Bain begins work with SMU
Bill Detwiler, a long-time official in SMU’s Business and Finance office, had the opportunity to sit in on the school’s recent Board of Trustees meeting last month. He’s sat through dozens of board meetings during his tenure at SMU, but said he’s never seen the trustees more excited about a project than they were at this meeting.
The board officially approved a motion to hire efficiency experts Bain & Company to consolidate the university’s budget.
“Of the many years I’ve been going to board meetings, I’ve not seen that kind of dialogue and engagement,” said Detwiler, associate vice president of Business Services and Human Resources. “They get it. They’re beyond approving it. They’re excited about it.”
Bain’s Atlanta-based higher education group will examine SMU’s finances and make recommendations about how it can become more efficient in the future. The plan, called “Project SMU: Operational Excellence for the 2nd Century,” will occur in three phases: Bain will identify places where SMU can save money in its budget, design new systems to reduce costs, and help SMU implement the systems across the campus. Bain sent a team to set up an office on campus April 7 and it will be here for the next 12 to 18 months, depending on how long it takes to complete their reporting and enact any new programs. Bain officials are working out of Perkins Administrative Building near the Business and Finance offices.
SMU President R. Gerald Turner said that the university had never hired an outside group to review operations on such a broad scale but thinks the decision to hire was well-timed.
“We are doing it now so that we can continue to enhance the academic stature of the university by operating as efficiently as possible,” Turner said.
Detwiler and Turner declined to disclose how much SMU would pay Bain for its services, but noted that a cost estimate couldn’t even be determined at this point in time.
“The exact number is not known because we’re not far enough along in the project,” Detwiler said.
The University of California, Berkeley paid Bain $7.5 million to do a similar review of its operations, according to The Daily Californian, Berkeley’s newspaper.
Detwiler said that Bain won’t get one large fee regardless of the results of the project. While there is a flat fee component, Bain will also charge a percentage of the savings they identify and a percentage of the savings SMU implements. Turner said that the expertise of Bain justifies the cost.
“Having extended access to the level of expertise available for this project is not inexpensive,” Turner said.
Bain’s review of expenses can be categorized into two separate “buckets,” according to Detwiler. The first bucket consists of faculty salaries and benefits, research and other expenses related to core academics. Bain will not examine this bucket because overspending isn’t present on the core academic side of SMU’s budget.
The other bucket, of which every aspect will be reviewed, consists of administration expenses and all other costs that provide the support system for core academics. These non-academic expenses include purchasing, IT costs, library and career services, athletics, campus activities and much more. Detwiler thinks administrative spending is currently too high, but the project will help to reign in unnecessary spending and free it for core academic purposes.
“Let’s examine every dollar of administrative spend, and see what we can do to repurpose it to the academic side of the house,” Detwiler said. “When you do that, you can get a tremendous increase in academic standing.”
“The overall goal is to provide the same or better quality services at less cost,” Turner said.
But Bain wasn’t just hired for the sake of improving academic standing, according to Jose Bowen, dean of the Meadows School of the Arts. The landscape of higher education is changing, especially with a declining college-age population and parents less willing to pay for the rising cost of college tuition.
“Once you stop being able to raise tuition to cover increases in costs, you’ve got to start controlling costs,” Dean Bowen said.
For the 2014-15 school year, the Board of Trustees voted to increase tuition by 4.9 percent, the smallest percentage increase in over a decade. In other words, the percentage of revenue SMU derives from tuition and fees will decrease in the future. Essentially, the savings that Bain finds may be used to cover budget shortfalls instead of just adding to academic resources.
One of the main reasons SMU hired Bain is due to its higher education track record, according to Detwiler. The group has performed studies at Vanderbilt University, Cornell, the University of North Carolina at Chapel Hill, and University of California, Berkeley; each of those schools is currently ranked higher than SMU on the U.S. News & World Report annual report on college rankings.
Al Niemi, dean of the Cox School of Business, is skeptical about how Bain’s recent clients are good indicators of what it can do for SMU. For Cornell, Bain completed similar work that it plans to perform at SMU, but Niemi said that Cornell’s medical school demands extra costs that don’t exist at SMU. Bain’s review of Vanderbilt focused only on the IT department and didn’t look at any other operational expenses. For UNC and Berkeley, Bain’s recommendations had to be more drastic because of state budget cuts.
“Their experience is with two schools that don’t look a lot like SMU,” Niemi said.
Niemi also believes that some of the operations that Bain will be reviewing could negatively affect academic life. Cox operates an independent career services center, library, and numerous other services that he believes are a necessity for the university as a whole despite not being directly tied to academics.
“You can’t just cut those services to save money and not have some negative impact on the university’s reputation,” Niemi said.
To prevent making any unnecessary changes to student life, Turner created a steering committee comprised of faculty and staff members to review the recommended changes from Bain and decide whether they are worth implementing.
“Bain will develop and shape recommendations, but we are ultimately responsible for the course the university takes,” said Turner in an email sent to the entire faculty March 21 announcing the decision to hire Bain.
George Utkov, student representative to the Board of Trustees, believes that the steering committee will not implement recommendations from Bain that will be detrimental to the school’s academics, leading a net positive result for the school.
“Student life will, in the end, benefit from the results,” said Utkov.