Piedmont University Harvard Case Solution & Analysis

Issues
Questions:
1. How should each of the issues described above be resolved?
2. Do you see other problems with the introduction of profit centers? If so, how would you deal with them?
3. What are the alternatives to a profit centers approach?
4. Assuming that most of the issues could be resolved to your satisfaction, would you recommend that the profit center idea be adopted, or is there an alternative that you would prefer?
Facts
The university was facing some financial crisis in 1991, the enrollments in the university were declining and costs were increasing leading to a shortage of funds. The university had to use funds reserved for use in the time of difficulty but somehow it managed and in 1993 Scott was approached by a local consultancy partner Malcolm and he gave several ideas for restructuring in the university so that issues which occurred in the past can be resolved and should never occur in the future. Malcolm gave the idea of establishing profit center by making every department independent.He gave the proposal that every department should be independent and departments should not be dependable on each other rather they should generate enough income for their own survival. He proposed the idea of an introduction of small fees on athletic activities, libraries and the allocation of the administration cost to the profit centers. But the deans disagreed with this proposal by giving numerous reasons and they said that sometimes the activities are mixed in the department of administrative cost so that it cannot be charged to profit center. The deans again argued that there cannot be any fees to the students regarding the use of library and athletic activities. The university did not have any register in which it might have been known to them about the number of computers they have in the university. There was no supervision on the overuse of the computers and there was overuse of computers several times and this would rather have added to the costs of the university. If the usage is supervised and there is some nominal cost on library and athletic activities, then cost of the university could be reduced.
Piedmont University Harvard Case Solution & Analysis


ISSUES AND THEIR SOLUTIONS

The Piedmont University was facing several issues in itsfunding and sometimes ithad shortage of funds to meet itsneeds. Of the. The problems listed below occurred at the Piedmont University.
Central Administrative cost:
Currently, no cost is charged to the academic department and this means that the costs incurred are borne by the whole university and this cost was deducted from the revenues and it cannot be ascertained that which section of the university or which department of the university is incurring the most administrative cost.
The solution to this problem was that the administrative department should charge the cost to the relevant department, this will lead to good appraisal in the end about how well each department is controlling its costs.
GIFTS AND ENDOWMENT:
The cost of fundraising activities is currently being deducted from the revenue earned from annual gifts and is transferred into the endowed funds of the university........

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