My Purchasing System Told Me, "You'd Better Shop Around."

Cornell University to update twenty-year old purchasing system and to shop online only with preferred vendors (Kelley, 2009).

Cornell University President David Skorton gives the directive to modernize the purchasing system software, do business only with preferred vendors, and to assess spending to identify new areas of cost-containment with hopes of a potential savings of $40 million a year (Kelley, 2009).


My Opinion

This new way of thinking for purchases and a new online system for making those purchases may require some "buy-in" from the university community, but will make a "big payoff" through future savings. By shopping around only with preferred vendors, there is a built-in method of cost-containment because of previously negotiated pricing. Savings realized through renovating an outdated mode of purchasing materials could help to absorb budget cuts that would have otherwise been absorbed by university personnel staffing and salaries.


Reference

Kelley, S. (2009). Skorton announces directive to reform purchasing system; could yield savings of up to $40 million. Cornell University Cornell Chronicle Online. As retrieved on November 6, 2009, from: http://www.news.cornell.edu/stories/Oct09/Procurement.html

Cost-Saving Miseries Love Consortiums

Colgate University in New York has recently partnered with five other New York area to form a consortium.

According to O'Keefe (2009), the goals of the consortium are:

• Harnessing technology to allow for greater collaboration in all areas, with emphasis on shared human resources, high end computing collaboration and advanced computer infrastructure.

• Acquiring of goods and services, including benchmarking, joint purchasing and risk management.

• Promoting sustainable institutional environments, including recycling operations and alternative energy supplies.

• Maximizing student engagement, including wellness programming, alcohol and substance abuse intervention strategies, responses to differential learning styles, and collaboration among teaching and learning centers.

• Shaping workforces, including faculty development, staff development, and preparation of future academic leaders.

• Fostering intercultural literacy, including strategies for ensuring students are prepared to live in a global and diverse world.

By joining the other five universities, Colgate University hopes to realize cost savings by being a member of a larger organization with more leverage and buying power.


My Opinion

A consortium may hold the answer of cost-savings, but leave several questions behind: Is decision of the consortium binding for all members, if so, how is it being monitored? How long should the consortium be formed and in operation? What legal, political, and monetary issues arise from consortium membership? How does the individual member institution maintain its identity while developing a consortium identity?



Reference

O'Keefe, T. (2009). Colgate, five colleges to explore cost-saving steps. Colgate University: News and Events Blog. As retrieved on Novmber 6, 2009, from: http://blogs.colgate.edu/2009/07/colgate-five-colleges-to-explo.html

Departments and the "Academic Ratchet"

Economic troubles have hit higher education hard several times over the last few decades. This has put the higher education system on the defensive each time. Each time, colleges explain why they are “neither privileged havens of waste nor institutions so out of touch with reality that they are on the verge of losing their relevance” (Massy and Zemsky, p.1). Public funding has generally declined each year, resulting in fewer services, yet students must pay more in tuition. The result of this is that “students are being asked to pay more for less” (p. 2).

The net effect of this is that undergraduate education has “destructured”, which means that “the undergraduate curriculum over the last two decades [has been reorganized so that it has] fewer required courses, less emphasis on taking courses in an ordered sequence, and greater reliance on students to develop their own sense of how the various bits and pieces of knowledge they acquire in the classroom fit together into a coherent picture” (p. 3). Massy and Zemsky believe that destructuring “derives in part from the faculty’s own pursuit of specialized knowledge” (p. 3). The authors believe that this destructuring phenomenon has created economic consequences, such as increasing the number of courses offered by a department and the number of faculty hired.

The second effect of the economic troubles is that of the “academic ratchet”. This occurs when “faculty members increase their discretionary time (tie for pursuing professional and personal goals) largely by loosening their institutional ties and responsibilities” (p. 3). In other words, as more professors spend time on their own projects, they spend less time teaching courses. The problem with this that this does not always result in better teaching, and even if it did it wouldn’t increase someone’s salary or other compensation. There are too many other things that are high stakes, such as “research, scholarship, professional service, and similar activities, that a professor must do in order to remain employed—yet these activities aren’t as valued by those who pay for education (students, parents, government). The end result is that the professor spends more time on the high stakes activities, less time on actual teaching, thus resulting in students paying more for less all over again. This results in what the authors call “output creep”.

Source:
Massy, William F. & Zemsky, Robert. (1994). Discretionary Time: Departments and the “Academic Ratchet. The Journal of Higher Education (Vol. 65, No. 1), p1-22.

Cutting Costs to Raise Salaries

The University of Texas system has dealt with the budget crisis with a new approach. Instead of attempting to weather the current downturn with budget cutting, minimized layoffs, and no salary increases for any faculty the current UT President, William Powers Jr., said “tough choices are essential if the university is to make progress in its quest to compete more effectively for talent with other major U.S. research institutions”.

According an article in the Austin American-Statesman newspaper scores of jobs at the flagship campus in Austin are likely to be cut in the coming months as UT retools its budget in an effort to free up money for retaining and attracting top faculty members. And in the next few years, the job losses could run into the hundreds. Besides lecturers, some of whom are part time, the cuts are likely to affect some graduate students who draw salaries for serving as teaching assistants or assistant instructors. In addition, some university staff members already have been dismissed, and more stand to lose their jobs.

The decision was made to cut costs and use the savings to increase salaries of those faculty that are highly regarded and whose pay hasn't kept pace with the market and select female faculty members whose salaries lag behind those of men. According the American-Statesman article raises totaling $6 million will be restricted to tenured and tenure-track faculty members, who make up about two-thirds of UT's faculty. As a group, these professors are the highest-paid faculty members at the university, with full professors averaging $132,253 a year, associates $85,328 and assistants $81,800. Twenty-five to 35 percent of the tenured and tenure-track professors are expected to get raises.

Some of the cuts and proposals being made:

Dean Gregory Fenves stated that The Cockrell School of Engineering has dismissed 13 staff members, mostly in computer-related support roles. The layoffs, coupled with the elimination of 12 vacant positions, freed up $1.6 million - 8 percent of the school's $20 million operating budget - for targeted raises, new faculty members and research support.

The McCombs School of Business plans to lay off 20 people, or 5 percent of its staff, to underwrite faculty raises. The school's budget of about $90 million is projected to remain flat through 2013. But overall expenses tend to rise 2 to 3 percent annually, so additional savings will be sought by combining some billing and other back-office operations, according to Dean Tom Gilligan.

In the College of Communication lecturers and graduate assistants in will be losing their jobs. The number of lost jobs is still being determined by the departments in the college. Faculty in the department were required to submit updated resumes to be considered for salary increases.

The College of Liberal Arts, UT's biggest unit, could eliminate 78 to 300 employees, depending on whether the cuts fall mainly on higher-paid lecturers or lower-paid graduate assistants.

Kevin Hegarty, vice president and chief financial officer, stated for American-Statesman article “While you can always cut some fat, I don't believe there's that much fat to be had. You really have to rethink your core business model, and that's what we're doing."

Reference

Layoffs loom amid UT belt-tightening. (Oct. 4, 2009). Austin American-Statesman. Retrieved October 30, 2009 from
http://www.statesman.com/search/content/news/stories/local/2009/10/04/1004utcuts.html

Unit 4: Cost Problem: The Revenue-to-Cost Spiral

The revenue-to-cost spiral results in cost disease within higher education. In his article, Martin (2009) maintained that in private industry revenue-to-cost spiral occurs when "higher revenues induce higher costs and those costs are used to justify future calls for more revenue" (p. 3). Unfortunately, costs in higher education are generally capped only by the total revenues. In other words, unlike private industry, a college or university cannot spend more than it takes in - unless of course the administration wishes to appear incompetent. To make matters worse, there are generally no incentives for colleges and universities to minimize costs. Martin observed that higher education is similar to private industry in that "as revenue increases, faculty, administrators, and board members extract more surplus from the cash flows in the form of higher costs and then use those costs as justification for more revenue" (p. 12). The cycle begins again next year thus developing a never ending spiral between revenues and costs. This creates enormous pressure thus forcing colleges and universities to seek out more revenues rather than cut costs. Regrettably it is often the students who must bear the brunt of the costs through higher tuition. It is certainly easy to see how the revenue-to-cost spiral is a problem that contributes to the cost disease in higher education.

Reference

Martin, R. E. (2009). The revenue-to-cost spiral in higher education. Raleigh, NC: The John William Pope Center for Higher Education Policy.

Tecnhically speaking: A lining of silver savings in every cloud

In an October 22, 2009, commentary to the Campus Technology website, Ohio takes to the clouds, Ohio Board of Regents Chancellor Eric D. Fingerhunt outlines how the University System of Ohio has transitioned to cloud-based computing technology for its e-mail and office productivity by partnering with Microsoft.

Cloud computing (2009) is defined by Mell and Grance of the U.S. Department of Commerce, National Institute of Standards and Technology Agency, Computer Security Division, Computer Security Resource Center as:

a model for enabling convenient, on-demand network access to a shared pool of configurable computing resources (e.g., networks, servers, storage, applications, and services) that can be rapidly provisioned and released with minimal management effort or service provider interaction.

Previously programs handling e-mail such as Microsoft Outlook and office systems package, Microsoft Office, had to be installed and supported by university computing technology staff. Now with the new partnership, those programs are hosted by Microsoft.

Microsoft will handle maintain, supporting, and updating the programs. Rather than installing those programs computer by computer, the University System of Ohio faculty/staff/student would connect to the program over the Internet.

The intended purpose of the transition to cloud-based computing is to realize cost savings from outsourcing, or as one commenter stated, "cloud-sourcing", the e-mail and office-systems programs.


My Opinion


It would be an interesting prospect to follow the University System of Ohio actual savings. In the short term, I could imagine the decreased expense of providing such services, but what happens later? In the future, would the rate to provide such service by "out-sourcing" eventually cost more than providing the service "in-house"?



References

Fingerhut, E. (2009). Ohio takes to the clouds. Campus Technology. Retrieved on November 1, 2009, from:
http://campustechnology.com/articles/2009/10/22/ohio-takes-to-the-clouds.aspx

Mell, P.; Grance, T. (2009). The NIST definition of cloud computing. U.S. Department of Commerce, National Institute of Standards and Technology Agency, Computer Security Division, Computer Security Resource Center. Retrieved on November 1, 2009, from:
http://csrc.nist.gov/groups/SNS/cloud-computing/cloud-def-v15.doc

Unit 4: Possible Solution: Private Colleges Containing Costs Through Student Employment And Other Initiatives

Public colleges and universities are not the only institutions seeking ways in which to contain costs. The National Association of Independent Colleges and Universities (2009) noted that private colleges and universities are implementing and even expanding practices that are designed to control operating costs, enhance efficiency, and give students a quality education at the lowest price possible. To accomplish such a task, several private institutions are controlling the high cost of having permanent full-time employees by replacing them with students while other schools are using more creative methods.

Rhodes College

Some private schools are using students as employees to control costs. Rhodes College in Memphis Tennessee is a good example of this approach. The institution's Student Associates program has been in place since 2004 (NAICU, 2009). After completing a rigorous selection process, students are placed in areas related to their academic field of study. The positions help solve departmental needs at a fraction of the previous cost and results in improved services, extended programming, and greater student satisfaction. Rhodes College generally pays students staff wages while reaping the savings associated with having permanent full-time employees. During the third year, Rhodes College experienced a savings of $725,000 with 60 students involved. This is a great way for students to gain valuable training and experience while helping colleges to cut costs.

Juniata College and Marquette University

Other private colleges and universities have replaced some of their full-time positions with students. The entire information tech support operation at Juniata College in Marion Alabama, for example, is run entirely by its students (NAICU, 2009). Students manage, direct budgets, and conduct research and development for new software or products. Likewise, Marquette University supplements its finance staff by hiring student accounting interns to apply classroom knowledge while providing a needed service. The data on how much these institutions saved has not yet been made available.

Unique Cost-Containing Methods

Other private colleges and universities are looking for creative ways in which to control costs. Adelphi University, for example, has installed a geo-thermal heating system in its residence halls (NAICU, 2009). This system has reduced the university's energy consumption by at least 30 percent. In a different situation, Clark University changed its budgeting system to one that is more enterprising. That is, certain departments are treated as self-containing business. This new budgeting approach has yielded an annual savings of 33 percent. Finally, Emory University has restructured itself by consolidating departments. In order to obtain the lowest prices and greater discounts, the institution is also combining outside contracts (for various services) when possible. Emory has just implemented this initiative and there is not data on their savings at this point.

Conclusion

By nature, the culture of higher education is not that of cost efficiency. Private non-profit and for-profit institutions are not immune to this. A recent article in the Chronicle of Higher Education, for example, reported on the high cost of attending private colleges and universities. While there is still a great deal that can be done to contain the costs, at least private colleges and universities are looking outside of the box for possible solutions.

Reference

The National Association of Independent Colleges and Universities (2009). Campus affordability and cost cutting initiatives. Retrieved October 31, 2009 from http://www.naicu.edu/special_initiatives/affordability/news