SUCCESSFUL SHARED SERVICES & OUTSOURCING

New service delivery models such as shared services and outsourcing should generate cost savings and higher service quality. Unfortunately, that doesn’t always happen. Why not? Our experience shows that you need an effective design and change management method to successfully implement new service models. Today’s newsletter will begin illustrating an approach that will drive institution-wide innovation, lower costs and deliver higher quality services across the university.

The Challenge

“Many college and faculty leaders bristle at the suggestion that the institutions — and their students — would be better off if only institutions operated more like their counterparts in the private sector.”

The Business of Higher Education (Praeger), edited by John C. Knapp and David J. Siegel.

Does this sound familiar?

That’s why we use an approach to designing shared services and outsourcing models that is palatable to faculty and staff alike: design thinking. For starters, it’s an idea with origins as remote from business as design itself. While their work is hardly nonprofit, designers are rarely found destroying the competition, maximizing profit margins and exploiting their employees. Few of the designers I know personally would fit the negative perception of corporate America held by many academicians. Design thinking is about helping people and organizations to solve their problems for long-term satisfaction, not achieving efficiency for short-run gains.

What IS Design Thinking?

While it is true that more organizations are adopting design thinking as a model for achieving better results, enhanced innovation and improved service to customers, the ideas behind design thinking emerged from the methods that are common to nearly all design fields: industrial, graphic, instructional, etc. These basic operating principles constitute a process that might be expressed most simply as the way that designers approach problems and achieve solutions. Designers think of themselves as problem finders more so than problem solvers because their solutions start with a deep understanding of the problem requiring a solution.

Design Thinking & Higher Ed

What can design thinking offer to higher education? In a word, change. Not just change for the sake of creating change or trying the latest fad, but thoughtful change for the higher education institution that wants to position itself to better withstand the challenges presented by both old and new competitors. Change not just for technology’s sake, but change based on better understanding students and putting into a place a mechanism for institution-wide innovation.

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One Size Does Not Fit All

Many of your institutions are implementing service models such as shared services and out‐sourcing. Unfortunately, these solutions don’t always deliver real savings & can have unintended consequences. HOW you go about putting these solutions together is the key to delivering real savings, mitigating consequences & ensuring long term success. Let’s review Shared Services first.

Shared Services in Higher Education

A shared service center is an organizational model striking a balance between local services and “commoditized” practices and activities. Successful implementations balance economies of scale and standardization with the deep relationships with and knowledge of the customer’s unique attributes. Many different models can generate excellent financial and organizational benefits. A variety of implementation options can and do occur within these models:

• A single shared service center is the most efficient model. Knowledge of the individual units’ unique attributes is traded for expertise in specialized transactions, functional areas and/ or institutional policies and procedures. The single shared service center is often a “transactional” processing entity for a central office. Roles are distinct: the central office is a policy‐ setting, training and auditing body. The shared service center is the processing and customer‐facing entity.
• A network of regional centers offers a balance between the efficiency gained by consolidating staff expertise with the opportunity to maintain relationships with the units served. The uniqueness of the different departments served is acknowledged. Shared service center staff is often assigned to specific departments, may attend department meetings and meet regularly with unit leadership and colleagues. Cross‐training, combined with the standardization of processes and procedures, allows for back‐up of staff members who are absent.
• Service pods operate in individual departments and groups of departments. Staff members at the unit level have been organized around functional tasks, with responsibility for a narrower span of tasks than generalist peers. Multiple departments are served. Service pods typically emerge in response to staffing challenges, driven by unit leaders seeking the benefits of staff with deeper expertise. This model focuses on the unique needs of each customer and is typically found with reporting relationships to the unit.

Expected Benefits

Shared Services should generate cost savings and higher service quality. Unfortunately, that doesn’t always happen. Why not? Our experience shows that you need an effective design and change management method to successfully implement shared services. We’ll illustrate a design method that reduces cost and delivers higher quality  services in our next newsletter.

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University of Texas Health Science Center-San Antonio Facilities Management Assessment

Starting Position

University of Texas Health Science Center-San Antonio (UTHSCSA) leadership engaged Mindstream to assess its facilities management department. UTHSCSA requested we identify cost savings they could quickly implement without disrupting service.

Assessment

After an initial review of the department’s organization and services, we focused on how the department processed service requests for renovations and maintenance. Renovation and maintenance service requests were departmentally funded – and a major expense for UTHSCSA’s Colleges of Medicine, Dentistry, Nursing and Biomedical Sciences.

In the five years of data Mindstream studied, UTHSCSA Facilities Management processed approximately 3,000 service requests annually, ranging from $500 to $1 million. Our in-depth analysis found that the majority of these requests were processed outside time and/or budget constraints, causing delays, cost overruns, and intense customer dissatisfaction.

Findings

Our assessment showed that:

• Service requests varied considerably in scope, making processing cumbersome

• These variations led to significant differences in how the department processed requests – despite  workflow software that should have standardized processing

• The amount of process variation caused a high process error rate

• The high error rate caused a high rework rate, further clogging and slowing the process

• Slow, uneven communication caused even more rework

Recommendations

We recommended UTHSCSA:

• Outsource certain types of service requests, rather than completing them in-house

• Reorganize the department

• Re-engineer the service request process

Impact

As a result of our work, the department now processes service requests within target timeframes (96%  on time) and with considerably fewer errors. In addition, customer satisfaction has soared and cost overruns plummeted.

The department achieved $1.4 million in first-year cost savings, which came chiefly from

• Drastically simplifying the request process

• Substantially decreasing rework needed to fix process errors

• Completely eliminating paper forms and paper document file copies

• Reducing the number of administrative staff needed to process requests, and redeploying facilities workers to more productive work 

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Texas A&M University System Facilities Planning and Construction Closeout Process Improvement

Starting Position

Mindstream was engaged by Texas A&M University System (TAMUS) leadership to assess its Facilities Planning and Construction (FPC) department, which was responsible for managing new capital construction projects at TAMUS’ eleven universities and seven state agencies across Texas. In fiscal year 2012, FPC managed a construction program of $204.4 million. The goal of the assessment was to reduce the cost of new construction.

Assessment

Our initial review of department organization and services indicated issues with how the department closed out construction projects. Capital construction closeout includes the steps after substantial completion of a new construction project, such as

• moving into a building

• closing the construction account

• returning any remaining money to the institution

• paying all vendors

Construction closeout costs had been a source of concern for several years for TAMUS member institutions.

Findings

Our assessment showed that the construction closeout process was ill-defined and poorly understood by member institutions, causing new construction projects to close in an ineffective and untimely manner. This resulted in:

• Expenditures that were not prioritized – or did not add value at all

• A large number of acceptance issues, which created intense customer dissatisfaction

• Ineffective and inefficient load balancing within the department, as FPC personnel struggled to manage new projects while continuing to deal with projects that should have been closed

Our detailed five-year analysis of construction closeout processes indicated that contract change requests made after substantial completion were driving cost overruns. In fact, member institution requests comprised most of those costs.

Recommendations

Our team gave TAMUS detailed recommendations to:

• Implement a policy to dramatically reduce non-value-add expenditures at the end of project

• Enhance project management by using appropriate software tools for project control and cost containment

• Improve process management by standardizing processes and eliminating wasteful steps

Impact

Following Mindstream recommendations substantially reduced change requests by 34.6% and cut costs by approximately $9.2 million over two fiscal years.

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