March 21, 2014
Dear Faculty and Staff:
During these years of our Second Century Celebration, 2011-2015, we are enjoying a special time of progress in our academic and student life programs; recruitment of outstanding students, faculty and staff; improvement in facilities; and rising national reputation. The continuing success of our Second Century Campaign is strengthening our resources to ensure the long-term economic vitality of the University.
Against the backdrop of our institutional progress toward the goals of our strategic plan, 2006-2015, there are economic undercurrents and changes affecting the future financial strength of SMU and all private and public universities. Nationally, it is a time of challenge and change in higher education, based on several factors. These include:
- A declining college-age population, combined with greater competition for the limited number of high-achieving students we seek;
- Decreasing federal research funds and greater competition for grants;
- Increased competition for private gifts and donor expectations of wise stewardship of their giving;
- Limited tuition increases reflecting the growing scrutiny among prospective parents and others regarding college costs, but, concurrently, a need to provide additional merit- and need-based financial aid to attract and sustain a talented and diverse student body;
- A growth in federal regulations with an impact on staffing for record-keeping, oversight and reporting;
- The rise of new and lower-cost education and credentialing models (e.g. on-line degrees and MOOCs);
- Continued declines in interest income generated by universities’ operational reserves.
These undeniable forces require all universities, including SMU, to increase innovation and carefully review their operational functions and costs. It is important to understand that The Second Century Campaign, which seeks to raise $1 billion, is succeeding tremendously in increasing financial resources. These are typically restricted to designated purposes, and we can see the positive results all around us. However, there remains the significant challenge of having limited increases each year for operations, personnel costs, and support for new programs.
Operational expenses are primarily dependent on tuition income. To continue to enhance the national competitiveness of the University, we must couple the support of private dollars with a review of our operational effectiveness and efficiency to ensure that the maximum support is possible for our institutional aspirations. There is more we need to do, and must do, if we are to continue moving forward.
To achieve our vision in the context of these challenges, it is critical that we affirm to ourselves and our supporters that we have a financial structure and operating model that applies a greater share of University funds toward our strategic goals. We plan to achieve this by realigning operational resources and by increasing revenue where appropriate opportunities exist. We must deliver high-quality support to our faculty and students as we continue to improve our programs.
Meeting these challenges requires that we initiate a University-wide review of our financial structure and operating model that has evolved over the years. To benefit from advice based on national perspectives, we have chosen to work with an external firm. After a competitive and thorough vetting process, the President’s Executive Council (PEC) recommended Bain & Company, which has a proven track record of successful transformation initiatives at other highly regarded universities. I accepted this recommendation and subsequently received approval from the Board of Trustees to proceed.
The project, called Project SMU: Operational Excellence for the 2nd Century (OE2C), will be organized in the following manner. The Executive Committee will be comprised of Paul Ludden, Tom Barry, Chris Regis and me. The Steering Committee will be comprised of the PEC, excluding me, the incoming President of the Faculty Senate, a dean or associate dean, as well as a staff member, to be announced shortly. The Steering Committee will make recommendations to the Executive Committee. Day-to-day communications with Bain will occur with two Program Coordinators, Bill Detwiler, Associate Vice President for Business and Finance and Chief Human Resources Officer, and Professor Martin Sweidel, Associate Dean of Meadows School of the Arts. These co-coordinators will work closely with the Bain team and communicate with the Steering Committee. The timeline for the project is estimated to run 12-18 months.
A key reason we chose Bain & Company is its reputation as a highly collaborative firm and its experience in working with universities. This assures that SMU’s unique context will be incorporated into this total analytical effort. Bain will engage with hundreds of you across campus through a mix of interviews, focus groups, surveys and other interactions. To this effort, Bain’s role is to provide process, structure, focus, analytical rigor, and insights and best practices from other universities. SMU’s role is to provide open access to information, historical context, and perspectives on what would or would not work in our culture. In partnership with the University, Bain will develop and shape recommendations, but we are ultimately responsible for the course the University takes, making strategic decisions about the generation of revenue and the appropriate allocation of resources to meet our goals. The final outcomes of this review lie within our own hands. A microsite has been established to allow the community to track the progress of the project (smu.edu/OE2C). In addition, periodic updates will be made to the campus regarding the progress of this project that I believe to be critical to the future vitality of SMU.
The changing national landscape for higher education trumpeted daily by the media creates opportunities as well as challenges. If we broadly examine our operational practices and plan wisely, we can develop the course of action that keeps us firmly on track toward our strategic goals: ever-increasing academic and faculty excellence and student quality combined with our unique campus experience. The success of all of these efforts will ensure our promise of “World Changers Shaped Here.”
R. Gerald Turner