mission

Preparing for the Future

Future:
The University’s Fiscal and Human Resources

Introduction

Core Component 2b: The organization’s resource base supports its educational programs and its plans for maintaining and strengthening their quality in the future.

This section of the report will focus on ways the University builds, safeguards, and makes good use of its fiscal resources, human resources, and facilities to maintain the University’s long history of excellence while anticipating the changing demands of the future.

Finance

Each year the Office of the Executive Vice President and Chief Financial Officer produces an in-depth financial report that describes the University’s financial health. The Financial Report for 2008 states:

…the institution maintains the highest credit ratings from both Standard & Poor’s (AAA) and Moody’s Investor Services (Aaa). This is particularly encouraging in light of the challenging state economy that we’ve faced for a number of years. These ratings are important indicators of the University’s strong financial health and outlook. The University, in fact, is one of only three public universities in the country to maintain these highest possible ratings.

The Financial Report includes three financial statements: the Statement of Net Assets, which presents the financial position of the University at the end of the fiscal year and includes all assets and liabilities; the Statement of Revenues, Expenses, and Changes in Net Assets, which presents the University’s results of operations; and the Statement of Cash Flow, which provides additional information about the University’s financial results by reporting the major sources and uses of cash. The chart below shows the University’s total revenues by area from all operating activities.

operating
2008 Operating activities. Total revenue: $4,983M. From: Financial Report 08

The report also includes letters or reports from the president, chief financial officer, and vice president for development, and information about the University’s fundraising, new appointments, the student profile, and major projects. Three sections, Excellence + Achievement, Creativity + Innovation, and Leadership + Service, each provide “Briefs,” which are examples of University activities and accomplishments in these areas. A sample drawn from each of these three sections of the 2008 report is provided below:

  • Excellence and Achievement. Research expenditures by the University were $876 million in fiscal year 2008, a 6 percent increase over the previous year and an all-time high. The federal government provided 70 percent of the total. Investments by the University, industry, foundations, and the state accounted for most of the rest.
  • Creativity and Innovation. A new $5 million, five-year grant from the National Institutes of Health will bring the University of Michigan Medical School closer to developing an implantable artificial lung that can serve as a bridge to lung transplantation. The grant will fund collaborative research with the College of Engineering’s Department of Bioengineering and the U-M Health System.
  • Leadership and Service. The expanded Robert H. Lurie Nanofabrication Facility is expected to change the high-tech landscape in southeastern Michigan. During the past five years, the facility has contributed an estimated $500 million to the state’s economy. Small and large companies as well as other universities utilize it for research and development.

With respect to the University’s overall fiscal health, the budget is a disciplined approach that allocates funds to meet current and emerging operating needs, and also focuses on cost savings. The University of Michigan adheres to government standards of fund accounting to be sure that revenues are spent for their intended purposes. The University’s four operating funds are as follows:

  • General Fund: tuition, state appropriation and indirect cost of sponsored research.
  • Expendable Restricted Fund: gifts and endowment payout, and direct costs of sponsored research.
  • Designated Fund: executive and continuing education, and conferences.
  • Auxiliary Fund: revenues to health system, athletics and housing.

The University’s budget approach, its diverse sources of revenue, its long-term investment strategy, and its fundraising campaigns contribute to the University’s strong financial position. As a result, the University continues to be able to make key investments in the facilities, programs, and people necessary to maintain its academic excellence and to help define what it means to be one of the world’s best public research universities. The University of Michigan Funding: A Snapshot describes the basic workings of the university’s budget. It focuses on the General Fund, which is the source of support for the Univeresity's educational enterprise.

Public Funding and the Endowment

Top-tier universities such as the University of Michigan focus inherently on the future. As a major public educational and research institution, the University develops the people and ideas that drive innovation and growth in all aspects of the nation’s economy. In the same vein, the University also focuses its finances on the future to allow the institution to fulfill its mission not just today but also for generations to come. The cornerstone of the University’s ability to achieve this long-term commitment is its endowment, a permanent fund that the institution manages carefully so that it will provide income to help cover the University’s core operating expenses in perpetuity.

As the figure below shows, funding from the state of Michigan has become an increasingly smaller fraction of the operating budget of the academic enterprise, moving from 23% of revenues in 1998-99 to less than 15% in 2007-08. During this same time, the endowment and its capacity to grow has become a key resource on which the University depends to carry out its mission and take on new initiatives. The increase in gifts/investment income spending as a percentage of total revenues increased during this same time period from 8% to 13%, with the remainder of lost revenue from the state being made up through fees and tuition, which increased from 32% to 37%.

rrevenue shares
Ten-year revenue shares from five primary sources that support the Ann Arbor campus’s academic mission: Tuition/Fees, Direct Research, State Appropriations, Gifts/Investment Income, and Indirect Cost /Other. Over time, the decline in state appropriations has been offset by increases in tuition and fees, and gifts and investment income.

The University’s endowment is built principally from gifts from alumni and friends who invest in the mission of the University of Michigan. Donors make endowment contributions with the understanding that the principal will remain untouched so that it will provide ongoing benefit to students, faculty, and academic programs. A majority of these gifts are restricted by donors to specific uses, such as scholarships. About 25% of the total endowment is restricted for use by the University of Michigan Health System. The Office of University Development has posted to its website Milestones in Giving, an interactive timeline of giving from 1817 to the present, which illustrates the many ways donors have helped the University to fulfill its mission over time.

To maximize the impact of the endowment, the University provides prudent stewardship of this resource. To accomplish this, the University strikes a balance that generates a steady, predictable stream of annual support for current needs and also preserves its purchasing power for the future in the face of inflation and inevitable fluctuations in financial markets.

Cost Savings and Environmental Stewardship

mtreeA central aspect of good fiscal management is to achieve cost savings through efficiencies. The example of this type of activity we highlight here is Planet Blue, a campus-wide educational and outreach campaign that actively engages the campus community to conserve utilities and increase reuse and recycling, thereby saving money and benefiting the environment. A 1% reduction in utility usage translates to over $1M in annual savings for the University that will be available to advance the core teaching and research missions. Planet Blue reflects our commitment not just to efficiencies and cost savings, but also to protecting the environment and the Earth’s resources, as mentioned in the University’s vision statement (Mission).

In FY 2008, the University piloted the Planet Blue project in five buildings on the Ann Arbor campus, with positive results. Many energy-saving actions were successfully implemented in the pilot buildings, while other recommendations are under review. Changes range from installing occupancy sensors for fume hoods to reducing operating hours for HVAC fans. Other efforts include compiling and distributing an annual report on consumption trends, research activities, and operations efforts; increasing electricity produced from renewable sources; maintaining and expanding alternative transportation options for students, staff, and faculty; strengthening procurement offerings to ensure that green products are prominently promoted; and revising construction and renovation guidelines to improve energy efficiency.

Human Resources

The University’s financial health depends in large part on its faculty and staff, who build on the University’s strong foundation and tradition of excellence by remaining focused on the institution’s core missions, even in the face of significant challenges. According to the University’s Office of Budget and Planning, in 2008 the University employed more than 6,000 faculty and more than 32,000 staff (of which almost 18,000 were employees of the U-M Health System). As in any organization, the people at the University are its greatest asset and give the campus its uniqueness. A significant part of the University’s budget covers the salary and benefits of its faculty and staff. Therefore, it’s critical for the University to develop, serve as a steward for, and invest in its faculty and staff. Some of the key ways in which the University plans and accomplishes these aims are described below.

Human Resources Strategic Plan

As part of its overall Strategic Plan, University Human Resources (UHR) has established a set of strategic goals, provided below, that articulate the human resource community’s focus, the desired outcomes, and the roles and competencies needed to achieve those outcomes. UHR uses these goals to plan, to allocate resources, and to assure that its actions align with the University’s mission. Several of the activities and initiatives described below echo these goals.

  • Develop leading practices in the recruitment, retention, and development of an outstanding faculty and staff.
  • Build human resources skills, competencies, and expertise to advance University goals.
  • Increase UHR’s contribution to the success of the University of Michigan through business intelligence (i.e., the applications and technologies that an organization uses to gather, store, analyze, and provide access to information, with the goal of helping the organization to make business decisions).
  • Support and promote the health and wellbeing of the University of Michigan community so individuals and the organization thrive.
  • Foster and maintain a work and learning environment that is inclusive, welcoming, and supportive, and is free from discrimination.
  • Improve human resource processes, systems, and infrastructure to provide high levels of efficiency, quality, and cost-effectiveness.

Human Capital Report

One important way the University safeguards its human resources is to compile information that helps University leaders make decisions and plan effectively. For this reason, since 2005 University Human Resources has created an annual Human Capital Report. The 2008 edition of this report examines the challenges and opportunities that the University faces in the years ahead due to anticipated retirements of faculty and staff members.

Training and Development

Another way the University builds and supports its human resources is to provide training and development opportunities for its faculty and staff. The University’s executive officers have formally adopted a Staff Development Philosophy that defines the role of staff members and management in this regard. This statement publicly recognizes that people are the University’s most important resource for sustaining excellent teaching, research, and service. To enhance the ability of staff members to contribute to the units where they work and to experience greater job satisfaction, the University has made this broad commitment to support ongoing staff development for all staff members. When the University achieves this goal, through training and mentoring, staff members grow, develop their talents, acquire and use new skills and knowledge, and become more effective. Training and mentoring for staff is provided on the job, through unit activities, and also through University-wide programs. A few examples of such activities are provided below.

  • Each year Human Resource Development (HRD) offers employees more than 100 courses designed to teach professional and personal skills to help them advance in their careers. HRD also delivers customized training, uses technology to promote learning, engages unit-level staff in discussions about their workplaces, and assesses and develops needed competencies.
  • Career Development Services is an online resource for University employees that provides a wealth of information for employees to assess and plan their careers, find career-related information, and access job search tools.
  • Participants in the Advanced Leadership Seminar develop leadership skills through presentations by executive and senior-level University administrators, by actively participating in focused discussions on organizational development, through assigned readings and small group discussion, and by undertaking an independent project that focuses on principles of leadership and systems change management. While working on these projects, participants also receive individual and group consultation and support.
  • The Plant Operations Division, a branch of Facilities and Operations within Business & Finance, has created a Plant Academy that delivers education, skills, and organization development programs and services. The Academy’s vision is to create a learning organization that encourages employees to develop skills to help them achieve the performance objectives of their work units—within the larger context of supporting and reinforcing the University’s mission, policies, culture, and strategic goals.

The University similarly provides professional and leadership development opportunities for faculty and academic administrators, a few of which are described below.

  • Teaching programs, services, and support. CRLT offers a variety of services and programs for faculty members who are interested in pursuing new and innovative approaches to teaching, want to learn more about teaching methods relevant to their courses, or want to consult about ways to improve their teaching and their students’ learning. These services include grants for teaching, workshops and seminars, mentoring, consultations on such topics as course design and the effective use of technology in teaching, mechanisms for student feedback, a variety of publications, and access to University honor codes and other policies.
  • New Department Chair and Associate Dean Orientations and Leadership Program. The Office of the Provost, with CRLT, offers an orientation program to new department chairs and associate deans, and a companion set of roundtable sessions for all University department chairs and associate deans. The orientation program provides an opportunity for participants to learn about the workings of the University, to deepen their understanding of the role of departmental and school or college leaders, and to become acquainted with others who serve as chairs and associate deans. The roundtable sessions focus on such topics as faculty hiring and retention, negotiation and conflict resolution, learning assessment, dealing with difficult faculty members, and planning for the future.
  • The Health Care Leadership Institute of the University of Michigan Health System is a collaborative institute developed and managed by the UMHS, the Ross Business School, and the School of Public Health. The Institute provides senior leaders in the health system with a multi-disciplinary learning experience that includes in-class work on leadership skills, management tools, and special topics, which are taught by University faculty in business, medicine, and public health.
  • Other school/college academic leadership training. The College of Literature, Science, and the Arts and the College of Engineering each provide college-specific education and networking sessions for their department chairs. The program content is typically specific to the policies, procedures, culture, and workings of the college.
  • The Committee on Institutional Cooperation (CIC) is a consortium of the Big Ten universities plus the University of Chicago. The CIC’s Academic Leadership Program, an annual program that was established in 1989, is for faculty members who have demonstrated exceptional leadership ability or who show great promise in this area. Each year, the 55-60 selected ALP Fellows attend three 3-day seminars hosted by the participating CIC universities on a rotating basis. The program content addresses the challenges and opportunities of academic leaders at major research universities and helps the Fellows to prepare for leadership roles. Many of the programs’ Fellows have gone on to serve with distinction as deans, vice presidents, provosts, and presidents of institutions of higher learning.
  • Each year, the CIC also offers a three-day Department Executive Officers Training Program for approximately 50 department heads and chairs from participating CIC universities, with topics that range from conflict resolution and time management to faculty development, performance reviews, and group problem solving.

Facilities and Infrastructure

The University’s buildings and related infrastructure are an integral element of its identity and values. In 2008 the University owned 538 buildings (including 223 apartment buildings on the North Campus) on 3,070 acres (~12.5 km2) for a total of more than 31 million gross square feet (~3 km2), including buildings on the medical campus and other auxiliary operations. ncrcstillIn addition, in June 2009 the University purchased property previously owned by Pfizer, Inc., which consists of 30 buildings suitable for advanced research and administrative offices located on 174 acres (0.7 km2). The University has named this new acquisition the North Campus Research Complex (NCRC), and planning for its use is underway. Get a video tour of the NCRC site, the University of Michigan's largest physical expansion in about 60 years, by clicking on the map.

Even in the face of ongoing economic pressures from the state and escalating health care and energy costs, it is essential that the University invest in its future by strategically renovating and replacing University facilities. These facilities play a critical role in such activities as meeting patient care needs, bringing in new technologies, and supporting academic, research, and clinical needs as they grow over time. In FY 2008 the University completed more than 327 projects across campus, representing an investment of more than $609 million. At the time of this report, the University had completed or begun construction on many facilities to support its academic, research, and athletic functions as the University strives to meet its changing needs.

General Facilities and Master Plans

In this section of the report, we highlight a few features of the University’s commitment to maintaining, improving, and adding to its capital infrastructure and campus planning: the University’s campus planning studies; the division of Architecture, Engineering and Construction; and the recently developed “Capital Project Guidelines.”

  • Since the 1960s, the University has undertaken campus planning studies for each of its Ann Arbor campuses. These studies, conducted by the local planning firm of Johnson, Johnson and Roy, have included the Central Campus Planning Study of 1963, the North Campus Planning Study of 1984, the Central Campus Planning Study update of 1987, and the South Campus Planning Study of 1991. In developing these plans, the University uses the concept of “framework planning,” which provides a flexible organizational structure for the campus by accommodating physical change over time without trying to forecast the details of future projects. In 2005, an update of the Medical Center master plan was completed, encompassing not only the Medical Center Campus core area but also the Wall Street district located nearby, and the East Medical Campus located on the northeast side of Ann Arbor. In 2008 an update of the North Campus Master Plan was completed, which provides a flexible physical framework for the University to coordinate incremental development on North Campus that focuses on four guiding themes: to create strong connections, to promote campus vitality, to optimize development capacity, and to respect and incorporate environmental features into the planning process.
  • Architecture, Engineering, and Construction (AEC) plans and manages the design and construction of new facilities, additions, renovations, and utility and infrastructure improvements. AEC, a division of the Department of Facilities and Operations within Business & Finance, manages the design and construction activities for all University of Michigan capital projects. Through all stages of design and construction, AEC’s project managers select all the consultants, construction contractors, and project leads. One of AEC’s primary responsibilities is to assure that all University projects are constructed in accordance with University and state of Michigan standards for design quality, including the economics of construction and operation. AEC also provides campus and building information, campus maps, planning topics and guidelines, traffic advisories, and information about topics and guidelines for sustainability. A list of current and completed projects is available on AEC’s website; major projects include the North Quad Residential Academic Complex, described in the section on Mission, an addition to the Art & Architecture Building, the Law School Academic Building and Hutchins Hall Law School Commons Addition, a replacement for the C.S. Mott Children’s and Women’s Hospitals, and the Michigan Stadium expansion and renovation.
  • The newly implemented Capital Project Guidelines, which were developed through the University’s Space Utilization Project, strengthen the process through which academic and administrative units on the Ann Arbor campus that are supported by the University’s General Fund may submit proposals for capital projects. The guidelines establish a structured, consistent, and documented process that provides information to units on the steps to follow, information to include in a proposal, criteria used to evaluate a proposal, and what to expect once a proposal has been submitted. The primary goal of this new process is to allow University leaders to review capital project requests at the same time each year, which greatly enhances our ability to make decisions and commit resources to institutional needs and priorities from a University-wide perspective.

Facilities to Help the University Achieve Its Mission

In the section on Mission, we described the new North Quad Academic and Residential Complex, which is an ideal example of the University’s commitment to plan, design, and build innovative facilities that will support future activities and enhance the ways in which we educate our students. Below are two more examples of such facilities on campus.

  • Since opening in 1996, the James and Anne Duderstadt Center has provided faculty and students with a wide array of state-of-the-art tools, technology, and spaces designed for innovative and collaborative work and creativity. The resources of the center are open to faculty, students, and staff. The Audio Studio is a laboratory set up in the style of a recording studio that encourages users to experiment, research, and develop skills and techniques in audio production. Three professional multimedia workrooms are also available. Using high-end equipment, users can edit and audio recordings, convert work from one media to another, and author DVDs, among other activities. The Video and Performance Studio provides a large, flexible space in which faculty, staff, and students can undertake experimental or academic projects that involve research and teaching/learning in the areas of art, music, dance, and film/video. An example is the Animation Station, conceived by faculty members in the School of Art & Design and staff in the Digital Media Commons. The Animation Station, which allows users to make their own short films at a portable kiosk, won the 2009 Michigan EMMY Award for Advanced Media Arts/Entertainment.
  • In January 2009 the Ross School of Business’ opened a 270,000 square feet (~25,000m2) building. The new facility is a 21st-Century structure designed to help catalyze business education by supporting the school’s commitment to action-based learning. It is built to nurture ideas that shape complex, global organizations, and for the people who lead them. In form and function, its design supports the school’s collaborative culture, embodies its commitment to environmental sustainability, and reflects its emphasis on creative imagination toward affairs of the world.

 

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