The University of California is trying to cut costs.Â The Berkeley campus, for example, hired Bain & Co. for $3m (your tax dollars at work) to find savings. The project is called Achieving Operational Excellence, perhaps because absolutely nothing beyond the home-page blurb seems toÂ have anything to do with it; the words value, excellence and quality, for example, appear nowhere in pages of FAQs outside the name of the project.Â It has so far come up with a bunch of descriptive powerpoints of surpassing banality and naivete (slides 5 and 8 get the Tufte chartjunk award in this set).
I should note that administrative bloat, measured by purely non-teaching, non-researching payroll and positions as a fraction of total budget or headcount, is a serious issue for us, though I certainly don’t see it at the level of my own 14-faculty unit, where the trend is in the opposite direction and our staff count shrinks every year. It’s a little troubling that the steering committee for the Bain exercise has only three members out of fourteen who teach or do research but six current or former, um, administrators;Â the Project Leadership & Organizational Design team is four administrators, period.
Among the project’s insights to date are the finding that the office of the Vice-Chancellor for Research, which does no actual research and is entirely people thinking, writing and talking on the phone (nothing wrong with that), spends all its budget on personnel, while the people who run the dorms and have, like, actual buildings to maintain and meals to serve, spends more than a third on supplies and expenses. Holy cow, and all the other blessed ungulates; we sure want to make those ratios the same, right? If not, this slide means what, exactly?
There are a couple of interesting findings. We buy lab supplies at different prices, sometimes a third different (nothing about differing order quantities or rush service, though; remember the $600 hammer nonsense?). There is probably some money to save here, but dollars to donuts we wind up seeking it by centralizing purchasing so people sit around not doing experiments while a clerk waits for a discountable quantity of beaker orders to accumulate, or just spends days looking for the best deal. The 6:1 range in energy consumption of office buildings with similar uses (no warehouses, no labs) is astonishing and important, but do we have to wait for Bain to tell us that this is probably because operating units at Cal don’t pay for gas or electricity, but do have to pay for things like weatherstripping or a new, efficient boiler?
The most interesting slide compares building space occupied by non-academic divisions, in square feet per employee.Â The range is from 400 to about 50, and the average is 200. Presumably the low numbers are units like Physical Plant and Parking and Transportation, many of whose staff don’t have or need offices. I foresee a lot of mischief from this item, even if apples are compared to apples, because space is much cheaper than most people realize, and managersÂ are inefficiently stingy with it, especially public managers worried about ignorant overseers looking over their shoulders and tut-tutting about something that looks like waste if you don’t bother to do any real analysis.
At top-price Berkeley lease rates, that 200 square feet (I hope it’s only assignable, not including corridors and janitors’ closets!) costs about $6000 per year, while the average cost of the worker is about $80,000 with fringes and benefits. Suppose more space could increase productivity 10%, maybe meeting rooms that don’t have to be reserved a week ahead, and offices big enough to hold a couch for a nap ( yes, a nap ) and conversation that isn’t across a desk. How much space would it be worth providing?Â Yup, twice as much would be a bargain.Â Think Bain will tell us to buy some?
My late colleague Bob Leone, a real live business school professor and a very high candlepower process, taught me that organizations that manage by cutting costs achieve savings and a quality/value reduction, while organizations that push on quality improvement get it and cost savings as well.Â There is a good deal of sense to this principle. For example, cost-cutting isÂ depressing and (as the Bain exercise radiantly illustrates) kind of stupefying, while continuous quality improvement is fun, complicated, and makes people both smarter and happier. You find the cost savings almost automatically by looking carefully at your production process (the core of quality assurance); you don’t see the quality hit by looking at expenditures and financials, especially gross aggregates and comparisons.