Abstract
Purpose. The purpose of this study was to examine the impact of institutional viability, defined in terms of financial capacity, on organizational effectiveness among independent colleges and universities in California. Theoretical framework. This study developed a framework for institutional viability that included three components, Financial Capacity, Organizational Process, and Organizational Effectiveness. Two of the relationships of the framework were tested in a Research Model for Financial Viability. This model examined the inputs of Financial Capacity as represented by the Federal CFI Core Ratio and the WASC Standard Nine Ratios and the outcomes of Organizational Effectiveness as measured by undergraduate student degrees granted. Methodology. Data from sixty-five independent colleges and universities of California were categorized into four groups using the Carnegie classification and were gathered from the IPEDS database for the year of the study 1996–1997. Three research questions guided this study through a description of the enrollment, completions and financial health data, a correlation coefficient, and a multiple regression analysis. Findings. This study found that the independent sector of colleges and universities was doing reasonably well although not dramatically healthy. The Baccalaureate Institutions (Group III) demonstrated the highest degree of fiscal fragility and the greatest amount of fiscal stress of the four groups. It was also found that 54 percent of the institutions scored the maximum 3.0 on the Federal Composite Financial Index (CFI) Core Ratio. The correlation analysis established that very little of the variation in degrees granted was accounted for by the WASC ratios and a slight increase in the variation for degrees granted was accounted for by the Federal CFI Core Ratio. It was also determined that there was not a significant relationship between the financial strength of the institution and its undergraduate student degrees when controlling for the variable of the Carnegie classification. Conclusions and recommendations. The study concluded that the Financial Capacity component of the Research Model appeared insufficient to predict the outcome of Organizational Effectiveness as measured by undergraduate degrees granted. It appears that other factors work at creating a successful outcome and further study of the components of financial capacity together with the components of organizational process would be useful.