LHE: A New Mindset for Success in Turbulent Times

LHE offers a new mindset to support the execution of a university’s strategy for differentiation and competitive advantage in the turbulent marketplace of higher education.¹¹ Senior leaders, regardless of portfolio, may resonate with

Table 8.1 Benefit Realization Spreadsheet: Example

Source: Adapted from Lawrence and Cairns (2017).

one or more of the powerful insights the LHE approach offers to improve and thrive in the future.

Cost Reduction is the Goal. Significant tuition increases over and above the general inflation rate (and growth in family incomes) had been the solution to generating the resources needed to balance a university’s budget after all the costs associated with a quality education were folded in. That time has passed with few sustainable alternatives available (i.e., most institutions cannot recruit an increasing number of out-of-state or international full-pay students or establish a multibillion dollar endowment to significantly underwrite the institution’s budget in perpetuity). Cost reduction is the goal in today’s higher education market where the price of higher education must be controlled, the historic pipeline of traditional students is declining, and the number of full-fee pay students is limited.

LHE transforms the historical business costing model (Selling Price = Cost + Profit; relabeled here with educational terms):

This simple altering of the equation focuses thinking and effort on the reduction of actual cost to free up extra revenue for new initiatives, investments in faculty, investments in teaching and research facilities, internally funded financial aid for students, and so on.

Figure 8.1 provides a visual representation of the LHE cost reduction goal (holding enrollment constant). Panel 8.1a shows the historical, but no longer viable, “cost-plus” scenario, where costs escalated each year and were simply passed along to those who paid for higher education (e.g., students, parents, employers, state legislatures). Today’s reality is better reflected in Panel 8.1b, where external forces have frozen, or constrained increases to, the total funds available to universities (e.g., zero increases in higher education funding from legislatures, limits in student and parent resources, limits in employers’ professional development budgets).¹³ In this scenario, the lack of control on costs results in no funds to innovate and invest by Year 3 and increasing budget cuts in Years 4 and 5 to avoid deficit spending (while hoping for a return to the scenario in Pane 8.1a). In contrast, Panel 8.1c demonstrates the LHE cost reduction goal: continuous improvement to remove waste and impediments to flow from university processes as desired by beneficiaries that also result in reductions in cost, including both cost savings (i.e., reduction in present resources used) and cost avoidance (i.e., avoiding the expense of additional resources). As costs decrease, the amount of extra revenue for innovation and investment actually increases, and the university can make its compensation more attractive (recruiting the best faculty), invest in new academic programs (to grow enrollment), innovate in the area of student support (to improve student academic and life success), invest in teaching and research facilities (to differentiate itself from others in the marketplace), and so on. Finally, Panel 8.Id depicts how cost reduction could be used to lower the cost of higher education, making it more affordable without compromising the institution’s ability to innovate and invest for the future.¹⁴

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Figure 8.1 Visual representation of the LHE cost reduction goal, (a) "Cost-Plus" scenario. (b) "Constrained Funding" scenario, (c) "Expense Reduction Through Elimination of Waste and Impediments to Flow" scenario, (d) "Cost of Higher Education Reduction Through Elimination of Waste and Impediments to Flow" scenario.

Figure 8.1 (CONTINUED) Visual representation of the LHE cost reduction goal.

(a) "Cost-Plus" scenario, (b) "Constrained Funding" scenario, (c) "Expense Reduction Through Elimination of Waste and Impediments to Flow" scenario, (d) "Cost of Higher Education Reduction Through Elimination of Waste and Impediments to Flow" scenario.

LHE’s goal of cost reduction, reflected in Panels 8.1c and d, is realized through the application of LHE principles and practices and Lean tools discussed in this book and shown to be effective in delighting beneficiaries, empowering employees, and reducing costs.¹⁵ Students benefit from LHE cost reduction efforts as well. LHE activities that improve the availability of undergraduate offerings to be better aligned with student needs (while freeing up employee time), create “intrusive” academic advising to reach more students earlier in their studies so that students take the appropriate courses required to satisfy graduation requirements (funded by the reallocation of employee time), and create a streamlined process for academic program review that improves course content and delivery as well as student learning and course pass rates (while freeing up faculty time) reduce student costs through better retention, persistence, and 4-year graduation rates.¹⁶ In addition, reduced student borrowing (cost avoidance) and entering the workforce earlier (revenue generation) are additional benefits that can accrue to students through LHE. These financial benefits (cost reduction, cost avoidance, and revenue generation) for students would be of great interest to families and employers (who may assist with educational fees), governing boards, and accrediting and oversight bodies. Last but certainly not the least, LHE engages employees in improving processes that have frustrated them (and students) or wasted their time, invests in their professional development and growth, respects their knowledge and skills, enriches their jobs, and improves their satisfaction.

One important caveat: LHE is not a cost reduction program.

While cost reduction is one metric when LHE is used to improve university processes, LHE is not a cost-reduction program.¹⁷ LHE’s important commitment to a “no layoff " policy means that freed up human resources following the application of LHE are not eliminated but rather reassigned, that is, they create a productivity gain for the university without an immediate reduction in personnel costs. For example, if a RIE results in the need for two fewer professional academic advisors due to the reduced waste and improved flow in the academic advising process, the productivity gain of those two employees will not be realized until student enrollment grows (tuition revenues increasing without any additional costs for academic advisors), the advisors are reassigned to other responsibilities (e.g., a related new or vacant position within the university, offering a new service of strategic value to the university, or insourcing a job that is currently being performed by an outside vendor or consultant), or they fill positions vacated due to natural attrition (e.g., retirements or resignations).

Overall, LHE initiatives create productivity gains that will reduce costs (here, personnel costs, but it could be space, operating budget, etc.) through management’s reallocation of excess staffing that converts these gains into savings for the university. Furthermore, productivity gains through cost cutting can also result in revenue generation (e.g., simplified processes in the research services office can result in more grants by faculty, shortened degree approval processes can result in quickly adding student enrollment in new programs in high demand), providing both new revenue and reallocated resources to support the university’s mission. Cost reduction, cost avoidance, and revenue generation through LHE can provide significant benefits to the financial health of a university while also improving the experiences of beneficiaries and employees.

Accepting the Challenge of “Doing More with Less.” A traditional lament in times of belt-tightening in higher education is “doing more with less:” working people harder to accomplish the same outcomes and deliver the same processes and services despite fewer resources (i.e., current employees are assigned additional tasks and responsibilities due to layoffs or unfilled positions). Assuming the process is critical to one or more beneficiary and must be maintained, reducing labor costs and reassigning the work is a typical response to this scenario.¹⁸ In the long run (and possibly the short run), however, it is likely that the value of the process delivered to beneficiaries deteriorates because the process may take longer, response times to emails or phone calls may be longer, lines may be longer, etc.

This traditional “doing more with less” approach is unsustainable (and antithetical to the LHE principle of “respect for people”).

LHE, in contrast, embraces “doing more with less” as integral to its problem-solving approach: engaging employees in the continuous improvement of the process using fewer and fewer resources while delivering more value to the beneficiaries.¹⁹ The Lean problem-solving approach evolved at Toyota in response to the limited resources available to manufacture automobiles following WWII in a low-growth period with a limited population of buyers desiring different types of vehicles and features - impossible to accomplish using mass production techniques. The continued evolution of Lean to nonmanufacturing and higher education processes makes it particularly applicable to the low-growth period facing higher education. Eliminating unnecessary steps, errors, signoffs, paper copies, etc. reduces the cost of the process, with saved employee time reallocated to other critical processes (and, over time, a reduction in personnel costs due to the natural attrition of the workforce due to voluntary resignations, retirements, and so forth): More value provided, less resources used and employees respected.

In fact, LHE activities (RIE, Just Do It, 3C, etc.) typically presume there will be no additional resources.²⁰ The unavailability of additional resources sparks creative thinking and brainstorming to generate more innovative LHE solutions, both improving the process and enhancing the professional development and growth of participating employees. Importantly, LHE identifies where resources (people, operating costs, space) are overcommitted in a wasteful process, allowing the university to reallocate as needed once the improved process is in place. This targeted approach avoids nonstrategic across-the-board budget cuts while improving the value of the process to its beneficiaries.

Built for Speed. Bob Emiliani created a wonderful graphic depicting the 12 positions of time around the face of the clock in higher education as months of the year rather than the hours of the day. The graphic visually captures what is perceived inside and outside the academy: university time, including its processes and ability to change itself, moves too slowly.²¹ While shared governance and institutional structures intentionally designed to prevent the hijacking of the curriculum by external fads or political influences contribute to slow and deliberate processes, these and other processes need to be more agile to respond to necessary and appropriate change.

LHE as a framework is designed to be fast and nimble, with individuals (e.g., Just Do It, 30 and groups of employees (e.g., Lean Stand Ups, RIE) empowered to quickly implement, test, and adopt improved processes;

checklists for consistent work; more efficient use of office spaces; and so forth. In 3-5 days an RIE team implements improvements within the scope of its authority, in stark contrast to a more traditional higher education committee or task force that studies the issue from a distance for a semester (or some other natural academic period of time) and proposes a set of recommends it has no authority to implement. LHE allows employees to make improvements to processes and advocates ongoing continuous improvement to avoid the calcification of less-than-perfect processes over time. For example, in a traditional university, professional academic advisors have no authority or mechanism to improve the scheduling of academic advising during heavy advising periods, with any changes more likely implemented by their supervisors in response to complaints passed along from the Office of the Provost rather than a deep understanding of the process and the expectations of the beneficiaries (students, advisors, academic departments, college offices, etc.). Contrast this situation to significant advisor-driven changes to the student advising process (e.g., “drop in” advising) implemented at the regional college of Bowling Green State University following a multi-week (intermittent schedule) LHE team using structured problem-solving tools (see Chapter 3). LHE is better aligned with the need for faster and regularly occurring change, whether it be by faculty members improving their teaching materials, an academic department updating its curriculum, a college improving its faculty onboarding process, or the division of academic affairs informing colleges of its allocation of new faculty lines sooner.

A Comprehensive, Integrated, and Proven Problem-Solving Approach. Traditional problem-solving approaches used in higher education to improve processes vary but may be limited by one or more of the following:

■ The absence of a systematic process for identifying which university processes should be improved first (e.g., a complaint to the Office of the President, rather than the frequency of a process or the strategic importance of the process, focuses attention on this targeted process)

■ Supervisors over the process are charged to fix the process, and the supervisor assumes responsibility - with some limited input from their employees - for choosing and implementing the best solution (even if the root cause to the problem is not fully understood)

■ Different supervisors and their employees use different problem-solving approaches to improve processes, and the problem-solving approach used by the same supervisor and their employees to improve processes may vary over time

■ Where a common problem-solving approach is used, it can change over time to reflect popular trends (e.g., new books, new leadership)

■ Consultants may be engaged to perform specific tasks (e.g., identify which process to improve and recommend solutions), and the report is turned over to someone inside the university (who lacks a full understanding of the process) to implement.

In contrast, LHE provides a comprehensive, integrated, and proven problemsolving framework to increase the value (i.e., what beneficiaries expect) and performance (i.e., based on performance metrics defined by the university) of university processes. Training, facilitated experiences, and ongoing mentoring on LHE applications discussed in Chapter 5, supported by a flexible set of LHE tools, work together to provide a clear approach to:

■ Choosing which process to improve

■ Understanding, diagnosing, and improving the process

■ Implementing and sustaining the improved process

■ Ongoing continuous improvement of the process.

In addition, LHE actively invites all employees to develop and apply their LHE skills and experiences to the processes in which they participate (as providers, beneficiaries, or both), building on their knowledge of the process and ideas they have had for a long time on how best to improve it. The results are continuous small and large improvements to an expansive number of university processes, including those prioritized and targeted by university leadership. Overall, LHE offers a comprehensive, integrated, proven, and sustainable problem-solving approach practiced throughout the university by all members of the university to create a true learning organization.

The Cost of Not Being Lean. Although the review of higher education practices in Chapter 1 failed to do so, we leave the door open to alternative university-wide approaches to improving universities that are comprehensive, integrated, proven and sustainable and will result in true learning organizations. While awaiting future developments in organizational development and change practices, Table 8.2 lists a number of potential costs to the university by being “un-Lean.” While perhaps some (or many) of these forecasted ills are unlikely at your university, contemplating the likelihood of each and your estimate of its potential impact (cost, sustainability, morale,

Table 8.2 Cost of Not Being Lean

culture, etc.) on your institution is worthwhile. You might realize, or you might help senior leaders realize, that the cost of not being Lean may be quite significant.

Organizations, in comparison to organisms, are not as well integrated to maximize the efficiency of their system. “Organizational slack” refers to resources available to run an institution in excess of what is needed to operate at a high level of efficiency; these extra resources are consumed by imperfect organizations to cover inherent inefficiencies (e.g., advising sessions that are unfilled, unnecessary and poorly run meetings). Costs associated with being un-Lean may consume a significant portion of the organizational slack in your university, providing the impetus for a discussion among senior leaders: How can we capture these wasted resources - especially the failure to use the full potential of our greatest resource, employees - and redirect them toward fulfilling the mission of our institution? LHE offers a well-developed approach for doing so.

Some Closing Comments on What Senior Leaders May Desire – But LHE Cannot Provide

We have discussed the number of benefits senior leaders can expect from the successful implementation of LHE. But there are some outcomes senior leaders may also desire that LHE cannot promise.²² For example, senior leaders may desire that the university-wide transformation to LHE will

■ Be implemented quickly with minimal resistance

■ Require minimal engagement on their part

■ Have an immediate impact on the university’s performance and finances

■ Be successful.

In reality, like any institution-wide change initiative, LHE will take time. It will change how all employees contribute to improving the value and performance of university processes, with significant change to the traditional roles of managers and supervisors. LHE will require significant commitment on the part of senior leaders to learn, use, and advocate for LHE. LHE will take time to unfold across the institution, and while immediate improvements to processes can be expected, financial benefits may take longer to fully materialize. Finally, while there is ample evidence supporting the effectiveness of LHE, its level of success may be influenced by a variety of factors, including how it is introduced and implemented across the institution. These potential challenges to the university-wide implementation of LHE are addressed in the next section.