This topic came up at lunch yesterday with Tyler Cowen. Could universities cut costs by firing half of their administrators?
I argued that administrators did not just descend on universities like a plague of locusts. In the economy as a whole, the ratio of middle managers to production workers is rising. You can see this by looking at the ratio of white collar workers to production workers in specific industries, such as automobiles.
In universities, I would argue that the growth in administrators is symptomatic, not an independent cause. The problem is what is known in the software business as scope creep or feature bloat. The more you add features to software, the more complex it becomes, and the harder it becomes to manage. Organizations are the same way.
Universities, like government, add new programs with alacrity, while almost never discarding old programs. Any university today has many more majors, many more activities, and many more technologies in use than was the case 30 years ago.
How do you introduce efficiency and cost saving at universities? Narrow scope and reduce features. Do students choose your school because of the chemistry department? If not, then get rid of it. Better to have three excellent departments than dozens of mediocre ones. Let students take courses on line in the ones that you do not cover.
What if a university unbundled its non-academic activities? Instead of using tuition to subsidize athletics, social events, and clubs, make students pay to participate in each of these activities. My guess is that participation would plummet. Students would find less costly ways to socialize.
If you want to reduce administrative overhead, you have to think in terms of radically reducing scope.