The University of Kansas: Changing for Excellence

The University of Kansas:
Changing for Excellence
November 12, 2012

Presenters

Jeffrey S. Vitter
Provost and Executive Vice Chancellor
The University of Kansas
jsv@ku.edu

John R. Curry
Managing Director
Huron Consulting Group
jcurry@huronconsultinggroup.com

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

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 Success

Perspective on University Cost Reduction
AN 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.

Immediate Incremental Transformational
• Across the board budget cuts • More across the board cuts • Comprehensive operational and
• Delayed deferred maintenance • Large tuition increases program reviews
• Capital project delay • Procurement strategies • Organizational rationalization
• Furloughs • Cuts to low priority services and • Shared services
• Hiring freezes programs • Outsourcing
• Early retirements • Sale of non-critical assets • Process standardization,
workflow optimization
• Procure-to-Pay transformation
• Budget process redesign
Short-term / Temporary Longer-term / Structural
Easier to implement More complex

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


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.

Reduction in Bold Aspirations Competition from
State Support Strategic Plan Other Universities

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

assure administrative redesign budgeting and focus on enrollment
functions are maximally planning capabilities to management as many
efficient orient all funds towards state universities are
strategic priorities aggressively recruiting


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 Environment
2. Elevating Doctoral Education
3. Driving Discovery and Innovation
4. Engaging Scholarship for Public Impact
5. Developing Excellence in People
6. Developing Infrastructure and Resources

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

Project Team Organization
PHASES 1, 2, AND 3

Executive Project Delivery Project
Committee 1 team/campus Leadership

• Chancellor, • Consultants • John Curry,
Phase 1
Opportunity Provosts Managing
Identification • Functional Director
• “Decision Specialists
makers” Advisory Opportunity • Mike Phillips,
Opportunity
Opportunity
Committee WorkWork Groups
Groups • Subject Senior
Work Groups
Work Groups
• Meets Matter Director
Phase 2
Business Case
monthly • Cross- TBD “Champion”
•
• • TBD Advisors day to day
TBD
• • Key project
Development campus
stakeholders stakeholders management

• Represented: Opportunity
Opportunity
faculty, Opportunity
Implementation Opportunity
Work Groups
Work Groups Implementation
Phase 3 operational WorkTeams
Groups Work Groups
Support Teams
Implementation Including project
leaders, staff, TBD
• • TBD Select areas
students • TBDchampion & • TBD only
ambassadors

Business Case Relationship Map
SYNERGIES AMONG WORK STREAMS

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

Key


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

Goals
Reduce 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.

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


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 I Phase II Phase III

Identified High Level Trends Created Detailed Business
Implemented Changes
and Opportunities Case Recommendations

• Maintenance labor costs • Consolidate maintenance • Consolidated Housing and
nearly twice as high per and custodial operations into Central Facilities
GSF than peers zone maintenance program • Implemented zone
• Campus operating three • Increase span of control to maintenance and eliminated
separate maintenance and align with peers supervisory layers
custodial units • Design performance metrics • Refocused organization on
• Travel time, due to to evaluate service and preventive maintenance
geographic dispersion, performance • Rolled out mobile
consumed one hour per day • Leverage work-order software application using iPod/iPad
per employee • Implement energy devices
• Primary focus on services conservation program • Implemented energy
billable to units initiatives
• High energy costs vs. peers

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.

Consolidated Housing and Reduced management FTE’s by 30 resulting in $1.4M in first year,
Central Facilities Operations with $2.6M per year expected

Implemented Contemporary Lowered maintenance response times, improved customer service,
Zone Maintenance Program focused the organization on PM, increased worker productivity

Employee Morale and
Utilized employee climate surveys and focus groups to engage
Workforce Productivity
staff in the change process and develop work place improvements
Initiatives

Energy Conservation and Involved stakeholders from across campus to develop integrated
Sustainability Initiatives behavioral change campaign to reduce energy costs 3% – 7% annually


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.

Challenge 1: Initiating Change

• 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 2: Determining the right organizational structure and operating
model

• 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


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

Challenge 3: Obtaining Buy-in from Workforce and Customers

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

Challenge 4: Maintaining Change Momentum

• 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


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 Stakeholders
1. Replaced facilities leaders who were not committed to change
2. Continually communicated commitment of leadership to change and to improving the organization for
employees and customers
3. Included Student Housing in design of future state from the beginning

Focused the Organization on a Preventive Maintenance Model
1. Separated construction function from the maintenance organization
2. Organized maintenance work into campus zones to improve productivity and to create a sense of
ownership of buildings and systems
3. 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 Change
1. Created workgroups composed of mostly front-line employees, stakeholders, and customers from
across campus to design future state operating and organizational models
2. Focused early on addressing employee morale concerns and create buy-in

Aligned Performance Objectives with the New Operating Model
1. Made new leadership and supervisors accountable to new model
2. Developed organizational and operating KPI’s to align with new model
3. 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

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

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

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


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

Annual Financial Opportunity
Work Stream Estimated Annual Saving Achieved 1st Year Savings
Strategic Sourcing $2.1-3.3M $3.9 – $4.3M
eProcurement $750K, after implementation In Process

Cumulative Cost Savings
$9.0
Millions

Procure to Pay Optimization $7.8
$8.0
$7.4
$6.9
$7.0 Sourcing Rebate Revenue
$6.4
$5.9
$6.0
Sourcing Cost Savings $5.4
$5.0
$5.0 $4.5
Sourcing One Time Incentives $4.0
$4.0 $3.5
$3.0
$3.0 Cumulative Project Savings
$2.6
$2.1
$2.0 $1.7
$1.2
$0.7 $0.8
$1.0

$0.0
Dec-11 Jun-12 Dec-12 Jun-13 Dec-13 Jun-14 Dec-14 Jun-15 Dec-15 Jun-16


Strategic Sourcing – Approach
NEGOTIATED SAVINGS AND KNOWLEDGE TRANSFER

After negotiating six commodity areas, Huron provided training and guidance for the KU
sourcing team, using the Express Shipping commodity area.
Before conducting the sourcing training, Huron negotiated contracts in six areas:
• Scientific Supplies • IT Distributors
• Office Related Products • Maintenance, Repair & Operations Products
• Computer Hardware • Multifunctional Devices
Negotiations,
Compliance
Presentation and Audit
and Action • Ongoing Huron
Business Case • Finalize business remote support,
• Develop industry case as needed
Data Analysis and internal • Present to
• Contract perspectives stakeholders
Data Gathering review/summary • Build business • Determine
and Contract • Pricing analysis case implementation
Strategic Review • Benchmarking • Summarize strategy
Sourcing • Estimate savings savings
• Identify target
Overview suppliers opportunities • Develop recs
• Classroom style • Supplier data
training request
• Market/industry
research


Procure to Pay – Approach
SYSTEM AND PROCESS UPGRADES, USER TRAINING

Wave 2 will deliver P2P transformation both centrally and across campus. The transformation
includes process, technology, and organization changes.
Task / Timeframe Campus Impact Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec
Wave I
KUPPS Optimization integration

Wave 1 All Business Suppliers
Supplier Data Collection Available in KUPPS
P2P Organizational
Wave 2
Changes and Centralized
Transformation
Invoicing
Wave 2 Streamlined Settlement
Design and Approvals
Workflow
Wave 2 Systems Integrations with
Build KUPPS, PeopleSoft,
DEMIS and ImageNow
Wave 2 Wave 2 Central and
Conference Room Pilots Department CRP Sessions

Wave 2 Wave 2 Testing and
Testing and Validation Validation


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
• 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

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

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

Estimated Financial Opportunity
Estimated Annual Saving Saving To Date
$6.7M - $9.5M $1.19M*
* Includes estimates to end of current fiscal year

Cumulative Cost Savings


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

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

Redefine & Reorganize • Identify Director for IT Support Services
Decentralized IT Staff
• 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

Co-locate & Virtualize Servers
• Identify and register all devices acting as servers on the KUL network
Completed as a
prerequisite to
• Develop policy regarding decentralized servers and other IT devices
implementation
Purchase and install necessary IT infrastructure to support future state
Shared Servers
•
Virtualized Servers
• Work with units and departments to set up intake list and systematically transition
Co-located Physical Servers
decentralized servers


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

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

KU Lawrence KUMC Others purchases by schools and departments
• Central IT • Central IT • General
Counsel
• Software Review Board with representation from across the University will be
• Tech Liaisons • Research
• Endowment
• User
Communities
• User
Communities established to identify opportunities for cross-campus collaboration on software
• Research • Purchasing
• Purchasing procurement

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.


IT – Enabling Collaboration
COST 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.

Single ID Management Network Optimization
Illustrative
Direct Login
Workarounds

Centrally manage one
Network Operations

Optimize Network
Expand Central

Management
KUL KUMC

KU network
Current
Students, Students,
State Faculty & Faculty &

Center
Staff Staff

Enabling Collaboration
Single Identity Management and Network Optimization
KU provide seamless collaboration across the campuses:
Future State
Students, • Collaborative research
Faculty & • Electronic libraries and resources for students
Staff • Reduced operational costs


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

Goals
Redesign 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.

• 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


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.

New budget report Full integration of
Refined budget report,
Prior budgeting model format integrating all budget process and
incorporate incentives
funds strategic planning

FY2012 FY2013 FY2014 FY2015
Budgeting Model Budgeting Model Budgeting Model End State Budgeting
and Process and Process and Process Model and Process

A “base plus allocation Budget model and reports Redesigned model Budgeting and resource
plus adjustments align with financial allows an all funds view management integrated
incremental model” statements and enhance of each area, reveals into the strategic planning
that did not understanding of cost key drivers and processes; budget
incorporate all sources structure at the school metrics, and aligns prioritization aligns with
of funding—out of and administrative unit incentives between strategy
sight, out of mind level each area and KU as a
whole


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

Goals
Increase 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

• 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.

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

Estimated Annual Saving Saving To Date

$1.97M - $2.9M N/A

Cumulative Cost Saving Projections
$8
Millions

$7 Administrative SSCs
Research SSCs
$6
Academic SSCs
$5 HR Pilot Site

$4 Cumulative Project Savings

$3

$2

$1

$0
2011 2012 2013 2014 2015 2016 2017 2018
-$1


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.

Deploy
• Execute Deployment
Develop/Build Plan
• Conduct Training –
• Build Processes Customers and Staff
Design • Recruit and Staff SSC • Execute Workforce
Organization Transition Plan
• Design Processes • Finalize Governance • Implement Processes
Assess • Design Organization Model
• Develop Training and • Create SLA’s / Funding
• Determine Baseline Knowledge Transfer
• Assess Current State Model
Plan • Complete Deployment
• Develop Future State • Develop Recruitment
Service Delivery Model Planning
and Staffing Plan
(High-Level) • Develop Facilities and
• Develop Business Logistics Plan • HR Process Redesign: PS 9.1 upgrade
Case and • Develop Governance
Implementation • Procurement and Sourcing: system upgrade and
Model business practice redesign
Roadmap
• Finalize and • Research Admin: improved PS functionality and
Communicate Strategy central office process redesign


Shared Service Centers – Communication
STAKEHOLDER 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
These committees involve Committee
the highest levels of
University leadership

Design Review Assistant Vice Provost Project Manager
Committee for Business Services (temp)

Communication Business Process
SSC Project Manager Support – 2 (temp)
Ambassadors

Broad campus Process Improvement Transition Planning and Communication and
stakeholders (150+) SSC Steering Committee
and Training Space Change Management

Research These committees involve thought
HR Finance
Admin leaders and decision makers

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

Steady-State Phase III Financial Benefits
EXPECTED STEADY-STATE ANNUAL FINANCIAL BENEFITS

Annual benefit at FY2016 = $24M

33

Combined Phase III Financial Benefits
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.

34

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

The University of Kansas: Changing for Excellence

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