Leadership & Governance

Universities Can Save Millions by Cutting Administrative Waste, Panelists Say

July 25, 2010

Universities must attack their growth in administrative spending by undertaking a thorough review of their business operations and convincing campus groups of the necessity of major restructuring, panelists from three prominent universities said at the annual meeting of university business officers on Sunday.

The well-attended session on the first day of the National Association of College and University Business Officers' meeting focused on the cost-cutting efforts at three universities that have hired Bain & Company, a management-consulting firm, to help them identify and reduce wasteful and inefficient practices in information technology, purchasing, and other areas.

Bain's high-profile contracts­—with Cornell University, the University of California at Berkeley, and the University of North Carolina at Chapel Hill—along with promises of millions of dollars in savings have attracted considerable attention over recent years as colleges try to weather deep budget problems.

Officials at each of those three universities said they had pursued strategies that are broadly similar: to seek savings in administrative areas, such as purchasing and information technology, while studiously avoiding a parallel effort in more-contested academic terrain such as instruction, teaching, and tenure.

Joanne M. DeStefano, Cornell's chief financial officer, said increased regulations have been only partially responsible for the well-documented growth in administrative spending. Reversing that growth requires a "culture shift," she said.

"In the past at Cornell, everything was just additive," Ms. DeStefano said. "Yes, there's new compliance, but we never evaluated what was redundant or what we needed to do less of."

All three campus officials said their efforts with Bain were paying off, especially in the area of procurement, where they said a decentralized purchasing process had left them with large inefficiencies. For instance, different parts of one university often pay wildly different prices for the same thing, they said.

Berkeley is expected to save in the "high single millions of dollars" in procurement reforms by the end of the year, said Frank D. Yeary, vice chancellor for strategy and planning. Chapel Hill saved about $2.6-million in the first year on procurement, said Richard L. Mann, vice chancellor for finance and administration.

But the panelists acknowledged that getting the faculty and other groups to buy in to the changes was a constant challenge, even on nominally administrative issues like purchasing contracts.

"The one I'm really expecting will be a big payoff is a contract for scientific equipment," Mr. Mann said. "But we're in the middle of a death struggle with some faculty members over that."

One questioner asked the panelists whether they had considered turning their cost-cutting attention to the academic side, provoking laughter and scattered clapping from the audience of business officials. "I wanted to know about the concept of tenure," the questioner said. "Have any of you looked at that?"

"No," Mr. Yeary said, to more laughter. "Next question."