The $495,000 Report

The $495,000 Report

Huron Consulting Group recently submitted its diagnostic and benchmarking study of four U of M administrative offices: finance, procurement, human resources, and information technology.


The "diagnosis" is based on numerous observations and "opportunity indicators" (areas for improvement). Here are some of the major findings for each office:

Finance 

The University has undertaken recent efforts to measure the resources related to distributed [decentralized] administrative functions; however, total administrative costs are still difficult to measure (p. 41).

Financial cluster staffing levels and organizational structures are inconsistent across UMN at the distributed level [outside central administration](p. 46).

Managerial reporting lacks clear processes and accountability (p. 53).

Although central Finance owns the financial functions, there is limited oversight of the performance of distributed finance staff (p. 54).

UMN has done substantial work to develop metrics in some areas of financial administration, notably cost of mission, but has not combined them into an integrated program that allows consistent comparison across units (p. 56).

Procurement

 Central offices do not directly oversee distributed roles and do not have direct accountability for accurate and timely payments or control of vendor relationships (p. 59).

Central organization spends time tracking missing imags across all types of invoicing rather than focusing on fraud or policy auditing (p. 76).

The University has a high volume of checks [71%] versus more efficient electronic payment methods (p. 78). 

Gaps in current process make it difficult to anaylze travel expenditures (p. 69). 

Human Resources 

The integration between distributed units and OHR [Office of Human Resources] is not always effective (p. 86). 

Lack of integration between financial and HR modules (p. 86). 

Individual HR functions collect and monitor some performance metrics, but they tend to be focused on volume of activity rather than outcomes (p. 84). 

Information Technology 

While UMN has more data on distributed IT resources than some peers, it does not have a full, detailed picture of total IT expenditures (p. 109). 

The University does not have a systematic process for evaluating IT services across the entire system (p. 120). 

IT service delivery is highly distributed at the University, leading to duplicative services and technologies across OIT and administrative/collegiate units. (p. 121) 

IT across units has grown organically, often without clear roles and responsibilities (p. 121). 

Existing timelines for consolidation initiatives span multiple years and are potentially longer than necessary (p. 124). 

Administrative Activity Survey 

An internal survey of the University's non-collegiate units demonstrated broad variation in staffing levels for administrative functions and the fragmentation of roles (p. 148).

While the University's collegiate units were not surveyed, initial analysis of available data suggests similar patterns (p. 148).

These findings generate numerous "opportunities" (recommendations for improvement) for the administration. All too often Huron fails to describe the specific actions necessary to implement its recommendations. Here is a sample:

Finance

Financial administration requires organization and coordination of the function at all levels of the University (p. 13).

Assess opportunities to provide reporting support through a different model (e.g., central support) (p. 53)

Finalize service level agreements to set service expectations between central Finance and distributed units (p. 54).

Human Resources

Create clear articulation of UMN's workforce strategy and identify gaps (p. 98.)

Actively and rigorously evaluate programs offered against the context of workforce strategy (p. 98).

Scale back or eliminate programs that consume resources disproportionately to the value they provide (p. 98).

Identify activities that are good candidates for consolidation (p. 103).

Information Technology

Create a University-wide mechanism for evaluating sevices and sunsetting those that do not provide value commensurate with their costs (p. 120).

Identify and measure the impact of IT investments (central and distributed) and communicate these measures to stakeholders (p. 120).

Service level and cost should both be defined; evaluation of costs/service levels should be part of annual budget process (p. 123).

Develop comprehensive business cases for consolidating common goods or scalable IT services (p. 124).

General Administration

Transformational change requires a strong vision and a shift in mindset to prioritize the University enterprise as a whole (p. 25).

Service delivery redesign can significantly impact a university's culture and workforce (p. 33).

Stakeholder engagement and change management are critical to building support for enterprise-wide change (p. 35).

Just as Huron fails too often to describe the specific actions necessary to get from point A to point B, it often fails to provide even ball park estimates of the costs of implementing its recommendations and the savings to be realized. These are glaring omissions for a report that promises to "prioritize opportunities for improvement (p. 5)." (It does so for its IT recommendations, but that is an exception to the rule.)


The "benchmarking" part of the Huron study is a comparison to other large universities. This has little practical value for two reasons. First, Huron received a limited response to its survey in two major areas. For procurement it received four responses (some of which were incomplete). For human resources it received seven responses (many of which were incomplete). See pp. 65, 90 of the report.


Second, it is not a saving grace that the cost of administration at the U of M is comparable to other large universities. Until recently no one has been watching the store anywhere. See the excerpt from the July 2012 Bain & Co. report in Nice Work If You Can Get It.


In some instances it seems that Huron misses the forest for the trees. It notes that the administration spent $39,000,000 for travel (apparently in fiscal year 2012), but that only 25% of the travel was charged on a corporate credit card that provides rebates. It recommends general use of the corporate card with a savings of approximately $150,000 (p. 68). Huron does not even ask (or answer) whether it is reasonable for the administration to spend $39 million per year on travel.


Huron reports that some of the units use a shadow (second) system for financial reporting and analysis due to the perceived limitations of the Enterprise Financial System (p. 46). The EFS is one of the greatest financial boondoogles ever at the University. See A Truly Sad Story. But Huron does not discuss how the administration stumbled into this multi-million dollar fiasco or whether it should continue to pour money down the EFS drain to try to salvage the system.


Huron notes that the administration is in the process of selecting a consultant to work on the job classification system at the University. This will be the second consulting firm hired by the administration on this project. See p. 4 of the January 31, 2013 report of the Civil Service Consultative Committee.


In fiscal year 2012 the administration spent $35 million for administrative consulting and professional services. See On The Cost of Administration Part III. Is this reasonable? Huron does not ask (or answer) this question. Indeed, it suggests more work for itself. Huron declares (p. 151) that "refining the survey [of administrative activities] and expanding it to the academic units will be required to evaluate University-wide opportunities for service delivery redesign." With the development of the modern corporate university we have seen the emergence of the universities--consulting firms complex.


The compensation of the senior administrators at the U of M now far exceeds the compensation of senior administrators in state government who have similar qualifications and duties. For example, the U of M vice president for human resources (in charge of the job classification system) receives an annual salary of $218,000. The annual salary of the state commissioner of employee relations is $112,000.


The administration tells us that the compensation of its senior administrators is necessary to attract "top talent." See The Cost of "Top Talent".  If the U of M has such talent, why is it necessary to hire consulting firms for such a basic task as job classification?


The total cost of administration at the U of M now exceeds $850 million per year or 28% of the total operating expenses. See On The Cost of Administration Part III. The explosion in this cost over the past decade has been financed by skyrocketing tuition that far exceeded the reduction in state appropriations.


Concordia University (St. Paul) recently demonstrated that tuition can be slashed (by $10,000 per year) when it recognized that the "high tuition high financial aid" experiment has failed. See the September 12, 2012 front page report in the Pioneer Press.


Reducing the cost of administration at the U of M from 28% to 20% of the annual budget would save $240 million. The savings should be used to reduce tuition and the crushing debt that the administration has imposed on students (and their parents). The one-half million dollar Huron report does not come close to getting us there.





Michael W. McNabb
University of Minnesota B.A. 1971; J.D. 1974
University of Minnesota Alumni Association life member