At the University Council on October 11, the University's Executive Vice President gave a presentation on the reengineering project now in progress. His text below is from the transcription of a tape recording.- -Ed.

Restructuring at Penn:
Four Basic Questions and Some Interlocking Goals

by John Fry

I would like to thank you for the opportunity to address Council, and I look forward to doing this on a regular basis as much as you need me to do. I'd like to start with an orientation of how we are viewing administrative restructuring at the University. And I'd like to frame this presentation around four basic questions.

Why are we doing this is the first place?
What is our approach to administrative restructuring?
What areas are we focusing on this year?
And finally, what do we plan to achieve?

Why Reengineering? Why Now?

Why are we doing this--particularly since Penn is experiencing such a series of good events, and is obviously a prosperous and successful institution? There are two reasons that would compel us to undertake a task that is usually associated with institutions that are in difficulty. One is to continue to hold the line on costs so that Penn can remain accessible to students. The diversity of our student body is one of our hallmarks and to continue to provide that type of access we need to hold down costs. We're doing that aggressively now and will continue to do so in the future.

The other is that we're in a very competitive market for attracting the best faculty and the best students--and to compete successfully every available dollar needs to be invested in high-impact, mission- relevant areas. I have a hard time justifying unnecessary administrative expense when in fact the money could be spent better on student endeavors, faculty endeavors, other mission-critical endeavors. So we have to get away from organizing ourselves for administrative convenience; think about where we invest our dollars at Penn; and put those dollars in the most relevant areas that are going to have the greatest return.

In this regard it is important to note what our competitors are doing. They are engaged in similar exercises, as I know from my previous work around the country consulting for Stanford, Chicago, Yale, Columbia, Harvard, Michigan, California--the list goes on.

Everyone is engaged in some form of this activity. Often the reason they start is in reaction to perceived or real financial difficulties. At Columbia, it was a projection of an $80-million deficit several years ago that spurred them to get involved in administrative restructuring.

Penn's approach is different--it's strategic, coming from a position of strength, not from a position of weakness or precariousness. And it's premised on the desire to move this institution forward in terms of its academic quality and its academic reputation. That takes money, as we all know. So what we're after now is investment dollars, for the President, for the Provost, and for the deans to put into their enterprises; and part of the way to get those dollars is to think about the way we spend them administratively and think about a reallocation strategy.

Our Approach

We're striving to do three things here, and we're not always going to succeed (we've probably already tripped up in some areas already), but these are the things we have our eye on.

First is comprehensiveness in terms of the way we think about the task. Second is how to make it as consultative as possible without getting bogged down and not being able to make decisions. And third is how to be compassionate given the fact that some people will lose their jobs. Let me take each of those separately.

Comprehensiveness: Based on my work at our competitor institutions, I believe that the key to a successful administrative restructuring process is to think about this broadly and in a balanced way. Therefore we have set four goals to achieve over a reasonable period of time. They are ambitious goals, they relate to one another very significantly, and I want to indicate to you that I feel each is as important as the next.

The first is to significantly reduce the cost of central administration while working collaboratively with the schools to reduce the costs of school-based administration. Remember, 70% of the administrative dollars are spent on school-based administrative activities, the other 30 % or so on central administration. Those are the rough proportions. Our first goal is to reduce those costs, starting at the center and then working with the schools to impact the entire process of administration.

Second is to generate significant additional revenues by managing University assets more aggressively, and leveraging where appropriate the private sector to help us achieve some of our goals in targeted areas. There are a lot of physical and financial assets that we have stewardship over, and the question we need to ask ourselves is, "Are we pushing those assets as hard as possible to get the greatest return?" Cash management is an example. Through some innovations last year, we generated better than a million dollars of annual savings, just from some changes in cash management. That is a particularly dramatic example; nonetheless, it shows you that there are restructuring opportunities out there that don't involve people losing their jobs.

The third goal is to implement a consistent, rigorous, service- oriented approach to delivering services to members of the Penn community. (I'm trying hard to avoid the "customer" word or the "client" word--some of my faculty colleagues have told me that that's not the right phraseology to use at Penn.) But based on surveys of our constituencies, and based on doing some comparative analysis-- particularly on some corporate sector activities, like purchasing, things that Penn does that corporations do also--we need to target the areas that we know need to improve in service, and ascertain what can we do through rigorous training of employees to develop a consistency, a friendly attitude, a responsiveness in the way we deliver all of our services.

Half the battle I think is getting people to return phone calls, to be courteous, to do more with communications. People understand sometimes if you can't turn on a dime, but they don't understand when you're rude to them or don't give them a sense of where they stand in the process. So one of the things we're trying to do is to take some of the inspirational stories of great service we have here at Penn and begin to leverage them across the institution to get a consistency in approach.

The last goal is to initiate a management development program for the most promising administrators and staff at Penn, while at the same time enriching the technical and supervisory skills training that we provide. In the end, good management is about selecting the right people and giving them support so they can do their jobs well. We need to pay a lot more attention to people's career paths here, what they come to Penn for, what we can do to enrich their professional lives so they can feel comfortable and supported, and in turn give us the best service possible.

Those are four interlocking goals that we have selected for ourselves, and again, I don't place a particular order on those. For this program to succeed, all have to function in an integrated manner.

Consultation: There are a number of ways we're looking at consultation. First is the direct involvement of our constituencies. Virtually every project that I'm going to comment on later has a significant number of faculty and school-based administrators directly involved in leading and managing projects, and I think that as we get more into the student areas we'll see an influx of students into the process as well.

For example, in computing, we're designing right now with about a 20-person group a more rational, cost-effective structure for organizing staff and funding computing. We have the good fortune of having people like Jim O'Donnell, Pat Harker, Eric Clemmens, Mark Liberman, Dennis DeTurck, Bob Hollebeek and many others, marvelous people who are serious researchers, serious teachers, who are putting a lot of their own personal time, along with the time of a lot of administrative people, into that committee. We're really benefiting from their insights.

Research administration is another example. In this project, we are looking at how we can help principal investigators obtain grants and then manage them in a way that is hassle-free. We have successfully recruited Alan Kelly, George Palladino, Ralph Amado, Dwight Jaggard, Richard Tannin, David Balamuth and a number of other people--again, people who understand what it takes to bring dollars in and to manage successful projects.

That's direct involvement--people sitting on committees, spending five, ten hours a week, contributing their time and their energy and their intellects to us.

Another way that we're trying to be consultative is through direct input of constituencies in the forms of focus groups, surveys, site visits, and the PENNy Saved program. There are a number of different ways that, without asking for the 10 hours a week, we're trying to solicit people's input in a meaningful way. For example, on research administration, most P.I.s will be surveyed--we'll try to make it quick and easy--to solicit hundreds of people's input on how well we're doing on research administration, what we need to do to make it better. So we are trying to reach out beyond just having representatives on committees, because we realize people's time is precious and not everyone can contribute in a direct way.

A third way we're dealing with consultation is through regular meetings with governance and other representative groups.

In the Faculty Senate, I'll be meeting monthly with the tri-chairs. We have a Faculty Senate-appointed committee called the Cost Containment Committee that meets every month and has been meeting for several years; it also has four deans, four faculty and a group of administrators and it's an enormously valuable group in that they know the issues well enough that they can give us very timely and good and blunt feedback which we've used and taken seriously....We'll be reporting out on a semester basis to the regular standing committees of the Faculty Senate and University Council that have charges similar to the ones that we have--for example in public safety or in facilities and things of that area. So, we're using the governance structure very aggressively.

We have monthly meetings with the senior business administrators, the 12 or so people who are, in effect, the chief administrative officers of their respective schools. These are important people to us because they're very involved in looking at the services that we provide and interacting with us.

The President's Advisory Group--where the deans and the vice presidents sit--is another group I interact with on a monthly basis. I'm starting to initiate quarterly meetings with the Women's Center, the Triple A, the A-1 and the A-3 executive leadership groups. So, we're branching out from the core Faculty Senate, senior B.A. and President's Advisory Group to a larger group of constituencies.

Are we going to get everyone on our first set of tries? Probably not. I need your input on where else we could go. But at the same time, we are serious about consultation; we want to do it in a structured way; we want to do it in a meaningful way; we intend to take people's advice seriously and we won't waste people's time.

The last way in which we're doing consultation is through the print media, Almanac and The Compass. We have a column called Innovation Corner that comes out every two weeks. We're also going to put out-- about quarterly--an overall status report, a simple chart that can track each of the ongoing projects so that people have a sense of where we are.

Compassion: The other thing I've been trying to do is put in place a structural approach to helping employees who are adversely impacted by the administrative restructuring initiative. I can say with confidence that based on the extensive research I have done on this topic, our employee transition program is the most advanced in the country relative to colleges and universities. The three components include in-placement, where we have reallocated monies to fund a person who helps match people whose jobs are being eliminated with currently available positions for which they may be well qualified; and out- placement, where we have contracted with two firms (one specializing in management positions and the other in technical and staff positions) to provide extensive counseling support and placement assistance to affected employees. We've engaged a temporary services firm that is going to be able to siphon some of our people back into temporary jobs at Penn. So we're thinking about what happens to people--we're thinking about it in a serious way. We're putting real dollars into those in- placement and out-placement programs. We're not a corporation; we're not going to act like a corporation. We're going to act as compassionately as possible, but we are going to achieve what we need to achieve relative to cost reduction.

The Current Focus

Initially we are going to focus on the central administration because we need to lead by example. I don't think we're ready at this point to say, "The schools need to restructure themselves and the central administration will follow." There are a lot of things we think we can do centrally to achieve savings, to generate additional revenues- -and to provide some success stories to give people confidence, to show people that this can be done. So we're starting centrally, but rest assured that all major University-wide processes, that all of the centers, the schools and the departments, will be looked at. This effort is going to fan out across the institution and is already ongoing as we take a University-wide view of computing, a University-wide view of research administration, a University-wide view of how we procure goods and services. That list will get longer.

[Seven administrative areas report directly to Mr. Fry. He discusses these in turn below--Ed.]

Human Resources: We have a new vice president who is now starting to spend time on campus and will be here full time on November 1. His name is Clint Davidson. Clint is helping us look at the organizational structure of the Human Resources unit and its staffing levels. We think there are some opportunities there to downsize and trim that organization. We're looking at the entire performance management life cycle, from performance appraisal, training, grievances, dismissal, and asking ourselves holistically, relative to all the various things that happen to employees while they're here, "What are we doing to make sure that we maximize performance?" We're looking at the core processes that human resources is responsible for (hiring is one), and thinking about ways in which we can streamline those, by eliminating unnecessary practices, putting technology into the mix to streamline things, and things of that nature. They've done a lot of very good work in Human Resources, with some short-term initiatives to cut better deals on some of our benefits--for example, negotiating harder with Blue Cross in certain areas-- and there are about $1.4 million in savings so far just from those efforts. So they are moving very aggressively.

Finance: In finance we have an enormous number of things going on. The ongoing project, and the genesis of a lot of administrative restructuring around here, is called the FinMIS Project (see Innovation Corner, a Compass feature in Almanac October 10), Penn will be the first major university in the country to put a new financial system in. It's something that, for twenty years, people have been talking about, and when the new administration came in last year they bit the bullet and made the investment. As a result we're going to see dramatically improved financial information, and therefore dramatically improved accountability and better decision-making, because we are leading the pack on that. One of the things that I go to is a meeting called the Listening Post, made up of EVPs and Senior VPs of all the major private and public universities. Whenever the topic is administrative restructuring--frequently it's first or second on the agenda--they want to know what Penn is doing first, and they want to know where we are with our financial systems. We are clearly being perceived, legitimately, as the leader in this area, and I think FinMIS has a lot to do with it.

Penn spends about $640 million on goods and services every year. We have a major project, with the Penn Health System, to think about our buying practices. If we could just create a 5% improvement--well, you could do the math as well as I. There are lots of opportunities out there, and we intend to push very hard. This is another situation where by managing our resources more aggressively, we don't have to affect people adversely--we just are using our dollars and our buying power in a smarter way.

I've mentioned research administration. In Technology Transfer, we've hired a new managing director, Lou Berneman, and he's taking a look at that function from an organizational perspective. We're redoing all of our risk management programs. We have all of our financial offices undergoing a benchmarking project, taking a look at corporate controllers' offices where we feel we can learn, and we're taking a very holistic look at how we manage real estate. The finance area is chock full of various initiatives.

Business Services: We manage about $90 million worth of auxiliary enterprises, including the Penn Tower, the Faculty Club and other areas. We're basically looking at how we can either erase deficits in operations that have deficits, or increase the earnings of others so we can reinvest that in the physical infrastructure to make them more pleasant, accessible places for constituencies to go to. Business Services has a real history of innovation in this regard, and some very exciting prospects relative to telecommunications, Bookstore, PennCard and many other areas.

Facilities: We're beginning a systematic look at how they deliver facilities services to our constituencies. This is sort of a knotty area--for all universities, not just Penn. It's something that no one has really found a successful solution to, but we think we have a couple of good ideas and we're beginning to embark on that.

Public Safety: We've brought Tom Seamon in, and I think we've made a wonderful choice. Tom is going to take the master plan that the President has worked on to the next level, particularly in technology and how we use it in a strategic way to make this campus a safer and better place to be.

Internal Audit: Our present Internal Audit director, Rod Fancher, is retiring. We're on a national search to find a new director, and with that will come substantial change.

So for the seven areas that I have direct responsibility for, there are well over 20 initiatives and probably over 250 University people involved in some way working on those initiatives. We're not assuming this is going to be easy, and we're certainly going at it as hard as possible.

What We Expect to Achieve

There are some obvious things of significance that we hope to achieve: significant cost reductions; greater return on our assets; higher client satisfaction (I used the client word, sorry!) measured through regular standard surveys; achieving performance benchmarks using corporate standards that I think will push us a little harder, and identifying and developing a cadre of up-and-coming managers who have a career path at Penn.

But there is something much more fundamental than just those. What we're trying to do is establish and embrace among all our service providers some very significant core values. In the end restructuring is not a one-shot deal; it's a way of thinking about what you're charged with doing, with a constant desire to improve. That is the important thing, the real force for why you work for a place like this university.

One of the values we're trying to demonstrate is that the only purpose for administration is to serve faculty and students. It is not an end unto itself. It is a means to an end, and we have to treat it that way from an investment perspective. Penn's administration needs to be accountable, needs to respect all the individuals who work in this organization, needs to be hard-working, needs to be frugal, needs to reward initiative, needs to work as a team, needs to test the market and see if the market is better than us at providing certain services--and if they are, we should probably get out of those businesses--and needs to invest in the professional growth and development of our people.

We are trying in the best way we know how to change the character of the way we deliver services and celebrate the people who deliver them.

Excerpts from the Council Q and A
with Mr. Fry, on Restructuring at Penn

Following his presentation, members of Council contributed questions and/or views on some of the areas Mr. Fry had covered. A query by the Spokesperson for the A-3 Assembly produced this exchange:

Ms. Wheeler: My question, Mr. Fry, voices a concern throughout the A-3 community about the time factor or time frame; people are worried that they may come in to work this week and be notified that they are going to be laid off; and hearing all of the initiatives you are planning and hoping to implement, do you have a perceived time factor or time frame--are we looking at three months, six months, a year--in which these layoffs will actually begin to take effect? Or are they actually happening in certain schools and centers and departments at the University now?

Mr. Fry: Let me say a bit about approach and then answer the question about time frame, because the two are related. The approach is not going to be a CoreStates, Scott Paper, ATandT style downsizing--one day you read that 10,000 jobs have just disappeared. This is not the way the University will approach that. You'll never come in here and pick up the DP and find out that hundreds or thousands of jobs have been eliminated. What we're committed to doing over a reasonable period of time--reasonable, I'm thinking, basically in the three-year range--is to take on every fundamental administrative process and organization; take a systematic, careful, strategic, consultative look at that and begin to systematically make changes, whether they be in downsizing the organization, implementing new technology, retraining people to deliver better service, or whatever. And so, I think as the units are coming under scrutiny, you will see activity in those units, but there will never be a broad, across-the-board cut of x number of employees--that's proven not to work and it's not the culture of this institution, nor, really would any good university do it that way. So really, I would say, the time frame that I'm looking at is to achieve all the significant things I'm looking at in about a three-year period--systematically, carefully; office by office, process by process.

Johanna Swift, a graduate student in nursing, added to the discussion that "...to marry corporate values with compassion is a tricky issue. I would urge the University to take a leadership role in not succumbing to the temptation to save money by expanding the use of part-time and temporary workers at the expense of benefits. You're talking about maximizing personal satisfaction, and, therefore maximizing performance--and, I'll just submit, quality of employment should also be considered."

Dr. Anthony Tomazinis raised questions of functional analysis which both he and Moderator Will Harris indicated might belong to the President and Provost rather than to the EVP: "Two major issues," Dr. Tomazinis said. "First, I'm very pleased hearing the key words and emphases in the administrative restructuring.

"What has not been mentioned yet is functional analysis and the costs by function," he continued. "In the past we had a huge discussion about the educational function, and if we take the University salaries involved...we may find that at most, no more than 18% of the total budget is devoted strictly to the educational function within the University. Is that true? The same thing with the research function. Those are the two key functions. Administratively we need to know the division of resources by function. The support function, then, is the third component. That's part of administrative restructuring. What I have not heard yet going on in the University is any concept of organizational restructuring. We have major organizational problems in the University...we have great disparities on the size of the schools, for instance,--one school can be a university by itself, another school can be university by itself, and then we have other units which are much smaller and, perhaps suffering. We have an issue of organizational restructuring which, of course, I don't think Mr. Fry would be the appropriate person--I submit those thoughts to the president and the provost--but there is a major job ahead for this university to examine in the nineties.

President Judith Rodin introduced the area of student services as a major part of the project. "This is a continuation of an analysis of student services," Dr. Rodin said, "but it will be done a very different way this time--with a reengi-neering kind of focus."

Larry Kamin, C '98, commended the report and asked if Mr. Fry intended to involve the UA and GAPSA as well as the other groups named. Mr. Fry asked Mr. Kamin's advice on what might be structured, and indicated his own interest in electronic surveys. "With some of the constituency groups I've mentioned," said Mr. Fry, "with A-1 and A-3, what we're basically going to do is sit down on a quarterly basis and talk through people's concerns. I'll talk through where I think we stand, and we'll see what areas of convergence and divergence we have, in the spirit of trying to push the whole thing forward--and that's a communications process.

"I think the issue with students is something I haven't thought through, primarily because when you're dealing with things like purchasing that's not as fruitful an area for student involvement. However, given what Dr. Rodin indicated in terms of a major emphasis on student services, University Life-type functions (I know Val Cade has been working on this) we need to think through systematic ways of involving students in a meaningful way. Lance [Rogers] and I have had some very brief discussions but nothing thorough. The one thing I did think of which could be very useful to us from a data perspective, is to put some sort of survey on-line using e-mail to get quick student responses on how they feel about various services; that'll help us target the areas we need to focus attention on. Nothing elaborate and nothing that is paper based (because the response rates would be very low), but something that would be interactive and quick, but still provide some meaningful data. That is one thing I have thought of and we are developing the capacity within my office to do that kind of survey work."

Dr. Swain-Cade McCoullum added that on the student services aspects [of restructuring] that are co-terminous with the Division of University Life, "We have been working all along and will continue to work with the UA, GAPSA, and any of the other student groups through some of the subcommittees of the UA and GAPSA. We started that process a year ago because we did some of our reorganization in the past 18 months. The reengineering work, as it moves forward, will continue to involve those groups and other students as well."

Alex Welte, a graduate Arts and Sciences student, asked if Mr. Fry was interested particularly in " ideas that would appeal to what such people are trying to achieve, or mainly in tactical advice about how to achieve some set of things that you regard as perhaps slightly more fixed... or whether you have no particular emphasis one way or the other at this point."

Mr. Fry's response: "No particular emphasis. I think it depends on the nature of the project. For example, in computing, we're really seeking expert advice from people like Bob Hollebeek who use computing very aggressively in their research, or Eric Clemmens, who's a consultant to a lot of major corporations and government agencies about the use of technology in an organization. There we're seeking content, matter, expertise--they are in effect consultants to us. In other cases, what we're doing is trying to get a fix on the problem and get people to respond as to whether or not the solutions we're offering are ones that they would feel good about. So it really depends on what we wade into."

-- K.C.G.