University y of Minnesota a Administrative Services s Benchmarking and Diagno ostic Study

Executive e Summary June 12, 2013

r by Sena ator Thomas Ba akk, DFL Majo rity Leader, an nd Senator Terr ri Bonoff, Chair r, In response to concerns raised gher Education and Workforce e Development Committee, r regarding administrative costs s at the Univers sity of Senate Hig n) to perform a Minnesota, the University y contracted Hu uron Consulting g Group (Huron an Administrativ ve Services ctional Benchmark king and Diagn nostic Study. Th he study was conducted c over r a 12-week pe eriod and focus sed on four func areas: finance, procurement, human res sources (HR), and a information n technology (IT). The study had three prim mary objectives: dentify, determine the scale of f, and prioritize e opportunities for improveme ent 1. Id 2. Describe primar ry factors such as technology, organizationa al structure, and d service delive ery approach w which may m currently im mpact performa ance in each ar rea 3. Highlight peer and leading prac ctices which may m have applic cability to the U University of Minnesota plish these obje ectives, Huron analyzed internal data suppliied by the Univ versity, conducted interviews and To accomp focus groups with leaders s and staff in th hese functional areas; design ed, distributed, and analyzed d custom surve eys of peer institu utions; reviewed d secondary ex xternal researc ch; and drew on n the firms ext tensive experie ence working w with other major research univ versities in thes se functional areas. Given the e projects short timeframe, th he focus was th he Twin Cities s campus, thou ugh interviews and a focus grou ups did include representative es from the sys stem campuses s. Overview In each of the four areas reviewed, the University is already undertak king major initiatives to promo ote efficiency a and effectivene ess and to redu uce administrative costs. Thes se initiatives, w which involve ch hanges to tech hnology, organizatio onal structure and a design, and d process and workflow desig gn, reflect peer r and private se ector leading practices. These T initiative es all have Univ versity-wide im mpact and requiire leadership a and staff time a and effort to pla an, design, and d implement. Representa ative examples s include: Fi inance: upgra ade of financial systems, imple ementation of U UM Analytics ( (business intelligence system m), ce entralization of accounts rece eivable for non-sponsored fun nds, closure of Bursars office e and restructur ring of th hose activities Procurement: implementation n of an eProcurement platform m and contract t management system, ongoing trategic sourcin ng initiatives st HR: upgrade of f human resour rces systems, including imple ementation of e electronic time and labor track king, co onducting a job b classification study, creation n of leadership development a and employee engagement pr rograms, reorganizing the Off fice of Human Resources IT T: consolidation and virtualiza ation of servers s, consolidation n of desktop su upport, creation n and im mplementation of a new best practice IT go overnance mod del, developme ent of institution n-wide technolo ogy st tandards, imple ementation of IT service mana agement, trans sition to Google e applications

1 | 2013 Huron Consultin ng Group. All Rights Reserved.

 At the sam me time, the University faces many m of the sam me general adm ministrative challenges as its s peers. Public research universities are complex organ nizations which h have historica ally operated a as coordinated collections of collegiate and a non-collegiate units as op pposed to unified enterprises s. In many case es, individual units have independently developed their own adm ministrative stru uctures which a are tailored to their local need ds, priorities, an nd cultures. While W this mode el promotes flex xibility and resp ponsiveness, itt also has the p potential to dup plicate resource es and does not ta ake advantage of economies of scale, in par rticular for tran sactional and o operational tas sks. Public rese earch universities s have flourishe ed with distribu uted administra ative models. T This established d approach, ho owever, is unde er considerab ble financial stress at institutio ons across the nation, and ma any are being c called upon to reexamine the e administrat tive efficiency of o this operating model. As with its peer institution ns, the University of Minnesot ta staff membe ers that deliver finance, procurement, human n resources, and informatio on technology services s are wiidely distributed d across the co ollegiate and non-collegiate u units and system m campuses an nd primarily rep port to the leadership of their units (as oppo osed to a centra al administrativ ve unit). While e the University y has recently implemented i a dotted-line rep porting structur re between the e distributed leadership of these functions and their respective r cent tral University o officers, the fulll benefits of im mproving alignm ment and reducing duplication have not yet been achieved. Also, like man ny of its peers, t the University lacks complete e, reliable dat ta on the distrib buted activities s and effort sup pporting these ffunctions. This s information ga ap is caused by y two primary fac ctors: nted. Individua 1. Responsibilities R related to thes se functions are e often fragmen als may suppor rt more than on ne ad dministrative fu unction or they may support a particular func ction only a po ortion of their tim me. Their effort t re elated to these functions may also vary with the shifting ne eeds of their un nit. 2. Th he Universitys s job classification system is not n current. Job b titles do not c consistently cap pture the types s of work w supported by staff. The University U is in the t process of conducting a jo ob family and jjob classificatio on st tudy which will directly addres ss these issues s. This is a long g-term project t that will be com mpleted over th he ne ext two years. The Univer rsitys high leve el of decentraliz zation and limited data make estimating the e Universitys to otal investment t in the in-scop pe functions very difficult. The e University has s invested time e to analyze its s workforce, but this work has s been fundament tally limited bec cause it relies on o the outdated d job title structture. As part of f this engagem ment, Huron conducted an administrat tive activity sur rvey of the Univ versitys non-co ollegiate units t to develop more complete da ata on administrat tive effort. The results of that survey confirm m the high levell of job fragmentation in those e units and sug ggest that analys sis by job title alone a underestimates the reso ources dedicate ope functions. ed to the in-sco Benchmar rking Given the number n of facto ors which drive e efficiency and d effectiveness s, such as techn nology, organiz zational structu ure, and strateg gic priorities, be enchmarking should be taken n only as a dire ectional indicato or. Benchmark king staffing lev vels on its own ofte en has limited value v in determ mining the optim mal size of a fu unction. Instead d, strategic and d operational goals should be the t primary driv vers of resourc ce decisions. Benchmarking B c can, however, be useful to hig ghlight opportu unities for further analysis a and id dentify alternative models and d approaches fo for providing se ervices. In this stud dy, Huron comp pared each of the t four in-scop pe functional a reas to peer an nd leading prac ctices. Peer resource data for finance, HR, and proc curement were collected throu ugh a custom s survey sent to t the Universitys s established d peer list. Not all institutions responded, an nd not all respo onses were com mplete. Individu ual institutions were

2 | 2013 Huron Consultin ng Group. All Rights Reserved.

 assured that their responses would be de-identified d in the report, and d Huron did no ot provide Unive ersity officials w with 1 identified data. d Peer data a for IT was taken from the ED DUCAUSE Cor re Data Survey y , a higher edu ucation IT benchmark king resource, as well as from m interviews wit th peer Chief In nformation Offiicers. These benchmarking effo orts generally re evealed that st taffing of centra al functions in t these four area as is within the broad range of re esponding peer rs and that the University is pursuing many o of the same typ pes of improve ement efforts as s other institu utions. Finance. Peer P institutions s varied with re egard to the org ganizational str ructure of finan nce functions a and the type of support the ey provide. The e Universitys staffing s of centr ral financial adm ministration (bu udget, account ting, and spons sored financial re eporting) relativ ve to expenditures appears to o be within the broad range of f responding pe eers. Peer institutions all indicated highly distribute ed resources su upporting finan ncial administra ation, but most were uncertain n as to aff or effort dev voted to these activities. Nota ably, the Univer rsity has a lowe er number of s staff with financ cial the total sta system acc cess, which like ely reflects the creation of fina ancial clusters s, or defined a administrative g groups, when th he Universitys s financial syst tem was upgraded in 2008. The T clusters con nsolidated tran nsactional activ vity and shifted much of it out of departments to o a higher level in the organiz zation. ceived only thre ee responses to o the custom p procurement su urvey, but they highlight some e Procurement. Huron rec stics of the Univ versitys approach to procure ement. The Uni versitys centra al procurement t function appe ears characteris smaller tha an those of resp ponding institutions. This likely reflects centtral Purchasing g Services emp phasis on providing contracts, tools, t and data a as opposed to o processing tr ransactions. Hu uron also comp pared the Unive ersitys procure ement and payables activities to o established le eading practice es. In general, tthe procuremen nt function mak kes extensive u use of technology y and plans to expand e its use to further redu uce costs. Since e 2009, the Un niversity has em mployed a strat tegic avings sourcing ap pproach, that is s, a set of meth hods to improv ve pricing and r reduce costs, w which has been n a source of sa for many other institutions s. Huron did no ote the Univers sitys lower utiliz zation of electr ronic payments s and lower adoption of travel an nd expense reim mbursement to ools than some e peers and ind dustry benchma arks. Human Re esources. Pee er institutions ha ave a range of complex opera ating models fo or human resources. In some e cases, this includes supp port from a sepa arate university y system or sta ate office. This variability mus st be acknowled dged when interp preting the results of benchm marking. The sta affing of the Un niversitys central HR function n, relative to the e size of the over rall employee population, p doe es not appear significantly s outt of line with fiv ve of its peers, but is larger than two others. The Universitys budget for central c HR rela ative to the em ployee populat tion was secon nd highest in the e. Peer estimates of distribute ed HR staffing, however, varie ed extensively, and institution ns that did repo ort it peer range indicated significant s unce ertainty in their numbers. Give en this uncertaiinty, the Univer rsitys higher central HR reso ource allocation could c reflect a greater degree e of centralization, higher leve els of centrally-provided services, and/or its lack of external support from a separate univ versity system or state HR fun nction. Informatio on Technology y. The Univers sitys overall us se of IT resourc ces appears to o be in line with peers, though h data rsitys central IT organization is somewhat suggest tha at its IT resources may be mo ore decentraliz zed. The Univer smaller tha an the peer gro oup average. Th he Universitys s central IT bud dget is also slig ghtly below the peer group, though some of this difference co ould come from m variation in what w is included d in the central IT budgets acr ross the peer campuses. . The size of the Universitys reported distrib buted IT staff ra anks near the c center of the pe eer group. How wever, when overa all IT staffing ra atios are examined, the Unive ersity appears somewhat more decentralize ed than its peer rs.
1

As per the e EDUCAUSE Co ore Data terms of o use, Huron did d not have direc ct access to the s survey database e (select data wa as extracted by y an authorized University emplo oyee). 3 | 2013 Huron Consultin ng Group. All Rights Reserved.

 The Univer rsitys total IT staffing, s including both central and distribute ed IT staff, rank ks in the center r of the group, and is nearly iden ntical to the gro oup average. On O a per-user basis, though, th he University a appears to spend significantly y less on both central IT and tot tal IT than its peers. Diagnostic c Study While cond ducting the ben nchmarking, Hu uron also review wed the four fu unctions to iden ntify and priorit tize potential opportunities for improvement. Finance. The T concept of f clustering fina ancial functions s is an establis hed practice in n some areas o of the University. The clustering of o financial functions at the co ollege/unit leve el consolidated some financia al administration n activities and d potentially improved efficiency. Howeve er, not all financ cial administrattion activity occ curs within clus sters, and in so ome cases the clusters c operat te independent tly of one anoth her. Huron reco ommends that the University undertake add ditional efforts to consolidate and d standardize financial functio ons both within and across co ollege/unit boun ndaries and to develop a more m coordinat ted, metric-driv ven approach to financial adm ministration. Hu uron also recom mmends that th he University specifically eva aluate the reso ources and serv vices devoted tto financial rep porting. ry: In summar Ev valuate service e delivery mode el for financial reporting Enhance govern nance of distrib buted finance Manage M financia al administratio on by metrics Procurement. While the University curr rently employs many leading procurement p practices, two p process areas remain dist tributed and pa aper-based: inv voice processin ng and travel/expense reimbu ursement proce essing. Huron recommends that these high-volume h pro ocesses be red designed to tak ke better advan ntage of electro onic tools as w well as discounts/r rebates. As wit th finance, Huro on also identifie ed the opportu unity to use met trics more exte ensively to man nage procureme ent and payable es functions. In summar ry: In ncrease travele er adoption of tr ravel and expense tools Fu ully automate travel t and expe ense process Consolidate trav vel managemen nt authority Consolidate invo oicing Ex xpand use of ACH A and ePaya ables (electron nic settlement to ools) in progress Im mplement a con ntract managem ment solution in progress Enhance procur re-to-pay perfor rmance metrics s Human Re ficant organiza esources. The Office of Human Resources is currently un ndergoing signif ational and cultural change wh hile undertaking g major projects. This level of f change requir res resources w which may be a able to be refoc cused once projects are comple eted and stabiliz zed. In order to o determine the e optimal staffing, service, an nd financial resource levels, HR programs and services must be comprehen nsively evaluatted. Huron reco ommends that the University develop a framework f and d formal proces ss for evaluating human resou urces policies, programs, and d services to determine the value they provide and en nsure they are aligned with c urrent priorities s. Huron also r recommends th hat the University move towards a leading-prac ctice service de elivery model. F Finally, Huron n noted the oppo ortunity to enha ance ongoing eff fforts to develop p an HR metric cs program and d a data integriity program.

4 | 2013 Huron Consultin ng Group. All Rights Reserved.

 In summar ry: Align HR progra ams and service es with HR stra ategy Refine R HR opera ating model to reflect leading practice Continu ue to develop centers c of expe ertise Define HR generalist roles and acco ountability Consolidate delivery of o transactiona al activities Define and imple ement HR perf formance metriics Fo ormalize data integrity progra am Informatio on Technology y. Information technology is also a undergoin ng a significant amount of organizational and d cultural cha ange. The conc cept of We of IT, which emp phasizes the in ntegration of IT across organiz zational lines appears to be gaining strength. The University has already begun or r is in the proce ess of impleme enting many romote efficien ncy (consolidatiing data center rs, migrating to o a single e-ma ail platform). Th he technical solutions that pr University should develop p a systematic approach to ev valuating curre ent and future in nvestments in technology and d for ending programs and ser rvices that do not n provide valu ue relative to th heir costs. Additional opportunities in IT invo olve continuing to build organizational and cu ng collaboratio ultural effective eness, promoti on, and acceler rating current initiatives to consolidate desktop d support and other bro oadly-used ser rvices. Create mechanism to evaluate e IT investment ts (current and future) Define IT roles and a responsibillities at all levels of the organ ization Determine Unive ersity-wide serv vice level expe ectations Accelerate usag ge of common good g services Refine R the IT go overnance proc cess

Enterprise e-wide Opport tunities The Univer rsity already ha as many of the basic foundations to drive gr reater efficiency y and effective eness. It has enterprise-level systems for managing finance, f procur rement, and HR R that are used d across the en ntire system of campuses. . Institutional po olicies and pro ocesses are generally well deffined and docu umented in a ce entral repositor ry for use across s the entire system. The Unive ersitys Respon nsibility Center r Management (RCM) budget t model promot tes financial ac ccountability fo or each unit and d campus. Som me administrati ve activities ha ave been centr ralized or consolidate ed to achieve greater g consiste ency and economies of scale e. Looking be eyond incremen ntal improveme ents to individu ual functional ar entified a broad der opportunity y to reas, Huron ide rethink how w administrative services are delivered. Dev veloping new a dministrative s service delivery y models requir res: 1. 2. 3. 4. Using systematic methods of evaluating e prog grams and serv vices, both central and distributed Defining service keholders e expectations and a levels of se ervice with stak Clarifying accountability for delivering service es at all levels Using metrics an nd reporting to determine resource requirem ments and mon nitor performance

e multiple forms s, from localized to centralized d. Activities tha at are high-volu ume and Service delivery can take transaction nal in nature ca an be consolida ated or grouped d to achieve gr reater efficiency y. Many public c and private institutions, including som me of the Unive ersitys peers, have h undertake en projects to transform administration within their collegiate and a non-collegiate/support un nits through the e consolidation n of administrat tive activities in nto shared serv vice centers. Th hese centers are charged with h working with faculty and sta aff to define a s set of services and then deliv vering

5 | 2013 Huron Consultin ng Group. All Rights Reserved.

 those serviices through managed, m servic ce-focused pro ocesses. A new w service delive ery model can t take a number of different forms and can in nclude a broad range of administrative activ vities within its s scope. Redesig gning and implementiing a new service delivery mo odel in any func ctional area is a multi-year ef ffort that would require dedica ated resources to t plan, manag ge, and implem ment. Before be eginning this typ pe of initiative, the University would need to o undertake a more compre ehensive evalu uation to determ mine its feasibi lity and potentiial return on inv vestment. Moving Fo orward Given its current portfolio o of projects, the University wiill need to eval uate its capacity and prioritize e additional improveme ent opportunitie es. Establishing g a clearer, sha ared vision of a administrative s services would help ensure th hat investment ts related to on ngoing projects, changes within individual fu unctions, and broader change es to service de elivery models alig gn with one ano other. As the Univ versity moves forward, f it shou uld consider the following nea ar-term steps: 1. Review R shorter and a longer-term m opportunities s with internal s stakeholders 2. Develop a broad der vision for University-wide U administrative services throu ugh expanded e engagement of f ac cademic and administrative stakeholders s ac cross all of the campuses 3. Continue to gath her internal dat ta and analyze administrative e activities, prio oritizing the non n-collegiate uniits, an nd develop alte ernative options s for improved service deliver ry 4. Ev valuate, select, and prioritize opportunities and a assess the eir connections s to other initiat tives already un nderway, in particular the Ent terprise System ms Upgrade Pr rogram 5. Develop a plan that t identifies le eadership/gove ernance, goals s, measures of success, supp porting resource es, an nd timing A discipline ed evaluation and a planning pr rocess that eng gages stakeho lders will be cr ritical to determ mining the appro oach that best meets m the Unive ersitys needs. Moreover, it will be an importtant step in shifting the comm munitys measure of efficiency and a effectivene ess to a more University-wide U view.

6 | 2013 Huron Consultin ng Group. All Rights Reserved.