Putting Education First: How can Canada stay competitive?

Strategy Talks

Podcast Series

Putting Education First: 
How can Canada
stay competitive?

Calum Semple
Randy Watt
Winky Whelan

Episode 39: Putting Education First: How can Canada stay competitive?

Release date: March 9, 2011
Host: Calum Semple
Guests: Randy Watt; Winky Whelan
Running time: 18:40 minutes

In this episode of Strategy Talks, Calum Semple interviews guests about funding challenges and service level issues within Canada's higher education institutions.

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Episode 39 transcript:

Announcer: Welcome to Strategy Talks, the business podcast series by PricewaterhouseCoopers Canada. Hosted by Helen Mallovy Hicks, National Leader of PwC’s Valuations, Forensics & Disputes Practice, and Calum Semple, an Operations and Consulting Partner. This interview series, featuring new topics and guests every episode, is designed to valuable insight into some of today’s hottest issues affecting your business.

Calum:  Higher educational institutions in Canada have long been faced with serious financial pressures and the recent downturn has created even more funding challenges and service level issues. As a father of a 3-year old and a 1-year old I’m particularly interested in this matter, ensuring that education retains its high standard that it does today and that they have something to look forward to in the several years from now when they’re attending university or college.

Helen isn’t able to join me today but with us, we’re very pleased to say that, from our Calgary office are Randy Watt, an associate partner specializing in finance transformation, and Winky Whelan, a managing director of finance.

Welcome to both of you.

Randy:  Thanks for having us.

Calum:  I’d like to begin with a question and I’ll aim this one initially at Winky.

What do you see as some of the challenges being faced by higher educational institutions internally and externally?

Winky:  I see some of the challenges as being, first of all, reducing the spend and making sure that they can actually survive on the funding from the province. I think that’s one of the biggest challenges. But we also see very manual processes as we go through and look in more detail at higher university and how their financial processes are very manual and driven by a lot of labour costs. So truly looking at their efficiencies and effectiveness of those processes and helping them along the way.

Calum:  How do you see the competition between universities? Are they faced with trying to grow student bases? Is there competition from within Canada, from outside Canada?

Winky:  I think that’s both. I think that they’re trying to recruit more and more internationally because that’s really where the large dollars come in to the university, is the international students.

Randy:  From a higher education perspective the universities, from a day-to-day operational perspective, I don’t  really think they consider themselves in a highly competitive environment. But where there is strong competition in higher education is in attracting and maintaining their student base they currently have, as well as the whole research area of higher education facilities which has become a very strategic area for the universities in both attracting research funding  from the various funding agencies, but also attracting high performing researchers themselves.

One of the drivers for change within the higher education community, as you mentioned in the intro, the recent economic downturn provided further financial pressures on universities as a significant portion of their funding comes from other levels of government. And then in addition to that they’ve been facing the pressure of tuition freezes, of pension shortfalls, of deferred maintenance challenges around universities. So they see a need to want to kind of address their overall financial pressures and both current and forecasted annual deficit challenges that they’re facing. And then specifically with respect to the tuition freezes themselves, it speaks to being a more effective and efficient organization that delivers a high quality service to its students in order to allow them to increase those tuition rates across the board.

Calum: So it sounds like that currently the higher education institutions are very focused on the way they operate and optimizing their spend and optimizing their cost base.

Question back to yourself Winky; what is the nature of the issues and opportunities that we’ve identified in supporting the higher education institutions that we’ve worked with so far?

Winky:  Well there is an awful lot of spend and its really consolidating that spend and looking at where they spend the money and how they can more effectively negotiate contracts and consolidate their spend so that they can have better contracts with more buying power so they can save large dollars. And that really impacts their capital projects. It’s just your supplies to the school, it really encompasses their major spend, like new buildings and where they can really get better contract negotiations.

Randy:  If I could just add to Winky’s comments. The universities have evolved and grown in an environment where it’s related to their devolved budgeting process and related to how the universities operate in the sense that they’ve grown up from smaller universities into larger higher education institutions; the various units being faculties and administrative units have acted and operated in an environment of a kind of siloed environment. And what this has resulted in is an environment where the spend is not analyzed and optimized from an organizational perspective ; that the units themselves, if they’re not satisfied with the level of service they’ve been receiving from another functional area such as finance or HR, have developed their own internal support service unit. And what this resulted in from the university perspective is a very high cost structure which is driven – like the duplication of service and activity across the university – a lack of integrated service delivery model, the lack of satisfaction of the support services that are provided across the university as a whole. So it’s moving from an environment of siloed schools, colleges, and units within the higher education institution, to one looking out at the university as a whole.

Winky:  And it’s for IT, it’s for marketing and communication, it’s for some accounting functions and budgeting functions. It’s just not one area; we’re seeing it across the board.

Calum:  So do you see then, in summary then, the higher education institutions then are not operating as a cohesive unit. Would that be fair to say? They’re operating in more of siloed / faculty-based environment?

Randy:  Absolutely the case. In some cases within a faculty there is good reason for the faculty itself to have its own brand, its own strategy in how they want to drive that, but specifically with support service environment – being IT, HR and finance – there is opportunities to act and deliver that service as an organization-wide across faculty and not specific to that faculty as a whole; there’s an efficiency and effectiveness to be gained.

Calum:  What approach have our clients, the higher education institutions and PwC taken to address some of these issues and progress things forward? Maybe start with yourself, Randy.

Randy:  Well to address the immediate concerns of the university situation – the situation of the higher education institutions - is to understand where the spend is occurring within the universities, how they’re consuming their resources with kind of an overall budget resource analysis that goes on within the universities. And at the same time the cost structure of the universities have built up to be a very high cost structure and it’s understanding why that is occurring, the level of service that is delivered out there, the consistency and the standardization of that service, and why the various units or faculty see a need to develop their own support service areas within their groups.

Winky:  It’s also really looking at how they can gain from additional tools that they can purchase on the outside and make a very manual process, or labour-intensive process, more automated so that they can better deliver to the faculties.

Calum:  What have you seen as some of the key success factors to delivery of these initiatives and then at the same time maybe talk about some of the inherent challenges, if you like, thinking back to that siloed-  and faculty-based environment that is very prevalent at the institutions. Let me start with yourself Winky.

Winky:  Some of the challenges I see – the biggest challenge – is really change management and actually... because the faculties are very siloed and you have a dean in every faculty, the dean wants to run his own operation the way he always has been running it. And it’s very hard sometimes to convince them of change, and I think we’re seeing that on our end that change is the biggest driver. There’s also some other challenges as far as funding if you have all these great tools that they can implement, and implementing is really making sure they have funding for it.

Randy:  Some of the other critical success factors that the university’s been using in the approach in driving these projects forward is there’s that need for very strong sponsorship at the executive level in the university and traditionally that’s been at the VP Finance or admin level as well as what the universities refer to as the provost position, which is the head of the academic side of the universities. The co-sponsorship from those two positions within the university allow the cross-organizational view which picks up both the supporter inside the university as well as the academic side.

At the same time, the universities have been very interested in involving as many of the university community as possible in this initiative. And that when the approach taken across these projects, both from a leadership perspective as well as those resources on a day-to-day level crossing both the admin side again and the academic side of the university, the people who are actually doing the work on a day-to-day basis, having input into the change that would deliver a more effective or efficient process organization.

The final point I’d make around this - and the university projects really need this and look for it – is the idea of some quick wins and change that they can communicate and call out from the project. It allows the projects to gain some momentum and be able to communicate that we are actually changing things at the university and we’re not just in a study or analysis mode, as well as providing some potential funding for more of the long-term, more complex changes that may be part of the program.

Calum:  So Randy and Winky, I’d like to close out with focusing on the thing our listeners are probably most interested in. With all this good work we’ve done to date with the education institutions what have the results been; what have they seen out of the combined efforts of our teams?

Winky:  One of the things I’ve seen is actually the ability to save dollars for the university so they can use it for something else. I mean, we’re saving a large number of dollars, we’re automating processes for them. And whether it’s automating their travel and expense process, where they have a tool instead of doing it manually, and we’ve gotten buy-in because we’ve brought everybody in – or not everybody – but we brought a large number of people in that had an interest in travel and expenses processing and bought into it. And we’re not just talking about a few people. We’re talking about large numbers, like 75-100 people. We’re saving dollars, we’re bringing in new tools, we’re keeping the staff happy by automating processes, people are getting more satisfaction out of their jobs.

Randy:   I think another thing to add with this as well, is universities have been able to identify and realize significant dollar savings opportunities which, depending on their current financial pressures, can use to reduce their deficit positions and help them in that financial pressure area. Or give them an option where they may want to reallocate those resources to what they might consider more strategic for them, be it the student support area or within the research area itself at the university.

Calum:  Maybe I can try and tie you down a bit here. Can we quantify the materiality of the savings that clients are seeing as a result of all this effort?

Randy:  We’re doing a number of projects with various higher education institutions within the country, and they’re all at various stages of their change lifecycle. With those that are in the implementation stage, they’ve realized a multi-million dollar savings within their project to-date, and through the analysis and design phases – and this is consistent across all the universities I’ve been working with to-date – they are estimating total savings, annual savings opportunities, in the 8-10% of their operating budget range.

Calum:  That’s fabulous numbers and I’m sure that’s something that clients are really excited about.

Talk about the culture as well. Are we seeing something that’s sustainable here? Is this a one off exercise where clients are seeing an 8-10% improvement but then next year it’s going to slide back to where it was before, or we being able to successfully change cultures and make this sustainable?

Randy:  Something that we’ve been pushing really hard with our clients throughout the lifecycle of the project here is, this isn’t a one-time change opportunity for the university. The changes that they make, both from a cost reduction perspective as well as the changes to services and service levels, you want that change to really stick. So we’re pushing these types of activities and changes and behaviours all the way through the projects, and there is a noticeable change within our clients both on how they view the project and the outcomes that they’re attempting to realize, as well as the concept within the  continuous improvement environment where they have the opportunity to realize further benefit down the road and there may be areas that they have not identified initiatives within the university up to this point and may be a second wave of opportunity for them as they move forward in the future.

Winky:  It’s only taking small steps really to get to the big step because you’re changing behaviours, you’re changing the way they do things, but they’re getting better tools, better ways to do things and they’ve got enthusiasm. You know, people are really enthused about some of the changes we’re bringing forth.

Randy:  And just to demonstrate this point, the projects have moved from a position where, at the beginning PwC would be seen as the lead both from an analysis perspective but also leading steering committees and other critical meetings that happen within the project. We’ve now moved to the point within the project that PwC is in more of a support role and, in some cases actually transitioning; we have our clients leading these meetings and leading the discussion on around critical change opportunities for the university.

Calum:  Randy and Winky, thank you very much for your time today.

An interesting insight to a topic that’s near and dear to all of us in Canada as we look to ways to maintain Canada at the forefront of innovation in the global community. But then also, more close to home just as parents, what we can look forward to our children experiencing as they go through their development and their final education.

For more information on this topic please visit our webpage at pwc.com/ca/publicsector.

Announcer: This concludes this episode of strategy talks. Thank you for listening. We hope you will join us again soon for another episode. To download or to subscribe to this podcast series, or to find more information, please visit pwc.com/ca/strategytalks. The information in this podcast is provided with the understanding that the authors and publishers are not here and engaged in rendering legal accounting, tax or other professional advice or services. The audience should discuss with professional advisors how the information may apply to their specific situation. Copyright 2009 PricewaterhouseCoopers LLP. All rights reserved. PricewaterhouseCoopers refers to PricewaterhouseCoopers LLP, an Ontario Limited liability partnership or as the context requires, the PricewaterhouseCoopers global network or other member firms of the network, each is which a separate and independent legal entity.

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Hosted by Helen Mallovy Hicks, a Partner and National Leader of PwC’s Valuations, Forensics & Disputes Practice, and Calum Semple, a Partner in the Operations and Consulting practice, Strategy Talks is a series of audio podcasts that explore key issues affecting businesses in Canada, and share strategies that companies can use to help address them.