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November 17, 2009 10:35 AM Colleges Hire Consultants to Save Money

By Daniel Luzer

From the New York Times comes word that some colleges’ attempts to trim their budgets to make up for a loss in investment revenue have resulted in the hiring of management consultants:

When Holden Thorp, the chancellor of the University of North Carolina, was looking for ways to cut the university’s budget, he did what many executives in private industry do — hired a management consultant.
The consultant, Bain & Company, came up with recommendations that it said could save the university more than $150 million a year. They included centralizing some of the university’s widely dispersed procurement operations (up to $45 million) and information technology functions (up to $19 million) and simplifying its organizational structure (up to $12 million).

Bain & Company, which has affiliations with Bain Capital, the private equity firm founded by Bain & Company partners, including 2008 U.S. Presidential Candidate Mitt Romney, has since been hired by both Cornell University and the University of California, Berkeley, to make similar cost cutting suggestions.

The Times article pointed out that Bain’s analyses of the colleges did not include suggestions about academic issues like course loads or tenure. Bain & Company paid attention only to business practices.

Bain discovered a lot of waste—expensive waste. At the University of North Carolina at Chapel Hill Bain & Company found that:

The university has plenty of inefficiencies. For example, more than half its managers have three or fewer people reporting directly to them.
In addition to the recommended changes that could save up to $161 million a year, the report suggested reining in the more than 100 centers and institutes that have sprung up around the university, many with their own finance, information technology and human resources departments.

No word on how much it cost UNC to hire Bain to determine these inefficiencies. Apparently an anonymous donor paid for the consulting project.

Daniel Luzer is the news editor at Governing Magazine and former web editor of the Washington Monthly. Find him on Twitter: @Daniel_Luzer