarter million. It is definitely cheaper than opening a new cohort. We seem to have enough qualified candidates.

For those of you who don't know, the math works like this: the program is 48 credits, at $340 per credit. This means each additional student would bring in $16,320. 15 additional students would generate $244,800. If we paid the instructors a little extra, it would cost us $2,880, plus perhaps $2000 more for coordination, total of $4880. The university is tax-exempt, so we would clear $239,920 in one year. Keeping in mind that the University is expecting a $2.9 million shortfall, this would not be a bad little something, all at a price of saying "sure." The catch is – we needed the permission quickly. To manage the increase, we would have to make sure most instructors are OK to teach the larger classes, we'd need to extend the official deadline, and make sure the admission process is still rigorous and fair, and people still have the time to apply. We cannot hold admission decisions, because students won't be able to meet the priority deadline for financial aid. It is entirely too late now, and I still have not received a decision. I did remind, and was told – this decision needs to be made at a higher level. And yes, of course, I did make a point this was time-sensitive. So, I scratched this one from my to-do list. We have other things to do, and this particular program is already successful, large, and gives more than enough work to its coordinator and our off-campus program manager.

Of course, the story is more complicated than that. The University is trying to make its operations more orderly and more equitable. For example, the increase of pay for off-campus classes has been discussed last year, and it was decided that there would not be a difference between on- and off-campus compensation, because it creates negative incentives for faculty to teach on-campus. I actually was in favor of it then, but this is a different proposal – not a blank increase, but a formula for oversized classes. This proposal has a clear rule attached to it.

As the Provost rightfully noted at our recent meeting, you cannot have two different accounting systems, one with large incentives, and another with small, or no incentives at all. I agree, and have written about this in June of 2008. So, there is a valid hesitation to just let people to do whatever they want, and to make separate deals with every unit on campus. There has to be a clear chain of authority, and the interests of the entire campus must be protected above those of each individual unit. I understand all this, but still, the answer should not and cannot include decisions that lose us all a lot of money, and let's not forget, deny 15 potential students access to education they need. Yes, we need a better, more orderly, more equitable system. Yes, the University s entitled to the lion's share of the profits we help generate. But you cannot innovate or grow if the decision-making channels are shut down. A new set of regulations should be firmly in place before the old chaotic system is yanked from under our feet.

And the financial emergency is not an excuse. Many economists believe that the Great depression was significantly compounded by the Federal Government trying to cut spending, raise taxes and retreat to protectionism. The same psychology is at work at our level. If you're in charge of an institution and it is facing financial problems, your first instinct might be to clamp down. You confiscate extra cash from all the units sitting on it, so you can allow them to operate more or less normally, no keep their own people employed, to avoid cancelling searches, etc. You try to normalize the cash flow back to the central office, so resources are not being horded and stashed away in hundreds of different accounts. It is, you figure, a small price to pay for making it through the emergency with minimal losses. I am not sure if I won't be doing something similar if I were in their position. But you cannot lose quarter a million dollars in 30 days, no matter what. Small decision or indecisions have large consequences. A time of crisis is the time to unleash people's initiative and creativity; it is the time of experiments and bold moves. You have to be very cautious when the times are good, and take risks when the times are not so good. To be agile and flexible, the institution needs to trust its people to have good intentions and to make good decisions. The last thing you want to do is to freeze up initiative.

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