II. Articulating a Strategic Framework
Responsibility center management
This resource allocation and financial accountability model has gained currency in several major U.S. research universities in the past 15 years. In this model, a university school, college, or major business unit is designated a responsibility center and is responsible for meeting negotiated net revenue objectives. Revenue is recognized from all sources such as direct and indirect sponsored research revenues, gifts and endowment income, and tuition and fees. Many universities using responsibility center management allocate the full costs of operations to the centers, including costs for space utilization, utilities, and even land. The theory of responsibility center management is that focusing the attention of revenue center managers (deans, directors) on net revenues creates behaviors that are both revenue-seeking and efficiency-seeking in cases where centers that generate surplus net revenues are allowed to retain the surplus. Deans, directors, and other revenue center managers who generate surplus net revenues are able, thus, to finance program growth. In units where revenues are insufficient to meet program costs, campus subventions and subsidies are made explicit. Such accounting makes it possible for campus leaders to make informed decisions about the economics of different academic programs and to grow or shrink such programs accordingly, in concert with other (non-economic) campus objectives.
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