The University Record, July 30, 1997
By Jane R. Elgass
For a number of years, the University has undertaken various initiatives related to cost containment and cost reduction. Annual reallocations of 1 percent to 5 percent of the total General Fund have resulted in the reallocation of more than $100 million. Other initiatives have included M-Quality, with teams across the University developing ways to improve quality of services while increasing efficiency, and a re-examination and re-engineering of business processes to identify redundancy and inefficiency and to focus processes on the customer.
A major goal of this year's budget is to reduce the cost of the central administrative units while enhancing the resources available to academic units. Provost J. Bernard Machen notes that the practice of across-the-board cuts of past years could not continue, because it is not the best way to achieve cost containment or savings and, in fact, sometimes places academic units at a disadvantage.
In building this year's budget, Machen and other University administrators kept in mind four fundamental objectives:
Budget allocations for nine administrative units show a net increase overall of less than 1 percent this year. (See tables at: http://www.umich.edu~newsinfo/U_Record/Issues97/Jul30_97/table.htm.)
Within the group, allocations for two units stayed at last year's level, while three received cuts and the rest received increases.
To avoid any undue hardship on employees in these administrative units, Machen says a loan will be provided to each unit to support a merit salary increase program for FY 1997-98. Repayment of the loan will be one component of an overall reduction plan that will be discussed over the coming year.
Machen says this year's budget makes it possible for "the University to take a look at the administrative pieces to see what we want to do, what we might not want to do. There hasn't been an annual review of administrative units, as there is with academic units, so it is not easy to identify areas that might be reduced."
The review of administrative units, considered a multi-year process, will have central oversight, Machen explains. Any cuts or changes will not be up to individual units. He sees this as a very important part of the process, since a desirable cut for one unit might have negative implications for another unit.
He also notes that the initiative has the full support of the Regents, who have been asking for an examination of administrative costs for several years. At their meeting earlier this month, Regent Philip H. Power noted that he was pleased "to see the decrease in administrative costs and the emphasis on academics." Regent Andrea Fischer Newman also was pleased and noted she would like to see the allocation for the Executive Vice President/Chief Financial Officer's office decrease next year.
Incoming Provost Nancy E. Cantor says that it is very important to look at the review as a "reasonable approach" to cost containment and reallocation to academic units. Units can take a look at activities they don't want to do, activities they might want to take on, activities they want to continue and activities they may want to collaborate on with other units.
"This is a dialog in which we want to engage the entire University community," she notes, and is "an important opportunity to examine ourselves, to think about reorganization. We're all in this together."
(See related article: "Tuition to increase by less than 3 percent.")