In a report to Council on February 21, Executive Vice President John Fry addressed four questions: What is the vision for administrative restructuring? What have we accomplished to date? What initiatives do we plan to undertake going forward? What are the factors critical to our success? Below is a summary of his presentation.--Ed.

At Council: An Update on Administrative Restructuring

The Vision for Restructuring

The guiding principle for all administrative restructuring comes from Agenda for Excellence, where Strategic Goal 3 reads The University will manage its human, financial and physical resources effectively and efficiently to achieve its strategic goals, Executive Vice President John Fry said at Council last Wednesday in his second report* on restructuring. But, he added later: "When you say 'administrative restructuring' it's more than saving money or generating new resources. It's also quality of life; it's also managing and controlling risk."

He began with three aspects of the vision for restructuring:

First, "to improve the quality and cost-effectiveness of service across Penn and establish measures to evaluate services delivered, so that we know whether or not we are doing well and doing it in a cost- effective way." As earlier indicated, Penn intends to:

Extensive discussion on training plans is going on with the A-3 Assembly's Karen Wheeler and others, Mr. Fry said.

A second, and longer-term, aspect of the vision is to "dramatically improve the quality of life on campus" through such measures as:

A third aspect calls for upgrading internal controls and compliance mechanisms to better anticipate and manage business risks--which are "considerable in a $2.5 billion-a-year University"; increasing stewardship and accountability at all levels ("not just a comptrollership function or internal audit, but to see that anyone who has anything to do with managing money, managing a building, managing people, be given the training and time to learn that responsibility"); and preparing people to navigate through "a very tricky regulatory and political environment that is changing all the time."

Accomplishments So Far

Highlighting a series of "key initiatives," Mr. Fry gave examples of progress in six areas--the first three of them "non-personnel" items that may be able to yield half the $50 million savings sought.

Energy Management: Energy conservation strategies have begun to deliver annual savings of $4.16 million, and this will be increased by another $4.14 million through upgrades in capacitor installations. The result is recurring, annual savings of $8.3 million by 1998-99, with more to come through such initiatives as a "green light" idea that was proposed by students.

Purchasing: On its base of $640 million of goods and services purchased annually, Penn takes advantage of size and market prominence, and works with minority vendors to improve business in West Philadelphia. "I think we do a solid job in purchasing," Mr. Fry said, "but significant opportunities still exist in a number of commodity groups." In four recently targeted areas--travel, publications, office equipment and supplies, and temporary services--specific savings of $5 million a year were identified. "If we look at all commodity groups, this could reach $12-15 million, by a conservative estimate, "if we take an institutional approach to negotiating, and resist the temptation to go off in different directions," he added. His aim is the $25 million range, and "the only thing that separates us from that goal is institutional will." He also mentioned such streamlining as electronic ordering and payment through credit cards and Web purchasing, which will reduce the effort going into purchasing by $500,000.

Insurance: Changes in analysis and practices could save $2.4 million over ten years, based on market tests.

Information Technology: A major project just completed is to outline a new strategy and delivery system for computing, with academic innovation and support in residence among the goals. Proposed is a user- centered model in which each faculty, student and staff member at Penn will have a "computing 'home' where they can get all their questions answered," Mr. Fry said. Applauding the selection of Dr. James O'Donnell as interim Vice Provost for Information Systems and Computing, he said Penn should step up ISC's distributed staffing program, putting more administrators in the field where the action is, and link "help" desks across campus. Using market-based service bureaus to help control costs, one proposal calls for running Penn's network as a regulated utility, with service-level agreements, campus-wide standards and a governing board to keep it responsive. This model is now being tested through pilots.

Public Safety: A Public Safety Master Plan is to be published For Comment in March, and a reorganized command structure has already been announced. Penn has joined the National Accreditation Program; connected the campus's police communications with the Philadelphia Police emergency radio system; and begun a dozen projects-- in Nursing, Engineering, Athletics, and Residences among others--to upgrade security technology. Also planned: increased use of Allied Security on foot patrol, and upgrade of the blue light phones.

Human Resources: So far, providing support to units in the process of restructuring has meant "a focus on orderly and fair processes," including competitive severance, inplacement/outplacement, and incentives for internal rehiring. But there's more ahead (see below ).

Next Initiatives

Human Resources: Giving samples rather than an exhaustive list, Mr. Fry started with the "total compensation" package and its components. The need is to reduce costs of the benefits system while maintaining total compensation at competitive levels, he said--and to track the effects through such measurements as success in recruitment, particularly from competitor institutions and the corporate sector. Specifically, he said, Penn needs to drive down the Employee Benefits (EB) rate from 33% into the 20's.

Compensation problems include frozen pay scales, with 300 staff over maximum; an outmoded job evaluation system, unchanged in 15 years; 200 positions ungraded; lack of clear performance variables for bonuses or clear incentive mechanisms.

Problems in benefits are escalating costs (a 27.4% increase over 3 years, to a total of $131 million); too many options, which increases costs but diminishes the management of benefits; and a "richness in plans that has no clear market linkage"--with tuition reimbursement and retirement plans as examples.

A comprehensive look at all benefits is next on the schedule. "We are launching a consultative process in March to begin to put changes in place by July, 1997," Mr. Fry said.

Bookstore: The questions are how to transform its size, look, feel, and breadth of products and services. "Do we need to run it ourselves?" Mr. Fry asked. "How do we leverage expertise and replicate the success of super-stores?"

Finance: A "Benchmarks" project centrally and in selected schools, (SAS, SEAS, Dental, Wharton, Nursing, Graduate Education) looks at cost, productivity, cycle time, and other factors in Penn financial management, using the KPMG database of 300 companies. Mr. Fry anticipates $1.3 million in central cost savings plus savings in schools through changes resulting from this initiative.

Construction: To address the issue of cost per square foot, Penn is working with developers, architects and consulting engineers to compare how others build buildings vs. how Penn does it. A paper contest is envisioned, with the developers vs. the University costing out a hypothetical 55,000 net sq. ft. and making detailed comparisons at every stage. "If we're willing to discipline ourselves, it appears that material cost savings per square foot are obtainable," Mr. Fry said. "Again, it's a matter of institutional will."

Public Safety: After the initial reorganization, the next phase would be to develop an integrated safety and security delivery system; improve the professional standards and performance of Police through training and career development and accreditation; and develop a command center with centralized reporting and deployment of all police, safety and security technology. Penn can improve the performance of contract guard services while reducing costs, Mr. Fry said, and can partner with external providers to build a state-of-the-art electronic security infrastructure. He also intends to "clarify and standardize the working relationship with Philadelphia Police and neighborhood groups," and "encourage a high level of service provision from City departments" including Special Housing Needs, L&I, and Streets.

General Strategies: Mr. Fry touched on a number of other areas of potential, including corporate partnerships in areas from instructional technology to professional development. In the key area of "managing attrition," he said that in 1995, 775 people left Penn for various reasons, many of them for other opportunities--and 899 external hires were made. However, he reiterated support for the strategy of attrition with controlled rehiring: "It takes longer but is much less stressful to the organization." It has savings potential of $7 million to $17 million, depending on how "frugal we are in filling vacant positions," but "takes real commitment."

New University-wide reengineering initiatives in the works are in Research Administration, and Student Services (from student recruitment through young alumni development stages). Also expected: the introduction of "shared services" to eliminate redundancy between central and school-based administrations.

Factors Critical to Success

Mr. Fry again focused on "the institutional will to work together as a university, to utilize buying power, reduce energy consumption, and manage attrition. He acknowledged that "hard choices" would be made as programs and services that no longer add value are revamped and perhaps eliminated.

But he also stressed "meaningful consultation...[and] constructive input, such as that of the Computing Task Force, the tri-chairs of Senate, the Senate Committee on Administration, the A-3 and A-1 leadership groups, the senior business administrators and the deans," he said, adding a long list of individual contributors of ideas and expertise.

The bottom line? "Restructuring is inevitable; we must slow growth in tuition. What isn't inevitable is that we have to turn Penn inside out," he said, reiterating the place of attrition and systems changes such as those in purchasing. The important thing is that "when jobs are eliminated--which they will be--we have a fair, humane approach to support our displaced employees."



* The first was in Almanac October 17, 1995.


February 27, 1996
Volume 42 Number 22

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