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Making the case for reengineering

We are now beginning to redesign MIT's administrative processes. As we get started with this second phase of our reengineering work, it is important to remind us all why we must undertake such a difficult task.


There are three primary reasons. First, our administrative processes have become complex as they evolved over the years. Second, these processes often do not provide the timely, high-quality results needed by faculty, students, staff and sponsors, even though everyone involved in the processes works hard. Finally, our operating budget has been out of balance, with our costs exceeding our income, for many years. More recently, the size of these annual operating gaps has grown, requiring the Institute to deplete other funds in order to close the gaps.

In redesigning our administrative processes, we seek to simplify our work, to improve the quality of the administrative services that support the Institute's fundamental mission of teaching and research, and to restore balance to our annual operating budget. Reengineering means changing the way we work-what tasks are performed and how information flows-across functional areas and departments. Reengineering MIT's administrative processes will not affect what and how we teach or how we conduct our research.


Our efforts to reengineer MIT's administrative processes are guided by seven institutional objectives set forth by President Charles M. Vest and Provost Mark S. Wrighton. Most recently stated in the March issue of the Faculty Newsletter and in the April 27th edition of TechTalk, these objectives include:

  • maintaining MIT's position as the leading academic institution focused on science and technology
  • maintaining merit-based admission and need-based financial aid for undergraduates
  • tempering the rate of tuition growth
  • ������enhancing the diversity of our community
  • fully supporting academic year salaries for faculty
  • ������maintaining competitive salaries, and
  • ������maintaining sufficient flexibility to take advantage of new ideas and opportunities advanced by the faculty.

Our ability to make major progress toward these objectives is limited by our fiscal constraints.


For many years, MIT has had a gap between annual income and expenses. Between fiscal 1975 and 1993, a total of $117 million was required to fill these annual gaps. The bulk of these monies, some $90 million, came from unrestricted gifts that were spent in the year they were received. If there had not been an operating gap, these gifts could have been used to build our endowment for professorships and financial aid, as well as to support new initiatives in teaching and research.

From 1975 to 1988, the average annual operating gap was $4 million. Since 1989, the average annual operating gap has been $12 million. In fiscal years 1993 and 1994, to close the operating gaps, we have spent current year unrestricted gifts and other funds. We have also had to decapitalize some unrestricted funds that were set aside in prior years to function as endowment. If we do not reverse these trends, more than $100 million will be required to close operating gaps between 1994 and the turn of the century, a period of only six years. About half of this funding would have to come from decapitalizing funds functioning as endowment. Such a move reduces income available from those funds that would support operations in future years.

To avoid such a scenario, and we must avoid it, the Institute must dramatically reduce annual expenses or increase income. However, external forces limit our opportunities to increase income in the years ahead. For example, U.S. research spending is growing at a much slower pace than in earlier decades. Regional economic development considerations may play an increasingly important role in funding decisions by research sponsors. At the same time, the federal government is pressuring the nation's research universities, including MIT, to reduce what we charge for the indirect costs associated with research. In addition, concerns by students, their families, and their prospective employers about the costs of education constrain the rate at which we can increase tuition.

Without significant increases to Institute income, it is estimated that we will have to reduce expenditures by some $40 million a year to eliminate the operating gaps that are forecast for upcoming years. (This figure takes into account decreases in indirect cost recovery that we will experience.) We must reduce our annual expenses by this amount over the next few years. We are committed to get there in a way that will simplify our administrative work and improve our services. If we just make budget cuts without also changing how we do our work, we will soon find ourselves back in financial difficulty. This is exactly what happened after the budget reductions that were made in the 1970s and 1980s.


Reengineering our administrative processes is one of several efforts to ensure that the Institute responds effectively to the situation and that the Institute's strengths and excellence endure. Some of the other efforts are:

  • a committee chaired by Prof. Merton Flemings, examining MIT's relations with industry
  • ������a blue ribbon panel studying healthcare options at MIT
  • ������Sloan School restructured to provide 25% more capacity to enable new educational and research programs and increase the quality of student services
  • ������Consolidation of administrative services in the School of Architecture
  • ������a recently completed study recommending improvements in the cost and effectiveness of campus mail services
  • ������the publications services review group's assessment of the Institute's printing needs in light of changing technology
  • a study of the academic appointment process, recommending that the Institute's appointment processes be redesigned.


In reengineering administrative processes, we aim to simplify the way we conduct our administrative activities and to increase the satisfaction of the people for whom we provide services: the faculty, students, sponsors and other staff. By simplifying our work, we will also significantly reduce our costs.

We are ready to begin the next phase of the reengineering effort and are determined to succeed. There is a bright future for work, study and research at the Institute. It can be a future freed of bureaucratic entanglements, where the best faculty, students and staff work together with adequate funding and tools, as national leaders, not only in research and in teaching, but in how we run our institution.

William Barton Rogers' vision for MIT must live on. MIT must continue to be an independent educational and research institution addressing the challenges of the nation and the world. It is up to us to protect and promote this vision of MIT as a powerful magnet for intellect and creativity, with an emphasis on the pragmatic and the practical. We must work together in the coming months so that our Institute community can define the leading edge of human knowledge and invention for the twenty-first century.

A version of this article appeared in the June 29, 1994 issue of MIT Tech Talk (Volume 38, Number 37).

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