Achieving Operational Excellence at University of California, Berkeley Interim Report

1. Achieving Operational Excellence at University of California, BerkeleyInterim Report February 2010

2. Agenda • Why Operational Excellence? • What is the process we are following? • What have we learned so far? • What comes next? Achieving Operational Excellence (Interim report)-no footnotes

3. State educational appropriations have been falling State Educational appropriations, inflation-adjusted, excluding ICR Achieving Operational Excellence (Interim report)-no footnotes

4. State will continue to face significant funding challenges going forward Achieving Operational Excellence (Interim report)-no footnotes

5. OE objective is to ensure as many resources as possible are dedicated to core mission World-class teaching and research supported by world-class operations Preeminent academic leadership Public character maintained by continuing to expand access Internationally recognized researchers and dedicated teachers Financial sustainability Organizational effectiveness Achieving Operational Excellence (Interim report)-no footnotes

6. We are four months into the first stage of Operational Excellence We are here Diagnostic Detailedsolution design Implementation What to do How to do it Do it! Achieving Operational Excellence (Interim report)-no footnotes

7. Operational Excellence governance structure Chancellor • Chancellor Birgeneau (OE lead) Operational Excellence Steering Committee (OESC) Campus Leadership • Chancellor Birgeneau (chair) • George Breslauer • Nathan Brostrom • Carlos Bustamante • Catherine Wolfram • Frank Yeary • Chris Kutz • Rod Park • Miguel Daal • Roia Ferrazares • Arun Sarin • Judy Wade • Phyllis Hoffman (staff) • Will Smelko • Chancellor’s Cabinet • Academic Senate Leaders • Council of Deans Project Leadership & Organizational Design Stakeholder groups • Frank Yeary (OE co-lead) • Phyllis Hoffman • Khira Griscavage • Claire Holmes (Communications) • Users of campus services • Providers of campus services Internal working group Functional Owners HR Procurement Finance IT Facilities Services Student Affairs Change Management • Jeannine Raymond • Ron Coley • Erin Gore • John Ellis • Shel Waggener • Chris Christofferson • Susanna Castillo-Robson • Elizabeth Elliott Point People • Rich Lau, Lila Mauro, Pamela Brown, Teresa Costantinidis, Jon Bain-Chekal, Nora Watanabe, Michael Mundrane, Liz Marsh, Ken Schmitz, Moira Perez, Jodie Rouse, Kathleen Satz, others TBD Achieving Operational Excellence (Interim report)-no footnotes

8. The OE team has been examining seven key opportunity areas A Organization simplification B D E F G C Admin(HR, Fin) IT Energy Space Mgmt Student Services Procure-ment Achieving Operational Excellence (Interim report)-no footnotes

9. A Organiz-ation ~55% of supervisors (>1,000 people) have three or fewer direct reports Implications How to read this chart: 471 supervisors have 1 direct report; 307 supervisors have 2 direct reports; 228 supervisors have 3 direct reports; etc. • Increased bureaucracy and slower decision making • Many supervisorsmay not be challenged to fully utilize managerial skills • Employees may not get an optimal level of managerial support Achieving Operational Excellence (Interim report)-no footnotes

10. B Admin(HR, Fin) Majority of admin personnel are outside of their functional group Observations Central:Functional staff reporting to central unit • Distributed functions evolved because of historical perception that central groups could not meet local needs • Distributed and shadow personnel do not report up through functional areas and are fragmented in small units • Lack of standardization, specialization and knowledge sharing contribute to lower productivity • Distribution creates risk management issues Distributed:Functional staff reporting to distributed units Shadow:Staff not classified to function, but perform function as part of their job % FTEs outside functional groups: Achieving Operational Excellence (Interim report)-no footnotes

11. B Admin(HR, Fin) Benchmarks suggest opportunity to improve productivity (HR example) Increasing efficiency Achieving Operational Excellence (Interim report)-no footnotes

12. C IT Infrastructure is highly fragmented across campus Observations • Highly decentralized: 900+ servers located in 50+ buildings • Capacity underutilized: Digital storage utilization across campus servers is ~ 52% • Increased risk: Some unmanaged servers with limited backup or disaster recovery • High energy consumption: 95% of servers (by number) not in central data center, resulting in sub-optimal distributed HVAC systems 100+ Servers 20–100 Servers 10–20 Servers <10 Servers Top energy consuming buildings Achieving Operational Excellence (Interim report)-no footnotes

13. D Energy Energy consumption varies significantly across the campus Example: Teaching/Office Buildings Achieving Operational Excellence (Interim report)-no footnotes

14. E Space mgmt Space usage also varies dramatically Observations • Space is a very large asset for the university that is currently not managed effectively • No university-wide space allocation guidelines exist • Space utilization is not tracked • Units have no incentives to give up unused space Select UC Berkeley non-academic divisions Achieving Operational Excellence (Interim report)-no footnotes

15. F Student services UC Berkeley spends >$215M on student services across 5 control units VC Student Affairs Achieving Operational Excellence (Interim report)-no footnotes

16. G Procure-ment Procurement is fragmented across ~18,000 vendors External benchmark: 6,000 vendors for ~$830M of spend Benchmark: ~$140K/vendor Berkeley: ~$32K/vendor Achieving Operational Excellence (Interim report)-no footnotes

17. G LAB EQUIPMENT EXAMPLE Procure-ment Identical products are being bought at different prices Item Fisher price VWR price Difference ($) Difference (%) Axygen Scientific Nalgene Achieving Operational Excellence (Interim report)-no footnotes

18. G Procure-ment Our current operating environment hinders efficient procurement No standard, e-enabled tools Autonomous culture Lack of mandate from leadership Fragmented spend Low leverage with vendors Inefficientprocurement spend Procurement-driven compliance Users purchase off-contract Sub-optimal pricing in contracts Achieving Operational Excellence (Interim report)-no footnotes

19. Organizational Commitment Earlyexcitement “I can see results” Success “Maybe there is an easy answer” “We need to act now” “The Boss says this is important!” “I had better board the train” “This is hard and painful” “I will just have to back channel my resource requests” “I have a day job, I don’t have time for this!” Failure Valley of death “If I give up control, I can’t do my job” “Let’s evaluate this one more time” Our commitment will be tested before wewill be able to see results We are here Achieving Operational Excellence (Interim report)-no footnotes

20. Next steps • Listen to feedback from campus community on this preliminary fact-base • Estimate savings and implementation costs for opportunity areas • Decide on opportunity areas to move forward with in next stage (detailed solution design) For information and updates: http://berkeley.edu/oe Please send ideas and suggestions to oe@berkeley.edu Achieving Operational Excellence (Interim report)-no footnotes