Operational Excellence fact sheet

Background and Budget Realities

The Berkeley campus has absorbed permanent cuts of more than $90 million, bringing our state allocation down to less than 25 percent of our total budget, compared to 50 percent 25 years ago.
Berkeley has already made deep cuts, ranging from 7% in academic areas to more than 20% in administrative areas such as technology delivery, finance, human resources, and academic support. These cuts have led to the elimination of 670 permanently budgeted positions or just over 10% of the total number of permanently budgeted positions on campus. So far in fiscal year 2009-10, the campus has laid off about 300 employees; the remaining eliminated positions may have been unfilled or vacated by retirements or VSO.
We are pursuing a number of different approaches to meet our budget challenges. Our strategies fall into three main categories: revenue increases, cost reduction, and financial management that are both short- and long-term strategies. For example, student fee increases are in the revenue category (short- and long-term) and this year account for about $12 million of our nearly $150 million budget gap. Faculty and staff furloughs are in the cost reduction category (short-term only) and will account for between $25 million and $30 million of the gap. Debt restructuring and better cash management are examples in the financial management category.

About Operational Excellence

For many years, we have been working steadily and incrementally to reduce administrative costs while continuously improving services and streamlining workload. However, when our budget gap expanded to almost $150 million, we faced the reality that an incremental approach was no longer enough.
A primary goal is to navigate this unprecedented economic crisis so that we emerge as strong, if not stronger, in the future. Operational Excellence is designed to create efficiency, improve organizational performance, and reduce our costs, on a recurring and ongoing basis, by tens of millions of dollars per year.
Before we began this effort, we reached out to several other universities across the country to understand how they were approaching similar challenges, we gathered best practices information from the Education Advisory Board in Washington, D.C. (a group that had just completed a survey of a number of universities), and we talked with campus leaders about our options. We concluded that the magnitude of the financial challenge was so great that we needed fresh thinking – and frankly some private sector benchmarks – to help us identify actionable solutions that could save the campus tens of millions of dollars and ensure that every available dollar is going to our core mission of teaching and research.
Operational Excellence will unfold over two to three years because it will likely take that long to create sustainable change in a complex institution such as Berkeley. The work is divided into three phases.
- Phase One is focused on an assessment of our current cost structure and development of viable options.
- Phase Two is focused on implementing the options identified in Phase One.
- Phase Three is focused on sustaining the changes over time.
Operational Excellence is governed by a Steering Committee that is chaired by the Chancellor and includes Vice Chancellors Brostrom and Yeary, Academic Senate Chair Christopher Kutz, faculty, staff, and student leaders, and key alumni with business expertise. The project leadership team includes Vice Chancellor Yeary, Associate Vice Chancellor Claire Holmes, Assistant Chancellor Phyllis Hoffman, and Special Advisor Khira Griscavage.
Following the October 1 launch, a working team of functional leads and professional staff has begun its assessment in key operational areas: Organizational Structure, Human Resources, Business Services (including Procurement), Finance, IT, Student Services, and Facilities.
- The team has met with more than 300 individuals through interviews and group meetings, including academic and administrative leaders, student government and staff representatives, and working groups such as the Campus Technology Council.

About Our Work with Bain & Company

External consultants, especially Bain, bring experience from other higher education institutions and can help us identify options that may not be so obvious to many of us who have been inside the Berkeley environment for many years. We recognize that, especially with regard to a substantial organizational change effort, "self-diagnosis" is not always impartial. We believe the Operational Excellence effort, with Bain's help, will capture more savings and improvement opportunities than we could on our own.
We have engaged Bain & Company to help us; however, this is a Berkeley-led, consultant-supported effort, and we are including some of our most talented staff on internal teams to partner with Bain so that we build on existing knowledge. When Bain leaves, we will have people on campus providing leadership in implementing recommendations.
We also discussed the idea of bringing in consultants with the Dean of our Business School, Richard Lyons, and one of our leading faculty members in organizational work, and they are fully supportive of this decision and with Bain & Company as our choice.
This phase of work will cost $3 million, plus expenses, for a six-month assignment, of which the University will pay half this fiscal year from a pool of resources we regularly use to invest in infrastructure initiatives, and the other half next fiscal year from the savings. IT is a critical component of achieving operational excellence, and solutions will require investment.

Communication and Outreach

Because we know that communication will be critical to the success of the effort, our plan includes frequent, broad, two-way communications:
- The Operational Excellence website includes the Chancellor's launch message, details on the governance structure, questions and answers, and links to additional resources. We continue to update the website with new questions and answers, and add further encouragement for website viewers to send us their suggestions.
- We have received more than 70 incoming emails from staff, students, alumni, and faculty members, most including constructive suggestions for streamlining operations and/or reducing costs. These messages are being categorized by topic (HR, IT, finance, etc.) and posted in the team's shared workspace for review by the team members working on each topic. We are also reviewing dozens of messages sent to Budget Central over the past eight months and will forward those as appropriate, as many of them contain suggestions relevant to the OE effort.
- We are developing a proactive outreach strategy that includes a monthly email update, to be sent to an opt-in list of interested campus community members.
- The campus has received a query from State Senator Gloria Romero regarding the decision to undertake this effort and to hire outside consultants; the Chancellor has responded with detailed information regarding the budgetary challenges we face and the plan for financing the Bain contract. We have also received a Public Records Act request from the San Francisco Chronicle and we have shared the Bain contract with the Chronicle reporter.