11/06/2012 02:07 pm ET Updated Jan 06, 2013

Look at the Whole Chessboard

Americans like quick fixes. Of course, finding a quick solution to a problem is nice. In the college world, though, one should -- as a rule -- resist quick fixes.

Focusing on the next semester or quarter may seem reasonable when one is burdened by the pressures of the moment; giving in to those pressures is wrong because they may both force an institution to forgo a better long-term solution and, through the law of unintended consequences, put it in jeopardy. It is always better to look at the college chessboard and try to see several moves ahead, rather than simply looking at the one facing a president.

Even though the average college presidency is somewhat shorter than it used to be -- decreasing to seven years from eight-and-a-half years in a recent American Council on Education survey -- it still may be hard for a president to act in the college's long-term interest. Do it anyway!

An obvious case in point involves relying on bonding rather than fund-raising for construction projects. Over the years, I was involved in building or renovating roughly 40 campus facilities (and another 50 off-campus buildings). Except for the occasion noted below, I never sought board authorization for those projects until I had pledges to cover both construction and an endowment for maintenance and operation. Yet the need to "get something done" may tempt presidents and boards to opt for long-term financing, rather than relying on fund-raising. While this quick fix could conceivably work well at some colleges and universities, such as well-endowed private institutions or (at least in the past) state institutions, it can result in the mortgaging of that institution's future and spell disaster for the college.

I recognize the fiscally conservative approach I am advocating means projects will be delayed. So what? Is it better to get something done now and jeopardize the college's future or accomplish a goal over time without putting the college at risk? I have no statistics about how many institutions have been subjected to fiscal peril by jumping the gun on capital projects. However, I know of quite a few, including, memorably and painfully for me, one of my former colleges.

In a call from a successor, we talked about a building project he wanted to undertake. When he mentioned the cost of construction, I asked how much money he had raised in pledges and said, as I knew he knew, I had never undertaken a building project without pledges to cover both construction and an endowment to maintain and operate the facility. He gave me the amount raised, an amount that came to about 30 percent of the construction cost.

I was stunned and explained the reasoning behind my policy, namely, I never wanted a construction project to have a negative impact on the college's budget. While agreeing with the philosophy, he stated, openly and honestly, he wanted to complete the project before he left the college. He did. Unfortunately, the college paid heavily for the decision because the carrying costs on the bonds resulted in unwanted budgetary cuts.

Of course, the decision to tackle a construction project is never that of a president alone. The board has to authorize any construction effort. So, as wrong as I think the president was (and I clearly think he was wrong), the board bears the ultimate responsibility for the decision.

Much as I believe in doing projects only when the funds have been pledged, I once violated my own policy and undertook a major effort without those funds. In tackling a neighborhood revitalization effort involving acres of vacant land and dozens of dilapidated homes, I decided -- and I subsequently convinced the board -- we could cover the carrying charges on the debt incurred, beyond the gifts raised, by housing students who were living off campus at the time. We wouldn't increase the number of students to pay for the project (almost always a mistake because it dilutes the quality of the student body), but we would house in the revitalized neighborhood students whom we should have been housing in the first place. (The policy worked.)

Given my fiscally conservative nature, this exception is the only one I made in my years as a president. Absent an income stream, construction should never occur in my view without funds to cover any borrowing costs. Just ask those presidents and boards who made the decision to go forward on projects with adjustable rate mortgages and no funding stream. Undoubtedly, they would like to hit the "reset" button.

Yes, projects took longer to achieve on my watch than they would have had I followed a different policy. However, those projects never prevented me -- or my successors -- from getting a decent night's sleep.

Presidents need to think carefully about any moves they make. What may look like a sound tactical move on the college chessboard can easily result in the institution being check-mated by consequences that may not have been seen (but should have been seen) when the move was made.