Efficiency in higher education

1. Efficiency in higher education Richard L. Petrick State of Louisiana Higher Education Governance Commission September 28, 2011

2. I. The “New Normal” “Today’s seemingly bleak budget environment … is “the new normal.” Navigating the ‘New Normal,” The Lumina Foundation

3. Dealing with the “New Normal” • Ration or curtail services • Muddle through to mediocrity, slowly hemorrhage • Become more strategic & productive

4. Dealing with the “New Normal” • Ration or curtail services • Muddle through to mediocrity, slowly hemorrhage • Become more strategic & productive

5. Budget-cutting is not that hard… • Any campus or state can cut its budget • Many have had to do so in the recent past • Decisions too often tend to be: • Short term • Tactical • Reactive • Singletons These actions do not fundamentally bend the cost curve

6. II. Become More Strategic Definition of ‘Strategic’ “Important or essential in relation to a plan of action”

7. Seven critical ingredients • Leadership • Create vision, set goal • Sustain commitment • Communicate often • Management • Who’s in charge? • What’s the charge? • Discharge the charge • Communicate often • Data • Uniform accounting systems • Technical devices • National benchmarks • Communicate often

8. Seven critical ingredients • Leadership • Create vision • Sustain commitment • Communicate often • Management • Who’s in charge? • What’s the charge? • Discharge the charge • Communicate often • Data • Uniform accounting systems • Technical devices • National benchmarks • Communicate often

9. Seven critical ingredients • Models • Inspire action • Provide guidance • Sustain morale • Tolerance for ambiguity and failure • Some experiments will fail • Incentives • Campuses must retain benefits of their actions • Honorifics and public praise doesn’t hurt • Deep collaboration • Campus • Institution • System • State • All public bodies

10. III. Tools “imitation is the sincerest form of flattery.”

11. Use the C.A.S.E. method • Copy And Steal Everything • Sources • Other states and campuses • Foundations – especially Lumina • Regional associations (MHEC and WICHE) • National organizations (NACUBO, many others) • Private sector partnerships

12. One example from Ohio • New Governor’s charge to reform public procurement • Public sector procurement and fiscal staff learn from private sector experts • Six to nine month review process • “Procurement Reform Working Group”

13. Chart of Prioritization According to Benefits and Ease of implementation

14. Chart of Prioritization According to Benefits and Ease of implementation

15. Scoring efficiency reforms

16. Lumina productivity initiative • Multi-year, multi-state, multi-million initiative to help higher education thrive in the ‘New Normal’ • “Four Steps to Finishing First” • Performance Funding: Targeted incentives for colleges and universities to graduate more students with quality degrees and credentials. • Student Incentives: Strategic use of tuition and financial aid to incentivize course and program completion • New Models: Lower-cost, high-quality approaches substituted for traditional academic delivery whenever possible to increase capacity for serving students • Business Efficiencies: Business practices that produce savings to graduate more students

17. Lumina productivity initiative • Implementation Strategy • Grants to promote the Four Steps in state policy. • Strategy Labs • Organize site visits to share best practices for the Four Steps, • Offer one-on-one conversations at many higher ed venues, • Provide limited special technical assistance funds • National Productivity Conference – annual gathering • The Knowledge Collaborative website – keeps the conversation going among practitioners.

18. Other examples and resources • Maryland: Effectiveness and Efficiency Committee • Ohio: Efficiency Advisory Committee • Ohio: Prescription Drug Collaborative • Texas: Advisory Committee on Higher Education Cost Efficiencies • Kuali Foundation • MHEC: Property Insurance, Energy, IT Procurement

19. IV. Financing Change “How do I pay for something I can’t afford?”

20. Need to spend money to make money • Projects are often financially lumpy • Financing options: • Stair-step savings • Performance contracts • Forced reallocations, with payback • Social impact bonds (?)

21. V. People “You win with people.” Former OSU football coach woody hayes

22. Managing staff expectations and morale • Change is difficult • States and campuses need transparent, comprehensive, and compassionate policies to help staff thrive through change, e.g., • Who is retained? • Who is retained and retrained? • How does attrition affect staffing needs and changes? • Provide sustained outplacement support? • Provide severance pay?

23. Links • State of Ohio Procurement Reform Report: • http://procure.ohio.gov/pdf/AdvantageOhio.pdf • Lumina Productivity Initiative: • http://www.luminafoundation.org/goal_2025/outcomes/productivity.html • The Knowledge Collaborative: • http://www.thekc.org/ • Strategy Labs: • http://www.collegeproductivity.org/ • University of Maryland Effectiveness and Efficiency Initiative: • http://www.usmd.edu/usm/workgroups/EEWorkGroup/eeproject/index • State of Ohio Prescription Drug Program: • http://www.rxoc.org/newsroom.htm • The Kuali Foundation: • http://kuali.org/