Top-Ranked Colleges Spend Their Money Differently From the Rest. Here's How.

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Published by The Chronicle of Higher Education

Look to the top of the U.S. News & World Report college rankings, and you’ll find public universities that tend to spend a greater share of their budgets on managing human resources and research. Move down the list, and you’ll see institutions that put more of their payroll dollars toward soliciting donations and marketing their campuses. So says a recent paper analyzing universities’ labor costs.

The paper is among the first fruits of a broader effort by a consortium of university administrators and researchers that is sharing financial data to better compare spending among institutions. But it is not, warns Paul N. Friga, the Chapel Hill business professor behind the research, a recipe for colleges hoping to engineer rises up the rankings.

Instead, Friga said, the correlations he found between universities’ rankings and their budgeting priorities could be indicators of the different challenges facing different universities.

Take spending on communications, for example, which Friga found correlates negatively with ranking. By virtue of their outsize profiles, better-ranked colleges may be able to harness more free attention from the media, prospective students, and alumni than, say, regional public universities without football teams or billionaire benefactors. Top colleges might not need to spend as much of their budgets on press aides or patron handlers because applications and donation checks will be in the mail regardless, Friga says.

The same goes for the share of spending on student services, which had an equally strong negative correlation with ranking. Lower-ranked institutions tend to be less selective, so their students might need more advisers and counselors, Friga suggested.

The strongest correlation of all was a positive one: Friga’s analysis found that universities with better U.S. News & World Reportrankings in 2018 devoted a greater share of spending on staffing in human resources in 2014, the year Friga looked at to allow a lag time for effect. Those institutions also tended to put more of their budgets toward research administration, finance, and information technology. Unsurprisingly, universities that spent more nonfaculty payroll dollars per student generally had better 2018 U.S. News rankings, the researcher found.

Friga cautions readers against making industrywide generalizations based on his work, in part because of the limited sample size of his analysis. (Thirteen public universities contributed data.) Correlation is not causation, he says, so colleges should not rush to spend less of their budgets on student services or development.


Richard A. Hesel, principal at Art & Science Group LLC, a Maryland-based consultancy, calls the benchmarking project "a good start." Greater participation from both public and private colleges could also yield important knowledge about the challenges facing different types of institutions, he said. Further analysis of payroll spending should control for a range of factors, like colleges’ endowment size or discount rate, Hesel says.

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