Thursday, January 13, 2011

Berkeley's Operational Excellence: Layoffs and Retirements for Staff But not for Upper Administration (1/13/11)

A message to members of the Berkeley campus community from the Operational Excellence Executive Committee

While we continue to absorb this week’s budget announcement from Governor Jerry Brown of a proposed $500 million reduction to the University of California state appropriation and study its implications for the Berkeley campus, we are more than ever convinced of the importance of the success of Operational Excellence (OE). We want to take this opportunity to update the campus about the progress of Operational Excellence and specifically, the results of one part of the organizational simplification initiative begun last fall that addresses our management structures.

We have for some time now been pursuing a number of different approaches to meet our budget challenges and reduce our reliance on state funding. Our plans have focused on both revenue increases and cost reductions and include both short- and long-term strategies. We have realized revenues through growing philanthropy, increasing research funding, higher student fees, and a rise in the number of students paying non-resident tuition.

Operational Excellence is a major strategy for reducing our administrative costs while simultaneously improving the quality of our operations. OE is designed to create efficiency, improve organizational performance, and reduce our costs over the next three years, on a recurring and ongoing basis, by at least $75 million dollars per year.

The Operational Excellence diagnostic report, completed and accepted in Spring 2010, identified that contrary to best practice in well-run organizations, we have too many supervisors who supervise only a few people and that elimination of management layers could save up to $20 million annually. In September, we set out to design new organizational structures across campus by asking our Deans and Vice-Chancellors, including the Chancellor’s office, to have unit restructuring plans ready to implement in early 2011 which would meet savings targets by creating higher spans of control, that is, having fewer supervisors manage more people.

While unit restructuring is never an easy or simple exercise, I am pleased to report that our Deans and Vice Chancellors put forward extremely high quality submissions that collectively exceeded our expectations. In total, the plans prepared by the unit leaders will deliver savings of as much as $20 million. As importantly, we will create a flatter and healthier organizational structure which will have about one third fewer managers and will focus our best managers on developing talent and actively managing the organization.

The campus expects to eliminate approximately 280 full time positions, half involuntarily and half through removal of vacant positions, retirements and voluntary separations, mostly before June 2011. Although this is positive news for our cost savings effort, we are saddened to announce that nearly 150 staff on our campus will be laid off. The reductions in our staff workforce have already begun and will continue through this fiscal year and beyond. Those leaving will be notified by their managers, with appropriate severance arrangements for those who qualify, including training and counseling services. We want to express our thanks and recognition to the staff who are leaving for their service to the university.

The reductions in workforce span all levels of our organization, including mid-management levels; about one-quarter of the positions eliminated have salaries plus benefits of $100,000 and above. We have significantly reduced the number of managers who supervised fewer than three people. Prior to the restructuring about 45 percent of our supervisors had fewer than three direct reports. Now, this has been reduced to 20 percent, and the campus has achieved an over-all average span of seven direct reports per supervisor. This significant elimination of layers of reporting will make us more nimble and productive.

We are encouraged by these initial results that we will meet our overall goals for Operational Excellence. Wide engagement with the campus has taken place for the second phase of Organizational Simplification, the designing of shared service centers for the delivery of common administrative functions in Human Resources, Finance, and Information Technology. A draft report for campus comment will be published in the next month. The remaining six initiatives, Information Technology, Energy, High Performance Culture, Procurement, Finance, and Human Resources continue to evolve their business cases and plans.

As was stated last September in a Chancellor’s memo, these are particularly stressful times for our staff and for managers who are working to realize these changes. We repeat how important it is that we all acknowledge the critical role that Berkeley managers and staff play in the success of our teaching and research mission. We are committed to treating all of our employees with dignity, respect and fairness while recognizing that in the end, we will have fewer administrative positions on campus. In addition to crafting a somewhat smaller workforce, our goal is to rationalize policies and procedures such that many staff will find their jobs more rewarding and less frustrating. As the OE initiatives are implemented, staff will continue to have opportunities for career growth.

We want to thank all of the many initiative sponsors, managers and volunteers who are engaged in helping us develop our plans, and our campus community for its engagement with this important effort. Your unit heads will be able to answer questions you may have about your individual unit restructuring. The OE Program Office will continue to provide information and updates on progress on their website at http://oe.berkeley.edu

Robert J. Birgeneau, Chancellor
George Breslauer, Executive Vice-Chancellor and Provost
Frank Yeary, Vice-Chancellor
Andrew Szeri, Operational Excellence Program Head and Dean of the Graduate Division

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