Is Yale U. starting to run more like Yale Inc.?

Plenty was unusual about the planning for this year’s budget. It entailed the deepest cuts in at least three decades, on the heels of years of exuberant growth.

But there was another wrinkle: The cuts would be negotiated with a new face at the table. For the first time, senior administrators from the University’s Business Operations division joined department heads and deputy provosts to work out the details of budget proposals.

The newcomers came from the Business Operations Leadership Team, a mobile response squad of business-minded officers, many of them from corporate backgrounds, charged with contributing to a conversation traditionally dominated by academics.

Faculty and staff have taken notice: Yale’s business operations are becoming more, well, business-like in how they run the behind-the-scenes services that support the University’s core academic mission.

At issue are two paradigms, perhaps stereotypes: on the one hand, corporations as ruthlessly efficient and conformist, and on the other, academia as freethinking, decentralized and slow to act. To the extent that either notion is true, and to the extent that either is preferable, their blending has introduced some degree of creative tension and raised institutional questions about how best to operate a university.

And it has led many to wonder if Yale U. is starting to run more like Yale Inc.

THE BUSINESS MODEL

BOLT’s involvement in budgeting is not a response to the recession. That this dramatic change happened in the same year as the University’s dramatic budget cuts was, in fact, mere coincidence. But the financial difficulties facing Yale cast the move into sharper relief, as is true of a host of other changes across the institution, signaling a shift toward more business-advised management.

For example, the entire University is in the midst of a comprehensive overhaul of its internal operations systems, an initiative known as YaleNext. Despite a University-wide hiring “chill” — as opposed to a strict hiring freeze — each residential college got a new business operations manager last year. And a new term has slipped into the lexicon of support services personnel to describe the people they serve: They call them “customers.”

This broad sweep of changes, large and small, comes under a corps of University leaders who migrated from the corporate sector. Michael Peel became Yale’s vice president for human resources and administration in October 2008 after leaving an equivalent post at General Mills; PepsiCo veteran Shauna King became Yale’s vice president for finance and business operations in June 2006; and Bruce Alexander, formerly a senior vice president at shopping mall developer Rouse Company, began the trend in May 1998 when he became vice president for New Haven and state affairs and campus development.

All three say they have tried to bring the most advantageous elements of the corporate philosophy to an institution that is, at least culturally, quite different.

“It is very important that Yale bring the productivity and efficiency of the private sector into the administrative side of the University, particularly as the University and its extensive research efforts have gotten much larger and much more complex in recent years,” Alexander said in an e-mail message.

He continued, “I think hiring people who have had past experience to bring to bear in strengthening the administrative functions of the University is good for Yale because those individuals have faced many of the management challenges already and know how to successfully surmount them.”

THE CAST

Yale’s corporate transplants quickly realized how the University’s computer systems lagged behind best practices in the corporate world. While most functions involving students are already online, thousands of routine business transactions for faculty and staff, such as record-keeping and payroll, are still done manually. Yale needed an overhaul — and individuals capable of executing it.

At PepsiCo, Shauna King held a variety of titles, many of them including the words “chief” or “vice president.” She oversaw PepsiCo’s transformation from a highly decentralized company (with its disparate brands, such as Pepsi, Frito-Lay and Quaker) into a corporation with shared business processes and standardized computer systems across all of its divisions.

Not surprisingly, University President Richard Levin calls King, a power-dresser with impressive public speaking skills, the “expert” on YaleNext, which seeks to standardize and centralize Yale’s business process across all its many schools, departments and divisions.

Michael Peel worked on the same floor as King at PepsiCo’s headquarters, although the two weren’t acquainted at the time. Peel left PepsiCo in 1991 to become executive vice president at General Mills.

In 2008, after 32 years without a break, he planned to retire — to relax and spend time “reflecting on the meaning of life,” said Peel, whose gentle demeanor is reminiscent of Mr. Rogers. But the same day his retirement was reported in the Wall Street Journal, Peel got a call from Levin, asking him to come work at Yale. Levin knew his vision of expanding the University would require a more modern and professional administration to manage it.

Peel said he remembers being impressed by Levin’s leadership and thinking, “this guy could be CEO of anything.” Peel was at a point in his career where he was comfortable taking a cut in pay and wanted to feel like he was making a difference. He took the job.

He arrived last October and was quickly struck by Yale’s rich history and strong sense of tradition. That reverence for the past meant the University’s staff took huge pride in its employer, he said, but it also meant more resistance to change and a lack of adaptability.

To corporate types such as Peel, Yale’s business operations appeared decades behind the times.

A SENSE OF URGENCY

Yale last upgraded its computer systems in 1999 in preparation for Y2K, which the University feared would cripple machines only programmed to accept dates beginning with “19.” Institutions across the country shared Yale’s fears and moved to implement similar solutions. With so many companies and universities running the same upgrades all at once and all racing to beat the countdown to Jan. 1, time and talent got squeezed.

The resulting implementation was uneven. The University introduced an Oracle software to manage some administrative functions, but the upgrade was not comprehensive, and some of the systems were incompatible with one another.

The inadequacies of Yale’s systems were exposed in 2006 when the federal government began investigating the University for allegedly making false claims on $3 billion in 6,000 research grants from 30 federal agencies. The weak mechanics of Yale’s internal networks made administrative tasks such as tracking expenses and aggregating data onerous. The resulting flubs cost Yale $7.6 million in a settlement last December.

As time wore on, the state of Yale’s administrative systems became an even more pressing issue. The work of the University and the government’s role in regulating it have both expanded. Yale has added 832 faculty since 1993, 500 of them since 2006. The staff has grown by 1,000 people since 2006.

“[The investigation] brought a sense of urgency,” King said. “Now we had a living example of ‘we can do this better.’ ”

Enter YaleNext.

Planning for the project began in earnest over a year ago, and it was formally launched last November after receiving approval from the Yale Corporation the month before. The multi-million-dollar project, which rolls out in stages over the next four years, will unite Yale’s internal maze of computer applications, Web sites, networks and paper forms currently spread across 11 separate systems. The program includes a centralized human resources call center and new infrastructures for reporting expenses, ordering supplies and accounting for grants.

The snappy, elided brand already seemed to be an improvement over the ominous code-name of the Oracle software’s introduction: Project X. Knowing the project would last four years, the working group decided the project needed a catchy name — and the constant talk of the “transformation of administrative processes and systems” was growing cumbersome.

“It’s a mouthful,” King said. “The acronyms were starting to get pretty silly.”

MORE CORPORATE?

King is hoping that, with a cadre of corporate veterans at the helm, Yale can avoid repeating the mistakes of 1999, but some of the same pushback is already starting to surface. The question of whether Yale is becoming “more corporate” reliably solicited sighs, eye-rolls and laughs; administrators and staff have heard the phrase a lot lately.

The consensus is that many of the innovations being introduced into Yale’s business operations are indeed modeled after the corporate world. And the attending concern is that they might not be as well-suited to the very different world of academia.

“That’s what you keep hearing,” Peel said. “If ‘corporate’ means excellent, maybe. If it means stiff and bureaucratic, no.”

Peel said Yale has a lot to learn from corporate American when it comes to efficient operations. But trying to force some aspects of corporate culture onto the University, at least without proper customization, would be “woefully stupid,” he said.

And the reasons are fairly obvious. Universities are non-profits, and the corporate model doesn’t have anything like faculty and students, which are a Yale’s raison d’être. Still, King said it makes sense to have businesspeople in charge of those functions of a university that are essentially business transactions.

“I come from a corporate world,” she said. “But the things that are continuous between the corporate and academic worlds — you’ve got to hire people, you’ve got to order goods and services from vendors and pay them for it — happen whether you’re not-for-profit or for-profit.”

There are some anecdotal observations of the trend toward university officers with corporate backgrounds, said Judson King, director of the Center for Studies in Higher Education at the University of California, Berkeley, but the phenomenon has not been formally studied.

“Everyone in the administration recognizes that a university is very different from the usual corporate world,” Deputy Provost of Science and Technology Steven Girvin said in an e-mail. “The purpose of business operations is to support the academic mission of the university.”

But, he added, supporting the academic mission requires many tasks that are fairly standard business transactions. So it makes sense to organize them like a business would.

‘THE ONLY EFFICIENT WAY’

During the early years of Peter Salovey’s deanship, the Yale College Dean’s Office’s system of accounting didn’t line up with the structure of its programs, making it difficult to see how much money was assigned to a particular use.

In the 2007-’08 school year, Salovey moved to reorganize the Yale College Dean’s Office’s business operations, enlisting the help of Julie Grant, a senior director of business operations and BOLT team member.

“The change was technical in the sense that the way we record things in the financial records changed,” Grant explained in an e-mail. “However, the impact of the changes we made facilitated much easier reporting to program leaders so they could understand what their budgets are and how their programs are funded.”

It took two staffers working full time for over six months to get the job done.

“[BOLT] viewed [the Dean’s Office] as a poster child of what they could do,” said Salovey, who is now the provost.

The BOLT team is led by Stephen Murphy, the associate vice president for business operations (and another migrant from the private sector, who, before joining Yale in 2001, worked for Häagen-Dazs and Wilson Sporting Goods). The team was created in April 2007 to connect departmental business managers and the institution’s administrative leadership. The goal, Murphy said, was to streamline business operations by pooling resources.

Around the same time, BOLT was centralizing the University’s system of grant accounting, another response to the costly federal investigation. Handling research grants is a complex process for Yale’s science departments due to the specialized expertise required to administer them. And before BOLT arrived, every department dealt with the burdensome and redundant process of accounting on its own, Girvin said.

BOLT created a new shared services group for the sciences, headed by David Gingerella, and brought business managers together to collaborate, not just within their departments, but across the sciences as well.

“Some business office services are local to departments, and some are more centralized,” Gingerella said in an e-mail. “This is the only efficient way to do it.”

The centralization eliminates redundancy, Salovey said, and provides a higher standard of service because those doing the accounting become specialists, which is critical now that the University is much larger and subject to much more regulation.

“We’ve moved into an age when people in finance positions have to have finance backgrounds and people in accounting jobs need to be accountants,” he said.

SOME GNASHING OF TEETH

YaleNext is now a familiar term for faculty and staff, and not always in a good way. After this summer’s round of changes, another is due this fall.

Applying corporate techniques to business operations can be an improvement, Peel said, so long as those techniques don’t spill over into those educational functions of a university that are intrinsically anti-corporate.

“If we’re being too corporate in the classroom, I’d worry,” he said. “If we’re being too corporate in IT, I’m not sure I’d worry about that.”

But some changes do trickle out into Yale’s school-related functions, especially where they become a burden on faculty that takes them away from teaching and research. Thomas Appelquist, a physics professor and former dean of the Graduate School, said faculty members are insulated from many administrative tasks thanks to their business staff. Still, some burdens, such as training sessions and surveys, do fall on them.

“It hasn’t been terribly onerous,” he said. “Sometimes annoying.”

Even supporters of the changes have experienced the inevitable growing pains that accompany any major reform.

“There’s going to be obviously a steep learning curve and some gnashing of teeth as people get used to it,” said John Fox, the business manager for the Physics Department, who also came from the corporate world. “Faculty want to focus on teaching and research; they don’t want to worry about computer programs.”

Faculty members are also used to certain relationships with the business managers in their departments. Joanne Bentley, the Chemistry Department’s business manager and a participant in planning for YaleNext, said it was strange to be instructed to point faculty to the new employee services center instead of helping them directly, although the service center would be more efficient.

Whereas academics may be used to face-to-face interactions, the corporate approach is to centralize similar activities in service centers, Salovey said.

Still, Salovey contends the discomfort mostly springs from changing anything that has become routine rather than from a tension between corporate culture and academia.

“The best model for Yale is probably an amalgam of the two,” he said. “It’s never the case that a traditional academic or corporate model is right or wrong. We need to take the best features and most functional aspects of each and create something new.”

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