Shared services plan presents UT opportunity to cut costs

Thomas Gilligan

University finances across the country are in the midst of a long-term transformation, challenging higher education leaders to respond strategically to control costs while continuing to deliver value to students.

Documenting the financial threat to “business as usual,” the American Council on Education in late 2012 highlighted that, despite growing demand for higher education since the mid-1970s, U.S. public funding has been in retreat for the past three decades, with 2011 funding for public universities down by 40.2 percent, compared to fiscal year 1980. A March 2013 report from the National Association of State Budget Officers, financed by the Bill & Melinda Gates Foundation, focused on the increasing difficulty for public colleges to offset declines in state revenue by raising tuition, and advocated strong action to increase administrative efficiency in higher education.

This dynamic has led universities around the country to join forces to share investments such as software licenses, health services and science facilities, and to streamline administrative functions — such as HR, accounting, procurement and IT — that can consume more than 20 percent of university budgets.

UT President William Powers Jr. has emphasized the importance of achieving new administrative cost savings and efficiencies to free up resources for the University’s core missions of teaching and research. This ongoing effort is a difficult but important aspect of making UT-Austin the best public university in the country. Powers knows great organizations never stop trying to improve how they operate.

There is neither a one-size-fits-all solution for university financial woes nor one type of reform initiative sufficient to address all financial challenges. But fundamental benefits of standardizing some transactional administrative processes via shared services — reducing costs through economies of scale, increasing opportunities for administrative staff and improvements in service quality standards — make the approach increasingly attractive to higher education. This is why shared services are being piloted at UT-Austin, and why the McCombs School of Business has already implemented some shared services and is now participating in the new initiative at the pilot stage.

The University has made headway over the past year in part by drawing on appropriate outside resources to provide the expertise and staff needed to advance the drive for greater administrative efficiency in a timely manner, including charting a pathway targeting savings of $30-40 million annually in perpetuity.

A well-respected global firm with a large presence in Texas, Accenture focuses on helping businesses, government agencies, educational institutions and nonprofits to operate more efficiently and improve services. The firm has a long history of successfully serving business, government and education organizations in Texas, with more than 1,000 employees in Austin and strong ties to UT for recruiting new graduates.

The University appropriately selected Accenture to support the UT-Austin-driven effort to assess approaches to achieve greater administrative efficiency. Shared services was not and is not an Accenture initiative. It was launched and has been managed by the University, and, as the project moves into pilot phase in units around campus, Accenture’s role, supporting the assessment and planning phase, has concluded.

As Powers said, UT-Austin is already one of the most efficient and effective public universities in the nation. A pervasive spirit of restlessness and discontent with the status quo is a large part of what makes it so, and is essential to advancing Powers’ goal of making UT-Austin the number-one public University in America. Shared services deserves to be in the mix of ways that UT-Austin can improve quality, increase efficiency and keep a lid on cost increases. This way, the University can focus more resources on student and faculty needs in the long term.

Thomas Gilligan is the Dean of the McCombs School of Business.