Recently, institutes of higher education (universities) have shown a renewed interest in organisational structures and operating methodologies that generate productivity and innovation; responsibility centre budgeting (RCB) is one such process. This paper describes the underlying principles constituting RCB, its origin and structural elements, and RCBs historical use by US universities. Its central focus is the organisational features that must be accounted for when making the decision to implement RCB. Included are the construction of responsibility centres from differing academic units, the allocation of revenues by function to centres, the allocation of unit operating costs according to the level of use, and a methodological base for allocating administrative and facility costs among the various centres. Focal considerations for implementation include an administration fully committed to the process, and an adequately sized, technically skilled, and motivated group of managers. Effective implementation demands that administrators understand the process and that managers expect to be accountable for performance.