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Provost challenges managers to work hard, adapt to change

STANFORD -- To remain a preeminent university, Provost Condoleezza Rice told an overflow audience of middle and upper managers on Nov. 22 that Stanford must now focus on downsizing.

"Without change," she said, "we are not going to be the Stanford that we are now in 10 years. It doesn't take long to decline."

Rice announced several weeks ago that to eliminate a chronic budget deficit, $18 million to $20 million must be cut from the budget over the next three years. That comes on the heels of a $22 million cut in 1990, and $43 million in cuts and income enhancement beginning in 1992.

In her first major speech before the staff, Rice said she knows the pain and the challenge of her request.

"I understand that people are tired and they're weary," she told an audience of more than 400 at Fairchild Auditorium. "I'm going to ask you if you will be willing to roll up your sleeves and commit to thinking that almost no task is really impossible."

Rice told the managers to "have faith in their own resilience and their own strengths."

She drew on her experience attending segregated schools in Alabama until the 10th grade.

"You were told in segregated Birmingham that if you ran twice as hard, you might get half as far," Rice said. "And there were also people who were willing to run four times as hard so that they could stay abreast. And once in a while, there was somebody who was willing to run eight times as hard so they could get ahead.

"We owe it to ourselves and we owe it to Stanford to think that way about adversity," Stanford's number two officer said. "Not about it crushing us, but about it giving us an opportunity to work harder.

"Where else would you want to work hard?" she asked.

The political scientist reminded her audience that she went to Washington as special assistant to President Bush for Soviet affairs in 1989, and on her watch saw the Berlin Wall come down, Germany unified, Eastern Europe became liberated and the Soviet Union broken apart.

"They were pretty exciting times," she said to audience smiles at the understatement. "But I can tell you that I never considered staying. There was always a draw back to where I had been, and that more than anything for me speaks volumes about the excitement of Stanford."

Provost knows problems of staff

Rice assured managers that her experience in Washington taught her what it meant to be "staff."

"It doesn't matter whether you're staff in the White House or staff at Stanford," Rice said. "There are times when you feel that you have enormous responsibility and no authority." And there are times the boss - even a president - "has the greatest idea in the world . . . but it's not workable."

She told the managers that she and university President Gerhard Casper would not ask them to do the same amount of work with fewer resources - "that's a recipe for frustration" - but instead be prepared to do some things differently and stop doing other things.

Rice promised to recognize and support those who "take on the challenge and in fact do cut costs and deliver outstanding service."

"I know what it's like to think you've been asked to do the impossible with very few resources," she said. "But I also know the exhilaration of getting through it."

The provost cannot sit in Building 10 and redesign administrative processes, Rice said. Rather, she asked staff to work cooperatively across boundaries, to give up turf consciousness and to be willing to be held accountable.

"We must reconnect ourselves to the mission of Stanford, to the excellences of Stanford, to the excitement of Stanford," she said.

Stanford's breadth is unmatched anywhere, she said. This can be something of a curse, "because it makes it very hard in times of constrained resources to know where to focus for downsizing."

Discussing the need to simplify university processes, Rice said that flow charts should show simple lines of authority and accountability, like those of the nuclear command and control system. Some of Stanford's processes have charts "that make your eyes spin," she said.

In her speech, she reiterated themes set forth in earlier interviews and Faculty Senate discussions about Stanford's budget problems:

  • Stanford is embarking not on another one-time budget- cutting exercise, but a process of restructuring and re-engineering that will be typical of all businesses and institutions in the 1990s.
  • The top priority is to establish long-term fiscal health so "we can once again think about innovation and investment in our future, not just about closing deficits year after year after year."
  • Upcoming cuts will not be across the board. "We really do have to make decisions about which services we're prepared to give up and which services we must keep," she said.
  • Administrative units are being asked to show potential service cuts if given a budget next year that totals 90 percent or 95 percent of this year's figures. That exercise is to be repeated for two additional years.
  • Where there are weaknesses that cannot be fixed, university officers will consider eliminating them. "We can't afford to have anything mediocre," Rice said.

Rosse started the process

Rice paid tribute to former Provost James N. Rosse, who "got out ahead of the curve with repositioning" in 1990. Rosse knew the long-term forecast of revenues and expenditures was out of balance, "and he understood it at a time when it didn't look that way." His program set up the university for managing in the '90s, Rice said, but was interrupted by the indirect cost problem, when $43 million in cuts and income enhancement had to be made, most of it in two years.

The university survived, she said, thanks to faculty and staff who figured out "how to go after cuts of that magnitude and still keep the university with a sense of itself and a sense of its mission and moving forward."

Rice reiterated earlier statements that she would consult formally and informally with faculty, students and staff on possible service cuts. However, the management structure ultimately is responsible, she said.

Responding to a question about the consequences to managers who take risks, Rice said she would encourage calculated risks that make sense and discourage those that do not. Some initiatives inevitably will not turn out, she said, but the institution must not squelch risk taking.

She said she would prefer to hold off on cuts until the Commission on Undergraduate Education makes its recommendations, but "frankly, we can't afford to wait that long."

Evaluating potential cuts

Asked what criteria would be applied to restructuring or eliminating departments, Rice responded that she is not a central planner.

"As a Soviet specialist, I am probably more aware of the dangers of central planning than anybody else," she said. "It killed off the Soviet Union; it could kill off Stanford, too. So you won't see me trying to plan from Building 10 what our academic future ought to look like."

She suggested that in evaluating programs, deans might ask whether they still attract top graduate students and whether undergraduates are signing up for courses. Visiting committees also could be used to analyze programs, she said.

"Obviously, if you're not attracting graduate students, you're not teaching undergraduates, you're not doing research and visitors don't think very much of you, you've got a problem," Rice said.

Regarding disposition of the 1988 report from the University Committee on Minority Issues, Rice said that "I do not see affirmative action and issues of multiculturalism as peripheral to what we do, but rather as an integral part of what we do."

She said that discussions about diversity will be part of academic and budget planning processes. To the degree that the committee wanted these issues mainstreamed into academic planning, "it has no stronger supporter than me."

Affirmative action will get more attention than the notion of multiculturalism, she said. If the institution concentrates on recruiting a diverse faculty, student body and staff, then some of the other issues will take care of themselves, she said.

Asked about budget cuts in formula schools, Rice said she had asked the Medical School and Graduate School of Business to engage in the spirit of the process. She said she hoped to see "significant restructuring" in the two schools.

Van Etten discusses finances

Joining Rice in the lengthy question-and-answer period were Peter Van Etten, chief financial officer, and Barbara Butterfield, vice president for faculty and staff services.

Responding to a question about the budget numbers, Van Etten said that most of the $18 million to $20 million cut would come out of roughly $100 million allocated to central services.

Another $100 million or so of the operating budget is in administrative services performed in the schools, Van Etten said, and $200 million is in purely academic expenses. No specific targets were assigned in these categories, but they have been asked "to restructure themselves to play a significant role in enabling us to invest in the future."

Discussing indirect cost recovery as an income source, Van Etten warned that in its desperation to reduce the national deficit, Congress may impose further restrictions on overhead.

In a later interview, Van Etten said that one idea floating around Washington is to cap indirect costs at 50 percent. Stanford currently is operating with a provisional rate of 61 percent.

"I don't think there's any concerted, thoughtful effort driven by public policy concerns to reduce indirect costs, but the issue gets swept in with 100 other issues as a means to reduce deficits," he said. "In this very volatile environment, anything could happen."

On deferred maintenance, Van Etten told the managers that past cuts were well intentioned, but "leave us in a worse position now than before" and provide a lesson for the future. He said he expects to know the dollar magnitude of the deferred maintenance problem in two to three months.

"In anticipation of that, we have planned to significantly increase the amount of money we're spending on deferred maintenance, and that's included within our budget projections now," Van Etten said.

Butterfield: a professional community

Asked whether Stanford would focus its downsizing on elimination of middle managers, Butterfield first cited statistics that the university now has the same ratio of staff to faculty as it had in 1982, down from a high in 1986. A greater number of nonexempt staff positions was eliminated between 1989 and 1991, then more exempt staff were reduced through 1993, she said.

It would be difficult to justify continuing a structure with "one manager reporting to one manager reporting to one manager," Butterfield said. Where staff perform the same kinds of tasks, "one person can typically supervise anywhere from 20 to 60 people." Fewer would be supervised where tasks are complex or varied, she said.

On the topic of making employee discipline easier for the university, Butterfield said that the relationship between the university and employees is changing. In the past, both colleagues and supervisors have been "accepting of performance that is not fully supported by the contract that we have with each other."

This cannot continue long term, she said, because it leads to deterioration.

Discipline is guided by federal employment guidelines, she said, "but we can be more precise and we must be more demanding of ourselves and people we work with."

"We are changing from family to professional community, and that's what we need to do," she said.

Challenged by a development officer who said she hoped Stanford would not lose the family and community feeling it promotes among alumni, Butterfield responded that "we must, everyone of us, act as fully professional, fully contributing individuals in an interdependent community."

Stanford cannot afford to have "dependents and parents" that are typical of families, she said.

Asked if Stanford would develop another staff early retirement program, Butterfield said she did not anticipate it.

"I would like to avoid a continuous brain drain," she said. "We really need experienced people who are committed to making their careers at Stanford, so there's a mixed blessing in early retirement windows."

Getting the best out change

Rice concluded the nearly two-hour session saying she hoped change could be achieved at a& rate that was fast but would not disrupt the "essence of what we are . . . and doesn't destroy our sense of community and our sense of belonging to Stanford."

Change can be frightening, she said, but "I hope that this time around we'll expect the best out of change, and that we'll come out of this period a stronger and fitter, and still innovative and interesting place. And I hope that we will do it in a collegial environment."



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