Smarter business practices

Universities, real universities, are not simply businesses. In a business, the customer is always right. At a university, to effectively do their jobs, faculty members must often remind students that they are not always right. And an industrial mentality can’t be imposed on the teaching enterprise without badly distorting its character.

But in specific ways they are like businesses — processing applications, supporting information technology, reimbursing travel, buying toilet paper from outside vendors, turning lights on and off, printing and mailing, and so forth — in these areas, they ought to be following the best business practices. To do otherwise, as the recipient of both tax dollars (for public universities like ours) and tuition dollars, is to betray the public trust. For any public institution, efficiency is a moral imperative. But it also is the smart thing because it can free up much-needed resources we can redirect to our core missions of teaching and research.

Across America, leading universities are taking on the formidable task of reorganizing the way they do their business. Some are looking at consolidating administrative functions into a more central, shared services model. Others are looking at how to better leverage their assets, such as parking, food and housing services, utilities and even their brand. Still others are revamping how they license the technology and other intellectual property on their campuses. Here at The University of Texas, we are taking on all three simultaneously. 

Last year I recruited 13 business leaders to put our University’s business operations under a magnifying glass and see if we were spending our money where it would do the most good. The Committee on Business Productivity spent the next eight months interviewing staffers across the campus and at universities across the nation. What they found was that while we were highly efficient relative to our higher education peers, relative to the private sector, there was room for improvement.

The decentralized structure of the University has served us well on the academic side of our operations. The committee, however, concluded that we were not well served by similar decentralization of business processes. Therefore it recommended consolidating certain transactional administrative functions in a shared administrative services model. Most of the savings in this area can be achieved through natural attrition over a multiple-year period.

The committee recommended a more strategic use of the assets we have as a university. Our campus is unusual in that we operate our own power plant. When we generate excess power, we should sell it on the open market, and we should incentivize our deans and department heads to conserve energy so as to have even more to sell. And instead of continuing to operate parking, food and housing merely on a cost-recovery basis, as most universities do, it recommended a strategic and more market-based approach.

Finally, the business leaders recommended investments to streamline the process licensing technology we generate. While we are already a leader in this area, they suggested we focus on maximizing the volume of licenses, leaving to the private sector the business of picking “winners.” It also recommended organizational structures that would further promote an entrepreneurial culture on the campus.

With public support for higher education falling as a share of our budget, students and families taking on more debt, and a down economy presenting challenges for endowments and philanthropy, it’s more important than ever that universities maximize their operational efficiency. But the benefits will be profound, not only in the additional support we can redirect to our academic mission but in the creative synergies that fresh organizational thinking can inspire.

Powers is the 28th president of the University of Texas at Austin.