After a three-year assessment and design process, the university is moving forward with implementing a Shared Services Center, which is expected to open in mid-2014, for select Finance and Human Resources administrative functions.
Shared services organize the service delivery of administrative functions to optimize and provide cost-effective, flexible, and reliable services to all customers. It is one component of the university’s Administrative Services Transformation (AST) strategy.
The shared services project began in 2009 when the Ann Arbor campus engaged in a process to benchmark a number of the university’s administrative functions, including Finance and Human Resources.
The benchmark data was collected, validated, and analyzed by a cross-functional team consisting of faculty and staff from across the university. The team — led by Rowan Miranda, associate vice president for finance, and Martha Pollack, vice provost for academic and budgetary affairs — also completed a design for a new shared services transaction-processing center. University leadership reviewed the team’s findings earlier this fall and made the decision to move forward with implementing a Shared Services Center.
Unlike some centralized models that provide support services, shared services organizations are more accountable to their customers — in this case, U-M’s colleges, schools, and administrative units — through strong governance and service management systems.
“Universities around the country, ranging from Yale to the University of California, Berkeley, are exploring — or are in the midst of implementing — a shared services model as one way to contain costs and improve efficiencies,” says Phil Hanlon, provost and executive vice president for academic affairs.
“We’ve made a concerted effort over the past several years to observe and learn from the shared services programs at our peer institutions, which enabled us to develop a customized process for building a Shared Services Center that will best meet U-M’s unique needs.”
Hanlon, along with Tim Slottow, executive vice president and chief financial officer, and E. Royster Harper, vice president for student affairs, serve as executive sponsors for the AST project.
The other element of the university’s AST strategy focuses on strategic sourcing, a systematic and fact-based approach for consolidating an organization’s spend with high-quality vendors to maximize pricing discounts.
“The university expects to realize more than $11 million in savings from Wave 1 of its strategic sourcing effort in fiscal year 2013 and another $5 million in recurring savings is targeted for FY 2014,” Miranda says.
During the past nine years, the university has reduced recurring costs in the General Fund by $235 million. Reductions largely have focused on support functions, and range from energy efficiency and employee benefit changes to information technology rationalization and facilities maintenance restructuring. The university’s cost-saving initiatives have helped protect its core missions while providing resources for reinvestment in its teaching and research missions.
At the same time, the university needs to identify another $120 million in General Fund reductions and/or alternative revenue over the next five years. Both components of the AST strategy are expected to play a key role in helping the university realize these additional savings.
“The current scope for Shared Services is expected to generate approximately $17 million in annual savings, with a significant portion of these savings going to the General Fund. These savings will be achieved through three integrated action steps: managerial span of control adjustment, process standardization, and elimination of non-value added work,” Slottow says.
“The estimates for the annual savings were derived from detailed process designs that were created with insight and feedback from subject matter experts in our colleges, schools, and units.”
“We would like to thank Royster Harper, vice president for student affairs, for serving as an executive sponsor with us for this initiative,” Hanlon says. “And we want to acknowledge the entire university community for its ongoing support of the institution’s efforts to contain costs and reinvest resources into our core missions.”
During the next few months, plans will be finalized for the implementation phase of the Shared Services Center. While regular communications will begin in early 2013 about the Shared Services Center, employees can learn more about both Shared Services and Strategic Sourcing by visiting the Administrative Services Transformation website at ast.umich.edu. Employees with questions about the university’s AST project can email [email protected].
