Mission Impossible? Budget Savings through Operational Efficiency Administrative and Financial Officers Special Interest Group July 11, 2010.

Mission Impossible?Mission Impossible?

Budget SavingsBudget Savingsthrough Operational Efficiencythrough Operational Efficiency

Administrative and Financial Officers Special Interest Group

July 11, 2010July 11, 2010

Mike PatilMike Patil

Associate Dean,Associate Dean, Eshelman School of PharmacyEshelman School of Pharmacy

Executive DirectorExecutive DirectorCarolina CountsCarolina Counts

University of North CarolinaUniversity of North Carolinaat Chapel Hillat Chapel Hill

TopicsTopics

Background and IntroductionBackground and IntroductionAbout the ProgramAbout the ProgramStreamlining Processes Streamlining Processes Organizational RestructuringOrganizational RestructuringLogistical RefinementsLogistical RefinementsProgram OutcomesProgram OutcomesLearning from the ProgramLearning from the Program

Administrative and Financial Officers Special Interest Group

Background and Background and IntroductionIntroduction

Administrative and Financial Officers Special Interest Group

About UNC Chapel HillAbout UNC Chapel Hill

State SupportedState Supportedfirst public university in the US, founded 1793first public university in the US, founded 179328,570 students28,570 students3,600 faculty3,600 faculty8,600 staff 8,600 staff $2.4 billion overall budget$2.4 billion overall budget$1.2 billion in contracts/grants/ services$1.2 billion in contracts/grants/ services

Consultant Study- Historical TimelineConsultant Study- Historical Timeline

• Consultant hired Consultant hired Spring 2008 Spring 2008

• Dollar does deep dive Fall 2008Dollar does deep dive Fall 2008

• Consultant reportConsultant report Summer 2009 Summer 2009($160M in potential savings)($160M in potential savings)

Consultant Report FollowupConsultant Report Followup

• Establish a program (Carolina Counts) to realize Establish a program (Carolina Counts) to realize the $160 million in administrative cost savingsthe $160 million in administrative cost savings

• Identify and act on high-potential saving areasIdentify and act on high-potential saving areas

• Use LEAN methodology as a toolUse LEAN methodology as a tool

• Get community involved in the programGet community involved in the program

About the ProgramAbout the Program

Administrative and Financial Officers Special Interest Group

MissionMission

To make the University of North Carolina To make the University of North Carolina at Chapel Hill the most collaborative, at Chapel Hill the most collaborative, well-managed university in the country.well-managed university in the country.

ObjectivesObjectives

• streamline and automate campus operationsstreamline and automate campus operations• implement more responsive, less costly implement more responsive, less costly processesprocesses• reduce bureaucracy and create a more reduce bureaucracy and create a more satisfying work environmentsatisfying work environment

February 2010

“There’s no reason we can’t conduct nonacademic functions as efficiently as possible.”

11/15/09www.nytimes.com ALL THE NEWS THAT’S FIT TO PRINT

UNIVERSITIES TURN TO CONSULTANTS TO TRIM BUDGETS

Holden Thorp, Chancellor

Business as Usual?Business as Usual?

Targets and Milestones Targets and Milestones

Process/Tools/

Tactical

Change

Competency/

Organizational

Change

Strategic/

Cultural Change

Year 1 Year 3 Year 5

DesignDevelopExecute

DesignDevelopExecute

DesignDevelopExecute

Ten identified areas of improvementTen identified areas of improvement

Teaching, Research& Public Service

University Operations

Admin Support

2.Procurement2.Procurement

3.IT3.IT

4.HR4.HR

5.Finance5.Finance

6.Utilities6.Utilities

7.Facilities7.Facilities

8.Space8.Space

9.Centers &9.Centers & InstitutesInstitutes

10.Research &10.Research & ComplianceCompliance

1. Overall University Structure and Strategy1. Overall University Structure and Strategy

Program ScopeProgram Scope

14

Analysis and Design(early 2010)

Diagnostic(early 2009)

• Identified high-potential saving areas

• Established UNC cost baseline

• Quantified savings areas based on benchmarks

• Set up Program Office

• Identified Initiative Champions and projects

• Identify projects and recommend improvements

• Develop detailed implementation plans to capture value

Planning & Resourcing(late 2009)

Program PhasesProgram Phases

Leadership, Project Selection,Timeline, Results

Project Team Management, Reporting

Oversight, Direction, Decision Making

Guidance, Know-how, Progress Tracking, Coordination

Program Structure and RolesProgram Structure and Roles

15

Initiative Champions

Project TeamLeader

Oversight Committee

Carolina Counts(Program Office)

Role Major Responsibilities

LEANLEAN- Streamlining Processes - Streamlining Processes

Administrative and Financial Officers Special Interest Group

• HR and FinanceHR and Finance

- 40 to 50% of time spent on inefficient, low value - 40 to 50% of time spent on inefficient, low value workwork

- Major Issues: manual, paper based work, - Major Issues: manual, paper based work, redundant entries, workaroundsredundant entries, workarounds

-- Solutions: redesign processes; minimize approval Solutions: redesign processes; minimize approval layers; create service clusters; automate processeslayers; create service clusters; automate processes

-- Annual Value- $1-2 million estimated to be Annual Value- $1-2 million estimated to be realized in 6-12 monthsrealized in 6-12 months

OpportunityOpportunity

Small Orders and Vendor PaymentSmall Orders and Vendor Payment

An Example of An Example of Streamlining Processes through LEANStreamlining Processes through LEAN

1.1. Appoint a Cross-functional TeamAppoint a Cross-functional Team

- Central Finance Staff- Central Finance Staff- Lab Administrative Personnel- Lab Administrative Personnel- Departmental accounting manager- Departmental accounting manager- Faculty Member- Faculty Member- System Designer/Developer- System Designer/Developer- Non-finance Related Personnel - Non-finance Related Personnel

LEAN ProcessLEAN Process

2. Current or “As-is”2. Current or “As-is”

• Map as-is process steps and process flowMap as-is process steps and process flow• Document time lag, effort, and quality of Document time lag, effort, and quality of results for every stepresults for every step• Determine failure points, major delays, and Determine failure points, major delays, and

rework requirements rework requirements • Identify redundant, marginal, non-value Identify redundant, marginal, non-value added processesadded processes

LEAN ProcessLEAN Process

3. Design New3. Design New

• Redesign workflows, redefine roles/functions, Redesign workflows, redefine roles/functions, eliminating redundancy while giving more eliminating redundancy while giving more

authority to the frontline workersauthority to the frontline workers• Design new organizational structure based on Design new organizational structure based on

the needed skill set and competenciesthe needed skill set and competencies• Identify system and HR requirementsIdentify system and HR requirements• Automate workflowsAutomate workflows

LEAN ProcessLEAN Process

Payment Process- OldPayment Process- Old

Payment Process- NewPayment Process- New

Before After

Number of Steps 14 8

Number of Loops 5 1

Frontline Authority Initiation, Corrections Approval, Accountability

Approval Levels 4 sign-offs 1 automated, 1 sign-off

Initiation to Approval 6 to 14 days 2 to 3 days

Process Visibility Non-existent Transparent, Tracked

Frustration Level High Low

Competency Required Many years of experience Low

Error Rate 18% 4%

Manpower Saved N/A 20%

Payment Process- ImprovementPayment Process- Improvement

LEANLEAN- Organizational Restructuring- Organizational Restructuring

Administrative and Financial Officers Special Interest Group

Organizational Layers and Spans Organizational Layers and Spans

An Example of the Analysis ProcessAn Example of the Analysis Process

Research Computing

User Support

& Engagement

Communication

Technologies

Teaching &

Learning

Deputy CIO

Enterprise Applications and ERP

Infrastructure

& Operations

FTEs:Mgrs:Span:

419735.7

Spans and Layers in an OrganizationSpans and Layers in an Organization

Spans and Layers- Digging DownSpans and Layers- Digging Down

Requires restructuring

Requires examination

Organization Structure and Organization Structure and ConsolidationConsolidation

An Example of the Analysis ProcessAn Example of the Analysis Process

0

20

40

60

80

100%

ITS/ERP

Admin

IT MgtSecurity

Network Mgt

Systemmonitoring

Systems Admin/Maint

End-User Support

Admin/Biz Apps

Research AppsAcad/Inst Apps

487

Academic

OtherAdmin

IT Mgt

Project MgtSecurity

NetworkMgtSystem monitoring

Systems Admin/Maint

End-User Support

Admin/Biz Apps

Research Apps

Acad/ Inst Apps

464

C&Is

OtherAdmin

IT MgtProject Mgt

SecurityNetwork Mgt

SystemsAdmin/Maint

End-UserSupport

Admin/BizApps

ResearchApps

102

Central

Admin

Other

Admin

ITMgtProjectMgt

Security

Systems

Adm

in/M

aint

End-U

serSupport

Admin/

Biz

Apps

54

Percent of IT FTEs Total = 1,107

24%

40%

Staffing Levels by FunctionsStaffing Levels by Functions by Organizations by Organizations

PotentialSavings

$4-6m

$3-4m

≈$1m

LEANLEAN- Logistical Refinements- Logistical Refinements

Administrative and Financial Officers Special Interest Group

Procurement – Procurement – Materials and ServicesMaterials and Services

Example of the InitiativesExample of the Initiatives

Procurement ProjectsProcurement Projects

Strategy:Strategy: Reduce Number of Suppliers to obtain Reduce Number of Suppliers to obtain greater discounts, reduce processing costsgreater discounts, reduce processing costs

ResultsResults: Equipment Rental: ~ $350 to 700K: Equipment Rental: ~ $350 to 700KFacilities Materials: ~ $360 to 700KFacilities Materials: ~ $360 to 700KOffice Supplies: ~$350 to 800K*Office Supplies: ~$350 to 800K*Printer Supplies: ~$225 to 400K*Printer Supplies: ~$225 to 400K*Courier Services: ~$185 to 250K*Courier Services: ~$185 to 250K*Scientific Eqpt/Supplies: ~$4.67 to 7.0MScientific Eqpt/Supplies: ~$4.67 to 7.0MEqpt Maint Contract: ~$680K to 1.0MEqpt Maint Contract: ~$680K to 1.0MCell Phones/PDAs: ~ $500K to 800KCell Phones/PDAs: ~ $500K to 800K

*implemented

Carolina CountsCarolina CountsOutcomesOutcomes

Administrative and Financial Officers Special Interest Group

Over three years:Over three years:

Budget Growth- 68%Budget Growth- 68%Research Funding Growth- 165%Research Funding Growth- 165%Faculty Growth- 60%Faculty Growth- 60%Staff Growth- Staff Growth- negativenegative 18% 18% Lowered Infrastructure cost - under 11%Lowered Infrastructure cost - under 11%Recommended as a model for UNC Recommended as a model for UNC

An Example of AccomplishmentsAn Example of Accomplishmentsin one schoolin one school

Carolina Counts AccomplishmentsCarolina Counts Accomplishments- organizational- organizational

•Governance structure for continuityGovernance structure for continuity•Business clusters: economy of scale, consistency, Business clusters: economy of scale, consistency, enhanced competency and efficiencyenhanced competency and efficiency•Reduced number of mid-management layers- Reduced number of mid-management layers- increased communication, better decision makingincreased communication, better decision making•Technology consolidation (email, user support, server Technology consolidation (email, user support, server

farms)- increased consistency and collaborationfarms)- increased consistency and collaboration•Jointly developed systems and streamlined process Jointly developed systems and streamlined process design between design between two major universitiestwo major universities

Learning fromLearning fromCarolina CountsCarolina Counts

Administrative and Financial Officers Special Interest Group

Program How to -StructureProgram How to -Structure

• Executives- establishment and continued support Executives- establishment and continued support of the programof the program

• Clear mission and objectives of the programClear mission and objectives of the program• Adequate authority and funding for the programAdequate authority and funding for the program• Accountability by initiative area championsAccountability by initiative area champions

• Input and buy-in from the constituentsInput and buy-in from the constituents• Tracked results, and accountability for the resultsTracked results, and accountability for the results•Open and transparent process and measurementsOpen and transparent process and measurements•Documentation to make initiatives part of the Documentation to make initiatives part of the

institutional culture and can be improved uponinstitutional culture and can be improved upon• Public scrutiny through community involvementPublic scrutiny through community involvement• Published comparative benchmarks for competitive Published comparative benchmarks for competitive

effortsefforts• Technical /tactical support from the program officeTechnical /tactical support from the program office

Program How to -OperationsProgram How to -Operations

•Aggressive “marketing ” effort to present a value Aggressive “marketing ” effort to present a value proposition making solutions attractiveproposition making solutions attractive

•Build “Trust” through satisfactory performance Build “Trust” through satisfactory performance and frequent communications minimizing the and frequent communications minimizing the fears fears of arbitrary and self serving solutions of arbitrary and self serving solutions

•Frequent reemphasis by the top managementFrequent reemphasis by the top management•Routinely assess the program and perform course Routinely assess the program and perform course

correction as neededcorrection as needed

Program How to -SustenanceProgram How to -Sustenance

Lessons LearnedLessons LearnedCautions/ RoadblocksCautions/ Roadblocks

• “ “We are different”We are different”• Stay within the comfort zoneStay within the comfort zone• Complacent with “low hanging fruit”Complacent with “low hanging fruit”• “ “Already done everything that could be done”Already done everything that could be done”• Delegate too far down to be able to take any actionDelegate too far down to be able to take any action• Too many proposals that diffuse the effortsToo many proposals that diffuse the efforts• Procrastinate till this will go awayProcrastinate till this will go away• Lack of desire to make unpopular decisionsLack of desire to make unpopular decisions

Questions?Questions?

Administrative and Financial Officers Special Interest Group