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Business Officer Magazine

Achieve Effective Cost Management, Performance Improvement

Fifteen sessions addressed efficient campus management, including challenges with employee benefits, campus operations, and facilities.

Strategic Procurement

A panel of business officers made a strong case for seeking opportunities to affect an institution's bottom line by managing costs in “Cost Management: The Fastest Way to Bottom-Line Improvement.” The key, according to presenters, is to move procurement from a tactical to a strategic operation with an alignment to the institutional mission. Using procurement professionals for larger strategies, while empowering units to handle smaller purchases through procurement cards, is the first step.

One way to manage costs, the panel noted, is through effective contracting—for energy performance, operating equipment, and renewable energy. Consortium purchasing is another method, demonstrated by the success at the University of Pennsylvania, Philadelphia, of purchasing office products. Penn is looking into additional consortia for purchasing life insurance and health programs. “Just-in-time” inventory through consortia purchasing—especially with scientific supplies—has been a successful strategy at California State University, Monterey Bay. Considerations for future opportunities include possible partnerships with local agencies, municipalities, and schools.

Presenters shared results of a recent survey that indicated facilities and infrastructure, including energy management and groundskeeping, are the leading sources of cost containment at institutions. Next is business services/processes, which include auxiliary services, bookstore, financial services, and information technology.

Measuring Up

The University of Michigan's business and finance division has more than 2,800 employees, five senior staff, and 61 operating sections (39 units have direct customer contact). Five years ago it was clear to the new executive vice president and chief financial officer that one major challenge would be to encourage high levels of performance through a metrics-driven strategic framework. In the session “Improving Effectiveness Through Metrics,” Catherine Lilly, senior adviser to the executive vice president and chief financial officer at the University of Michigan (U-M), and Aaron Sorensen, senior consultant at Sibson Consulting, Chicago, shared what they learned from trend data derived from customer and employee surveys.

Lilly began by acknowledging that “plenty of research exists outside higher ed to suggest that satisfied employees and a positive culture will help drive better customer service and ensure customer satisfaction. At our institution,” she continued, “we believe this is the case even when our customers are other employees of the institution.” She emphasized the importance of engaging employees early to create a common understanding of shared values and communicating metrics to support decision making on all levels—including the role of leadership—in accountability for measurable improvements.

Numbers for baseline metrics are only numbers until there is something concrete to compare them to, said Sorenson. “It is well known that CFOs love numbers and decisions are often data driven, but while measurements are meant to stimulate, they can also be harmful if unrealistic.” The U-M case study faced many challenges but over a five-year period measurable outcomes gave evidence to high performance improvements.

Read more about the U-M customer and employee surveys in the June 2008 Business Officer article, "Benchmarking Happiness".

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