These minutes reflect discussion
and debate at a meeting of a committee of the
Minutes
Senate Committee on Finance and Planning
Tuesday, April 12, 2005
2:30 – 4:15
238A Morrill Hall
Present:
Charles Campbell (chair), Rose Blixt, Steve
Fitzgerald, Lincoln Kallsen, Thomas Klein, Joseph Konstan, Ian McMillan, Kathleen
O'Brien, Diane Parker, Terry Roe, Charles Speaks, Alfred Sullivan, Kate
VandenBosch, Susan Van Voorhis, Warren Warwick
Absent:
Calvin Alexander, Kendal Beer, David Chapman, Arthur
Erdman, Daniel Feeney, Scott Fine, Michael Korth, Richard Pfutzenreuter, Thomas
Stinson, Michael Volna
Guests:
Professor Jennifer Windsor (CLA Council of Chairs),
Assistant Vice President Michael Berthelsen; Senior Vice President for Academic
Affairs and Provost E. Thomas Sullivan; Professor Fred Morrison
(chair-designate, Finance and Planning Committee); Leslie Krueger (Office of
the Vice President for University Services)
[In these minutes: (1) Facilities Management costs and
attribution; (2) administrative strategic planning task force; (2) strategic
planning academic report]
1. Facilities Management Costs and
Attribution
Professor
Campbell convened the meeting at 2:35 and welcomed Assistant Vice President
Berthelsen. He reported that at a recent
meeting of the budget model meeting, Mr. Berthelsen presented an overview of
facilities costs, an issue that is related to whether or not space costs can be
included in a new budget model. The
presentation was excellent so he asked Mr. Berthelsen to provide the same
information to this Committee.
Mr.
Berthelsen distributed copies of a set of PowerPoint slides on "Twin
Cities Management Services and cost allocation." He quickly reviewed the core purpose,
mission, and values of University Services, Facilities Management (hereinafter
FM) mission and vision (the goal is to be the service provider of choice), and
Facilities Management cost-saving efforts.
With respect to the last, FM has saved $7.4 million in the
reorganization of service delivery in the last two years and is currently
working on additional savings in energy and service delivery.
He
reviewed the definitions of supported and non-supported space. Supported space is that "for which
supported services are funded by central allocations: primarily for education, research, and
administration." Supported services
are the "basic level of services funded by the University (custodial;
preventive maintenance, renewal, utility service)." Non-supported space is space that FM "is
not funded to maintain. This generally
includes auxiliary (or self-supporting) units such as housing, parking, food
services and Internal Service Organizations (ISOs): costs for maintaining non-supported space
must be paid for by the department, program, or unit that uses it." Non-supported service is "services
beyond centrally funded level of services requested by units (ex. cosmetic
needs such as office painting; small renovations; additional window AC)." Supported space may thus have both supported
and non-supported services (supported space can ask for non-supported services,
such as painting). All service to non-supported
space is treated as non-supported and charged to the unit assigned the space.
Several
other definitions were explained, including different definitions of space, such
as the difference between gross and assignable square feet. "Compass" is the FM
"work-order system that tracks all assigned hours of work and related
costs to complete any given task."
There is a space inventory, a "database that records the assignment
of space to programs. This information
is updated annually with assistance from each academic and administrative
group." In other words, for every
building the University owns, who is assigned the space in that building is
maintained for each room by the user's "Area" (an organizational
level that is typically a department, for academic units. Space Management also use the Minnesota
Facilities Model, a set of space utilization benchmarks for capital planning
and assessment of space needs—how many square feet seem to be required to
accomplish a particular task, such as the space needed for an English professor
and a Biology professor.
Mr.
Berthelsen provided a few summary statistics for FM: it has 950 employees in 18 labor unions, it
is responsible for "cleaning, maintaining, managing and operating 250
buildings with an aggregate 22 million square feet," the University is
Xcel Energy's 7th-largest customer in a 12-state area, FM collects
9,000 tons of waste annually, recycles 3,000 tons of waste annually, and
provides 24/7 fire alarm monitoring at the Twin Cities and Duluth
campuses. FM's core activities are
building services, maintenance, energy management, land care and grounds, and
building systems automation. The FM
budget in FY2005 is $144 million.
FM
can tie costs to buildings through the use of utility meters (steam, chilled
water, electricity, water and sewer), compass (tracking work done on a
building), and the space inventory (which assigns space to a particular unit),
Mr. Berthelsen reported. For supported
space, the costs are charged against central allocations; once per year FM
produces a cost report for all supported costs.
All costs are allocated to buildings on paper (not in a bill to
colleges). Those building costs are
divided by assignable square feet (the non-assigned space costs are spread equally
to all assignable square feet—for example, common spaces). The building cost per assignable square foot
is linked to the space inventory and attributed to the appropriate department
and central administrative office. For
non-supported space, the costs are fully allocated and are billed monthly based
on actual use. The charges are set in
order to be sure that supported space is not subsidizing non-supported space
and that non-supported space users are paying all direct and indirect costs.
There
are several different ways that costs are allocated, by service. There are billed hours of service with
overhead (custodial, preventive repair and maintenance), activities billed by
assignable square feet (waste, recycling, land care—total cost divided by square
footage), activities billed for actual cost and no general FM overhead (parts
and supplies, purchased labor, and utilities billed by metered use), overhead
(FM administration, finance, etc., prorated based on billed hours of custodial,
maintenance, waste, and grounds). The
What is the goal in making these
measurements, Professor Konstan asked?
He could envision two reasons: it
is a fair way to do billing and it provides some leverage in conserve money
when possible. Mr. Berthelsen said they
rely on both reasons. It is a balancing
act, however, because they do not want to create incentives to do the wrong things. This is the way they do things now, on paper,
and there has been no decision about adopting the system; it has been presented
to the budget model committee. Professor
Konstan said that this approach glosses over the fact that units have been
located in buildings that have different expenses and that some cost more due
to factors outside of their direct control; it would be possible to do billing
on average thermostat temperature, for example, to amortize the cost of heat
across campus. Mr. Berthelsen said the
question of different building costs is one the budget committee will want to
consider; one issue is the tools available.
They do not have, for example, the means to measure average thermostat
setting. One must look at simplicity,
accuracy, and availability of tools. The
biggest driver of energy consumption, for example, is building function. Professor Konstan then asked if custodial
services, for example, would be billed differently depending on the seniority
of the staff, or if the cost would be averaged.
Mr. Berthelsen said that "we can cost-allocate ourselves to
death" and could dramatically increase the overhead cost of accounting by
insisting on extremely specific measures.
There is a need to balance costs and benefits, he said, and they are
also looking for incentives.
Mr. Berthelsen provided average cost data
for buildings on the
Professor Speaks noted that the cost
per square foot varied considerably for the collegiate/administrative units
(e.g., for Mr. Pfutzenreuter's office the cost is $22.40 while for Nursing it
is $15.20 and Biological Sciences it is $30.26). It all depends on the building(s) the unit is
in, Mr. Berthelsen said. Professor
Speaks observed that in some cases, even if one knows the actual costs for
something, the variance may be so small that it is not worth drilling down to
the department level to determine unit costs.
That is the tradeoff, Mr. Berthelsen agreed: How much is it worth to get the
information? Where an office is next to
a lab, the office will cost less, and one could ask if that space should be
charged less. Assignment of costs can be
done more cheaply in buildings that have only one function, but there are
programmatic implications if one wants to push to build buildings for only one
function.
Professor Konstan said that if it
reaches the point where some version of this cost allocation model is included
in the budget model, the initial allocation of space will be critical. Space is not fluid, he observed. When a building is opened, providing more
space, there is usually no talk about what budget changes will accompany the
move into that space. And typically when
faculty lines are allocated the growing units are not assigned to new space
(just as they similarly don’t receive additional support budgets).
How will they account for departments
that are moved into temporary space for a few months or years, Professor Speaks
asked? They try to address that through
the space system, Mr. Berthelsen said—by keeping track of where a department
is. Under a new budget model where costs
would be allocated, the system would be increasingly accurate because every
unit will immediately let them know what space they occupy or no longer occupy.
May a department opt out of services
(e.g., custodial) and provide its own, Professor Roe inquired? Mr. Berthelsen said there are certain
standards of service that the University will require, such as levels of cleanliness,
prevent maintenance, safety checks, etc., that a unit would not be allowed to
opt out of. Decisions about who can
provide or contract for selected services will need to be an institutional
decision, however, the new administrative strategic planning document points
toward the University acting as a single enterprise, which should look for the
delivery of services by those with core competencies. Asked if units can lower their costs by
moving out of some offices or rooms, Mr. Berthelsen said it is like selling a
house: one pays the mortgage until
closing. Departments cannot give up
space until someone else will take it. A
department cannot just give up three offices.
Vice President O'Brien said she wanted
to recognize the excellent work Mr. Berthelsen has done in order to respond to
questions from the budget model committee.
She said she hopes this informs the thinking of the Committee as it
hears more from the budget model committee.
Professor Campbell said that the
Committee needs to focus on the policy questions that Mr. Berthelsen outlined
on one of his slides:
What do we want to achieve? What are our goals? What are goals for facility performance? What are financial goals of model?
How do we want to achieve these
goals? What are our strategies? Should all costs be allocated and at what
level of detail? Should units be treated
differently based on some defining characteristic (auxiliary versus central
support unit)? How are facilities
standards established?
Who do we want to do what work? What should be the roles and
responsibilities? Who sets standards for
services? (i.e., should Physics decide
when they need a new roof?) Who is
finally responsible for maintenance; safety; stewardship? What are core competencies for service
delivery? (i.e., should deans manage
custodial contracts?)
What incentives should be used for
effective and efficient use of resources (both space and financial)?
Mr.
Berthelsen said they want to be sure they maintain good stewardship and that
any system adopted not permit poor or dangerous choices for space. The University needs to set standards that
units cannot opt out of; they also need a system that is not so complicated
that they spend more time in administering it than they gain in efficiencies. They also want a set of standards that people
can understand (for example, the biggest cost driver is the amount of space and
the most important thing a department can do to reduce costs is use less space). If it were not for the need to identify
non-supported costs, would this be worth doing, Professor Konstan asked? It would be, Mr. Berthelsen said, because it
provides a helpful management tool to identify whether costs are too high, or
if there are spikes in costs; the problems can be addressed if they are
identified.
Professor
Campbell thanked Mr. Berthelsen for his presentation.
2. Administrative Strategic Planning Task
Force
Professor
Campbell now turned to Vice President Kathleen O'Brien and Executive Associate
Vice President Al Sullivan to lead a discussion of the administrative strategic
planning task force report.
Dr.
Sullivan noted that the two task force reports have been out for a while and
that more attention has been focused on the academic task force report, which
is appropriate, he believes that recommendations and strategies in the
administrative report are important and can help achieve the goal of being
among the top three public research universities in the world. There are transformative things in the
report. He believes the University is
well-managed, despite the mythology to the contrary, but the President wants
the University to be as well-known for its service as for its research and
outreach, so they are looking for improvements in efficiency, effectiveness, and
accountability.
The
administrative task force contained seven major recommendations, with
strategies to achieve each of them:
-- recognize
the University as a single enterprise
-- embrace and achieve a culture that is
committed to excellence, service, and continuous improvement
-- transform the "centralized vs.
decentralized" administrative structure
-- adopt best-practice management tools
throughout the University
-- focus administrative support on
serving students, faculty, and academic units
-- maximize opportunities for the people
of the University to grow, develop, and contribute
-- optimize the use of the University's
physical, financial, and technological resources
They will follow up on all of them, Dr. Sullivan
said. They cannot at this point identify
the cost savings that will accrue, but have looked at four of the
recommendations and believe the University could save $15 million in recurring
funds if the recommendations are carried out.
With
respect to the first recommendation, "recognize the University of
Dr.
Sullivan reviewed the components of the other six recommendations.
2. "Embrace
and achieve a culture that is committed to excellence, service, and continuous
improvement": define the culture,
have a communications plan, align human resource processes with cultural
expectations (training, work plans, performance evaluations, rewards,
compensation, and employee engagement), continuous improvement reviews (in all
service and support units).
3. "Transform
the 'centralized vs. decentralized' administrative structure": define responsibilities distribution of
responsibilities, organizational service-delivery clusters (for financial
services, human resources, technology, facilities management, and communication
to maximize expertise and minimize cost).
4. "Adopt
best-practices management throughout the University": data-driven decision-making across units,
performance metrics, effective use of leadership time (design meeting schedules
that maximize consultation and reporting while streamlining schedules and
processes), release from over-regulating ourselves (delegate decision-making
that is understandable and not onerous, allowing people delivering the service
to make as many decisions as possible).
What this means is hiring someone to get the job done rather than hiring
someone to inspect.
5. "Focus
administrative support on serving students, faculty, and academic
units": an intentional, critical
path for student success (improve retention and graduation rates), support for
a diverse community with diverse needs, streamlined business services for
faculty and students, property management services.
6. "Maximize
opportunities for the people of the University to grow, develop,
contribute": continuity of
leadership and development (understand and promote the value of preparing and
equipping our current talent for the future), enhance diversity,
performance-based compensation strategies, internal equity in compensation,
employee engagement.
7. "Optimize
the use of the University's physical, financial, and technological
resources": space utilization
(provide incentives for units to focus on effective uses of appropriate, well-equipped,
and well-supported space (quality) rather than amount of space (quality), asset
optimization (manage physical assets strategically and evaluate the costs and
benefits of holding, developing, and selling each real estate asset), utility
cost control (diversifying fuel sources, increasing conservation, using more
market-based fuel-purchasing tools).
Professor
Speaks asked if #3 means things would be more centralized. Dr. Sullivan said it will mean defining the
levels of expertise needed and where (e.g., labor relations is only needed
centrally; what level of human resources staffing is needed in the
colleges?). Professor Speaks urged
caution in approaching this issue; if a current central function is sent to the
colleges, it would help if funds accompanied the transfers. Dr. Sullivan agreed.
Professor
Konstan raised a question about positioning services for reasons other than
efficiency. There are tasks that can
interfere with people working together, he said, and he hoped that long-term efficiency
would be considered, not just short-term efficiency. The idea is to get the right level of
services where they are needed, Dr. Sullivan said.
Dr.
Sullivan added that the administrative task force operated with two
principles: everything was on the table
and any saving would go toward the academic mission.
Vice
President O'Brien told the Committee that the task force started its work in
mid-January so only had about two months to prepare its report. They could not have produced the report without
the continuous improvement work going on throughout the University all the
time; much of what is in the report reflects what is already going on, planned,
or a gleam in the eye of the administrators.
She juxtaposed the Drive to Excellence roadmap for the State of
Vice
President O'Brien also commented on the recommendations.
1. Standardize products and processes. Promote, and require when necessary,
standardization of key administrative products and processes, coupled with a
process for opting out that is reasonable, rigorous, and fair; Seize institutional purchasing opportunities. The University does not take full advantage
of its size and scale to negotiate better rates and/or higher service
quality. Goods and services whose total
expenditures or frequency of use warrants should be negotiated institutionally.
For FY 2004, the University saved an
estimated $43 million on University-wide contracts. For every $10,000,000 of additional purchases
made from University-wide contracts, the University will save approximately
$3,100,000. Behavioral norms. Maintain
and reward consistent excellence in performance, commitment to diversity, and
respectful behavior. We must provide appropriate training, educational
materials, and support so that every unit of the University is a consistently
excellent place to teach, learn, and work.
2. Develop
a culture that is aligned with and encourages transformational behavior and
purposeful and intentional strategies to transform our culture; this is key to
the successful implementation of all of the recommendations. Communications plan --Every employee should
know why this new culture is needed, what it will look and feel like, and how
it will be evidenced in their work environment.
Align human resource processes with cultural expectations --Venues
include training, work plans, performance evaluations, rewards, compensation,
and employee engagement. Continuous
improvement reviews: Provide a
legitimate, recurring dialogue within University governance and with faculty,
students, and staff on what services are needed and at what level of quantity
and quality.
3. The
University must restructure and realign its administrative units. We must understand each others' roles and
responsibilities: within the system,
among management systems, and must identify what skills/competencies we need
and respect them. Define
responsibilities: delineate
administrative roles and responsibilities, conduct a structured assessment of
all administrative services, clarify responsibilities of vice presidents and
chancellors for common system services, and share services between the Twin
Cities and coordinate campuses where possible.
Distribution of responsibility:
define administrative management systems, identify core competencies,
and assign responsibility for human resources, finance, information technology,
and communications at all levels.
Organizational service-delivery clusters: develop clusters for financial services,
human resources, technology, facilities management, and communications to
maximize expertise and minimize cost.
4. This is about reliable information, informed
decisions, and stronger management: Data–driven decision making across units: provide better information to senior officers
to support their decisions. Reinvigorate
the Office of Institutional Research and Reporting, examine its roles and align
functions with Information Management Services, the Office of Measurement
Services, the Office of Service and Continuous.
Performance metrics: design
common metrics, to measure progress and achievement; ensure there are systems
and structures in place for leaders to review and act to improve key
performance indicators. Release from
over-regulating ourselves: minimize, and
eliminate where necessary, internal regulations that are not mission-critical;
increase arbitrary dollar limits that trigger further reviews; ensure that
self-imposed policies have been evaluated for cost benefit; appropriately
manage high-risk and material activities.
5. This is about service. It means better understanding the
people we serve: what are the right
things to do? What services should we
provide? How well do we do them? What is the quality? Strategies include: An intentional, critical path for student
success; improve retention/graduation
rates: developing systems that support
initiatives in academic strategic task force.
Support for a diverse community with diverse needs: community for students of color and
international students; including undergraduate, graduate and professional
students; streamlined business services for faculty and students: enhance ease of typical business practices
for faculty, such as travel arrangements, room scheduling, reimbursements,
etc.; review the certified approver program; use self-service and electronic
capabilities as much as possible. Property
management services: reliable,
consistent services and high quality space will be provided to research,
teaching, and administration; maintenance and operations services will be
reengineered to control costs, optimize productivity
6. This is about people. People ARE the
7. Are we making the best use of what we
have? Strategic resource
acquisition, management, and redeployment are essential. Space utilization: build a user-friendly, comprehensive space
inventory/geographic information system to manage space usage; integrate
accountability for effective space usage into University planning at all
levels. Asset optimization: the University must manage physical assets
strategically, including the disposition and use of real estate holdings;
evaluate the costs and benefits of holding, developing, and selling each real
estate asset. Utility cost control: by diversifying fuel sources (biomass
fuel/oat hulls), increasing fuel conservation efforts, and utilizing more
market-based fuel purchasing tools, the University will reduce its operational
dependence upon any given fuel; increase the predictability of its fuel costs
by limiting price spikes; and reduce its anticipated cost of operations by an
anticipated $4-6 million annually.
Professor
Morrison said he was reassured by the presentation at this meeting. He said he was initially disappointed by the
administrative task force report, which seemed to contain many more
generalizations than the academic report.
Is there an appendix with specific recommendations? Ms. O'Brien said there is and that it is on
the web. The recommendations in the
report are general as opposed to specific things that can be carried out,
Professor Morrison said.
As they move forward to implementation,
is the assumption that there will be consultation, Professor Morrison asked? The task force was heavily administrative and
the recommendations could have impacts that are unforeseen on the
administrative side. The report notes it
will take 3-5 years to implement the recommendations, Vice President O'Brien
said. Everyone with support
responsibilities in units must be engaged to achieve the envisioned change. There must be discussion throughout the
organization about standards, structures, performance measures, what should be done
at what level. They have already
discussed the importance of engaging department administrators to assess the
impact of recommendations. Professor
Morrison said his concern was different—she talking about consulting with
department administrators, who may or may not know how faculty or researchers
in departments will be affected. Vice
President O'Brien said she identified department administrators as an
example. She agreed consultation must be
thorough and comprehensive.
Professor Konstan offered two
suggestions: identify low-hanging fruit
for improvement that everyone would recognize as having gotten something done,
and allow room for trailblazing by identifying half a dozen departments or a
college and push them to have a model early.
That could help identify where the challenges are. All of this looks good, he said, but it is
not clear the recommendations will solve the problems. CUFS can be marked as a failure because
departments have to maintain shadow systems and individuals have to maintain
shadow systems to track the department systems; how will these examples and
principles get at the problem of building shadow systems and avoid the mistakes
of CUFS? As they pursue the
recommendations, Vice President O'Brien said, they must study examples within
the University of success and failure.
She agreed that it would be good to make progress soon.
Professor VandenBosch commented that
the faculty members were added to the administrative task force late in the
game, after the subcommittees had completed their work. Once appointed, they had a steep learning
curve. She said she hoped they were able
to contribute to the report. As faculty,
they were impressed with the leadership and tone provided by Ms. O'Brien and
Dr. Sullivan. The specific
recommendations reflect a commitment to service; they are general principles
but provide a framework. She asked Dr.
Sullivan to say something about the task forces that will be appointed. Dr. Sullivan said that to the extent things
need Regents' approval, they will not get out in front of the Board. They can receive suggestions, but will not
create task forces in advance of regental action. Ms. O'Brien said it had been helpful to have
the faculty on the task force, to provide language that would be meaningful to
the campus. She agreed that there will
be more concrete action on future task forces after the Regents have acted.
Professor Speaks agreed with Professor
Morrison that the presentation had been helpful. He suggested that they talk more about
continuing consultation, not just in April and May before the Regents act, if
the implementation is expected to take 3-5 years. If something will affect faculty and staff,
it should be consulted on, he said. They
worked on an urgent time schedule, Dr. Sullivan said, and wrestled with many
ideas—some have been tested, some not, some are large and some are small, and
some will take 3-5 years with appropriate consultation while others can be
someone's work plan.
Professor Campbell thanked Ms. O'Brien
and Dr. Sullivan for their report.
3. Strategic Planning Academic Report
Professor
Campbell welcomed Provost Sullivan to the meeting to talk about the academic
strategic planning task force report, and in particular the finance and
planning implications of the report. The
discussion touched upon a number of issues:
-- The potential savings to be achieved
by implementing the recommendations and the reinvestment of the funds in the
academic mission
-- The communication about the
implications and recommendations concerning
-- The
work to be done with respect to IT, COAFES, CHE, and CBS and the role of
biology
-- The
source of resources to fund the recommendations
Professor
Campbell thanked Provost Sullivan for joining the meeting and adjourned it at
4:30.
--
Gary Engstrand