Are You In or Out?
- By Amy Milshtein
- November 1st, 2010
It’s a no-brainer, right? If a school self-runs their auxiliary services, like the bookstore or the food service, they reap 100 percent of the earnings and wield 100 percent of the control. But wait; they also inherit 100 percent of the responsibilities, costs, and headaches. So maybe outsourcing is the better answer. Let a professional handle the buying, staffing, and operations while your school sits back and collects a profit. Except it’s never as easy as all that. What’s the right answer in today’s challenging economy? The choice is as unique as your school.
“Neither is inherently right or wrong,” insisted Patty Eldred, director of AFS auxiliary services for the University of Vermont. “The choice can’t be emotional. Instead it must be a data-driven decision that provides the best service in the most fiscally responsible manner.” Eldred draws from a variety of examples on her own campus. The food services have been outsourced for the last 50 years, while their bookstore is self-run with a third party that helps with their Web operations. That hybrid solution also works for their in-house print shop. “We contract with a local printer for big, four-color jobs,” she said.
This mix-and-match option can be found on most campuses. “The standard answer is that you must deliver services in the most efficient and effective way,” said Dr. Bob Hassmiller, CAE, chief executive officer, National Association of College Auxiliary Services (NACAS). “Outsourcing means you are buying valuable expertise from organizations that have national reach, tremendous training programs, and cutting-edge technologies and services.”
Looking at the Advantages of Outsourcing
That’s just what Sam Wheeler, executive director of auxiliary business services, University of Arizona, did when he outsourced his school’s digital document services program. “We have an enormous campus, 70,400 students, and 7,000 copiers and printers to serve them,” he said. “It just wasn’t sustainable. Some of our equipment was 15 to 20 years old.”
An RFP was sent out and Canon Business Services won the contract. They will run 100 percent of the business, providing the University with 2,000 to 3,000 new, energy-efficient, multi-use machines. Yes, that’s considerably fewer, but this up-to-date equipment is faster, reliable, and efficient. They also took over the repair team and bought their fleet of maintenance vehicles. Canon will maintain the infrastructure and replace machines when they are outdated. “It’s almost like working with a utility,” said Wheeler, “We get state-of-the-art equipment and without a capital outlay. Eventually we will see a profit as well.”
New equipment is one reason outsourcing remains attractive. Staffing is another. “Sodexo (the food service giant) employs 500 workers for our dining services,” said Mark Kraner, executive director of retail operations, George Mason University, Fairfax, VA. “That would be 10 percent of our on-campus workforce if we had to employ them.”
Private workers often are cheaper to employ. “The pay is usually the same, but colleges typically offer a very rich benefits package,” said Hassmiller. They can also be easier to hire and fire, according to Kraner. This allows schools to focus on what they are experts at: educating students.
“The benefits of outsourcing are great,” said Jeff Pittman, Ph.D., vice president of Student Services, Regent University, Virginia Beach, who wrote his dissertation on the topic. He noted that in the last five years states have been offering less and less support to their schools, which makes outsourcing more attractive. “The economies of scale are hard to beat. There’s no human resources to worry about, no paperwork; but that doesn’t mean you can just sit back and collect the profits.”
In or Out, People Matter
Pittman emphasized that even though a bookstore’s or cafeteria’s employees and managers see a different name printed on their paychecks, they must be treated as equal team members. Eldred agreed. “Outsourcing doesn’t relieve you from the responsibility of understanding the business or building a relationship with the employees,” she said. “You must be fully engaged with the contractor at all times. They must understand what you need and want, and your job is to make sure they deliver.”
That relationship makes or breaks a successful partnership. “In my experience you can have two schools within 15 miles of each other using the same contractor and have completely different outcomes,” said Hassmiller. “Usually the school that treats the managers like valued team members has the best relationship with the contractor and the best overall experience.”
Customer Focus is the Bottom Line
Ultimately the most important relationship is the one with the student/customer. “Follett may operate our business but it’s still a Regent University bookstore,” said Pittman. “If a customer has a problem, it’s our problem.” Sometimes to best serve that customer a school needs to self-operate auxiliaries. “It comes back to the core mission of the school,” said Kraner. “If you want full control, then self-op is the way to go.” Kraner pointed to the University of Wisconsin, Au Claire, or Yale University as examples of schools that recently brought their food service operations back in-house.
Eldred enjoys the control of self-operating the college bookstore. “It allows us to price in a way that’s fair to the student,” she said. “We have very little mark-up for essentials like textbooks or software or pens, but higher margins for discretionary items like T-shirts.” Any surplus that’s generated goes back into a general fund for operating costs.
That general fund can be a blessing or a curse. If a school runs an auxiliary like a successful business that means some monies are allocated for improvements and renovations. But those reserves can have hungry administrators licking their chops. “In today’s economy that fund might be raided,” said Hassmiller. This can leave an auxiliary without the means to remain competitive, causing a downward spiral.
Hassmiller admitted that there are no clear statistics on how many schools are presently outsourcing. “It’s a moving target,” he said. “There are too many different hybrids going on. For instance, a school may self-operate their bookstore but use Follett software to manage it.” They may also become their own contractors.
A Shared Service Model
As is the case of the University of Missouri school system. They have been using a shared services model that allows five different campus bookstores to collaborate and achieve annual sales of $60M. “It’s the best of both worlds,” reported Jeffrey Zeilenga, Ed.D., assistant vice chancellor for student affairs, University of Missouri. Negotiating the pitfalls of bringing five campus bookstores under one management umbrella is a unique story that College Planning & Management will look at in depth next month. “I didn’t realize the outcome would be so beneficial,” he said. “It has me thinking about other partnerships we could form around the state.”