Published on 2016/02/26

Transforming Performance-Based Funding to Celebrate Institutional Differences

The EvoLLLution | Transforming Performance-Based Funding to Celebrate Institutional Differences
Performance-based funding has merits in its concept but in its execution it can have unforeseen outcomes that diminish the diversity of postsecondary systems.

Many proponents of improved innovation and accountability in higher education bang the drum loudly when it comes to the adoption of performance-based funding. However, the short-term factors measured by many funding mechanisms may lead to unforeseen changes that diminish the diversity of public higher education. In this interview, Sally McRorie sheds some light on the impact of Florida’s performance-based funding mechanism and shares her thoughts on how the approach could evolve to better represent the work and missions of different state institutions.

 The EvoLLLution (Evo): What is the value of performance-based funding systems?

Sally McRorie (SM): Performance-based funding requires public universities to maintain a laser focus on areas of strategic emphasis that lead to steady or increased budget allocations in our time of greatly decreased state support. Universities have long been less than nimble in their abilities—and yes, willingness—to change. Losses in state funding, however, have made that resistance to change a poor strategic choice. It really is inevitable for public universities as well as many privates.

Performance-based funding’s focus on specific outputs (retention, graduation rates, cost per degree, first-year salaries, etc.) rather than inputs, dramatically changes the traditional patterns of how we determine quality (funding per student, faculty to student ratios, etc.). Although student success surely is the goal of every institution of higher education, performance-based funding specifies:

  1. What is valued and how it is measured based on metrics chosen
  2. How one university in a system performs relative to every other one in the system
  3. Whether additional performance funds will be allocated

In my own state, Florida, those universities in the bottom three of our twelve publics across the Florida State University System (FSUS) do not receive any new performance funds, and may lose their “skin in the game” funds, which every institution must contribute as a significant part of the total performance funds available for allocation throughout the entire system.

Evo: Conversely, what are some of the aspects of the work institutions do that performance metrics tend to overlook?

SM: Every university has its own unique mission and vision. My institution, Florida State University, offers a number of very highly ranked programs in the arts and humanities as part of meeting our mission. We are proud of the impact of those programs on the quality of experiences for all our students, faculty and community. However, graduates of these arts and humanities programs do not earn points on performance funding metrics, which are heavily weighted toward STEM. Similarly, arts and humanities graduates typically do not earn first-year salaries (a performance metric) that are as high as STEM graduates, although by mid-career their salaries often are commensurate with those of their STEM peers.

As another example, we have a major focus on entrepreneurship on our campus, with entrepreneurs-in-residence in 12 of our 16 colleges, from music to medicine. Our recent gift of $100,000,000 to start the interdisciplinary Jim Moran School of Entrepreneurship here will broaden even more the entrepreneurial and innovative nature of student experiences. I often say that no artist is ever successful without being entrepreneurial! However, business start-ups and performing careers do not usually yield a lot of money in the first year, a reality that a metric on first-year salaries does not take into account.

Finally, universities are charged with helping prepare students not just for their first jobs, but also for a lifetime of evolving careers. Integrating critical thinking and collaborative working experiences, as well as research, internship, and social service opportunities into the education of our students. These accomplishments of universities are difficult to measure, but are bedrock to becoming fully engaged and productive citizens.

Evo: What impact do you think the wider adoption of performance-based funding metrics will have on the diversity of postsecondary options available to students?

SM: The need to meet performance-based funding metrics by its nature lends itself to a homogenization of curricula and programs. If the only “new” money an institution receives is due to its short- and long-term investments in STEM, for example, then every institution feels the need to make such changes to ‘earn’ that money. Long-term impacts may be the increased difficulty of a public university system to provide access to students, including minority students, who have not had the best secondary school opportunities in STEM, but who are capable of success in STEM (or other) degrees with a scaffolding of academic support.

A major question of how one chooses to invest performance funds, should they be allocated, is whether or not they are given as recurring or non-recurring funds. Universities make recurring investments in faculty in particular, so if funds are given as non-recurring, it is difficult to make the kinds of personnel investments that yield long-term impacts in curricula and programs, as well as research initiatives.

There is the possibility of a tiered or a mission-driven approach to determining the specific metrics that are used in performance-based funding. For example, the mission of New College of Florida, which is a top-ranked liberal arts college, is simply not the same as the mission of our system’s large research institutions. Grouping similar colleges within a system might lead to a lessening of homogenizing impacts or to the allocation of funding for exceeding performance expectations in meeting institution-specific missions.

Evo: How would you transform the central metrics of Florida’s performance-based funding mechanism to better represent the work of FSU and the success of its graduates?

SM: A committee of representatives from FSUS universities and Florida Board of Governors staff is looking into possible modification of several of the existing performance-based metrics. It will be interesting to note how that discussion proceeds.

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Key Takeaways

  • Performance-based funding is valuable in driving institutions to consider the value of innovation and change.
  • Unfortunately, the metrics to determine institutional success drive homogenization and short-term skill development rather than differentiation, innovation and investment in long-term growth.
  • A tiered or benchmarked approach to performance-based funding would be more successful at achieving the aims of the project.
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