Melbourne Operating Model Evolution Australian Universities Senior Finance Officers Group 19 October 2018 Minay Lodhiya Associate Director, Financial Performance John Demagistris Director, Financial Accounting and Budgeting 1
University of Melbourne Snapshot Nationally and Globally Prominent University Number 1 in Australia and number 32 in the world 1 Commonwealth and State Government regulated Strong Financial Profile Income of A$2.5 billion (32% from Government) Assets of A$7.2 billion Investment portfolio of c.a$2.5 billion AA+ Rating S&P since 2003 Robust Student Demand 50,270 EFTSL (40% international)² Average ATAR of 93.60² 1 million MOOC enrolments Commercially Focused Melbourne Curriculum introduced in 2008 Melbourne Operating Model introduced in 2014 Research Income $475 million (HERDC) 8,539 Staff (FTE) (4,429 Academic and 4,110 Professional) 1 Times Higher Education World Rankings 2017/2018 2
Rationale for Change Significantly greater resourcing capacity required to achieve our ambitious strategy and retain our national and international standing Professional Staff Growth (FTEs, 2008-2012) -1.7% 5.0% 3,084 3,033 3,515 Academic Staff Growth (FTEs, 2008-2012) -0.3% 1.9% 2,960 2,950 3,122 Reductions in public funding Unclear accountabilities and decision rights Limited drive for functional excellence Limited cost containment or operating efficiency Limited change in underlying work practices from past restructures resulted in staff growth Flattening of research outcomes 400 300 200 100 0 383 221 2008 2009 2012 RDM introduced University historical HERDC income ($M, 2008 2013) CAGR 2008-2013 337 171 357 182-0.5% 376 376 374 179 169 163 162 166 175 197 207 211 2008 2009 2010 2011 2012 2013 2008 2009 2012 UoM historical Student Load Growth (EFTSL, 2010-2013) CAGR 2010-2013 35,365 25,545 9,820 2010 35,601 37,046 25,720 9,881 +3.3% 26,655 10,391 2011 2012 38,934 27,531 (71%) 11,403 (29%) 2013 CAT 1 CAT 2-4 Domestic students International students 3
The change journey Led by senior management with support from expert consultancy advice Establish Program governance Aug 2013 Design endorsed Nov 2013 Change plan endorsed Jul 2014 Spill and fill professional staffing Sep 2014 Day 1 new model Feb 2015 Phase 0 Phase 1 Phase 2 Phase 3 Establish Program scope Early 2013 Extensive engagement initiated Late 2013 Org Structures developed May 2014 Financial Model implemented Staff vacated Transitional staffing vacated Jul-Oct 2014 Dec 2014 Jan-Dec 2015 Phase 0 - Governance Phase 1 - Diagnostic Phase 2 Detailed Design Phase 3 - Implementation 4
Melbourne Operating Model in operation Clear accountabilities exist Chancellery Small core focused on leadership, strategy and oversight of the broader University Sets strategy, policy and standards Develop control measures to ensure strategies are delivered Separation of strategic and operational activities, with operational activities part of University Services Academic Divisions Stronger leadership role for Deans in stewarding the operating model Strengthened Faculty Executive Director role, with greater strategic focus Transactional activities part of University Services University Services Transactional and common expertise activities consolidated within University Services Clarity of purpose deliver fit-for-purpose services across the University Investment in new capabilities (e.g. Business Intelligence) Buyers committees chaired by Deans provide an opportunity for clients to influence service outcomes and costs University Services Board provides whole of service oversight and advice Service level agreements exist with agreed KPI s 5
Financial management model Provides the mechanisms to support and reinforce the intent of the operating model Established Accountability Reporting framework Allocation Model $190M Savings realised Mechanisms to incentivise AD performance Investment into teaching and research Professional $ & FTE envelopes Capital Planning Framework Business Process Improvements 6
Present day Since implementation significant growth has been achieved UoM historical Student Load Growth (EFTSL, 2008-2017) CAGR 2013-2017 UoM historical HERDC income ($M, 2008 2017) CAGR 2013-2017 35,365 25,545 35,601 25,720 +3.3% 37,046 26,655 38,934 27,531 (71%) 41,141 28,189 (69%) +5.7% 43,895 28,885 (66%) 46,495 29,150 (63%) 48,632 28,966 (60%) Domestic students International students 500 400 300 200 383 221 337 171 357 182-0.5% 376 376 374 179 169 163 413 192 +6.7% 396 193 444 243 485 284 CAT 1 CAT 2-4 9,820 2010 9,881 10,391 2011 2012 11,403 (29%) 2013 12,952 (31%) 2014 15,010 (34%) 2015 17,345 (37%) 2016 19,666 (40%) 2017 100 0 162 166 175 197 207 211 221 203 201 201 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Business Improvement Program (BIP) Savings ($M, 2015-2018) $39m $5m $34m $1m $78m $21m $2m $92m $95m $33m $34m $2m $2m $55m $57m $59m Reinvestments into Teaching & Research. Academic vs Professional Staff (FTE, 2009 vs. 2017) 3,978 (54.3%) 3,347 (45.7%) 4,110 (48.1%) 4,429 (51.9%) Professional Academic 2015 2016 2017 2018 Property Lease Gross Opex Procurement Non-Salary FTE 2009 2017 7
The Evolution Shared Innovation Financial model evolved Uplift in staff capability Business process reengineering Consolidation of transactional processes Intangible benefits adding value to influence change End-to-end process design mindset starting with customer University Growth Continues Improvement Financial Model has to adapt Business Framework allows for better agility and ensures further accountability to respond to opportunities and challenges through continued evolution and improvements of the processes 8
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