The team that first explored bringing a shared services model to the University of Michigan couldn’t help but notice some vast inefficiencies when it broke down the $325 million being spent on IT. Excluding the university’s massive health system, the analysis revealed multiple networks, data centers, and server closets, with 35 different email systems and more than 150 organizations maintaining computers for faculty and staff.
Within months, the team also had measured the efficiency and effectiveness of eight administrative services: finance, HR, procurement, IT, student services, research administration, communications, and development/fundraising. Staffing numbers and others costs associated with the services were included.
Rowan Miranda, associate vice president of finance at the university, says that while the shared services concept has caught on in other industries, it’s still considered at the cutting edge in higher education. “The vast majority of Fortune 500 companies have been using a shared services model for years, so it is well-proven in the private sector and is readily adaptable to higher education,” he says.
Hilbert College uses a student engagement team model to prioritize shared services.
Institutions may share services with other institutions, but the idea can be implemented within a single institution as well, either through a single shared services center or through multiple offices on campus.
Here’s a look at how the shared services concept is being introduced at three universities.
University of Michigan: Steps toward sharing
The shared services initiative, which was first explored in 2009 and began its kickoff planning in 2011, first looked at sharing three categories of services: IT, finance, and HR. The actual shared services functions take place in multiple buildings.
The initiative’s progress was spurred by several factors. For one, the concept received strong support from the university’s president, board of regents, provost, and CFO. Second, the project moved slowly. “We spent the first two years on benchmarking, analyzing the business case, and preparing a detailed design before getting a green light from university leadership to implement shared services,” says Miranda. “Along the way, there were several decision gates, where we asked, ‘At this point, should we continue?’ ”
Third, the faculty and academic side of the house was involved from the start. Faculty and associate deans are on the advisory committees, meaning that the concept is not something led just by central administration.
Officials have emphasized that while they want to consolidate administration, there are no plans to centralize academics.
Finally, the administration has emphasized that any savings will be reinvested in the institution’s core mission. “We have been actively looking for ways to become more efficient and reallocating those savings to teaching, research, and patient care,” he says.
The vast majority of shared services staff will come from within the university, primarily from the areas where these functions had been housed. However, there are a small number of roles that can’t be filled internally, so these will likely be filled by outside candidates.
Officials expect to save about $17 million a year, for a one-time investment of about $30 million for shared services in finance and HR. For IT shared services, a one-time investment of $38 million is expected to save $25 million a year. The projected cost savings come from improved processes, a tighter organizational structure, and technology-enabled efficiencies.
Yale University: Center for service
It’s not just big-picture cost savings that tend to be impressive when it comes to shared services. Administrators leading the Yale Shared Services center (YSS) cite task-specific savings, as well.
For example, since January 2010—when YSS opened with a goal of taking common, repeatable financial tasks out of other departments across campus—the cost of completing an expense report has decreased by 26 percent, says Ronn Kolbash, assistant vice president and director of the center.
Part of that savings was the ability to decrease the amount of rework that had to occur on expense reports, work that previously was necessary due to errors. YSS has also been able to decrease the number of invoices that have been on hold for more than five days by 64 percent.
Other financial management functions now handled by YSS include monthly financial review and budget monitoring, quarterly budget forecasting, management reporting, and ad hoc analysis. Shared transactional processing includes procurement, accounting, accounts payable, and client accounts.
YSS defines itself to the campus community as a business service center providing financial management and transactional processing services to schools and departments. Centralization of all of these services is not a new idea; Yale previously had three business service units that handled these functions, but they were consolidated in January 2011 when YSS moved to its current location a mile from the main campus.
YSS allows departments to use their staff for more core-centric functions, Kolbash says. This reduced overtime and eliminated the need to replace certain people when they leave. “We expect to continue to see improvements in operating efficiencies and labor savings or reallocations,” he says.
YSS will continue to look for new ways its staff can be of assistance to the university. Kolbash also anticipates departments will begin approaching the center with requests.
Operating YSS requires continuous outreach about the changes being made, he says. His team also will ask for suggestions on ways the center can improve.
“It continues to be a challenge,” says Kolbash. “We have to be out front with communications, especially with faculty and staff, on what we are doing, why we are doing it, and what results and benefits we are achieving.”
University of California, Berkeley: IT takes the lead
UC, Berkeley, launched its standalone shared services center as part of its Operational Excellence initiative. That initiative’s goals were ambitious:
• Reduce administrative costs by $75 million annually and direct those savings toward more resources for teaching, research, and public service;
• Create administrative operations that are both more efficient and more effective; and
• Establish a culture of continuous improvement.
Operational Excellence consists of 25 projects, the largest of which is shared services. “Since shared services was obviously low-hanging fruit, it was identified as a top priority,” says Thera N. Kalmijn, chief operating officer for Campus Shared Services (CSS).
Planning for CSS began in 2011, and a building location was secured in May 2012. “At first, there was some concern among people in the university about the shared service model,” she says. “They felt that it seemed too ‘corporate,’ and they weren’t sure how it would work in a university setting.”
To address these concerns, Kalmijn kept an active dialogue with the deans, the vice chancellors, and other administrative leadership. The team also used the “early adopter” model, instead of changing everything over all at once.
The shared services center was set up to consolidate administrative services in several broad areas: information technology, business and finance, human resources and academic personnel support, and research administration.
“Since we want to keep the campus focused on academics, our building is located a few miles from campus,” she says. “The majority of our staff works in this building. However, we still have some shared services personnel working on campus.”
Eventually, the building will be home to approximately 550 employees.
IT was the first shared service to “go live” in January 2013. “We realized it was the easiest one to implement in a shared services environment and that it would lend itself well to a ‘help desk’ type of environment, whereas some of the other services are more advisory and less transactional, which would take a little longer to implement,” she says.
At first, there were some concerns among the shared services employees themselves, some of whom didn’t like the idea of having to work in a new facility off-campus. “However, once they got here, they quickly realized how much they enjoyed working with other people who performed the same types of work,” she says.
Before, each staff member was often the only person in their department who performed particular functions. Now, staffers can easily collaborate with others who have a similar role.
One early indicator of success is that customer satisfaction levels for shared service IT support are at or above average for higher education and other industries, she says.
“We also receive a lot of unsolicited ‘thank yous,’” she says.
Estimates are that ROI for IT shared services should occur approximately two-and-a-half years after implementation, in mid-2015. “After that, we are expected to be able to return about $14 million a year to the campus,” she says.
CSS has just begun consolidating the other major functions, but also will try to anticipate what additional shared services people want, she adds. “We will also be listening to people so we can find out what is and isn’t working for them.”