Great Expectations, Bleaker Results

Consultants help colleges save money, but not as much as colleges might expect, according to a new report.

August 20, 2014

Higher education consultants tend to project savings beyond what colleges can achieve, sometimes don’t understand the complexities of the institutions they advise, and fail to appreciate the politics around the changes they propose, according to a new study by the Education Advisory Board.

The group, a business that produces research for colleges on some of the same issues on which some institutions hire consultants, did a detailed analysis of cost-reduction efforts at 21 different colleges and universities that hired outside consultants.

Consultants had told those institutions they could, on average, save up to 4 percent of their operating costs if their recommendations were adopted.

The colleges, the study found, saved far less. On many campuses that have hired consultants or considered doing so, faculty leaders have questioned the cost and relative benefits of such arrangements.

According to the new research, colleges reported saving only 2 percent on average so far. That might increase to 2.2 percent when all is said and done, though, because of cuts the colleges are still making. That's pretty close to the low-end "base case" of savings consultants gave colleges, of 2.6 percent in savings, but a long way from the best-case scenario of 4 percent.

David Attis, a practice manager at the Advisory Board who worked on the report, said while colleges may enjoy working with consultants to diagnose their problems, the consultants’ recommendations end up being fairly similar.

“There’s a playbook, so to speak, for this,” he said.

Still, he did not find a college that lost money using a consultant, only colleges that saved much less than the best-case scenario.

Attis said that colleges in the study felt they needed consultants, and some of the projects they worked on required hundreds if not thousands of people. So they might not have been able to achieve much or any savings without the aid of consultants.

“I don’t think many people think they could have done the whole thing on their own,” he said

The report suggests that some consultants offering their services to higher education institutions don’t have years of experience in the business or politics of higher education. (The board released only a portion of its full report to Inside Higher Ed, and that portion does not name either the consultants or the universities that were studied.)

For instance, some consultants have recommended ending programs supported by outside grants – meaning that cutting them would not save the universities any money at all.

Other recommendations did not appropriately account for the role of faculty in college governance. Savings closest to the faculty were, the report found, the hardest to achieve.

Jeff Denneen, a partner at the consulting firm Bain & Company, said he believed the success of higher education consulting work has been “highly variable,” though he said some of his firm’s clients achieved tens of millions in savings beyond what they could do on their own. Among the factors, he said, were a firm's capabilities, the role of the firm, the focus and engagement of the campus's leadership and the skills on the campus.

He said experience with higher ed can be a double-edged sword.

“ 'We’re different, we’re unique’ is something we hear from clients in every industry,” Denneen said in an email. “What’s important is to be able to discern where that is actually true and matters and where it doesn’t.  A core part of our role as consultants is to push the client beyond their natural comfort zone so that they can get to real change within the organization. We have to understand the politics, but we should not always accept them as insurmountable.”

When consulting firms did find savings, according to the Advisory Board report, they tended to be in the same places: procurement and redesigning the organization.

Consultants and their work have drawn ire in the past year at several major universities, notably the University of Michigan. There, department chairs were kept in the dark about an effort to centralize staff work and then given what faculty members have described as “gag orders” to prevent them from talking about it.

Barry Swanson, the associate vice provost and chief procurement officer at the University of Kansas, is in the midst of a consultant-assisted overhaul of the campus’s operations.

Swanson said university leaders have to take the lead on any plan.

“The key to making a consultant-assisted project work doesn’t lie with the consultant; it lies with the university,” he said. That means, he said, an open process, lots of communication with campus interest groups and leadership.

That doesn’t mean everybody will end up liking what happens, but it does make what happens more possible. Kansas has gradually been centralizing some of its operations and using attrition and buyouts to reduce its staff size.

 “A lot of people oppose change, a lot of people like that familiarity, and they get attached to certain people, and a lot of that is all great and good,” Swanson said. “But at the end of the day, universities are businesses – our business is academics, research and public service – and at the end of the day we have to run them as a business, or we’re going to go out of business.”

Like Michigan, the University of Texas at Austin worked with Accenture, and it too was the site of some controversy.

Eventually, though, the university ended its relationship with Accenture. Not only would it have cost an estimated $40 million to keep Accenture around, but Chief Financial Officer Kevin Hegarty said there were some things the university needed to do on its own.

Hegarty said Accenture was helpful coming up with a plan, but he felt Texas officials should be left to execute it.

"I think we can do it ourselves," he said, of the second leg of the reorganization, "and I think we can learn a lot ourselves."

At Kansas, the faculty are also pitching in to advise on change management, among other efforts. The university is working with Huron Consulting, which Swanson said “really did come in and listen to us and get to know us.” Other consultants may not have a reputation, he said.

On the procurement side, Swanson said he’s heard of consultants recommending a switch to the lowest-price vendors. But that can result in more headaches if the low-cost vendors offer poorer service.

“They may reach their initial savings totals, but they leave you in this mess, they wreck your supply chain for the next five years – I think that happens, but I don’t think that always has to happen,” Swanson said.

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