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Achieving Operational Excellence at University of California, Berkeley Interim Report. February 2010. Agenda. Why Operational Excellence? What is the process we are following? What have we learned so far? What comes next?. State educational appropriations have been falling. - PowerPoint PPT Presentation
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This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent.
Achieving Operational Excellence at University of California, BerkeleyInterim Report
February 2010
DRAFT – FOR WORKING PURPOSES ONLY 2Achieving Operational Excellence (Interim report)-no footnotes
Agenda
• Why Operational Excellence?
• What is the process we are following?
• What have we learned so far?
• What comes next?
DRAFT – FOR WORKING PURPOSES ONLY 3Achieving Operational Excellence (Interim report)-no footnotes
State educational appropriations have been falling
State Educational appropriations, inflation-adjusted, excluding ICR
$497m $475m $429m $399m $416m $454m $484m $390m $304m
$497m$452m
$394m$353m $350m $371m $377m
$297m
$232m
2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 projected
DRAFT – FOR WORKING PURPOSES ONLY 5Achieving Operational Excellence (Interim report)-no footnotes
State will continue to face significant funding challenges going forward
-30
-20
-10
$0B
2009-2010
-$6B
2010-2011
-$14B
2011-2012
-$21B
2012-2013
-$23B
2013-2014
-$20B
2014-2015
-$18B
State general funds (billions)
DRAFT – FOR WORKING PURPOSES ONLY 6Achieving Operational Excellence (Interim report)-no footnotes
OE objective is to ensure as many resources as possible are dedicated to core mission
Financial sustainability Organizational effectiveness
World-class teaching and research supported by world-class operations
Internationally recognized researchers and dedicated teachers
Preeminent academic leadership
Public character maintained by continuing to expand access
DRAFT – FOR WORKING PURPOSES ONLY 7Achieving Operational Excellence (Interim report)-no footnotes
We are four months into the first stage of Operational Excellence
What to do How to do it Do it!
•Identify and prioritize opportunities to improve efficiency and effectiveness
•Develop detailed implementation plans tocapture value
•Implement workstreams and drive change in organization
Detailedsolution designDiagnostic Implementation
We are here
DRAFT – FOR WORKING PURPOSES ONLY 8Achieving Operational Excellence (Interim report)-no footnotes
Operational Excellence governance structure
• Frank Yeary (OE co-lead)• Phyllis Hoffman• Khira Griscavage • Claire Holmes (Communications)
Operational Excellence Steering Committee (OESC)
Project Leadership & Organizational Design
• Chancellor Birgeneau (chair)• George Breslauer• Nathan Brostrom• Carlos Bustamante• Catherine Wolfram
• Frank Yeary • Chris Kutz • Rod Park• Miguel Daal• Roia Ferrazares
• Arun Sarin• Judy Wade• Phyllis Hoffman (staff)• Will Smelko
• Chancellor’s Cabinet• Academic Senate Leaders• Council of Deans
Campus Leadership
• Chancellor Birgeneau (OE lead)Chancellor
• Users of campus services• Providers of campus services
Stakeholder groups
Internal working group
• Jeannine Raymond
• Erin Gore• John Ellis
• Shel Waggener
• Elizabeth Elliott
• Ron Coley
Point People • Rich Lau, Lila Mauro, Pamela Brown, Teresa Costantinidis, Jon Bain-Chekal, Nora Watanabe, Michael Mundrane, Liz Marsh, Ken
Schmitz, Moira Perez, Jodie Rouse, Kathleen Satz, others TBD
• Susanna Castillo-Robson
Functional Owners
HR Procurement Finance IT Change Management
Student Affairs
• Chris Christofferson
Facilities Services
DRAFT – FOR WORKING PURPOSES ONLY 9Achieving Operational Excellence (Interim report)-no footnotes
The OE team has been examining seven key opportunity areas
Student Services
Organization simplification
IT Energy Space Mgmt
Admin(HR, Fin)
A
D EB C F
Procure-ment
G
DRAFT – FOR WORKING PURPOSES ONLY 10Achieving Operational Excellence (Interim report)-no footnotes
~55% of supervisors (>1,000 people) have three or fewer direct reports
0
100
200
300
400
500
1
471
2
307
3
228
4
195
5
148
6
113
7
73
8
62
9
47
10
38
11
19
12
13
13
17
>13
90
26% 2% 1% 1% 1% 5%17% 13% 11% 8% 6% 4% 3% 3%
Number of direct reports
Number of Supervisors
Percent ofsupervisors
Implications• Increased
bureaucracy and slower decision making
• Many supervisors may not be challenged to fully utilize managerial skills
• Employees may not get an optimal level of managerial support
Organiz-ation
A
How to read this chart:
471 supervisors have 1 direct report; 307 supervisors have 2 direct reports;228 supervisors have 3 direct reports;
etc.
DRAFT – FOR WORKING PURPOSES ONLY 11Achieving Operational Excellence (Interim report)-no footnotes
Majority of admin personnel are outside of their functional group
0
20
40
60
80
100%
UC Berkeley administrative FTEs(full-time equivalents)
IT
~885
Finance
~700
HR
Shadow
Distributed
Central
~280
72% 87% 88%
Observations
• Distributed functions evolved because of historical perception that central groups could not meet local needs
• Distributed and shadow personnel do not report up through functional areas and are fragmented in small units
• Lack of standardization, specialization and knowledge sharing contribute to lower productivity
• Distribution creates risk management issues% FTEs
outside functional groups:
Admin(HR, Fin)
B
Central: Functional staff reporting to central unit
Distributed:Functional staff reporting to distributed units
Shadow:Staff not classified to function, but perform function as part of their job
DRAFT – FOR WORKING PURPOSES ONLY 12Achieving Operational Excellence (Interim report)-no footnotes
0
50
100
150
200
Education(75th percentile)
200
Education(Average)
127
Education(25th percetile)
83
UC Berkeley
58
Total FTEs/HR FTE(UC Berkeley vs. Education benchmarks)
Benchmarks suggest opportunity to improve productivity (HR example)
Increasing efficiency
Admin(HR, Fin)
B
DRAFT – FOR WORKING PURPOSES ONLY 13Achieving Operational Excellence (Interim report)-no footnotes
Infrastructure is highly fragmented across campus
100+ Servers 20–100 Servers 10–20 Servers <10 ServersTop energy consuming buildings
• Highly decentralized: 900+ servers located in 50+ buildings
• Capacity underutilized: Digital storage utilization across campus servers is ~ 52%
• Increased risk: Some unmanaged servers with limited backup or disaster recovery
• High energy consumption: 95% of servers (by number) not in central data center, resulting in sub-optimal distributed HVAC systems
ITC
Observations
DRAFT – FOR WORKING PURPOSES ONLY 14Achieving Operational Excellence (Interim report)-no footnotes
Energy consumption varies significantly across the campus
0
5
10
15
20
2008-2009 Energy consumption by building (kWh/GSF)20
1211
9 8 8
54 3 3
Teaching and office buildings
Average
Example: Teaching/Office Buildings
EnergyD
DRAFT – FOR WORKING PURPOSES ONLY 15Achieving Operational Excellence (Interim report)-no footnotes
0
100
200
300
400
500
FY2008-09 office and supportspace per employee (Sq. Ft./FTE)
Average
Space usage also varies dramatically
Select UC Berkeley non-academic divisions
Space mgmt
E
Observations• Space is a very
large asset for the university that is currently not managed effectively
• No university-wide space allocation guidelines exist
• Space utilization is not tracked
• Units have no incentives to give up unused space
DRAFT – FOR WORKING PURPOSES ONLY 16Achieving Operational Excellence (Interim report)-no footnotes
UC Berkeley spends >$215M on student services across 5 control units
0
20
40
60
80
100%
Residential and studentservices programs
Supplies & Expenses
Personnel
Debt service
$112M
Pers
onne
l
$14M
OtherPe
rson
nel
Other
$13M
VC Admin(UHS, rec
sports, ASUC)
Personnel
Supplies &Expenses
$42M
VCE&I
Pers
onne
l
S&EOther$14M
EVCP
Pers
onne
l
$20M
University spend on student services(FY2008-09)
Admission& Enrollment
VCRe
-se
arch
$1MTotal = $216M
VC Student Affairs
Student services
F
DRAFT – FOR WORKING PURPOSES ONLY 17Achieving Operational Excellence (Interim report)-no footnotes
0
20
40
60
80
100%
Number of vendorsTop 10%
Remaining 90%
~18,000
Vendor spend
Top 10%
Remaining 90%$578M
UC Berkeley purchasing spend,FY2008-09
External benchmark: 6,000 vendors for ~$830M of
spend
Benchmark: ~$140K/vendorBerkeley: ~$32K/vendor
Procurement is fragmented across ~18,000 vendors
Procure-ment
G
DRAFT – FOR WORKING PURPOSES ONLY 18Achieving Operational Excellence (Interim report)-no footnotes
Identical products are being bought at different prices
• 48-well deep well plate (case) $249.02 $206.22 $42.80 17%
• MaxyClear Snaplock microtubes (case) $127.57 $93.28 $34.29 27%
• Universal Fit pipette tips (case) $133.96 $195.73 $61.77 32%
• Axyrack microtube rack (case) $74.05 $115.38 $41.33 36%
• Graduated cylinder $10.85 $11.25 $0.40 4%
• Polypropylene beakers (case) $83.92 $104.55 $20.63 20%
• Economy wash bottles (case) $88.59 $68.05 $20.54 23%
• LDPE laboratory bottles (case) $43.31 $60.03 $16.72 28%
LAB EQUIPMENT EXAMPLE
Item Fisher price VWR price Difference
($)Difference
(%)
Axyg
en S
cien
tific
Nal
gene
Procure-ment
G
DRAFT – FOR WORKING PURPOSES ONLY 19Achieving Operational Excellence (Interim report)-no footnotes
Our current operating environment hinders efficient procurement
Low leverage with vendors
Sub-optimal pricing in contracts
Users purchase
off-contract
Fragmented spend
Inefficientprocurement
spend
Procure-ment
G
DRAFT – FOR WORKING PURPOSES ONLY 20Achieving Operational Excellence (Interim report)-no footnotes
Our commitment will be tested before wewill be able to see results Organizational Commitment
Earlyexcitement Success
Valley of death
Failure
“Maybe there is an easy answer”
“The Boss says this is important!”
“I have a day job, I don’t have time for
this!”
“This is hard and painful”
“I had better board the train”
“We need to act now”
“I will just have to back channel
my resource requests”
“Let’s evaluate this one more time”
“If I give up control, I can’t do
my job”
“I can see results”
We are here
DRAFT – FOR WORKING PURPOSES ONLY 21Achieving Operational Excellence (Interim report)-no footnotes
Next steps
• Listen to feedback from campus community on this preliminary fact-base
• Estimate savings and implementation costs for opportunity areas
• Decide on opportunity areas to move forward with in next stage (detailed solution design)
For information and updates: http://berkeley.edu/oe
Please send ideas and suggestions to [email protected]