Cost Reduction Task Force Final Report

September 2009

Background

The non-compensation value of spending by major activity at the University is as follows, based on the financial results at April 30, 2008:

• Operating Activity - $63.0 Million (excludes student assistance)
• Ancillary Activity - $66.6 Million (excludes interest on long-term debt)
• Research Activity - $97.4 Million (externally contracted services may contain compensation)

• Central Financial Services
• Strategic Procurement Services
• Physical Plant Services
• IT Services
• Residence and Event Services
• Human Resources

As well, a number of emails and letters have been received from the Queen's community.

In the last formal update, the Committee put forward three areas where the Committee felt cost savings could be achieved: 

Office Supplies - Queen's implemented the Government of Ontario office supply contract with Lyreco in February 2009, which Strategic Procurement Services estimates could save the University approximately $500,000 per year. 

Photocopiers/Multi-Function Devices - Queen's participated with the Ontario Education Collaborative Marketplace (OECM) on a Request for Proposal (RFP) for these devices as well as rationalization of services. Queen's participated in this RFP along with five colleges. As a result of this process, Xerox Canada was awarded a three year contract for the provision of a wide range of multi-functional copiers and digital printers. Strategic Procurement Services has indicated that Queen's will benefit from substantial savings in both equipment and ongoing operating costs from this contract. In addition to the direct savings available under the new contract, the Committee has made an application to the Principal's Innovation Fund for funding to complete a pilot print assessment in three Queen's departments in order to develop and implement a print strategy that will optimize the use of imaging devices by identifying ways to be more cost effective, productive, IT secure and environmentally friendly.

Travel - The Committee met with American Express Travel Advisory Services to discuss travel at the University and to provide a demonstration of the latest self-booking software tools. As previously noted, American Express Travel believes that if Queen's implemented a comprehensive travel management program, including an updated travel policy and a single travel agency, savings of between 20-30% may be attainable. Use of a single travel agency would not limit an individual's choice in the array of travel products and services that are available to meet their needs while traveling on University business. In 2007-08, Queen's expended approximately $5M in travel related to the Operating Budget and approximately $9.3M related to the Research activity of the University. Additional work is required to validate the savings opportunity available to the University. Travel will be one of the more difficult areas to realize potential savings. Travel is traditionally a very personal and emotional spending category, as it relates to each employee's personal experiences and time. Not withstanding this caveat, the Committee feels an effort must be expended to harness the potentially significant savings in this area.

The Committee discussed approximately 100 recommendations received by the Principal's office in response to the Principal's request for suggestions on how community members thought the University could reduce costs. The Committee felt that each recommendation received should be discussed to determine which suggestions had merit, which suggestions were worthy of additional follow-up, and which suggestions should be passed to other Task Force Committees or Departments directly.

In addition to the objectives previously listed, the Committee used a number of criteria to weight the merits of each suggestion, including:

• potential for impact
• potential for implementation
• relevance to the University environment
• ability to quantify, measure and report impact

The Committee decided the best approach to deal with the recommendations received from the Queen's community would be to summarize the recommendations into a concise, manageable list of topics that warranted further investigation.

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Recommendations

In addition to the three savings areas noted above, the Committee feels that the following areas warrant the expenditure of time and resource to determine what impact they may have on the University and to set out a process for their implementation, if appropriate.

1. Assign responsibility for the assessment and implementation of cost reduction initiatives to a Senior Administrator

In order to best achieve significant institution-wide cost savings in many areas, the University should assign someone the specific responsibility for assessment and implementation of cost reduction initiatives. Appropriate supporting resources would need to be available to achieve potential savings, particularly in the areas of implementation and measurement.

While many may consider it counter-intuitive for a cost reduction task force to recommend expenditure of resources, the Committee feels that appropriate investments in this area, particularly one-time in nature, could more than repay themselves with annual expenditure savings. Indeed, this should be part of the evaluation process for such an initiative, particularly if net savings can be achieved to the University's operating budget.

2. Adopt the Ontario Supply Chain Guidelines as soon as possible

The University is part of Ontario's Broader Public Sector and as such is bound by the provincial Supply Chain Guidelines which were published in April 2009. These guidelines must be implemented by March 2010. The guidelines are intended to support and help improve supply chain activities with this first edition including two essential principles towards the goal of supply chain excellence: a code of ethics and a procurement policies and procedures standard. The intention of these guidelines is to support the University's delivery of high-quality service efficiently and effectively. The Committee recommends that the university allocate appropriate resources to implement the guidelines as soon as possible and develop a plan that supports all departments and individuals that will be affected by the guidelines.

3. Communications Strategy

While there is clearly some evidence that many individuals are aware of the need to manage costs, the University needs to further engage faculty and staff in relation to cost management. The Committee feels that there needs to be a clear communications strategy to make members of the Queen's community more cost aware and provide both ideas and incentive to encourage efficiencies. Cost management should be everyone's job. Some of the specific recommendations relating to communications include:

• A cost management website


• Top 10 list of ways to reduce costs


• E-mail tip of the week / Quarterly bulletin
  • Best practices
  • Identify specific areas to save
  • How do we do things differently to save money
  • How much things currently cost and how much could be saved if behaviors changed i.e. how much could be saved if the lights are turned off in a building overnight or for a day
  • Comparisons and reports on savings achieved
• Electronic distribution as much as possible
  • Gazette
  • Marketing material, etc
• Principal's involvement in major announcements

4. The creation of cross-functional teams to assess Queen's processes

In order to achieve real cost savings in administrative areas, it is necessary to examine processes at the University, many of which have been in existence for numerous years.

The purpose of a cross-functional team is to bring together appropriately skilled resources from within, or outside the University, to examine a process and question the necessity of steps, forms, signatures, approvals and routing to make sure that each step of a process adds cost effective value to the University. If a step does not add cost effective value, it should be questioned and likely eliminated.

The cross-functional nature of these teams will lead to a cross section of talented people asking challenging questions. The review should also include an assessment of whether specific tasks are being performed in the most appropriate areas or whether redistribution of tasks would lead to an increase in productivity and or efficiency. The teams should be facilitated by an independent party to ensure there is no bias towards the process owner.

Some of the areas identified by the Committee as candidates for review include, but are not limited to:

• Procurement to Payment Process
• Human Resource Activities
• Recruitment
• Hiring
• Research Related Administration
• Academic Unit Structure
• Streamlining of Processes and Reporting required by the Collective Agreements

5. Outsourcing

Organizations typically outsource areas of their operations that are not strategic to their core operations for two main reasons:

• Cost reduction
• Lack of management resources to manage non-core activities

The Committee felt that there were numerous areas that are candidates for potential tactical outsourcing.

6. Shared Services

Various private and public sector enterprises transitioned to shared services models in the 1990s. A driving factor behind this movement was to reduce the cost of providing a service by ensuring that services performed across a number of areas in an organization were combined into a single location. Beyond cost savings, there were also service advantages gained as a result of the increased specialization that this approach promotes. In addition, peaks and valleys in employees' daily activities can often be reduced and the combined structures often facilitated a more balanced stream of like-activities for those involved in the provision of a service. One of the keys to managing in a shared services environment is to have service level agreements in place between the service provider and each of the consumers of the services being provided, to ensure that the specific needs of each Faculty/Department are being met. Indeed, it was noted that our Queen's ITS department has succeeded with a couple of pilot projects in this area.

The Committee felt that areas where like services are being performed across Faculties, Departments or Units were candidates for further assessment of a shared services model.

7. Accountability of Internal Services

A number of suggestions dealt with the concept of having internal service providers compete for business to ensure they remain competitive. The service provider most often mentioned in this regard was Physical Plant Services (PPS).

The Committee agreed that the topic warranted further analysis as to how to implement a system to ensure internal service providers have an incentive to be competitive and are made aware of relevant issues when they are not competitive. There are risks associated with an improper implementation of this type of competitive model if existing resources are maintained, yet become less utilized in favour of external resources.

This topic needs to be assessed in the context of the broader University.

8. Energy Efficiency Audits

Based on the Committee's meeting with representatives from Physical Plant Services, it was felt that effort should be expended on additional efficiency audits. Many buildings on campus have not been assessed and the Committee felt that additional savings may be available if more of these audits were performed.