Of FROs and WOFEs: Models for Expanding U.S. Universities' Global Presence
By: Daniel Obst on Monday, September 10, 2012
Last week, IIE co-hosted one of our occasional “IIENetwork National Conference Calls,” which bring together colleagues from around the world to discuss key topics that affect international higher education. The call was developed by IIE in partnership with JP Morgan and focused on “Models for Expanding U.S. Universities' Global Presence: Strategic and Financial Issues.” More than 160 senior financial and administrative leaders and Chief International Officers from colleges and universities across the United States dialed in for this call.
We had the good fortune of having four excellent presenters from two U.S. universities who have been particularly engaged internationally, and who are at the forefront of implementing new models for global engagement: William Brustein, Vice Provost, and Ashley Behrendt, Business Coordinator - Global Gateways, from The Ohio State University; and Matthew Santirocco, Senior Vice Provost, and Maureen Fiske, Project Director - China, from New York University.
Each of these two institutions has developed a distinct model of international engagement. According to William Brustein, The Ohio State University’s Global Gateways are “multidimensional, multipurpose platforms” that engage the academic, business, and alumni communities in such activities as study abroad, internships, institutional partnerships, and revenue-generating corporate partnerships (advising companies on career services, research and consulting, and so on). In order to define the strategic direction and global locations for engagement, Ohio State engaged in a data-mining exercise that considered the “where, how, and why.” Among the data points considered were: where are faculty engaged in the world in terms of research; where do the students and alumni come from; and where are Ohio companies most engaged globally.
In contrast, New York University, according to Matthew Santirocco, started with a “two-part movement”: initially, NYU considered itself a “global university,” which entailed expanding its study abroad programs and developing a broader international research agenda. Now, NYU considers itself a “Global Network University,” which led to the creation of full-service campuses abroad that are “coordinated and connected” and that “participate in the overall value proposition of NYU.” Students and faculty can move around freely in a “circulatory system” of multiple campus locations, and administrative functions (such as enrollment management, financial planning, HR, and student services) are fully integrated and coordinated.
While many recent articles (see the excellent article in the July/August edition of NAFSA's International Educator magazine) and panel discussions have focused on campus internationalization and the strategic rationales for establishing or expanding an institutional presence abroad, we wanted to explore a less frequently covered aspect of global engagement: the financial and administrative aspects. What do college CEOs and other senior financial officers need to know about setting up an international presence abroad? What implications does it have for the financial and administrative infrastructure of the home campus?
Below are five key themes and questions that emerged from our conference call:
- What is the right business structure for your international venture? For example, is it an FRO (a Foreign Representative Office) or a WOFE (a Wholly Foreign-Owned Enterprise)? At first, Ohio State's Global Gateways in India and China were FROs—subsidiary companies to an “operationally independent” LLC that was set up to manage the Global Gateways’ network and that received central funding from the university. Now, these gateways are WOFEs, which means they can enter into contracts and generate revenue. In contrast, NYU's new Shanghai campus that is currently under development is neither an FRO nor a WOFE; it's a fully accredited (both in the United States and China) higher education institution. As both cases illustrate, researching the local regulatory framework and landscape is central to determining the right business structure for your international venture.
- What type of administrative infrastructure needs to be in place? What types of internal controls and oversight structure need to be established? Is an independent Board of Directors required? What types of regular financial reporting or approval processes should be in place? What are the finance and HR platforms required?
- What unique financial considerations should be kept in mind? For example, according to NYU's Maureen Fiske, “tax planning is key in a shifting environment.” There might be new tax regulations that can impact your operations. There might also be issues related to the currency controls, like in China. How do you pay your administrative and academic staff in overseas locations? What are the local payroll and compensation plans? Will exchange rate fluctuations affect employees’ salaries? Ohio State's Ashley Behrendt reminded us that each market is different and that institutions “must adapt to the local region where they are doing business.”
- How will you align business practices and the financial management of your overseas site with the home campus? This may require aligning not just the HR and finance platforms, but also the registration and tuition payment system, which NYU has started to do. According to Maureen Fiske, this may require substantial investments in the systems-wide infrastructure.
- Finally, strong local partnerships and a strong local team are central to a successful operation. Local partners can be other universities (in NYU's case, it's East China Normal University) that can provide space, on-campus housing, etc. You may need to involve the local Ministries of Education and other government agencies. Finally, according to Maureen, you need a strong local team that can engage with local constituents and communicate effectively with the home campus.
Read more about Ohio State's Global Gateways in Chapter 7 of IIE's book, Developing Strategic International Partnerships
Learn about part of NYU's "Global Network University" strategy: NYU Abu Dhabi
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