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Administrative Services Transformation at the University of Michigan - Rowan Miranda
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Administrative Services Transformation at the University of Michigan
March 14, 2013
Presentation to the Higher Education and Workforce Development Committee of the Minnesota Senate
Rowan A. Miranda, Ph.D.
AVP for Finance University of Michigan ([email protected])
Agenda
2
Benchmarking Administrative Services 2
Background and Context 1
Shared Services Design and Implementation 4
Assessing the Business Case for Shared Services 3
Q & A Session 6
Tips and Traps 5
Profile
3
Organization –3 campuses (Ann Arbor, Dearborn, & Flint) – 19 Schools & Colleges in Ann Arbor – 42,000 faculty and staff
Students –59,000 students
Academic and Research Excellence –Academic Programs Ranked in Top 10: 95 –Times World University “World Reputation” Rankings: 12 out of 100 (2013) –Research Spending: $1.2B
Financial Strength –Operating Revenue - $6.4B (includes health system) (FY2013) –Endowment Size - $7.8B –Bond Ratings – S&P (AAA), Moody’s (Aaa)
3
4
State Appropriations Funding Gap
Core Financial Principles
Disciplined operating budget strategy
Continue to diversify revenue streams
Adherence to long-range capital investment strategy, with emphasis on infrastructure renewal
Conservative utilization of debt
Preservation and growth of endowment funds (spending rule)
Sustained focus on cost containment
5
Cost Containment as a Financial Principle
To enable us to make investments in our highest priorities, we have implemented a very aggressive cost containment program. Phase I: FY03-FY09: $135M (recurring funds)
Phase II: FY10-FY12: $100M (recurring funds)
Phase III: FY13-FY17: $120M (recurring funds)
For the past ten years, all our new investments have been funded through re-allocation of savings.
6
Major Cost Containment Efforts
Assessment of Academic Programs/Centers & Institutes
Health Benefits
Facilities Maintenance Improvements & Efficiency
IT Rationalization
Strategic Sourcing in Procurement
Administrative Shared Services
7
Cost Containment Supports Investments in Academic Excellence
Key investments in recent budgets focus on:
Recruiting and retaining outstanding faculty Enhancing our students’ academic experience through continued focus on
student/faculty ratio and innovative uses of technology to assist learning Planning for the renewal of key academic facilities and save money by
avoiding piecemeal renovations and repairs Maintaining the value and distinction of the University’s library collection Expanding centrally awarded undergraduate financial aid now totals $100
million, an increase of 10.1% over FY 2012 Note: The Department of Education’s recent report on College Affordability
and Transparency shows that U-M’s net price increase was lower than 567 of 650 institutions in the public four-year category
8
Agenda
9
Benchmarking Administrative Services 2
Background and Context 1
Shared Services Design and Implementation 4
Assessing the Business Case for Shared Services 3
Q&A Session 6
Tips and Traps 5
10
Challenges Delivering Administrative Services in Higher Education
Administrative activities are often replicated by line units (schools, departments, auxiliaries): Finance, HR, Procurement, & Information Technology
Student Services, Research Administration, Communications/Marketing, and Development/Fundraising
Business processes lack standardization and aren’t focused on outcomes
Processes based on incremental decisions made in the past rather than leading business practices
Suboptimal use of enterprise systems, excessive reliance on standalone/shadow systems
Transactional activities crowd out strategic/analytical work
Administrative functions are staffed to support peak demand periods
Inability to achieve an optimum scale of service in some units
Administrative services aren’t “core” to what the school or unit does
Poor compliance and weak internal controls environment
Administrative services are often delivered in a decentralized manner & mix policy and transactional activities which reduces efficiency & effectiveness
10
University engaged The Hackett Group in August 2009 – Hackett is the leading firm in benchmarking administrative functions Jointly sponsored by CFO, Provost & EVP of Health System Organizations in Benchmarking Efforts – Ann Arbor campus
Campus Academic and Business Units University of Michigan Health System (UMHS) Flint, Dearborn campuses were not included in most of the study
Functional Scope Finance – Communications Procurement – Student Services Administration HR/Payroll – Research Administration (Pre & Post Award) Information Technology – Development/Fundraising
Key Events September 2009 – Project was kicked off with focus on organizing for data collection October 2009 – Data collection began and ran through the end of December (12 weeks) January 2010 – Data validation/scrub to explain outliers and complete missing data February 2010 – Hackett Group conducted statistical analysis Spring 2010 – Findings discussed with UM leadership Summer 2010 – Communication of results across campus
Participation was very high (more than 90% of the campus is covered by the data collection)
Benchmarking Process
Summary Data
11
Hackett Group Benchmarking Approach
12
Benchmark Comparisons • U-M “Peer Group”
• Cross Industry Medians
• “World Class” Performance
13
Preliminary Results
Nearly 2/3 of the cost and staffing for Finance occurs in the schools & units; much of the “local” work is transactional
rather than strategic in nature
0%
6%6%
88%
LaborOutsourcingTechnologyOther
8%
1%10%
81%
LaborOutsourcingTechnologyOther
Total Cost =$22.62 MTotal Cost =$22.62 M
22%
42%
36%
ManagerProfessionalClerical
Staff Mix
16%
5% 3%
76%
TransactionProcessingControl & RiskManagementPlanning and Strategy
Mgmt & Admin
Resource Allocation
FTEs = 244.9FTEs = 244.9
Central
Local
Total Cost Allocation
Total Cost =$44.78 MTotal Cost =$44.78 M
23%
34%
43% ManagerProfessionalClerical
1%
21%
1%
77%
TransactionProcessingControl & RiskManagementPlanning and Strategy
Mgmt & Admin
FTEs = 533.2FTEs = 533.2*Based on subset of UM-Campus benchmark locations 13
General Findings from Benchmarking
14
The 66% Rule – about 1/3 of the costs are centrally located & 2/3’s are local/unit level The 75% Rule – about 75% of the work done at the unit level is transactional rather than
strategic/analytical Process Fragmentation – while processes were standardized within central functions,
processes varied greatly at the local/unit level. Many improvement opportunities especially as it relates to better use of workflow
Misplaced Professionals Rule – a greater mix of managers & professionals do
transactional work compared to similar sized private sector companies Low Span of Control– most managers oversee the work of a few people (e.g., 1 to 4)
compared to private sector companies Underutilization of ERP/Financial Systems – organic growth of shadow systems at the
local/unit level that replicate what the central systems often do better Outsourcing – minimal use or appetite for outsourcing, even in areas such as IT where the
outsourcing market is mature
Area of Opportunity Annual Savings Estimate (ranges)
Finance Up to $22 M Procurement (Administration) Up to $3 M Human Resources Up to $5M Strategic Sourcing $10M – 20 M Information Technology $25M-$30M
Total Up to $80M Note: (1) Estimates of savings are based on benchmark results and industry experience. (2) Each “area of opportunity” requires a business case before savings estimates can be finalized for budgetary purposes. (3) To achieve savings estimates requires one-time and on-going investments – as specified in a business case.
What is the size of the savings opportunity?
Identification and Prioritization of Initiatives
15
Agenda
16
Benchmarking Administrative Services 2
Background and Context 1
Shared Services Design and Implementation 4
Assessing the Business Case for Shared Services 3
Q&A Session 6
Tips and Traps 5
Finance process areas include: Accounts Payable Accounting (Reconciliations and Journal Entries) Billing & Accounts Receivable (non-patient related) Travel & Expense Reimbursement Human Resources process areas include: Onboarding Administration, Exit Management and Relocation
and Immigration Benefits & Savings Administration Time & Leave Administration HR Data Management & Reporting
Administrative Services In Scope for “Shared Services 1.0”
17
18
College / Unit-Driven Model “Administrative Service by Unit”
Service-Driven Model “Administrative Service by Region”
Client-Driven Model “Administrative Shared Services”
Unit
HR Fin
Proc Other Admin Svcs
Regional Center
Unit Unit Unit Unit Unit
HR Fin Procurement
Other Admin Svcs
Shared Service Center
HR Finance Procurement
Other Admin Services
Regional Hub
Spec
ializ
ed S
ervi
ces
Spec
ializ
ed S
ervi
ces
Spec
ializ
ed S
ervi
ces
Regional Hub
Spec
ializ
ed S
ervi
ces
Spec
ializ
ed S
ervi
ces
Spec
ializ
ed S
ervi
ces
Regional Hub
Spec
ializ
ed S
ervi
ces
Spec
ializ
ed S
ervi
ces
Spec
ializ
ed S
ervi
ces
Unit Unit Unit Unit Unit
Cent
ral A
dmin
istr
atio
n
Uni
vers
ity-w
ide
Stra
tegy
and
Pol
icy
Unit
HR Fin
Proc Other Admin Svcs
Unit
HR Fin
Proc Other Admin Svcs
Unit
HR Fin
Proc Other Admin Svcs
Unit
HR Fin
Proc Other Admin Svcs
Unit
HR Fin
Proc Other Admin Svcs
Regional Center
Unit Unit Unit Unit Unit
HR Fin Procurement
Other Admin Svcs
Regional Center
Unit Unit Unit Unit Unit
HR Fin Procurement
Other Admin Svcs
Central Administration
HR Finance Procurement
Other Admin Svcs
Cent
ral A
dmin
istr
atio
n
Uni
vers
ity-w
ide
Stra
tegy
and
Pol
icy
Key: Strategic Services Commoditized Services
The Many “Shades” of Shared Services
18
19
Cost Savings through Shared Services
The integrated actions include:
Span of Control Adjustment Process Standardization Reduction of “Non-Value Added” Work Salaries Aligned to Market
Benefit estimates come from a detailed process design that is created with
insights and feedback from U-M schools and units
Approximately 2,700 people at U-M currently spend some level of time on the in-scope administrative services
Some positions will be reduced thru attrition, workforce reduction, and reassignment over the implementation period
Demographics of planned retirements help minimize negative impact on the workforce
The $17M-$20M in annual benefits is achieved through three integrated actions deployed through a Shared Services model.
19
Agenda
20
Benchmarking Administrative Services 2
Background and Context 1
Shared Services Design and Implementation 4
Assessing the Business Case for Shared Services 3
Q&A Session 6
Tips and Traps 5
UM’s Shared Services Overview
Shared Services Center Design
Benchmarking and Opportunity Identification
Business Case Analysis
Shared Services Implementation
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Adm
inis
trat
ive
Serv
ices
Tra
nsfo
rmat
ion
FY 2012 FY 2013 FY 2014
HR Shared Services Wave 1
Advanced HR Capabilities Wave 1
University-Wide Time Reporting
Finance Shared Services Wave 1
Finance Shared Services Wave 2
HR Shared Services Wave 2
SPG Refresh
Service Management & Contact Center
Creative Staffing & Shared Services Task Force
Timeline (36-48 months)
Decision Gates
1a
1b 2 3 4
21
Administrative Services Center Mission, Vision and Guiding Principles
(a work in progress)
MISSION STATEMENT The Administrative Services Center is a customer focused service organization focused on providing user-friendly, cost effective and expert administrative services to support the University’s missions of teaching, research and public service.
VISION STATEMENT U-M Administrative Services Center will be the “go to”, most trusted University resource for all administrative services, while also providing growth-oriented and creative employment opportunities for our workforce.
GUIDING PRINCIPLES 1. Operate efficiently. 2. Provide the best customer service. 3. Be the experts. 4. Provide a creative, growth-oriented
staff environment. 5. Deliver services reliably. 6. Ensure sustained continuous
improvement efforts. 7. Tailor some services to customer needs
and price accordingly. 8. Operate with a “partnership” mindset. 9. Work is done right the first time. 10. Minimize “work shifts” on the faculty
22
Implementation Timeline for Shared Services 1.0
2013 2014
Jan Feb Mar Apr May Jun July Aug Sept Oct Nov Dec Jan Feb Mar Apr Comms
Plan
Deployment Planning
Finance Process/Policy Build
HR Process/Policy Build
SSC Org Design / Sizing Unit Org Design
Staffing Approach / Transition Planning
Facility Build-out Facility Selection
Technology Build-out
Call Center Build-out
Governance Model
Change Management and Communications Activities
Tech Req
FIN Go-Live
Training
Testing and Transition
23
Design and Implementation Challenges
24
Funding for Project Investment
Sponsorship Across the Organization
Minimizing the Impact on Faculty Teaching & Research
Impact on the Workforce
Communications and Change Management
“Fractional FTE” Issue and Getting to Scale
“Can Shared Services even work in higher ed.?”
Agenda
25
Benchmarking Administrative Services 2
Background and Context 1
Shared Services Design and Implementation 4
Assessing the Business Case for Shared Services 3
Q&A Session 6
Tips and Traps 5
26
Tip Don’t propose a solution before defining the problem
Trap Ignoring the role of governance – define it up front
Tip Approach the project as a comprehensive strategy rather than an incremental look at operations
Trap Top down approach without sufficient collaboration from administrative with academic/auxiliary units
Tip Be honest in assessing your needs for outside consulting support
Trap Diluting the solution’s impact by compromising on the key causal drivers that deliver the value
Tip Utilize site visits to increase confidence that “it can really be done!” Trap Implementing big, when capacity & support to do so is small
Tips and Traps
Agenda
27
Benchmarking Administrative Services 2
Background and Context 1
Shared Services Design and Implementation 4
Assessing the Business Case for Shared Services 3
Q&A Session 6
Tips and Traps 5
28
Q &A