With the greater detail afforded by the new BSQ Finances Module, we can now analyze different ways in which business schools are using their operating budgets. In the first part of this series of posts, I explore how school size and relationships with their parent university/institution (if any) interact with the way that operating funds are channeled by AACSB member business schools.
For those who are not already familiar with the data elements, I defined both the faculty size categories and the different types of relationships that business schools self-report with their parent in my first post on governance models. From the data below, we can clearly see that both dimensions correlate to different ways in which business schools split their operating funds between salary versus non-salary uses.
Figure 1. Mean Percentages of Uses of Operating Funds, by Relationship Type
In the case of relationship types, we see a clear progression. On average, half of all reported uses of operating funds by Type C schools (fully independent business schools with no parent institution) were used for non-salary purposes, while Type B schools (semi-autonomous academic units of a parent institution) devoted slightly less than a third of their reported uses of operating funds for non-salary purposes, and Type A schools (standard academic units at a parent institution) reported that only about one-sixth of their total uses of operating funds went to non-salary purposes.
This progression makes sense, given that schools that are more fully embedded within the structure of a parent university (i.e., Type A schools) would be able to rely more on their parent to cover operating costs that do not involve personnel, whereas at the other end of the spectrum, fully independent (Type C) schools must cover the costs of all such functions themselves, without the ability to spread it out among other academic units.
Figure 2. Mean Percentages of Uses of Operating Funds, by Faculty Size
In the case of faculty size, we see a somewhat more counterintuitive pattern emerge. Larger schools apparently tend to devote a greater proportion of their operating funds to non-salary uses than their smaller counterparts. At first glance, this seems paradoxical; more faculty means more people who need salaries, right? When we look at actual amounts of operating funds budgeted and used, larger schools do tend to have larger budgets and larger total uses of funds. However, larger schools also tend to have more research centers, infrastructure, and other types of non-salary-based functions that require funds to operate (which I’ll cover to some degree in Part II of this series), and that helps to explain the paradox.
Figure 3. Mean Percentages of Uses of Operating Funds, by Relationship Type and Faculty Size
When we take both factors operating together, the interplay between them makes things more interesting. Within each size category, the correlation of greater autonomy with a greater proportion of funds used for non-salary purposes holds true. However, looking between the size categories, it seems that fully autonomous business schools with no parent institution (i.e., Type C schools) break the pattern. While I’m sure that the small sample size for the Type C schools may have something to do with that, the sample size for Type B schools is no larger, and for them the pattern does hold. It may be that Type C schools tend to work with larger absolute amounts of funds. Indeed, six of the top 10 and four of the top five reporting schools in terms of total uses of operating funds were Type C schools.
Look out for Part II of this series, in which I discuss different types of uses of funds!