The Economic Model Office (EMO) assist deans and directors, faculty and staff in reaching their school and unit goals through the application of cost/revenue assessment and planning tools at Indiana University Purdue University Indianapolis (IUPUI).

The Economic Model Office (EMO) is part of the Office of Vice Chancellor for Planning and Institutional Improvement (PAII). Specific responsibilities include:

Overview

The effort to examine the economic aspects of campus activities was conceived in Fall 1990 as a tool to assist campus administrators in fulfilling their new duties within the recently implemented Responsibility Center Management (RCM) environment. When the responsibility for managing both sides of the financial budget was delegated to unit levels, it became even more important for resource managers to understand the costs of their operations and the impact of their allocation decisions.

As a result of the strong support for planning and improvement from both IUPUI and IU Bloomington, the IUPUI Economic Model Office has evolved to provide an activity-based costing service to schools and support units on each campus. According to Gordon and Charles (Planning for Higher Education, Volume 26, Winter 1997-98), we are one of only a very few U.S. colleges or universities that have begun using activity-based costing methodologies.

Economic Model (EMOD)

The Economic Model (EMOD) is a desktop computer-based decision support tool, which uses activity-based costing techniques to analyze the costs of campus activities (e.g. degree programs, research projects, service activities).

The Economic Model consists of:

• a graphic view of inter-related organizations and activities;
• an activity-based costing tool which defines the costs of various activities and outputs;
• the ability to perform "what if" cost variation analyses.

As a management tool, the Economic Model helps campus administrators understand their operations within a financial perspective. The model can be used to enhance decisions regarding resource allocation. It can be a key component in successfully realizing the benefits of Responsibility Centered Management (RCM). The value of the model can be especially significant when limited resources must be reallocated due to limited funding. The model is one tool of many to consider and must be applied in concert with other factors such as qualitative outcomes and strategic initiatives.

The model is specifically designed to enable managers to:

• define the costs of unit activities;
• identify potential investment or cost saving opportunities;
• help address the issues of accountability;
• estimate the cost impact of proposed changes in operations and varying customer demand.

The model has two significant benefits:

• It provides a cost-based perspective of an organization's operations.
• It supports the decision maker with information for operations improvement.

At its core, the model forms the basis for detailed analysis of costs and pricing. It can be used to identify the direct cost of unit activities so that rational pricing (or acknowledged subsidization) decisions can be implemented. The activity analysis involved in this phase can also identify underutilized resources and opportunities for enhancement of operations through organizational, procedural, or technological change.

The steps for the EMOD process are the following:

• Define issues & the outputs of products and services
  • e.g. programs, student services, other cost centers
• Analyze the activities to produce the outputs
• Develop framework of economic model
• Collect financial, registrar, and effort data
• Continue model assembly and input data
• Determine allocation scheme of internal support services to unit core processes,
  • e.g. admin & information tech to teaching, research & service
• Validate economic model structure & review data
• Integrate economic model into planning process

Contact Information

James Johnson, Ed.D.

• Director, Economic Model Office
• Division of Planning and Institutional Improvement
• Indiana University-Purdue University Indianapolis

• 620 Union Drive, UN 244
• Indianapolis, IN 46202
• Phone: (317) 274-5048
• Fax: (317) 274-5041
• E-mail: jnjohnso at iupui.edu