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                                   Mon, Sep 23, 1996


Dr. David Maxwell
Commission on Higher Education


Dear Dave:     

Since I've given three weeks to the Task Force on Administrative
Management, I wanted to share with you some of the concerns I have about
the performance funding mandated by the General Assembly.

First, as I indicated at the first meeting of my Task Force on Administrative
Management, it would take a year to operationalize the variables (criteria)
specified by the General Assembly, and some of them were so nebulous
("user friendliness") that the Task Force didn't know what the legislative
committee really wanted. (There was a fair amount of debate on this,
including audience participation.) For some variables, operational
definitions could be obtained, but it would take a great deal of money and it
would have to be done by contract. (In all fairness, CHE has neither the
number of staff nor the knowledge to do this type of work.)

There was a problem (understandably) both with some of the Task Force
members and with some of the CHE staff in understanding just what was to
be done: that the first set of task forces would operationalize variables and
that the second set of task forces ("sector task forces") would set the value
("benchmark") for each type of institution. I finally used the overly simple
example of temperature, explaining that we would choose the scale
(Fahrenheit, Celsius, or Kelvin) and the "sector" task forces would choose
the numbers expected of each type of institution.

Second, there is an enormous problem of the validity of the measure,
especially on something like "best management practices." If we agree on a
philosophy, it can be measured by specialists, but not in three weeks.

Third, nowhere in the performance formula is the number of students
included. Thus, an institution producing 500 graduates of slightly higher
quality would get more money that an institution producing 2,000 graduates
of a quality slightly (but not significantly) lower.

Fourth, nowhere is there a differential for the level of program: BA in
education, Ph.D. in engineering, MD. To use an extreme example. I've
estimated that it costs (at a private medical school) approximately $500,000
to produce one medical scientist (for the seven years [beyond the BS] it
takes to earn both the MD and PhD). Presumably it costs less at MUSC, but
good medical schools produce only about five of these per year! Yet, for me
personally, no program is more important than one that produces the men
and women who will search for a cure for cancer and other dread diseases.

Fifth, concerning the 'sector" Task Forces, in management practice it is
standard procedure in benchmarking to find an organization that you
consider to be the best on a criterion that has already been operationalized
and for which the values are known. In the case of higher education, data
for most of the 37 variables simply don't exist as to (a) who is the best, (b}
on established scales, (c) with the values (benchmark) known. It just
doesn't work to take only the language (specialized terms) of modern
management (TQM or whatever) and apply it without the necessary tools. In
companies that have successfully adopted modern management practices,
the minimum time frame was five years!

Here are some possible solutions.

First, give a close-to-zero weighting to variables we don't understand or
can't measure, or are too costly to measure.

Second, to assist in the weighting process, I think it would be best if the
Steering Committee had a computer model built, showing how this will play
out. In all fairness. I think that may be beyond the scope of commission staff 
(and probably the equipment); if so, it would have to be done by some
external group.

Third, use the management practice of "continuous engineering," revising
the formula and fine tuning it each year until it achieves the desired result.

Fourth, perhaps it should be phased in gradually.

I hope that my observations are helpful to you. The task you have before you
and other members of the Commission is a most difficult one, and I wish you
all well.

I appreciate all you do for higher education.

Sincerely yours.

Walt Owens, Ph.D
Chair, Administrative Management
     Task Force