For Operational Excellence, bottom line is $75 million in change

In May, when Chancellor Robert Birgeneau needed someone to lead the program office for the next phase of Operational Excellence, he dialed up Albert “Al” Pisano, a Berkeley faculty member since 1983. It was, as top-level decisions go, an easy call.

Engineering Professor Al Pisano heads the campus's Operational Excellence program office. (Peg Skorpinski photo)

Easy, that is, for the chancellor. Pisano, for his part, mulled the request for a week.

Pisano, a former chair of the mechanical engineering department and then-acting dean in the College of Engineering, is the FANUC Chair of Mechanical Systems, with a joint appointment to the Department of Electrical Engineering and Computer Sciences. His CV, now edging toward 40 pages, is notable not just for scholarship, teaching and business acumen — he’s co-invented 20 patents and co-founded six startups — but for its breadth and depth of management experience. Besides piloting both a college and a campus department, during his time at Berkeley he’s directed major research units, administered research contracts worth $40 million a year, and squeezed in a two-year stint as a program manager for the federal Defense Advanced Research Projects Agency, better known as DARPA.

“I have to practice managing all day every day,” says Pisano. All told, he figures he’s compiled “12, 13, 15 years of actually living administration, as well as being a customer of the administration” as a Berkeley professor for going on three decades — a neat fit with the rigorous demands of the new appointment.

Why, then, keep the chancellor on hold for a week?

“The thing I was wrestling with was, ‘Wow, there is no option for failure on this,'” he recalls, hunkered in his new, closet-like headquarters in McLaughlin Hall. “I had to get to a mental place where I was completely committed to it. You can’t just go halfway on this sort of thing. You have to put your all into it to make it work.”

“Making it work,” in this case, means guiding the campus to what Birgeneau has called “a coherent, integrated, and systematic approach” to cutting waste in campus operations, boosting their effectiveness — and reducing administrative costs by at least $75 million a year. The savings opportunities were identified during the six-months-long diagnostic phase of Operational Excellence, launched last fall after deep state-funding cuts triggered staff layoffs, a hiring freeze, unpaid furloughs for staff and faculty and service cutbacks and fee hikes for students.

To a casual observer, the assignment might seem like mission impossible. But Pisano, a New York native with a ready, self-deprecating sense of humor, views it as closer to mission critical.

“The most important thing about this job is that if we’re successful, we’re going to be able to direct more money into our core mission, which is teaching and research,” he declares. “And in an era when the state just isn’t able to give us everything that we really need to do the job, you have to find a way to redirect those funds.

“If you can save just $25 million a year in operational expenses — and remember, we’re going to try to save $75 million or more — that’s the equivalent of a 13 percent fee increase. It’s the equivalent of almost 20 days of furlough. It’s the equivalent of finding another $500 million for the endowment.

“If we come in between $75 million and $100 million,” he adds, “look at the drastic actions we’ve been able to avert. That’s the big thing.”

It is also, Pisano believes, why OE’s savings targets are not only necessary, but eminently achievable.

“In this endeavor I have a really, really good fundamental advantage,” he explains. “On this campus, I think everybody would agree that we can’t continue on the track that we’re on. No one is satisfied with the status quo. And if you think about it, that’s a very important thing to have established before you move forward with an effort to work some major institutional change to get operational excellence.

“So in one sense, a very difficult portion of the problem is already solved. Everyone knows we have to make a change.”

Engaging with change

As Pisano acknowledges, however, “Change can cause a lot of anxiety. And we really have to alleviate the anxiety and get out the message that we’re all about the excellence part, and that if you get operations excellent, they intrinsically cost less money.”

“You can think about this as increasing capacity,” he suggests, offering student services as an example. In the current economic environment, “it’s really tough to throw extra money at the problem. But if you could reorganize it so it runs better, you could increase the quality of student services and either cap the expenses or even have them go down a little bit.”

That might be the battle cry, in fact, for the entire design phase of Operational Excellence — expected to take up to six months — which Pisano views as “all about developing a plan by which you simultaneously make things work better, and need less money to do it.”

And if the devil is in the details, Pisano emphasizes the details will be worked out by those most familiar with each sphere of campus operations where potential savings have been identified. Based on the results of OE’s diagnostic phase, teams of two “sponsors,” an initiative manager and up to 14 volunteers — for lists, see the “news and updates” section of the OE website — will explore how best to restructure five broad areas: procurement, organizational simplification (including human resources and finance), information technology, energy management and student services.

Two additional volunteer teams will devote themselves to designing a new financial model for the campus, and to building a “high-performance culture,” in Birgeneau’s words, “with aligned, clear goals throughout our organization, consistent decision processes, effective management strategies, and clear career paths for our employees within the university.”

“This is not an exercise in which a plan is written far away, then forcibly pressed upon people,” stresses Pisano. “This is really a case where the constituents — faculty, staff and students — are being engaged in the process.” The plans will come “from the field, from the people doing it day to day. My job is to help avoid collisions among the plans.”

Yet despite “an overwhelming response” to the call for volunteers, Pisano fully expects some headwinds. “No major change goes through an organization without a group of people saying, ‘Hey, you know, I’m not sure I want to do this,'” he says. But he adds: “If there is no resistance, you’re not making substantive change. I welcome resistance, and we will have an open dialogue and then we will surface these issues and slowly resolve them.”

Like other campus leaders, he expects some plans to result in layoffs. But he says the combination of natural attrition, retirements and organizational restructuring — including new job opportunities for current employees — will be key to helping the campus achieve its savings targets.

“I can’t guarantee that every single person is going to be here at the end of the process,” he says. “But the core of the process is to get the right people doing the right things with the right tools in order to be efficient, and to increase capacity so we don’t have to throw a big chunk of money at the problem to solve it. Because we don’t want to have to resort to drastic actions again in order to find the money.”

Meanwhile, he encourages everyone on campus to seek out members of the seven initiative teams and help forge the way forward. The design phase will also feature focus groups, interviews and group briefings, and surveys.

Pisano has made a three-year commitment to Operational Excellence, during which time he’ll be 25 percent “pure professor” and 75 percent head of the program office.

“The joke is 75 percent of what — 8, 10, 12 or 24 hours a day?” he says. “Right now it’s looking like 75 percent of 16.”

Whatever it takes, though, he’s confident the effort will succeed.

“Everyone understands that there’s no perfect plan,” Pisano says. “But we all know that there’s iteration and continuous improvement, and going back and cleaning up the little pieces that we didn’t get quite right the first time. And I think everyone on this campus should take a great deal of comfort from that. Because this is really an issue of, we’re going to keep at it, and we’re going to get it right.

“We have a great campus, and we want the administrative processes to be as great as the rest of the campus,” he adds. “And I will do everything I can do in order to get there.”