The University of Kansas: Changing for Excellence

The University of Kansas:Changing for ExcellenceNovember 12, 2012

Presenters

Jeffrey S. VitterProvost and Executive Vice ChancellorThe University of Kansas [email protected]

John R. Curry Managing Director Huron Consulting Group [email protected]

2© 2012 Huron Consulting Group. All Rights Reserved. Proprietary & Confidential.

Agenda

• Perspective on University Cost Reduction

• KU’s Rationale

• Bold Aspirations – KU’s Path Forward

• Project Team Organization

• Business Case Relationship Map

• Areas of Focus

• Facilities• Procurement• IT • All Funds Budgeting • Shared Service Centers

• Keys to Success3© 2012 Huron Consulting Group. All Rights Reserved. Proprietary & Confidential.

Immediate Incremental Transformational• Across the board budget cuts• Delayed deferred maintenance• Capital project delay• Furloughs• Hiring freezes • Early retirements

• More across the board cuts• Large tuition increases• Procurement strategies• Cuts to low priority services and

programs• Sale of non-critical assets

• Comprehensive operational and program reviews

• Organizational rationalization• Shared services• Outsourcing• Process standardization,

workflow optimization• Procure-to-Pay transformation• Budget process redesign

Perspective on University Cost ReductionAN EVOLUTIONARY PROCESS


In the face of unprecedented budget challenges, large public and private research universities have implemented or are considering a range of approaches to cost reduction.

Transformational approaches, while more difficult to implement, can secure sustainable gains in efficiency and performance.

Short-term / TemporaryEasier to implement

Longer-term / StructuralMore complex

KU’s Rationale PROACTIVE APPROACH - STRATEGIC INVESTMENT

The University leadership launched Changing for Excellence to identify strategies to become more effective, reduce costs and increase revenues in service and program areas.

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Competition from Other Universities

Bold Aspirations Strategic Plan

Reduction in State Support

assure administrative functions are maximally

efficient

focus on enrollment management as many state universities are

aggressively recruiting

redesign budgeting and planning capabilities to orient all funds towards

strategic priorities

KU considered multiple approaches for more effective and strategic management of resources

© 2012 Huron Consulting Group. All Rights Reserved. Proprietary & Confidential.

Bold Aspirations – KU’s Path Forward ADMINISTRATIVE SAVINGS WILL FUND THE STRATEGIC PLAN

Our aspirations are bold: to be recognized as a top-tier public international research university.

Our plan is organized around six goals to achieve our goal: 1. Energizing the Educational Environment2. Elevating Doctoral Education3. Driving Discovery and Innovation4. Engaging Scholarship for Public Impact5. Developing Excellence in People6. Developing Infrastructure and Resources


The primary goal of administrative transformation is to create savings to fund the strategic plan.

Project Team OrganizationPHASES 1, 2, AND 3

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Phase 1Opportunity Identification

Phase 2Business CaseDevelopment

Phase 3Implementation

Executive Committee

• Chancellor, Provosts

• “Decision makers”

• Meets monthly

Advisory Committee

• Cross-campus stakeholders

• Represented: faculty, operational leaders, staff, students

Opportunity Work Groups

• TBD


• TBD


• TBD

Work Groups

• “Champion”• Key

stakeholders


• TBD


• TBD


• TBD

Implementation Teams

Including project champion &

ambassadors

Project Leadership

• John Curry, Managing Director

• Mike Phillips, Senior Director day to day project management

Project Delivery1 team/campus

• Consultants

• Functional Specialists

• Subject Matter Advisors


• TBD

Implementation Support Teams

Select areas only


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Key

Business Case Relationship Map

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There is a high level of connection among the KU business cases.

SYNERGIES AMONG WORK STREAMS


Facilities – Overview (1 of 2) CONSOLIDATING OPERATIONS TO ACHIEVE SAVINGS FROM ECONOMIES OF SCALE

GoalsReduce costs by consolidating operations, improving workforce morale and enhancing worker productivity, improving customer service, and implementing a preventive model to reduce deferred maintenance backlog over time.

Implementation Objectives• Consolidate Student Housing and central facilities operations reducing total FTEs and capitalizing on

economies of scale • Implement a zone maintenance program focusing on preventive maintenance and customer satisfaction• Implement mobile technologies to optimize the work order system• Implement energy conservation and sustainability initiatives


KEY CHALLENGE: Achieving cost savings required organizational and operational changes, with little initial support among facilities leadership or the workforce to undertake these changes.

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Facilities – Overview (2 of 2) CONSOLIDATING OPERATIONS TO ACHIEVE SAVINGS FROM ECONOMIES OF SCALE

Estimated Annual Financial Opportunity

Estimated Annual Saving Savings To Date

$2.6M $1.4M

Cumulative Cost Saving Projections

© 2012 Huron Consulting Group. All Rights Reserved. Proprietary & Confidential. 10

Facilities – Three Phased Approach WORKFORCE INVOLVEMENT ENABLED BUY-IN AND CHANGE


Benchmarks, business cases, and extensive stakeholder and workforce involvement throughout the project were the three keys to success.

Phase IIPhase I Phase III

Identified High Level Trends and Opportunities

• Maintenance labor costs nearly twice as high per GSF than peers

• Campus operating three separate maintenance and custodial units

• Travel time, due to geographic dispersion, consumed one hour per day per employee

• Primary focus on services billable to units

• High energy costs vs. peers

Created Detailed Business Case Recommendations

• Consolidate maintenance and custodial operations into zone maintenance program

• Increase span of control to align with peers

• Design performance metrics to evaluate service and performance

• Leverage work-order software• Implement energy

conservation program

Implemented Changes

• Consolidated Housing and Central Facilities

• Implemented zone maintenance and eliminated supervisory layers

• Refocused organization on preventive maintenance

• Rolled out mobile application using iPod/iPad devices

• Implemented energy initiatives

Facilities – Implementation Outcomes WORKFORCE INVOLVEMENT CREATES BUY-IN AND ENABLES CHANGE


The consolidation of multiple operating units and separation of the construction function resulted in $1.4M in immediate personnel savings with the potential to achieve $2.6M/year moving forward.

Reduced management FTE’s by 30 resulting in $1.4M in first year, with $2.6M per year expected

Consolidated Housing and Central Facilities Operations

Lowered maintenance response times, improved customer service, focused the organization on PM, increased worker productivity

Implemented Contemporary Zone Maintenance Program

Utilized employee climate surveys and focus groups to engage staff in the change process and develop work place improvements

Employee Morale and Workforce Productivity

Initiatives

Involved stakeholders from across campus to develop integrated behavioral change campaign to reduce energy costs 3% – 7% annually

Energy Conservation and Sustainability Initiatives

Facilities – Key Challenges (1 of 2)PROACTIVELY ADDRESSING CHALLENGES IS KEY TO EARLY SUCCESS


Leadership actively engaged the workforce, key stakeholders, and customers early on in the implementation effort as challenges confronted the management team.

• Existing workforce and supervisors had little input into the management and direction of the central Facilities organization

• Apprehension on the part of Student Housing with respect to consolidating operations’ impact to customer service

Challenge 1: Initiating Change

• Organization was focused on construction and large, re-billable projects• Little preventive maintenance and growing deferred maintenance backlog• Centralized shops and storeroom led to significant ‘windshield’ time and reduced worker

productivity

Challenge 2: Determining the right organizational structure and operating model

Facilities – Key Challenges (2 of 2)PROACTIVELY ADDRESSING CHALLENGES IS KEY TO EARLY SUCCESS


• Low workforce morale and disenfranchisement needed to be overcome• Campus customers resistant to change and feared reduction in service levels

Challenge 3: Obtaining Buy-in from Workforce and Customers

• Breaking old habits and practices difficult post-implementation with respect to billing practices and customer service

• Workforce and supervisors have tendency to confront operational challenges in new model with old ways of thinking about service delivery

Challenge 4: Maintaining Change Momentum

Facilities – Key Success Strategies (1 of 2)LEADERSHIP AND STAKEHOLDER COMMITMENT IS REQUIRED FOR CHANGE


Addressing workforce concerns and early communications efforts with stakeholders, along with removing resistant leadership were key strategies for successful implementation.

Leadership Commitment & Making the Case to Stakeholders1. Replaced facilities leaders who were not committed to change2. Continually communicated commitment of leadership to change and to improving the organization for

employees and customers3. Included Student Housing in design of future state from the beginning

Focused the Organization on a Preventive Maintenance Model1. Separated construction function from the maintenance organization2. Organized maintenance work into campus zones to improve productivity and to create a sense of

ownership of buildings and systems3. Utilized work-order software and mobile technologies to enhance new operating model

Facilities – Key Success Strategies (2 of 2)LEADERSHIP AND STAKEHOLDER COMMITMENT IS REQUIRED FOR CHANGE


Involved Stakeholders & Employees in Creating Change1. Created workgroups composed of mostly front-line employees, stakeholders, and customers from

across campus to design future state operating and organizational models2. Focused early on addressing employee morale concerns and create buy-in

Aligned Performance Objectives with the New Operating Model1. Made new leadership and supervisors accountable to new model2. Developed organizational and operating KPI’s to align with new model3. Continued involvement of workforce post-implementation in new change initiatives and continued focus on

improving employee morale and welfare

Procurement – Overview (1 of 2)FINANCIAL SAVINGS, IMPROVED OPERATIONAL EFFICIENCIES


Findings and Opportunities• Develop strategic sourcing program as part of ongoing operations and shift focus to commodity

management • Implement an eProcurement solution to

• channel spend to University contracts• streamline the approval and settlement process• address the low utilization and efficiencies of procure to pay technologies

• Merge procurement organizations, resulting in additional resources for commodity management expertise and strategic sourcing activities

Goals• Focus purchasing staff on commodity management and strategic sourcing • Optimize technology and operations to address the drivers behind the low utilization• Implement procurement/payables technology to automate processes and routine transactions

KEY CHALLENGE: Organizational resistance is substantial due to a failed eProcurement attempt several years ago.

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$0.7 $0.8$1.2

$1.7$2.1

$2.6$3.0

$3.5$4.0

$4.5$5.0

$5.4$5.9

$6.4$6.9

$7.4$7.8

$0.0

$1.0

$2.0

$3.0

$4.0

$5.0

$6.0

$7.0

$8.0

$9.0

Dec-11 Jun-12 Dec-12 Jun-13 Dec-13 Jun-14 Dec-14 Jun-15 Dec-15 Jun-16

Mill

ions

Procure to Pay Optimization

Sourcing Rebate Revenue

Sourcing Cost Savings

Sourcing One Time Incentives

Cumulative Project Savings

Cumulative Cost Savings

Procurement – Overview (2 of 2)FINANCIAL SAVINGS, IMPROVED OPERATIONAL EFFICIENCIES


Annual Financial OpportunityWork Stream Estimated Annual Saving Achieved 1st Year Savings

Strategic Sourcing $2.1-3.3M $3.9 – $4.3M eProcurement $750K, after implementation In Process

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Strategic Sourcing – Approach NEGOTIATED SAVINGS AND KNOWLEDGE TRANSFER


Strategic Sourcing Overview• Classroom style

training

Data Gathering and Contract Review• Identify target

suppliers• Supplier data

request• Market/industry

research

Data Analysis • Contract

review/summary • Pricing analysis• Benchmarking • Estimate savings

opportunities

Business Case • Develop industry

and internal perspectives

• Build business case

• Summarize savings

• Develop recs

Presentation and Action • Finalize business

case • Present to

stakeholders • Determine

implementation strategy

Negotiations, Compliance and Audit • Ongoing Huron

remote support, as needed

Before conducting the sourcing training, Huron negotiated contracts in six areas:• Scientific Supplies• Office Related Products• Computer Hardware

• IT Distributors • Maintenance, Repair & Operations Products• Multifunctional Devices

After negotiating six commodity areas, Huron provided training and guidance for the KU sourcing team, using the Express Shipping commodity area.

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Task / Timeframe Campus Impact Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec

Wave I KUPPS Optimization integration

Wave 1Supplier Data Collection

All Business SuppliersAvailable in KUPPS

Wave 2 Transformation

P2P OrganizationalChanges and Centralized

Invoicing

Wave 2 Design

Streamlined Settlement and Approvals

Wave 2 Build

WorkflowSystems Integrations with

KUPPS, PeopleSoft, DEMIS and ImageNow

Wave 2 Conference Room Pilots

Wave 2 Central and Department CRP Sessions

Wave 2 Testing and Validation

Wave 2 Testing and Validation

SYSTEM AND PROCESS UPGRADES, USER TRAINING


Procure to Pay – Approach

Wave 2 will deliver P2P transformation both centrally and across campus. The transformation includes process, technology, and organization changes.

Information Technology – Overview (1 of 2) REDUCED COSTS, SEAMLESS COLLABORATION


Goals• Centralize and virtualize servers maintained remotely across campus to reduce institutional IT costs while

providing improved service and data integrity • Reorganize departmental IT staff to provide broader coverage and more standardized service • Increase the use of multi-function devices (MFD) to reduce total costs of campus printing • Centralize identity management and network management solutions for all KU campuses • Leverage combined buying power of all campuses to negotiate more favorable deals with software

vendors

KEY CHALLENGE: Many of the IT initiatives require buy-in and support of decentralized campus leaders, including collaborative infrastructure design across campuses.

Findings and Opportunities• High level of decentralized hardware, software, and IT staff managed by departments • Poorly defined role of local IT staff, leading to inconsistent expectations and levels of service across campus • Perception among campus users that IT implementations and projects are not fully supported by University

leadership, causing many efforts to “fizzle out” mid-stream or shortly after completion • Each campus has developed unique technical infrastructures to support most administrative areas

Information Technology – Overview (2 of 2) REDUCED COSTS, SEAMLESS COLLABORATION


Estimated Financial OpportunityEstimated Annual Saving Saving To Date

$6.7M - $9.5M $1.19M*

Cumulative Cost Savings

* Includes estimates to end of current fiscal year

IT – Optimization (1 of 2)REDUCING OPERATIONS AND TECHNOLOGY COSTS


Initiatives are underway to maximize efficiency in a number of IT areas across KU.

Completed as a prerequisite to implementationShared Servers

Virtualized Servers

Co-located Physical Servers

• Identify Director for IT Support Services• Change reporting lines of Technology Liaisons to Central IT• Complete assessment of additional IT responsibilities and customer needs• Evaluate and standardize workstation support job description and salary bands • Reorganize and rationalize workstation support

• Identify and register all devices acting as servers on the KUL network

• Develop policy regarding decentralized servers and other IT devices

• Purchase and install necessary IT infrastructure to support future state

• Work with units and departments to set up intake list and systematically transition

decentralized servers

Redefine & Reorganize Decentralized IT Staff

Co-locate & Virtualize Servers

IT – Optimization (2 of 2)REDUCING OPERATIONS AND TECHNOLOGY COSTS


• KU will employ an annual “software call” to help identify planned software

purchases by schools and departments

• Software Review Board with representation from across the University will be

established to identify opportunities for cross-campus collaboration on software

procurement

• Central IT• Tech Liaisons• User

Communities• Research• Purchasing

• Central IT• Research• User

Communities• Purchasing

• General Counsel

• Endowment

KU Lawrence KUMC Others

Leverage Software Purchasing

Early Success in Cross-Campus Initiatives

• Dual initiatives to upgrade separate installations of the HR information system were integrated into one, resulting in one-time savings for the University of $640K and projected recurring annual savings of $750K.

• This set a precedence for cross-campus collaboration in the IT arena going forward.

Network OptimizationSingle ID Management

IT – Enabling CollaborationCOST SAVINGS ARE ONLY PART OF THE BENEFIT OF IT OPTIMIZATION


Pursuing Single Identity Management and Network Optimization initiatives across campuses will increase opportunities for collaborative research while reducing costs.

Illustrative

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Direct LoginWorkarounds

Future State

Enabling CollaborationSingle Identity Management and Network Optimization provide seamless collaboration across the campuses:• Collaborative research• Electronic libraries and resources for students• Reduced operational costs

Budgeting – Overview (1 of 2) ALL FUNDS BUDGETING AND GREATER TRANSPARENCY


GoalsRedesign the annual budget allocation process to encompass all sources of funding; enable comprehensive budget understanding and budget transparency for all stakeholders, and manage fund balance growth.

Findings and Opportunities• Unexpended endowment distributions have been growing by a CAGR of 6.36% over the past 5

years,--from $76M in 2006 to $101M in 2011.• Carryforward balances have been growing by a CAGR of 11.9% over the past 5 years--from $60M in

2006 to $106M in 2011.• Unit budgets have been based on the previous year’s allocation and do not take into account cost

drivers such as enrollment and research • Recent years’ budget allocations have not included funding for strategic priorities

KEY CHALLENGE: Implementing an all funds budgeting model requires increased communication and coordination to analyze multiple data sources from the central offices, schools and units, and the University Endowment

Budgeting – Overview (2 of 2) ALL FUNDS BUDGETING AND GREATER TRANSPARENCY



Estimated Annual Flow Available Utilized To Date

$4.5M N/A

Cumulative “Newly Available Resources” Projections

Prior budgeting modelNew budget report

format integrating all funds

Refined budget report, incorporate incentives

Full integration of budget process and strategic planning

FY2012 Budgeting Model

and Process

FY2013Budgeting Model

and Process

FY2014Budgeting Model

and Process

FY2015End State Budgeting Model and Process

A “base plus allocation plus adjustments

incremental model” that did not

incorporate all sources of funding—out of sight, out of mind

Budget model and reports align with financial

statements and enhance understanding of cost structure at the school and administrative unit

level

Redesigned model allows an all funds view

of each area, reveals key drivers and

metrics, and aligns incentives between

each area and KU as a whole

Budgeting and resource management integrated

into the strategic planning processes; budget

prioritization aligns with strategy

Budgeting – Approach CHANGING THE BUDGET CYCLE


Transformation of KU’s budget model, from an incremental approach to an incentive-based system will be phased in over several years.

Shared Service Centers – Overview (1 of 2) IMPROVED SERVICE, FINANCIAL SAVINGS

GoalsIncrease customer service and reduce costs by creating shared service centers (SSCs) across campus to organize staff around job functions and increase training effectiveness for business processes

Findings and Opportunities• SSCs are service-driven, using periodic assessments of customer service and metrics to ensure high

performance.• Improved performance of administrative functions will free up funds for strategic initiatives.• Unorganized demands on staff time are replaced by balanced, focused workloads, allowing staff to

have backup during leave time and to develop new skills and expertise.• SSCs build teams of staff with common experience and goals, bolstering camaraderie, knowledge sharing

and fostering a professional and experienced work environment.


KEY CHALLENGE: SSCs represent a substantial cultural shift for both faculty and staff. Gaining buy-in for the change requires persistent, focused effort with stakeholders across campus.

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Shared Service Centers – Overview (2 of 2) IMPROVED SERVICE, FINANCIAL SAVINGS


Estimated Annual Saving Saving To Date

$1.97M - $2.9M N/A

-$1

$0

$1

$2

$3

$4

$5

$6

$7

$8

2011 2012 2013 2014 2015 2016 2017 2018

Millio

ns

Administrative SSCs

Research SSCs

Academic SSCs

HR Pilot Site

Cumulative Project Savings

© 2012 Huron Consulting Group. All Rights Reserved. Proprietary & Confidential. 30

Cumulative Cost Saving Projections

Assess• Determine Baseline• Assess Current State• Develop Future State

Service Delivery Model (High-Level)

• Develop Business Case and Implementation Roadmap

• Finalize and Communicate Strategy

Design• Design Processes• Design Organization• Develop Training and

Knowledge Transfer Plan

• Develop Recruitment and Staffing Plan

• Develop Facilities and Logistics Plan

• Develop Governance Model

Develop/Build• Build Processes• Recruit and Staff SSC

Organization• Finalize Governance

Model• Create SLA’s / Funding

Model• Complete Deployment

Planning

Deploy• Execute Deployment

Plan• Conduct Training –

Customers and Staff • Execute Workforce

Transition Plan• Implement Processes

Shared Service Centers – Approach A PHASED IMPLEMENTATION BUILDS UNIVERSITY SUPPORT


Our approach integrates cross-over work with separate Procurement, Research Administration and HR work streams.

• HR Process Redesign: PS 9.1 upgrade • Procurement and Sourcing: system upgrade and

business practice redesign• Research Admin: improved PS functionality and

central office process redesign

Shared Service Centers – CommunicationSTAKEHOLDER INVOLVEMENT


The shared service center implementation is dependent on several committees comprised of staff from all facets of the University.

Changing for Excellence Executive Steering Committee

Design Review Committee

Assistant Vice Provost for Business Services

SSC Project Manager

Project Manager (temp)

Business Process Support – 2 (temp)

Process Improvement and Training

Transition Planning and Space SSC Steering Committee Communication and

Change Management

HR Research Admin Finance

Communication Ambassadors

These committees involve staff currently doing the work, as well as central office functional experts

These committees involve the highest levels of University leadership

Broad campus stakeholders (150+)

These committees involve thought leaders and decision makers

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Steady-State Phase III Financial BenefitsEXPECTED STEADY-STATE ANNUAL FINANCIAL BENEFITS

Annual benefit at FY2016 = $24M

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Combined Phase III Financial Benefits

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CUMULATIVE COST SAVINGS FY12 TO FY16 – DETAIL BY PROJECT

The five projects included here represent a cumulative financial opportunity of over $99M by the end of calendar year 2016.

Key Success Factors (1 of 2)


It is critical that the approach produces specific, actionable recommendations, creates stakeholder buy-in, and has unwavering public support from University leadership.

Keys to Success / Lessons Learned• Clearly articulating campus and leadership initiative objectives and desired end-goals at the start –

and reiterating often – builds agreement among stakeholders, even those directly impacted by the change: at KU, administrative efficiencies in support of BOLD academic ASPIRATIONS

• Understanding the University’s appetite for change and capacity to change based on available resources

• Engaging faculty, process owners, and key campus stakeholders at every stage of the process• Utilizing data-driven business cases and objective measures to depersonalize and depoliticize

change• Pursuing opportunities for enhanced enterprise-wide resource management• Using the budget process to sustain efficiency gains

Key Success Factors (2 of 2)


It is critical that the approach produces specific, actionable recommendations, creates stakeholder buy-in, and has unwavering public support from University leadership.

Keys to Success / Lessons Learned• Identifying “quick win” opportunities to demonstrate success and transformational opportunities

to affect significant and sustainable change • Establishing methods for measuring savings achieved and tracking progress following

implementation• Seamlessly transitioning from assessment to implementation to ensure forward momentum is

maintained• Demonstrating results to the University community through both internal communications and

public, third-party media reinforces the reasons for and commitment to change• Blocking pathways to the old ways to re-enforce commitments to change

Above all, University leadership must show a clear and consistent commitment to change and an intolerance for the organizational inertia which can sabotage transformational efforts.

The University of Kansas: Changing for Excellence

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