ERIC EJ1140980: Budgeting and Organizational Trust in Canadian Universities

2012·0.32 MB·English

by  ERIC

Budgeting and Organizational Trust in
Canadian Universities
Cynthia V. Simmons
Associate Professor
Accounting Area, Haskayne School of Business
University of Calgary
Calgary, Alberta, Canada
ABSTRACT
Te purpose of this research was to investigate the relationship between budget processes and levels
of organizational trust in universities. A series of semi-structured interviews were conducted with
senior administrative personnel in universities across Canada. A relationship was found to exist
between university administrators’ level of organizational trust and their views regarding the ap-
proach and value of the budgeting process at their institution. Te trust levels are influenced by the
correspondence between the stated goals and directions of the university with actual resource alloca-
tions, the level of influence the individual felt they had on the budget process, and the degree that the
budget could be used to predict financial impacts under various scenarios.
Tis study provides new information on the way budgets can affect the workings and organizational
culture of the university. It shows that there is a relationship between budgets and organizational
trust and presents evidence that individuals’ attitudes toward cost information differ from that of
the budget itself. It shows that the usefulness of budgets as a management tool is increased when us-
ers recognize that it functions as a broad communications medium - both the manner in which it is
developed and the financial information it presents can affect organizational trust
“Nowhere is the competition for funds as brutal or political as in most universities” (Bublitz &
Martin, 2007)
This paper presents the findings from a prelim- are institutions designed both to educate and to
inary investigation into the relationship between develop new knowledge, the outcomes of which
university administrators’ attitude toward the are difficult to quantify, and the relationship be-
budgeting process at their institution and their tween resources expended and these outcomes
level of organizational trust. Budgeting within being fuzzy at best. The result is that in univer-
universities has received increased attention as sities the utilization of authority, power, and/or
institutions of higher learning across the globe influence, i.e. the political, can have a significant
deal with strains on funding (see the ies National influence on the distribution of resources.
Center for Education Statistics; Blumenstyk,
In this politically charged environment the level
2010; Goetzmann et al., 2010 for information
of organizational trust held by individuals may
on university funding levels), as well as the ap-
influence, or be influenced by, the budget pro-
plication of formula-based costing approaches
cess. Trust is seen to provide an advantage to an
(Thomas, 2000), and the use of incentive based
organization. It leads to more effective communi-
budgeting systems (Priest et al.,2002). In the
cation, increased co-operation, and a diminished
ideal a budget is an instrument of resource dis-
resistance to change. Given the unique nature of
tribution in line with the strategic focus of the
the university – their knowledge based outcomes
organization, and can serve as a basis of evalua-
and politically charged environment – together
tion and control. The nature of universities is
with their increased focus on cost structure and
such though, that their approach to the budget
control, the relationship between budgeting
process can emphasize the political. Universities
Journal of Academic Administration in Higher Education 1
Cynthia V. Simmons
practices and organizational trust is worthy of figure be an amount representing actual need.
further investigation. This “gaming” of the budget is especially prob-
lematic when budget values are used as part of
an organization’s performance evaluation/con-
BUDGETS AND TRUST
trol system. But perhaps the most limiting view
Accounting textbooks define a budget as a for- of the budgeting process is when it is considered
mal, quantitative expression of an organization’s to be lacking in relevance. Where the process is
strategic plans (see Horngren et al., 2007). The seen as a time consuming bureaucratic exercise
budget process translates “qualitative mission that is either not reflective of company strategies,
statements and corporate strategies into action or flexible enough to allow for changing condi-
plans, link(ing) the short term with the long tions, or both. (Hope and Fraser, 2003; Libby
term, bring(ing) together managers from differ- and Lindsay, 2010).
ent hierarchical levels and from different func-
As institutions of higher learning whose focus is
tional areas, and at the same time provid(ing)
on teaching, research and service, resource distri-
continuity by the sheer regularity of the process”
bution decisions within universities can be sub-
(Umapathy, 1987, pg. xxii). A budget translates
ject to a high level of political influence. The goals
an institution’s plan into priorities (Whalen,
of research and teaching are understood, but the
2002). Complications can arise however from
exactness of what is to be learned is not agreed
a long list of considerations: when organization
upon nor is the relationship between effort (re-
goals are not clear or are conflicting; when there
sources) and outcome determinable. Reputation
is a lack of agreement regarding priorities; when
plays a key role, allowing for the impact of au-
there is inconsistency between stated priorities
thority, power and influence in the development
and subsequent resource allocations; when the
of goals and the distribution of resources. Social
methods for achieving outcomes are unclear;
attributes such as the non-profit character of the
when there are limited resources; or when indi-
universities goals (Gross, 1968), strong attach-
viduals determining resource allocations and/
ments to traditional academic values (Paterson,
or performance benchmarks have a conflict of
2003; Lapsley and Miller, 2004), and the nature
interest. In other words, the nature of complex
of contemporary academic work as both a pub-
organizations such as universities can result in a
lic service and creative knowledge work (Deem,
budget that is a reflection of these complexities as
2004), support the unique nature of the univer-
opposed to strict economic considerations.
sity as an organization. It is this that can make
The budget, together with the process used to the allocation and evaluation of resource usage
create it, can be seen to be something far differ- especially problematic.
ent than a rational statement of resource alloca-
Studies have shown resource allocation processes
tion based on agreed upon strategic goals. For
and models to be historically and culturally situ-
example, the budget can be seen to be the prod-
ated within the context of each university, with
uct of a negotiation exercise (Wildavsky, 1984).
the models in use being more a matter of internal
Given a finite level of resources, a commitment
fit than of best practice (Goddard and Ooi, 1998;
of resources to a specific unit or activity within
Jarzabkowski, 2002). Empirical findings indicate
an organization necessitates that other units or
that the existence of models in universities pro-
activities will do with less. The planning aspect
vided a sense of objectivity, but that the strong
of the budget process can thus be viewed as less
collegial culture proved unwilling to accept a
a division of resources to achieve an agreed upon
strongly centralized organization of the resour-
result, and more of a political exercise where com-
ces allocation processes (Jones, 1994; Scapens
peting organizational interests vie for recogni-
et al., 1994). And although the use of computer-
tion and support. Budget projections can also be
based models for planning is seen as being more
affected by budget gaming (Jensen, 2003), where
transparent, knowledge of how universities al-
resource allocations are set at levels designed to
locate resources appears to be largely restricted
force increased efficiencies (low), or resource
to those involved in the process (Angluin and
needs requested at levels designed to allow for
Scapens, 2000). Even formula based approaches
slack (high). In neither case would the budget
2 Spring 2012 (Volume 8 Issue 1)
Budgeting and Organizational Trust in Canadian Universities
to resource/cost allocation have been found to be source pressures are high; where tradition, micro-
influenced by patterns of micro-political activity, political activity, and differential sub-unit power
the influence of sub-unit power, and the prior- exists, and where there is limited knowledge of
ities and preferences of key individuals (Thomas, resource allocation practices; an understanding
2000). Clearly political, social and group effects of the relationship between an administrator’s
influence the development and utilization of level of organizational trust and their views and
budgets in a university context. perception of the budget could lead to improved
functionality.
Trust is a social construct that can occur between
individuals or between individuals and groups. It
is recognized as an important factor in determin- METHOD
ing organizational success, organizational stabil-
The researcher undertook a series of interviews
ity and the well-being of employees (Albrecht
with senior university administrative personnel
and Travaglione, 2003; Cook and Wall, 1980;
across Canada. Twelve individuals at four uni-
Shaw, 1997; Kramer and Tyler, 1996). High
versities representing the Western, Central, and
levels of trust between senior management and
Maritime regions of Canada were interviewed.
employees strengthen an organization’s ability
All individuals were actively involved in the
to remain competitive (Davis et al., 2000). This
budget process at their university and included
competitive advantage is assumed to come about
deans, associate deans, members of the Univer-
from the reduced transactions costs (Cummings
sity Budget Committee, as well as non-academic
and Bromiley, 1996), more effective communica-
senior financial personnel. Academic areas repre-
tion, increased co-operation among organization
sented included Business, Economics, Education,
members and diminished resistance to change
and Social Work. None of the academics inter-
(Kramer, 1999) – factors important in a uni-
viewed had in-depth accounting training, but
versity as well as a business context. In terms of
the senior financial personnel held accounting
budgeting, it has been argued that trust between
designations. The research was conducted over a
the resource allocation process members plays an
5 month period.
important role since it facilitates better manage-
ment of the process and supports structures of A semi-structured interview method based on a
accountability between participants (Manochin, 42 item questionnaire was used. The questions
2008). covered their general understanding of budgets
and cost determination; the nature of the bud-
Researchers have defined trust in a number of
get and the budgeting process at their specific
ways. Mayer et al. (1995) characterized trust as
institution; as well as the level of budget partici-
a willingness to be vulnerable. Cook and Wall
pation they felt appropriate and why. They were
refer to trust as the extent to which one is willing
also asked to provide as overall evaluation of the
to ascribe good intentions to and have confidence
budget process at their institution considering
in the words and actions of other people (1980).
time spent, overall effectiveness and any dysfunc-
Albrecht and Travaglione define trust in senior
tional behavior it might cause. Associated with
management as “an employee’s willingness to act
the questions on budgeting and the budget pro-
on the basis of the words, actions, and decisions
cess, interviewees discussed the manner in which
of senior management under conditions of un-
costs were determined and allocated across the
certainty or risk” (2003, pg 78). The definition of
different functional units of their university. As
trust used in this study is the one articulated by
well, issues surrounding the frequency and accu-
Cummings and Bromiley (1996). Trust being a
racy of cost and budget reporting and the reports
belief that “another individual or group (a) makes
usefulness for future planning and program eval-
good-faith efforts to behave in accordance with
uation were raised.
any commitments both explicit or implicit, (b) is
honest in whatever negotiations preceded such Included in the 42-item questionnaire was a
commitments, and (c) does not take excessive modified version of the Cummings and Bromiley
advantage of another even when the opportun- short-form organizational trust inventory (1996)
ity is available” (pg 303). In universities where re- to aid in determining individual trust levels. The
Journal of Academic Administration in Higher Education 3
Cynthia V. Simmons
questions provided a starting point for a broader bership “worse off” through the creation of an
discussion on the level of organizational trust at us versus them mentality as opposed to that of
their institution. In all cases the individuals re- a single working team. Likewise, the manage-
lated a critical incident surrounding the budget- ment professionals had harmed the institution
ing process. The interviews provided rich insight through the implementation of an ever changing
into the relationship between the participants set of inappropriate controls and procedures. To
perceived level of trust within the organization, illustrate this point this dean referenced the im-
their attitude toward the budget and the budget- plementation of mandatory four year budget pro-
ing process, and their confidence in and desire for jections by senior administration. It was his/her
more detailed cost information. view that the revenue and cost in these four year
budget projections were “worthless”. Demanding
that the deans take actions to assure that their
FINDINGS
budgets were balanced for the next four years
while regularly changing the revenue and cost
Trust projections, created a lack of confidence in both
the skills of the management professionals mak-
Eight of the twelve individuals interviewed indi-
ing the projections, and the administration who
cated that they did not trust the governing ad-
put such a system into place.
ministration of their university, with four indi-
cating strong levels of trust. This dean felt that the “us versus them” mental-
ity at the university, together with the increased
Trusting individuals felt that those involved in
focus on financial controls, had resulted in a high
the administration of the university were reli-
level of mistrust between central administration
able, they kept their word, and negotiated fairly
and regular faculty. Senior administration were
and honestly. In all of these cases the interview-
seen as viewing faculty members as completely
ees talked about working closely with central ad-
self interested - only concerned with how change
ministration. They considered themselves to be a
was going to affect their individual lives in terms
part of the decision making process and believed
of teaching loads and personal research agendas.
that their views were considered. When asked
They viewed the regular faculty member has
about their opinion regarding the need for in-
having no concern about the greater institution.
creased financial controls, one trusting individ-
Individual faculty members, on the other hand,
ual became strongly defensive. S/he emphasized
were seen to view senior administration as only
how hard those in “Centre” worked and how
looking to the bottom line without respect for
administration was trying to build the university
the faculty or concern about the quality of re-
“in spite of strong resistance to change” (P4)1.
search and the education process.
Another trusting respondent spoke of his/her
close working relationship with the president Support for this dean’s (P3) perception that there
and the need for a stronger “business approach” exists a high level of mistrust between central
(P5) to university finances. administration and the faculty was found in
the responses of the other interviewees. One of
One interviewee, a dean of a non-business pro-
the structured interview questions asked if the
fessional faculty (P3), expressed a strong level
participants believed that the central admin-
of trust in academic members of university ad-
istration, the operating units, and the facul-
ministration but articulated his/her belief that
ties/schools held a common view regarding the
there was a high level of mistrust throughout the
purpose and focus of the university. There was
institution. S/he attributed this mistrust to the
unanimous agreement amongst all the academics
actions of the union and the non-academic man-
that a common view was not held. There was dis-
agement professionals working in the university.
agreement as to the reasons for this lack of a com-
Through their defence of individuals whose ac-
mon view, ranging from “the faculty members’
tions did not warrant support, the union had
resistance to change (P4),” to the administration
“harmed” the institution and made their mem-
being “out of touch with really happens in the
1 In order to assure confidentiality partici- classroom (P11),” to “they (specific individuals in
pants have each been assigned a unique number.
4 Spring 2012 (Volume 8 Issue 1)
Budgeting and Organizational Trust in Canadian Universities
administration) are sucking resources away from We spent hours justifying our resources
the people doing the real work so they can inflate needs in terms of these priorities, build-
the salaries of their friends” (P7). This proved to ing a strong case for our request. In the
be an emotionally charged area for some of the end they gave us the same as they did
interviewees. Based on these responses one could before. They didn’t pay any attention to
conclude that the Universities had failed to cre- our arguments. In fact there was no ac-
ate, or perhaps maintain, a generally accepted knowledgement at all… They could have
overarching idea of their purpose and how best said something, ‘Hey we recognize and
to pursue it. value the case you put forward, but we
just don’t have the money right now”….
Those interviewees who expressed a lack of trust
But there was just silence. This year at
with the governing administration felt that those
budget time we just upped last year’s
in central administration failed to keep their
numbers by X% and submitted that.
word, that they tried to get the upper hand, and
Why waste your time. (P2)
that they would take advantage of people who are
vulnerable. The interviewees felt distanced from Another talked about the failure to determine an
the decision making body at their institution and accurate profit for different executive education
resentful that their expertise was not recognized programs.
or their views considered. They felt that a hier-
He (the budget officer) manipulated the
archical leadership style dominated, as opposed
information so that the people he liked
to the more desired collegial governance model,
appeared to do well and the people he
with the increased dominance of the financial
didn’t like did badly. He didn’t like (di-
within university discourse as evidence of this
rector of program X) so they received a
shift. The view expressed was that the budget
significant allocation of overhead costs,
was in fact a reflection of the attitude of those
making it look like they were losing
governing the institution, but that this attitude
money. But he did like (director of pro-
did not match the stated goals of the university.
gram Y) so he argued that (Y) was a new
Rather, the budgeting process served as evidence
program and should be given a chance
of a shift from traditional university ideals to-
to prove itself without having to cover
wards a more managerialist approach and the
overhead. It looked like (Y) was mak-
creation of a well compensated managerial class.
ing money when really they were losing
Those who felt cut out from the decision process money hand over fist. Our new budget
looked to the budget to communicate the “real” officer fixed it, but those people in Cen-
intention of the governing administration, re- tral never caught on. Proves you can’t
source allocation being seen as a stronger indi- trust the numbers or the system. (P8)
cation of objectives than rhetorical statements
In summary there were a greater number of inter-
surrounding the University’s goals and purpose.
viewees who expressed a sense of mistrust in their
If the resource allocation did not reflect the stat-
institutions than those who expressed a sense of
ed goals of the university mistrust increased. If
trust. This perception was strongly influenced
budgets were not adjusted to reflect faculty input
by the level of participation the interviewee felt
mistrust increased. If technical computations
they had in the decision making process at their
were not clearly explained, were changed, or were
universitsy. For those who felt they were part of
inconsistently applied mistrust increased. One
the decision making process, trust was expressed
non-trusting individual gave a detailed descrip-
for individuals in the central administration. For
tion of the failure of central administration to
those who felt set apart from the decision pro-
implement a promised new approach to budget-
cess, a lack of trust was expressed and the internal
ing and resource allocation at their school.
accounting processes provided evidence for this
mistrust.
We were told that the resources would
flow to the four priorities of the Uni-
versity as outlined in our Strategic Plan.
Journal of Academic Administration in Higher Education 5
Cynthia V. Simmons
Budgets plan. This corresponds to their views regarding
financial controls discussed later in the paper and
In addition to questions about trust, interview- points to tensions related to the use of the budget
ees were asked their views on the budget and the as a control device.
budgeting process at their institution. Included
were their views on university budgeting in gen- When asked to how the operating budget at their
eral; the nature of the budget and the budget university was treated in practice there was dis-
process at their specific institution; as well as the agreement. The trusting responders again indi-
level of budget participation they felt appropri- cated that it was in practice treated as a plan.
ate and why. They were also asked to provide an The non-trusting responders gave a more diverse
overall evaluation of the budget process at their set of responses. The most common response of
institution considering time spent, overall ef- the non-trusting interviewees was that that the
fectiveness, and any dysfunctional behaviour it budget was a negotiations tool – it provided a
might cause. forum by which an astute administrator could
obtain (or protect) resources from a limited pool.
When asked how best to consider the role a The next most common response was that it was
budget plays in the operations of a university, a bureaucratic exercise without impact. Little
all those interviewed indicated that the budget time was spent on determining accurate projec-
should be thought of as a plan and that this plan tions of costs (and in some cases revenues), but
should be based on the strategic goals/direction rather individuals tended to put forth last year’s
of the university. One Dean expressed it slightly numbers or last year’s numbers multiplied by a
differently, stating that the “real planning takes set percentage. Two described the budget at their
place when developing the strategic goals and institutions as predominately a means to control
objectives of the faculties” (P3), with the budget expenses. Only one non-trusting interviewee
being a reflection of this plan. Still, there was indicated that the operating budget at their uni-
unanimity that in the ideal the budget should versity was, in practice, treated as a plan.
serve as a reflection of the strategic direction of
the university – a plan of action with the relevant When asked if the budgeting process should
resource implications clearly laid out. begin at the top of the organization and work
down, or at the faculty member level and work
Even with this unanimity regarding the plan- up, one interviewee replied:
ning role of the budget, many of the academics
interviewed felt the need to bring up the fact that
“Not either/or (top or bottom), it should
actual financial results would differ from what
be both. To me this is the negotiation.
was budgeted. One emphasized the inevitability
This is the crux of it. Don’t know where
that budget numbers would not match the actual
you start, but it is important to start the
numbers, that “rapidly changing external condi-
discussion.” (P3)
tions overwhelm… and there is no way to (deter-
mine) an accurate estimate of costs and revenues” Another talked about the “lack of consensus be-
(P7). Another discussed the issue of budget es- tween ‘units’ versus ‘university’” and the need to
timates differing from the actual figures, and “talk about what we are as a collective. What we
described it as “a truism – just the nature of the are going to do and, importantly, what we are
beast” (P4). One program director felt that the not going to do.” Without a two way discussion,
budget provided a general direction, but that without agreement regarding which activities/
too much detail was costly to produce and could programs will be pursued and which will not, s/
serve as a “straight jacket”. In his/her view budget he worries about the “’atomization’ of dollars –
variances were valuable only in that they pro- the breaking down of the dollars into smaller bits
vided a starting point for discussion (P12). Thus until nobody has enough money to do anything”
while there was an expressed consensus among (P1). Importantly to this individual the difficult
those interviewed that operating budgets at uni- decision regarding resource distribution should
versities should function as a plan, or a reflection not be made unilaterally by Central Adminis-
of a plan, the academics felt the need to call for tration but by discussion, directed by strategy,
flexibility when comparing actual results to this across functional and hierarchical lines.
6 Spring 2012 (Volume 8 Issue 1)
Budgeting and Organizational Trust in Canadian Universities
All those interviewed expressed interest in hav- up in discussion by the interviewees were, in all
ing input into the budgeting/resource allocation cases, communicated as directives from central
process at their universities, with their current administration and not as a result of informed
level of perceived input being strongly associated debate between interested parties. As such, and
with organizational trust. This desire for input since the changes tended to reduce the dollars or
was the case even though as one individual stat- the flexibility of the departments/faculties affect-
ed: “it is a very fuzzy thing to people. It is seen ed, the motivations for the changes were called
as another bureaucratic activity that takes time into question. The discussion then moved to the
away from the real job of teaching and research” need for more and better cost information. Cost
(P2). information was seen to provide real and useful
information on the state of the organization as
The individuals with higher levels of individ-
opposed to the biased or inaccurate projections
ual trust believed that their concerns regarding
of the budget.
budget distributions were considered and had af-
fected the estimates included in the final budget. To conclude the discussion on budgeting, the
Those who indicated low levels of organizational interviewees were asked to provide an overall
trust felt that they had limited – if any – mean- evaluation of the budget process at their institu-
ingful input into the budget process. The rev- tion. Based on the question developed by Murray
enue/cost estimates included in the final budget and Lindsay (2010), interviewees were asked to
were “not helpful for planning” and “subject to assign and overall “grade” of the process taking
arbitrary change based on the needs and wants into account time spent, system effectiveness,
of central”. These final figures were determined and any dysfunctional behaviour it might cause.
“based on history and not as a result of consul- Trusting respondents ranking the process as
tation or need.” Those most negative toward the falling between a 60, “more helpful that harm-
budgeting process were those who felt that their ful”, and 70, “good”, with the average being a 65.
requested input was mere pseudo-participation. Non trusting respondents gave a wider range of
Statements about the process included: “No cor- responses falling between 30, which the respond-
respondence between what we submitted and ent labelled as “useless,” to 70, or good. The aver-
the way the money flows down;” “Nothing I can age grade assigned the budget process by the non-
control affects the outcome;” and “Hell of a lot of trusting respondents was a 52, with a 50 on the
work - no impact.” scale being labelled as “no value”. This scores indi-
cate a relationship between held levels of organ-
The perceived usefulness of the budget as a tool
izational trust and individuals’ views regarding
for determining the financial impact under
the value and effectiveness of the budget process,
various scenarios not only affected the user’s
and is worthy of further investigation.
perceived value of the budget itself, but also in-
fluenced their level of organizational trust. One
individual talked about how budgeted monthly Costing
costs did not reflect the actual utilization of re-
The individuals interviewed expressed a differ-
sources across the academic year. Another spoke
ent view towards cost information than that held
about the timing of revenue distributions not
towards budgets. Whereas budget figures were
corresponding to what was budgeted. In both
plans or tools of negotiation, costs were con-
cased the individuals felt this lack of correspond-
sidered to be a real reflection of the true state of
ence minimized the value of the budget as a con-
things. There was a general desire for more cost
trol tool and caused them to question the ability
information and a belief that a significant con-
of individuals in the central budget office.
tributor to the financial constraints facing uni-
Changes to the budget approach such as an in- versities today was the absence of sufficient ac-
clusion of multi-year forecasts, or the require- curate financial information. Information that
ment for a contingency fund were not seen as enabled/supported an appropriate response to
process improvements but as additional work changing conditions was needed.
for “meaningless” results. Those changes to the
budget numbers or the budget processes brought
Journal of Academic Administration in Higher Education 7
Cynthia V. Simmons
When asked if they believed that accurate cost- allocations were not a concern to most (as in the
ing information should be determined for all dean quoted above) and the view was that more
activities within the university, all but two indi- information was always better. Two individuals
viduals agreed. The two who disagreed with the did, however, express the view that that a full
statement both expressed low levels of organiza- cost/student figure would be meaningless given
tional trust and in both cases they focused on the the high percentage of fixed cost in universities.
word “activities”. Both individuals had worked When the individuals were asked if they would
with activity based costing systems (ABC) in find incremental cost valuable, there was unani-
organizations outside of the university. Their mous and strong support for the calculation and
views of ABC were negative, believing that the distribution of such figures.
approach was expensive, time intensive, and that
Participants were anxious to express their views
it caused the organization to move its focus away
on the reasons for the financial constraints con-
from its primary mission.
fronting their institution and/or faculty and in
Participants were asked if they would find full many cases were looking for detailed cost reports
costing information – costs including an alloca- to confirm their held beliefs. There was a repeated
tion of all overheads - on student enrolments, call for “full disclosure of all university expendi-
course sections, research and various program tures from the President on down” (P12) and an
activities valuable to their decision making. This expressed need for re-evaluation of procedures
led to wide ranging discussions on the nature of associated with the financial aspects of running
costs within the universities; the level of expendi- the university. To quote one dean “(The VP) is in-
tures directed towards infrastructure, adminis- terested in establishing a transparent but one size
trative compensation, student support services fits all method. I am interesting in establishing
and the difficulty of allocating professorial time. a transparent but not one size fits all approach.
Most agreed that they would find full cost infor- There has to be local relevance” (P3). Reasons
mation valuable. One dean said for financial difficulties ranged broadly. They
included too much money being spent on build-
“we can’t get mired in minutiae. I don’t
ings, a lack of sufficient government support, an
want to drown in data, don’t want to
increase in the size and compensation levels of
be data driven, but I need information.
senior administration, and faculty members who
No one can tell me how much it costs
only cared about protecting their own comfort-
to run a program. I took faculty salary
able lives. Some called for increased decentral-
and tried to divide it between teaching
ization of decision making and others called for
and research, then between programs. …
increased centralization. All interviewed were
I don’t know how much it costs to edu-
looking for increased cost transparency to shed
cate a student. I don’t know how much
light on the issue.
it costs for a function – like research”
(P3). When asked “if there should be a government
policy that mandates a detailed, consistent, and
Participants were aware and frustrated by the
transparent costing approach to all institutions
fact that a high percentage of costs within the
of higher learning in my Province”, most voiced
University were fixed, limiting their ability to
agreement. Follow up discussion indicated dif-
respond to changing conditions. Most wanted
fering views, however, on the level of direct con-
the full cost information because they believed
trol that governments and or central adminis-
it would make more transparent the level of
tration should exercise over expenditures. One
cost directed toward the administration of the
vice president who had moved to academia from
schools. The value of the full cost approach was
industry stated “I thought that as a public insti-
seen to come from a consistent approach to cost-
tution (X) would have a higher level of fiduciary
ing across the institution making comparisons
responsibility, but I’ve learned that we have very
meaningful and making transparent the level of
little. A Mom & Pop grocery store has better con-
expenditures directed towards various cost cat-
trols. Maybe because it is their money” (P1). S/
egories, especially senior administration. Issues
he felt that in addition to a consistent approach
surrounding the arbitrary nature of fixed costs
8 Spring 2012 (Volume 8 Issue 1)
Budgeting and Organizational Trust in Canadian Universities
to costing across and between universities, there
CONCLUSIONS
was a need for increased monitoring as well.
The information obtained through the interview
In general the academics interviewed held a dif-
process indicated that there exists a relationship
fering view. They viewed increased financial
between university administrators’ level of or-
monitoring and control as an impediment to
ganizational trust and their views regarding the
getting the real work done. “There is too much
approach and value of the budgeting process at
focus on where to put costs, and not enough on
their institution. Both the final resource alloca-
the real work of the organization.” (P12) An-
tions as specified in the budget and the proced-
other interviewee complained about how many
ures and processes utilized to determine these
signatures you needed to hire a graduate student.
allocations, affected the trust levels. This affect
A third colourfully stated that the financial of-
comes about through: the correspondence be-
fice of their university needed to “get the hell out
tween the stated goals and strategic directions
of micromanaging” (P3) and focus on outcomes
of the university with the actual resource alloca-
based evaluations. One interviewee, a depart-
tions, the level of input and influence the individ-
ment head and member of the university budget
ual felt they had on the process and the final allo-
committee, stated that: “deans should be given
cations, and the degree that the individual could
carte blanche on developing world class faculty
use the budget to predict the actual financial im-
and measured against this directive 5 to 8 years
pacts under various situational alternatives.
out” (P4). In his/her view deans should be given
full discretion on how the money allocated to The messaging from the top university admin-
School/Faculties is spent. Essentially the call was istration regarding the mission, vision, values,
for financial control to come about through re- and/or strategic direction of the institution
sults based evaluation as opposed to the monitor- were viewed with a degree of scepticism by those
ing of spending. The outcomes/results measures interviewed. Whereas, the resource allocations
mentioned included research productivity and as outlined in the budget were seen to be a ac-
reputation, student quality and placement, and curate reflection of the true priorities and power
institutional rankings. politics of the institution. A correspondence be-
tween the stated goals and strategic direction of
The academics interviewed wanted increased
the university with the allocation of resources
cost disclosure and outcomes based assessment.
supported organizational trust, whereas a lack of
Increased cost disclosure would serve to make
correspondence decreased trust.
the general public aware of what was driving costs
and “make sure that monies are being directed to Individuals who felt they had more input into
activities in line with the wishes of tax payers and how the resource decisions were made, were more
funding bodies” (P7). Disclosure would also give likely to express trust in the governing body of
those responsible the information they needed the university. Since budgets were seen to be a re-
to effectively run the centre/activity over which flection of the power politics of the institution,
they were responsible. They were willing to be individuals who felt they had meaningful input
held accountable for the results of their financial into the budget process tended to feel they had
decisions but were frustrated by close monitoring influence with the administration. This increase
and being told no. These individuals wished to be in influence was associated with increased levels
given broad say over the financial resources made of trust. The perceived usefulness of the budget as
available to them and sufficient time for the re- a devise for predicting resource allocation under
sults of their decisions to manifest. In effect. various situations was also associated with or-
detailed financial systems and information were ganizational trust. Lack of consistency regarding
desired when it increased the users’ knowledge approaches to budget development, changes in
and control, but were viewed negatively if seen to government funding projections, changes in stu-
limit their autonomy. dent number projections, or changes in overhead
charge rates all resulted in reduced trust in senior
administration. Numerous incremental changes
over a relatively short period of time caused indi-
Journal of Academic Administration in Higher Education 9
Cynthia V. Simmons
viduals to question the competency and/or mo- DISCUSSION AND LIMITATIONS
tives of central administration.
It has been stated that university budgeting
In spite of the utilization of cost information should help “translate an institution’s plan into
in the development and use of budgets, inter- priorities, allocate resources that reflect those
viewees expressed differing views with regard priorities, empower heads of academic and sup-
to cost information from those expressed about porting units to use the resources allocated to
the budget. Budgets were viewed as a reflection them to accomplish the objectives assigned to
of the priorities and politics of the institution them, and monitor their progress”(Walen, 2002).
composed of estimates and subject to change. Too often the resource allocations as specified
Cost data was considered to provide a picture of in the budget are not seen as aligning with the
the true state of things by all those interviewed university’s espoused goals and objectives. When
and to provide valuable information for decision this lack of alignment occurs trust decreases. In-
making. Individuals wanted increased disclosure dividuals turn to the budget to determine what
of detailed costing across all levels of the organ- the true goals are and/or to speculate as to whom
ization. It was felt that seeing this information and in what manner influence over these deci-
would help to form a clearer picture of the basis sions was exercised. This preliminary research
underlying the financial state of the university has found that university administrators pos-
and their faculty/department. It would provide sessing a higher level of organizational trust were
them with the data they needed to predict the those who felt their views on the budget were
financial impact of different scenarios – such heard and considered, who saw a correspondence
as changing student enrolment, the addition of between the stated goals of the institution and
a program, or a change in organizational struc- the subsequent resource allocations, and who
ture. The high proportion of university costs that had available to them useful financial informa-
could be described as fixed in nature was clearly tion. Those who did not witness this approach to
understood by those interviewed, but the impact university budgeting had low levels of organiza-
of this cost structure on the meaningfulness of a tional trust.
cost/student number was not clear to those with-
out a financial/ accounting background. With A university budget is more than a statement of
the exception of two individuals who expressed resource allocations by operating area. It func-
concern, those interviewed felt that having de- tions as a medium for communicating the goals,
tailed cost information available was worth the objectives, and power structures of the institu-
additional expenditure required to obtain it. tion. A distribution of resources based on fa-
vouritism, self-serving wants, capriciousness, or
When asked if there was a need for greater lev- volume of complaint will be recognized as such.
els of cost control within the organization, non- Resource allocations that correspond to the stat-
academic financial personnel agreed. The aca- ed goals of the institution provide evidence of
demics interviewed did not want to see increased the legitimacy of these goals and objectives - in
financial controls applied to them. They spoke effect money talks. It also builds trust in those
of financial controls as adding an additional im- individuals outlining the goals and determining
pediment to getting the task accomplished and the resource distributions.
limiting their personal autonomy. Instead the
academics preferred having a clear unchanging Recognizing that the budget functions as a de-
picture of the resources available to them over an vice for communicating the true priorities and
extended period of time in order to accomplish power politics of the institution increases its
a specific set of objectives. The objectives most usefulness as a management tool. The fact that
often mentioned included research productivity, all the university administrators interviewed
research reputation, student quality, and institu- wanted more and better cost information would
tional reputation/rankings. indicate that, independent of their level of trust,
they wanted to be part of making the university
function effectively. The cost information would
provide them with a necessary tool for making
this happen.
10 Spring 2012 (Volume 8 Issue 1)