RCM Definition

            RCM is a decentralized approach to budgeting that assigns greater control over resource allocation decisions, in most cases, to deans. Under this budget approach, revenue-generating areas are referred to as “responsibility centers” with all or most of the institution’s revenues and support costs assigned to them. RCM's underlying premise is that the decentralized nature of the model entrusts academic leaders with more control of financial resources, leading to more informed decision making and better results or outcomes for the University as a whole.

           In centralized budgeting models, academic program decision-making is largely decoupled from financial responsibility.  By allowing responsibility centers to control most of the revenues they generate, decision makers are better able to understand both the academic and financial impacts of their decisions.  Academic planning and resource decisions are more transparent within the unit and throughout the institution.  Armed with improved information and the potential to retain increased financial resources, decision makers at the college/campus level may leverage even limited resources more effectively, improving university accomplishments and outcomes.

RCM at Kent State: Budget Review Committee Recommendation

At the request of President Lester A. Lefton, Senior Vice President for Administration David K. Creamer convened a broad-based university Budget Review Committee in November 2006 to study possible new approaches to the university’s budget-planning process.  This request was, in part, a response to the changing expectations of public universities by taxpayers and government; the reality that traditional revenue sources (i.e., state appropriations) no longer provide sufficient funds for fulfilling the multi-faceted missions of today’s public universities; and the resulting need for public universities to proactively identify and generate new revenue sources. 

No new budget approach alone is the answer to the complex financial issues confronting Kent State; however, the Budget Review Committee concluded that RCM has the potential for enabling better resource allocation choices and, in turn, improved accomplishment of university priorities. In its review process, the committee found, for example:

• RCM is a highly flexible budget approach that can be adapted to unique circumstances or characteristics of a university;
• RCM is compatible with shared governance values;
• RCM aligns with unit (college and campus) planning; and
• RCM’s effectiveness and efficiency has been demonstrated in university environments similar to Kent State (i.e., large universities where there is a growing dependence on revenue sources other than state support).

While the Budget Review Committee identified many potential benefits over the current budget model (See Comparison Chart), significant changes would also be necessary to implement RCM successfully across the university.  For example:

• New knowledge and skills would be required of deans, other academic administrators, faculty, and staff in the “responsibility centers” created through this approach;
• Improved planning would be required by each college and campus;
• A greater understanding of how to use financial, enrollment, and other information for decision-making and planning;
• Changes in the university’s approach to support services and their funding; and,
• Greater accountability to accompany the increased responsibility and decision-making authority throughout the university.

RCM at Other Institutions

         The RCM budget approach has gained popularity in the public sector of higher education in the last 20 years.  The focus on decentralized management and budget systems first garnered national attention with Harvard University’s “each tub on its own bottom” model, meaning that each college generally was accountable for operating on the revenues it generated.  Migration of a responsibility center model, then known as RCB (responsibility center budgeting), to the public sector of higher education gained prominence by 1990 through the experiences of early adopters such as Indiana University.  Today, RCM is used by many large public institutions, including Ohio’s largest and most complex public university – The Ohio State University.