More bucks for Bucky? UW mulls $3M study to save money

2010-09-21T07:20:00Z 2010-09-26T11:30:43Z More bucks for Bucky? UW mulls $3M study to save moneyBy TODD FINKELMEYER | The Capital Times | tfinkelmeyer@madison.com madison.com

When UW-Madison leaders quietly made it known last month they were searching for a consultant to examine how the university might run more efficiently and effectively, the few faculty and staff on campus aware of the proposal may well have been a bit uneasy with the whole idea.

The world of higher education, after all, is not an enterprise with an easy-to-measure bottom line. Of course, with the state facing a projected budget shortfall of at least $2.7 billion, no one was going to speak out against a project designed to save a few bucks during these economically challenging times.

But after university administrators told faculty leaders last week that such an endeavor would likely cost UW-Madison at least $3 million, some on campus started to openly question the merits of such a project.

“This definitely has the attention of the University Committee,” says UW-Madison professor Judith Burstyn, who is chair of the UC, the executive committee of the university’s faculty senate. Burstyn and the UC met with university leaders, including Chancellor Biddy Martin, to talk about this potential project on Sept. 13.

Adds Burstyn, who is a professor of chemistry and pharmacology: “I will say the University Committee is not convinced that hiring an external consultant is worthwhile, especially given the estimate that this sort of thing will cost between $3 million and $4 million.”

Darrell Bazzell, UW-Madison’s vice chancellor for administration, says it’s not yet clear where the money to fund such an undertaking would come from, but notes “the one thing we’ve made a clear decision on is that we would not use state funds or student tuition revenue to support this one-time cost.”

Bazzell adds that before the university would move forward with hiring a consultant, “we would have to feel confident that there would be a significant return on investment. And we haven’t come to that conclusion yet.”

On Aug. 20 the university put out a 32-page “request for proposal” for a consultant “that can provide rigorous benchmarking of the university’s administration and governance in terms of its effectiveness, efficiency and flexibility against our peer educational institutions. The administrative areas to be benchmarked could include, but may not be limited to, information technology, business services, procurement, financial management, grant management, energy conservation, facilities management, human resources and auxiliary operations.”

UW-Madison is a massive organization with an operating budget of nearly $2.5 billion and some 17,000 workers, with state taxes supporting only 18.6 percent of the university’s spending.

“We’re a multibillion-dollar operation and it’s very important to take an introspective look at how we manage our enterprise and what the efficiencies, or lack of efficiencies, are,” says UW-Madison Provost Paul DeLuca.

Final proposals are due to the university by Sept. 23. A selection team led by Carl Hubbard of the university’s purchasing services department will examine the proposals. Per a request from the University Committee, this team will include Brad Barham, a professor of agricultural and applied economics and a member of the UC.

In an e-mail to The Capital Times, Martin touted the promise of an efficiency study:

“If we receive a proposal that we believe could be helpful, we would spend one-time funds in order to assure ourselves and the broader public that we are doing everything possible to organize our administrative functions in the most effective possible way, i.e., to enhance the research and teaching productivity of our faculty and staff, to whom increasing amounts of administrative work now falls, while helping identify possible long-term administrative savings that could be re-invested in our core mission.”

•    •    •    •

If university leaders ultimately decide such a project makes sense, UW-Madison would join a short but growing list of large institutions turning to pricey management consultants for advice on how to save money.

“But does this make any sense?” poses Noel Radomski, the director of the Wisconsin Center for the Advancement of Postsecondary Education, a higher ed think tank on the UW-Madison campus.

“We’ve got some of the best international scholars and practitioners on organizational efficiency right here on campus,” says Radomski. “And if the university believes this would be a conflict of interest, there are plenty of national experts at other universities who study this. There are excellent alternatives that could be employed for only a fraction of the potential costs.”

Over the past two years, however, the University of North Carolina at Chapel Hill, Cornell University and the University of California-Berkeley each turned to Bain & Company — a global business consulting firm — to examine their institutional structure and businesses practices. In all instances, school leaders made it clear the consultants would not be focusing on academic issues directly related to teaching students in the classroom.

Nonetheless, that didn’t stop faculty — who argue the line between academic and non-academic allocations can easily blur — from casting a wary eye toward the project.

“Faculty initially was concerned,” says Joe Templeton, a chemistry professor who was chair of the faculty at North Carolina when Bain & Company was nosing around campus during the 2008-09 academic year.

But, adds Templeton, Bain “did a very good job of explaining to our faculty that they weren’t looking at the academic side — they weren’t getting into areas of research and teaching. And then they said, ‘Look, you have over 10,000 employees, you’ve got a $2 billion budget, you’re buying things and hiring people and communicating over the Internet — these are all activities corporations routinely strive to improve; we help them, and we’re going to try to help you.”

When Bain released its final report for North Carolina in July of 2009, it identified 10 areas in which the university could save money. Some of the suggestions included consolidating information technology services; reducing the number of managers in a top-heavy organization; restructuring the university’s procurement organization; and focusing on reducing energy consumption. In all, Bain’s detailed report outlined how these changes could save the university at least $89 million per year.

Today, Templeton is in charge of North Carolina’s push to implement those suggestions on the Chapel Hill campus.

“So you’re not talking to an objective observer who is sitting outside the fence anymore,” admits Templeton. “But I feel like we’re really making progress or I wouldn’t be doing this.”

Cornell, where Martin spent eight years as provost before arriving in Madison two years ago, is hoping to save some $90 million annually thanks to Bain’s expertise, while UC-Berkeley recently announced it is looking to save $75 million each year.

“When you look at what’s been done nationally, the results of some of these efforts have been quite striking,” says DeLuca.

But Radomski is not convinced. “The jury has not yet come out on the efficiency or the effectiveness of these efficiency reports,” he says. “There is no evidence these studies create savings equal to the costs associated with them.”

And when considering these savings, Templeton cautions it’s not always clear who exactly will be “saving money.”

“In some cases it’s the citizens of North Carolina who pay taxes,” he says, but “if you streamline and save money in a research grant, the money saved might go back to the (principal investigator) to hire another student to help with research.” In other words, every dollar saved can’t simply be used to plug a budget hole somewhere else on campus.

Similarly, Templeton says Bain & Company pointed out how North Carolina could save big bucks if it significantly cut back on the number of vendors it uses. If a university buys all its paper from one place, for example, it’ll likely receive a significant discount from the vendor.

“But should you do the same thing with purchasing sophisticated reagents for a lab?” he asks. “My guess is researchers are going to want to work with more than one vendor. If you damage somebody’s ability to apply for a successful million-dollar grant, they’re not going to be tickled that you saved them a few bucks on latex gloves.”

North Carolina also didn’t have to shell out big bucks for Bain’s expertise because an anonymous donor paid for the consultant to come to campus. Cornell did not indicate how much it paid Bain for its work, while reports indicate it will cost UC-Berkeley $3 million.

•    •    •    •

UW-Madison’s decision to seek bids from management consultants is only partially tied to the current economic crisis and state budget woes that could ultimately cost the university significant funding in years to come.

A key reason the university is considering allowing an outside entity to take a closer look at its operations is tied to Martin’s push in recent months to start developing a new business model for UW-Madison. Although the chancellor has only outlined her vision in what she is calling the Badger Partnership, she generally argues that UW-Madison can no longer be run as though it’s just another state agency. Martin is hoping to convince state leaders to give the university more flexibility by loosening some of the oversight strings currently controlled by the state and UW System’s Board of Regents.

“As we seek to gain a little more flexibility in how we operate on the campus it’s incumbent upon us to demonstrate to the public and to decision-makers that we are, in fact, using our resources in the most efficient and effective manner possible,” says Bazzell.

Martin is expected to speak to the faculty senate about hiring a management consultant at the senate’s first meeting of the new school year on Oct. 4. Although UW administrators say they look forward to receiving more input from those across campus, plans to hire a consultant can move forward without a green light from faculty. If plans do move forward, faculty leaders say they will follow the work and make sure recommendations do not impede their teaching or research.

“If the university does decide to hire an external consultant, the University Committee is committed to ensuring that any recommendations by that consultant and actions by the university not adversely affect faculty productivity,” says Burstyn.

Copyright 2015 madison.com. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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