In the six years I have been in my current academic job, my university has created several administrative positions at the level of director or above. I'm not talking about filling existing openings, but creating new job titles that didn't previously exist. When there is a new vice president for this-or-that, I would guess that there is also support staff in this new department of this-or-that. My first reaction is usually skepticism about whether the benefit of such a position is really worth the resources being devoted to it. For some of the administrative positions that have been around for years, I have to wonder the same thing. Would we be much worse off if we didn't have that VP for XYZ?
The latest addition to my university's administration is an associate vice president that is meant to help faculty do research--by organizing workshops and so forth. As beneficial as that might be, I have to say that I don't think it's a good idea. The announcement of the position included the detail that it was being funded by another position that was eliminated by the consolidation of two administrative units within the university. For me, that detail did nothing to justify the creation of the new job. Wherever the money came from, the question to ask is whether this is the best way to use it. It's hard for me to imagine that the new vice president's salary would not have been better spent on course releases for faculty. That's the single best way to facilitate research. (On the other hand, another position that was created a few years ago was someone to help faculty obtain external grants. According to the university president, total grants received by our faculty increased by a factor of ten in the first year after that position was filled. That one was totally worth it, but I suspect that it is an exception.)
I've seen data indicating that, for the typical university, the percentage of the budget devoted to administration has risen dramatically in the past few decades. It would be facile to leap to the conclusion that administrations can and should be cut without considering why they have grown in relative size. I would guess that one reason for the growth is that universities have become more complex entities and thus are more complicated to manage. Then the question is not how much to hack and slash to get back to where we were, but how can we redefine what exactly the university is trying to accomplish and what role the administration should play in all of that. Put that way, I think there is plenty of scope to reduce the administrative weight in the typical university. This has to be a consideration for any university that is serious about trying to make higher education less expensive for students. We should be going in that direction.
A problem here is that the administrators are (pretty much) in charge of the administration. Naturally they have incentive to maintain a robust administration for their own sakes. By that I do not mean that they are bad people or that they are engaging in corruption. Everyone has incentive to look after their own best interests, and such incentives cloud many issues. To take another example: many faculty resist alternatives to traditional higher education. There may very well be good reasons for this, more so for some alternatives than for others; but at the same time, alternatives pose a threat to traditional faculty, and we have an interest in maintaining our own livelihoods. It's hard for me to imagine someone so morally upright as to lack that incentive entirely, or someone so self-aware as to be able to compartmentalize the selfish self-interest and the selfless self-interest. I wouldn't claim to be able to do that myself. Obviously faculty should have a voice in determining what happens to higher education, but they shouldn't be the only voice. Others' incentives matter also. Similarly, your typical university administrator probably has a genuine interest in doing what is best for the university (defined as a community of participants, not an administrative entity), but also has an interest in maintaining their current position as well as having attractive opportunities for advancement. Your typical, non-super-human administrator will have difficulty separating the two.
Maintaining an entrenched administration is one of perhaps many things that administrators have at least a little bit too much incentive to do. It's tricky because it's easy to offer a decent-sounding rationale for something like a new vice president of this-and-that, and the lack of a serious consideration of the opportunity cost is likely to go unnoticed and unchallenged. Typically the administration is overseen by a board of trustees, but I don't think that is much of a constraint, especially when it comes to fundamental issues like what the scope of the administration should be. The trustees' incentives aren't necessarily much different from the administration's, and the trustees are largely dependent upon the administration for whatever information they need about the best policies to pursue. Is the answer then to install a board of trustees with better incentives and an ability to obtain information independently? How one would accomplish that, I have no idea. Or how about putting the faculty in charge of the administration? Even if that could be instituted, it would raise some other issues.
I suspect that universities will not change their way of doing things dramatically without major disruption from the outside. For example, if online education becomes a viable option for students, then traditional universities could face a lot of pressure to change the way they do things. As in many areas of society, we can figure out all sorts of ways in which we might do things better, but real change involves changing the incentives of the people making the decisions. Accomplishing that is especially difficult in the face of institutional inertia, to which universities seem especially prone.