University of Minnesota
Vision and Leadership header image

University of Minnesota President Eric Kaler commits to $90 million in administrative cost savings

U’s Board of Regents also discuss Accountability Report and 2014 Capital Request

September 13, 2013

Recognizing the need to continue to drive efficiencies, University of Minnesota President Eric Kaler has pledged $90 million in administrative cost savings between fiscal years 2014 and 2019. The University will redirect those resources to mission activities and to stem growth in the U’s net cost of attendance.

Kaler outlined his Operational Excellence implementation plan to the University’s Board of Regents today. Among President Kaler’s first actions upon assuming leadership of the U was to launch Operational Excellence – changing the U’s culture to work smarter, reduce costs, enhance services and redirect resources to the mission. The work has resulted in $34 million in savings in its first two years, with $32 million of that recurring.

"The University must use its limited resources to the highest purpose possible," Kaler said. "I am absolutely committed to driving excellence in all we do at this great University, while ensuring it remains affordable for qualified students. Saving $90 million over the next five years is a big step towards this goal."

Board Chair Richard Beeson said, "President Kaler’s leadership to make the University a more efficient and effective organization has been impressive. His administration’s commitment to Operational Excellence will allow the U to invest in its core mission, curb the net cost of attendance and meet inflationary cost pressures."

Consistent with the performance measure established by the Minnesota Legislature, the University will reduce administrative costs by $15 million for FY14. To achieve continued savings, The U will reduce and reallocate an additional $15 million annually, beginning in FY15.

Kaler’s Operational Excellence implementation plan anticipates new initiatives that will come out of a strategic planning process and also includes initiatives already underway, such as completing a job classification study; upgrading human resources, finance and other outdated operational systems; the new U Market eProcurement system; and implementation of a new governance model in the Office of Information Technology.

The University will also begin a two-step process to implement shared services, a model for standardizing and right sizing administrative services across business units. That implementation, which is more complex and requires a significant level of planning and analysis, will be piloted on the Duluth campus and in non-collegiate units. Finally, if gains are realized in phase one, it will be extended within or among collegiate units.

Further re-design of administrative units to increase standardization and improve efficiency was Huron’s the primary recommendation. Huron also  found through its Benchmarking and Diagnostic Study that the U is already undertaking a great deal to promote efficiency and effectiveness. Similarly, a "spans and layers" analysis by Sibson Consulting found that the University has an economical organizational structure that is largely within conventional ranges.

2014 Capital Request
Regents reviewed the six building and infrastructure projects being recommended for inclusion in the University’s request for $232.7 million in state bonding during the 2014 legislative session.

The University’s proposed 2014 Capital Investment Request includes:

  • Higher Education Asset Preservation and Replacement (HEAPR) – system-wide funds to maximize and extend the life of facilities (request for state to fund entirety of $100 million project cost);
  • Tate Science and Teaching Renovation – renovate obsolete labs and classrooms in the 87-year-old science building to meet modern day requirements of core science and technology disciplines, Physics and Earth Sciences (request for state to fund $56.7 million of $85 million total project cost);
  • Microbial sciences research building – construct a new laboratory building for interdisciplinary research in microbiology-focused fields such as plant pathology, food safety and animal infectious diseases, a project that will allow the University to decommission one or possibility two existing obsolete facilities (request for state to fund $30 million of $45 million total project cost);
  • Crookston wellness center – providemodern wellness facilities and programs at the Crookston campus to support academic programs, and better serve students (request for state to fund $10 million of $15 million total project cost);
  • Research laboratory improvement fund – system-wide funds to improve existing research facilities, including the University’s bee laboratory, plant greenhouses and aquatic invasive species laboratory (request for state to fund $12 million of $18 million total project cost);
  • Chemical sciences and advanced materials building – expand Duluth campus Science, Technology, Engineering and Math (STEM) programs with a new teaching and research facility (request for state to fund $24 million of $36 million total project cost).

The proposal aligns with the U’s strategic goals to attract and retain the best and brightest students and world-class faculty and staff; to inspire innovation, exploration and discovery; and to be a responsible steward of its physical and financial resources.

Excellence and progress: 2013 Accountability Report
Regents reviewed the 2013 University Plan, Performance and Accountability Report, which outlines how the U is fulfilling its land-grant mission and delivering value to Minnesota.

The report details the University’s progress, success and strategic initiatives, outlining what Senior Vice President for Academic Affairs and Provost Karen Hanson calls "A story of excellence and tremendous progress on our strategic goals."

For example, the Accountability Report and a companion highlights brochure outlines how the U:

  • Graduates students for success, with record-high rates for retention and graduation complementing a six-year completion rate for Ph.D. students that is above the national average;
  • Is a productive, efficient organization that has realized more than $32 million in recurring administrative cost savings and $2 million in one-time savings during the past two years;
  • Engages with communities, including over 180,000 student volunteer hours and over 1.1 million hours of service from Extension educators;
  • Serves as the state’s economic engine, training nearly 70 percent of Minnesota’s health care workforce, engaging in vital industry partnerships and realizing a 13-to-1 return on investment for every State dollar;
  • Illuminates the world with research, translating scientific breakthroughs into improved health through the nation’s eighth-largest public university research enterprise.

Annual report on compensation
Per Board policy, Office of Human Resources (OHR) Vice President Kathryn Brown provided Regents with an annual report on compensation for University employees. For the first time, this report also included senior leader compensation, a recommendation of the Board’s 2012 Special Committee on Executive Compensation.

The report showed that, for 12 of 16 positions, University of Minnesota senior leadership compensation was at or below average compared to peer and Big Ten institutions. The same held true for deans and other top leaders, with 17 of 27 positions falling at or below peer and conference average.

At an institutional level, the report compared University data against workforce trends that impact compensation. An historical look shows that University employee headcount has remained stable over the past decade, as has total compensation as a percentage of total institutional spending. Base salary increases at the U have trended below market in the last five years, during which time benefits as a percentage of total employee pay have risen, but also at a rate below national trends.

The University strives to achieve and maintain a compensation package that is competitive relative to peers and labor markets. As such, professional salaries are being evaluated against market median as part of the ongoing job classification study.

Other Board activity included:

  • Public health partnership: Regents approved a partnership between the University’s School of Public Health and Arizona State University to offer existing public health nutrition and public health administration and policy academic programs to students from Phoenix and surrounding areas.
  • Danita Brown Young: Senior Vice President for Academic Affairs and Provost Karen Hanson formally introduced and welcomed Danita Brown Young, who began in late July as the U’s vice provost for student affairs and dean of students.

The Board will meet next on Oct. 10 and 11. For more information, go to

Twin Cities Campus: