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Presentation to the Higher Education and Workforce Development Committee of the Minnesota Senate
Rowan A. Miranda, Ph.D. AVP for Finance University of Michigan (rowanm@umich.edu)
Agenda
1 2 3 4 5 6 Background and Context Benchmarking Administrative Services Assessing the Business Case for Shared Services Shared Services Design and Implementation Tips and Traps Q & A Session
Profile
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), Moodys (Aaa)
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Adherence to long-range capital investment strategy, with emphasis on infrastructure renewal Preservation and growth of endowment funds (spending rule) Sustained focus on cost containment
For the past ten years, all our new investments have been funded through re-allocation of savings.
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Assessment of Academic Programs/Centers & Institutes Health Benefits Facilities Maintenance Improvements & Efficiency IT Rationalization Strategic Sourcing in Procurement Administrative Shared Services
Note: The Department of Educations recent report on College Affordability and Transparency shows that U-Ms net price increase was lower than 567 of 650 institutions in the public four-year category
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Expanding centrally awarded undergraduate financial aid now totals $100 million, an increase of 10.1% over FY 2012
Agenda
1 2 3 4 5 6 Background and Context Benchmarking Administrative Services Assessing the Business Case for Shared Services Shared Services Design and Implementation Tips and Traps Q&A Session
Administrative services are often delivered in a decentralized manner & mix policy and transactional activities which reduces efficiency & effectiveness
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 Poor compliance and weak internal controls environment
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Administrative functions are staffed to support peak demand periods Inability to achieve an optimum scale of service in some units Administrative services arent core to what the school or unit does
Summary Data
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 Functional Scope Key Events
Campus Academic and Business Units University of Michigan Health System (UMHS) Flint, Dearborn campuses were not included in most of the study Finance Procurement HR/Payroll Information Technology Communications Student Services Administration Research Administration (Pre & Post Award) Development/Fundraising
Benchmarking Process
Participation was very high (more than 90% of the campus is covered by the data collection)
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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
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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
Total Cost Allocation
10% 1% 8% 16%
Preliminary Results
Resource Allocation
5% 3%
Staff Mix
22%
Central
81%
Transaction Processing Control & Risk Management Planning and Strategy Mgmt & Admin
42%
23%
Local
88%
1%
Transaction Processing Control & Risk Management Planning and Strategy Mgmt & Admin
43%
77%
34%
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The 66% Rule about 1/3 of the costs are centrally located & 2/3s are local/unit level 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
The 75% Rule about 75% of the work done at the unit level is transactional rather than strategic/analytical
Underutilization of ERP/Financial Systems organic growth of shadow systems at the local/unit level that replicate what the central systems often do better
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Outsourcing minimal use or appetite for outsourcing, even in areas such as IT where the outsourcing market is mature
Strategic Sourcing
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.
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Agenda
1 2 3 4 5 6 Background and Context Benchmarking Administrative Services Assessing the Business Case for Shared Services Shared Services Design and Implementation Tips and Traps Q&A Session
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Onboarding Administration, Exit Management and Relocation and Immigration Benefits & Savings Administration Time & Leave Administration HR Data Management & Reporting
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Accounts Payable Accounting (Reconciliations and Journal Entries) Billing & Accounts Receivable (non-patient related) Travel & Expense Reimbursement
Unit
HR Fin Other Admin Svcs HR
Unit
Unit
Unit
Unit
Central Administration
Proc
Proc
Central Administration
Regional Center
HR Fin Procur ement Other Admin Svcs Unit
Regional Hub
Regional Hub
Regional Hub
Unit
HR Fin Other Admin Svcs HR
Unit
Fin Other Admin Svcs
Specialized Services
Specialized Services
Specialized Services
Specialized Services
Specialized Services
Specialized Services
Specialized Services
Unit
Specialized Services
Unit
Unit
Unit
Unit
Proc
Proc
Regional Center
HR Fin Procur ement Other Admin Svcs Unit
Unit
HR Fin Other Admin Svcs HR
Unit
Fin Other Admin Svcs
Proc
Proc
Unit
Unit
Unit
Unit
Unit
Unit
Unit
Unit
Key:
Strategic Services
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Commoditized Services
Specialized Services
The $17M-$20M in annual benefits is achieved through three integrated actions deployed through a Shared Services model.
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
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Agenda
1 2 3 4 5 6 Background and Context Benchmarking Administrative Services Assessing the Business Case for Shared Services Shared Services Design and Implementation Tips and Traps Q&A Session
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1a
Creative Staffing & Shared Services Task Force
FY 2012
Q1 Q2 Q3 Q4 Q1 Q2
FY 2013
Q3 Q4 Q1 Q2
FY 2014
Q3 Q4
SPG Refresh Service Management & Contact Center HR Shared Services Wave 1 University-Wide Time Reporting HR Shared Services Wave 2 Finance Shared Services Wave 1 Finance Shared Services Wave 2 Advanced HR Capabilities Wave 1
1b
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2014
Feb Mar Apr
Finance Process/Policy Build HR Process/Policy Build SSC Org Design / Sizing Staffing Approach / Transition Planning Governance Model Call Center Build-out Deployment Planning Facility Selection Tech Req Facility Build-out Technology Build-out
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Minimizing the Impact on Faculty Teaching & Research Communications and Change Management Fractional FTE Issue and Getting to Scale Can Shared Services even work in higher ed.?
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Agenda
1 2 3 4 5 6 Background and Context Benchmarking Administrative Services Assessing the Business Case for Shared Services Shared Services Design and Implementation Tips and Traps Q&A Session
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Be honest in assessing your needs for outside consulting support Implementing big, when capacity & support to do so is small
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Diluting the solutions impact by compromising on the key causal drivers that deliver the value
Top down approach without sufficient collaboration from administrative with academic/auxiliary units
Approach the project as a comprehensive strategy rather than an incremental look at operations
Agenda
1 2 3 4 5 6 Background and Context Benchmarking Administrative Services Assessing the Business Case for Shared Services Shared Services Design and Implementation Tips and Traps Q&A Session
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Q &A
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