Monday, December 31, 2012


With the DFL in charge of the Minnesota Legislature, we can soon expect to hear calls for the need to “invest” in education. Part of this will include more money for higher education including institutions like the University of Minnesota. While no one would argue the benefits that a school such as the U of M can bring to a state and its people, before we spend another dime on higher education the taxpayers of Minnesota should feel secure in knowing that their money is being invested wisely.

A front page story in Saturday’s WSJ raised serious questions about whether that is currently the case. Cost of College: Colleges' Bureaucracy Expands Costs:

MINNEAPOLIS—When Eric Kaler became president of the University of Minnesota last year, he pledged to curb soaring tuition by cutting administrative overhead. But he hit a snag: No one could tell him exactly what it cost to manage the school.

Like many public colleges, the University of Minnesota went on a spending spree over the past decade, paid for by a steady stream of state money and rising tuition. Officials didn't keep close tabs on their payroll as it swelled beyond 19,000 employees, nearly one for every 3½ students. "The more questions I asked, the less happy I was," Dr. Kaler said.

Many of the newly hired, it turns out, were doing little teaching. A Wall Street Journal analysis of University of Minnesota salary and employment records from 2001 through last spring shows that the system added more than 1,000 administrators over that period. Their ranks grew 37%, more than twice as fast as the teaching corps and nearly twice as fast as the student body.

Those of us who work in the private sector shake our heads when we read such things. No one knows what it costs to manage the school? Officials didn’t keep close tabs on their payroll? Both of those should be fairly basic financial controls that one would think would be in place at any organization, especially one the size of the University of Minnesota.

Some other notable nuggets from the article:

Administrative employees make up an increasing share of the university's higher-paid people. The school employs 353 people earning more than $200,000 a year. That is up 57% from the inflation-adjusted pay equivalent in 2001. Among this $200,000-plus group, 81 today have administrative titles, versus 39 in 2001.

Administrators making over $300,000 in inflation-adjusted terms rose to 17 from seven.

It’s hard to determine whether those raw numbers are appropriate or not. What is critical is the increase in the ten-year span.

In its Office of Equity and Diversity, the number of people with "director" in their title grew to 10 in the 2011-2012 school year from just four directors five years earlier, by a university official's count.

Ten people who work in the Office of Equity and Diversity are directors? Again, it’s hard to know if that’s appropriate since we don’t know how many people work in that particular office overall (and frankly I’m almost afraid to ask). But at a time when students are being asked to take on greater tuition burdens because the school needs more money, it’s hard to imagine that the U of M has really been focused on getting the most bang for their buck when they double the number of diversity directors in five years.

Dr. Kaler, in his inaugural address in September 2011, criticized the costs of "long meetings, excessive committee deliberations and endless email chains" that contribute to a "tangled web of bureaucracy that dogs us." He pledged to reduce administrative expenses.

One hurdle: The system's chief financial officer, Richard Pfutzenreuter III, says that while he can track the cost of heating a particular floor of a building or of serving a cafeteria meal, he can't specify elements of the hierarchy such as how many people report to each manager. The human-resources system doesn't track such chain-of-command information, he said, because "it wasn't a priority in the past."

This is the most stunning revelation in the WSJ piece for me. The CFO of the University of Minnesota doesn’t have a system that provides visibility to the organizational structure. How can you properly run an organization, manage costs, maintain accountability, and become more efficient without such basic information? That fact that it “wasn’t a priority” says a lot about what the real problem is here.

The summary of the article nicely captured it as well:

To Dr. Luepker, in the public-health department, such goals are up against an institutional inertia that inhibits the periodic streamlining common in business. "We establish things and programs and they never quite go away," Dr. Luepker says. "They're nice people and they're colleagues and they're good people…but in this environment, you have to ask can we continue to do this?"

The obvious answer should be a resounding “No!” especially from the taxpayers of Minnesota who are the ones footing the bill for the “things and programs” that the “nice people” at the U of M don’t seem to have much of an ability to manage in a cost effective manner. This prominent article should help bring attention to the matter and get people in Minnesota talking about what we need to do to correct. It’s unfortunate that it came out during a weekend smack dab in the middle of the holidays or it surely would have attracted greater notice locally.


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