October 8, 2015 Employee Forum Vice Chancellor Representatives’ Meeting
Attending: Kim Andrews, Phillip Edwards, Matt Fajack, David Fraley, Lori Haight, Shayna Hill, James Holman, Brad Ives, Karen Jenkins, Arlene Medder, Becci Menghini, Kirk Montgomery, Ashley Nicklis, Jackie Overton, Karen Ramsey, Charles Streeter, Carol Tresolini, Ben Triplett, Katie Turner, Felicia Washington
Charles Streeter called the meeting to order at 10:02 a.m. He asked if Matt Fajack if he could speak on the narrative about what has happened and the planning process involved in the Student Stores situation. Fajack said that the Forum’s proclamation on the issue had been premature, as the University has barely begun its analysis. He said that Follett had submitted an unsolicited bid that would produce $3 million plus occupancy costs, which he assumed meant that the University would not charge for rental of the space. The Follett proposal would keep employees on at least a year afterwards, but whether as University employees or Follett employees was not clear. Fajack said that the University did not want to pre-negotiate with one company so it would put out a Request for Proposals (RFP). He was not certain that the $3 million cited by Follett represented an “apples for apples” comparison with current Student Stores budget models. For example, he asked if the company would pay rent or utilities. He said that the best way to address these questions was through an RFP, and possibly an invitation to negotiate. The University will form a committee composed of Forum, Faculty Council, and student representatives to review responses and speak with potential bidders.
Fajack cited three criteria governing the possibility of outsourcing Student Stores: 1) increasing the amount of money available for student scholarships, namely the $3 million offered by Follett versus the $400,000 generated by Student Stores currently; 2) treating employees fairly; and 3) providing a consistently high level of service. James Holman asked if the University had discussed the merits of the proposal with other universities. Fajack said that representatives have discussed the proposal with the University of Florida, Notre Dame, Wake Forest, Kent State, and the University of Virginia, among others. Holman noted that some UNC System schools had reported unfavorably on Follett’s level of service. Fajack said that larger universities have reported good service from Follett, while smaller ones have given the company trouble. Holman asked if the prices of books will be comparable with current Student Stores prices. Fajack said that the price of books would be part of the Request for Proposals.
Shayna Hill asked if the University of Florida had issued a “before and after” report. Fajack noted that Florida had just signed a ten year contract renewal with Follett after an initial five year contract with the company, indicating satisfaction with the service.
Charles Streeter thought that the process for discussing the RFP, when unsolicited, should have gone into a Request for Information (RFI). He worried that the University had jumped the gun in this situation. He said that the Forum wants this question to be approached in a systematic way, and he did not think it had been done this way so far. He said that the Forum asks for a thorough process in which any decision goes through its due diligence. Fajack said that the University can say ‘no’ to an RFP. He noted that the University can put in an RFP in this situation.
Streeter said that the Forum had passed its proclamation regarding privatization, drawing upon what had been agreed twenty years ago. He said that the precepts of the proclamation were not new. He also said that if the University proceeds in a fast matter regarding Student Stores privatization, he would have to respond with full force in his position as representing the Forum and the staff of the University. At this point, the Forum is not in favor of this effort and could not fully support the administration. He said that the Forum wants to know the issue from “A to Z,” understanding the problems and reasons for decisions. He said that now there is a lack of understanding as to why this is being done. He requested statistics and numbers to back up decision-making. He noted his job representing staff at the University in these difficult conversations, noting that a loss of fifty jobs to privatization would be huge.
Brad Ives said that Forum delegates are welcome to review the RFP and accompanying numbers. Kirk Montgomery said that a full analysis of the Follett proposal led to finding that the $3 million promised would instead result in only $100,000 realized by the University. Ives said that the $100,000 figure is only for book scholarships, not for academic scholarships. Fajack said that the RFP will avoid some costs such as administrative service fees for some employees. The RFP will begin the “apples to apples” comparison about what would be gained and lost. He said that Follett is likely to agree to any guarantee of retaining student workers, as they are typically cheap to employ and are good workers. Fajack observed that it sounded like Streeter believed that the administration had already made a decision on this question. Streeter said that the Forum had never referred to the decision as already having been made. Instead, he raised questions about whether the process for consideration of this unsolicited bid had been circumvented.
Ives drew a parallel with a family receiving an unsolicited offer on their house. In this analogy, the homeowners would need to do due diligence to insure that selling made sense. He said that administration officials have scheduled meetings with groups like the Forum to provide a heads up about the process. Streeter said that the RFP needed to be made clear that the University was still in its planning stage. Katie Turner said that the administration needed to take the Forum’s proclamation and resolution seriously. She said that the resolution was composed of a list of concerns from current Student Stores employees. She recalled being at the University of Florida when Fajack was on the administration there, and she did not want the same level of anxiety there to distress employees here in Chapel Hill. She noted that the Forum had voted unanimously in favor of the resolution and so desired a direct response to the concerns within. She hoped that the administration would appoint someone who could supply Student Stores employees with clear answers about severance and timeline questions. Turner also noted questions about whether a privatization effort would fail, similar to the situation in which Xerox was brought to take over UNC Printing, only to depart campus a few years later.
Fajack said that administration officials have met every two weeks with Student Stores employees. He noted that these employees have requested separate time with Human Resources officials, which will occur. He said that there has been no done deal to privatize Student Stores. He regretted the anxiety that has occurred, but said that it will take at least a year to evaluate possible bids for the service.
Katie Turner noted that Student Services employees have signed up as State employees for the protections involved. She said that they do not want a change in their jobs imposed from above. Ives said that he had been in meetings in which everyone involved had lost their jobs at once. He asked what the University should do to process this offer from Follett. He said that the figures involved make it a necessary decision, as Student Stores and the Bull’s Head Bookshop each have seen revenue drops from peaks five years ago. He granted that these stores exist in a very competitive environment versus enterprises like Amazon. It was observed that trying to squeeze blood from a turnip seemed silly. Ives said that statistics showing a drop in revenue are not silly. He was not blaming employees for this revenue drop but he said that things must change. As a comparison, he noted that UCLA is earning $1250/student from its various enterprises whereas UNC-Chapel Hill earns only $850/student. He said that other universities also earn more per student than UNC.
Ives said that the University does not have the expertise to manage its Stores most effectively. As an example, he noted that the prime entry location for patrons near the escalator is currently dedicated to graduation gowns, a once every four year expense. He said that if the University retains Student Stores’ opposing proposal, the University must hire expert consultants to find ways to increase revenue. He granted that everyone loves the Bull’s Head Bookshop, but said that losses such as $100,000 on $750,000 sales are not sustainable in today’s rough competitive environment. The University must do something different in this area.
Turner asked if these things could be fixed. Fajack said that the power to make retail changes lies with Student Stores management. Carol Tresolini observed that this situation seems to be a process in search of a problem. She observed that the expected and typical approach when there are problems is to first have discussions with employees about any problems and engage in efforts to solve the problems rather than beginning with a solution to a problem that people were not aware existed and therefore had not had sufficient opportunity to address. Fajack observed that Student Stores now contribute $400,000/year to student scholarships, a number that could increase to $3-4 million/year according to Follett. The University is in the process of evaluating this claim. He emphasized that the privatization proposal does not mean that Student Stores are doing a bad job. Instead, this represents a question of resources. The University does not have layout specialists, capital, or the expertise to run Student Stores as profitably as it could be done. He said that the University will look out for these employees, possibly not as State employees, but in the best interests of the University. He noted that there had been outsourcing that had occurred with Aramark food services, the Carolina Inn, and other campus enterprises. He did not undertake this study lightly, but said that campus stores in this environment are difficult to run as profitably as a corporation like Follett might run them.
Kathy Ramsey asked if the administration could make statistics available Ives described. Ives said that these are available but with limitations. He said that the University had compiled a huge book on Student Stores and possible alternatives, but some of this data is restricted as contributors do not want to be subject to the open records laws. He said that Student Stores Director John Gorsuch has this data.
Phillip Edwards asked the extent to which campus administrators have reached out to independently managed campus bookstores to obtain best practices information. He noted that the University of Washington had retooled its layout and space complements to increase revenue. He asked if these stores could contribute to the discussion in a meaningful way. Ives said that Gorsuch had studied textbook buyback practices at such institutions. The administration will try to really be thoughtful in evaluation of these ideas. Ives noted that he only has one partial full-time employee to study these questions on staff.
Turner was skeptical of claims that the University does not have money available to hire consultants to improve Student Stores as it has hired consultants in many other areas recently, such as policies and practices, athletics, and sustainability. Ives said that changing branding will require far more than a short-term consulting relationship, costing upwards of $250,000 to accomplish this task. Turner said that removing Student Stores employees from the State system was equivalent to laying them off, as they would lose years of pension and other benefits. She noted that until recently, it had taken State employees ten years to vest into the State retirement system. Ives said that the University could possibly include retirement vesting and other benefits in the eventual final plan if deemed necessary. He stressed that the University must run Student Stores as efficiently as possible. He said that consultants must make difficult decisions and that the University must do something big and different in this area, perhaps internally or not. Kirk Montgomery asked if these employees could remain State employees as part of the eventual contract. Fajack said that the University would consider this option, but would also need to consider the eventual cost of this option. James Holman suggested a provision that Student Stores employees be kept on as State employees for ten years.
Lori Haight asked if the administration had ever used alumni consultants who might be encouraged to provide a discounted rate given their relationship with the University. She suggested searching the alumni databases for this information. Fajack said that not many alumni offer discounts for this level of service. Ives mentioned the Kenan-Flagler Business School as a possible source for marketing expertise. Haight underscored that expert alumni might be proud to form a connection with the University for this purpose.
David Fraley noted a previous relationship between Follett and the University which had ended poorly. Fajack said that the University’s experience with Follett’s wholesale operation was not very good. He said that Follett must overcome this reputation when presenting its retail proposal to the University.
Shayna Hill thought that the administration had set mixed messages about the research of different proposals versus the readiness for action in this area. Ives said that the University has not yet issued an RFP but had researched the question. He planned to make several site visits to learn how other peer institutions have handled this issue. He worried that Hill was implying that there was something improper about the administration’s actions to this point. Hill noted concerns that the RFI should have been issued publicly to this point. Ives said that in a recent software contract change negotiation, he had been forced to not enact a clause in order to prevent prolonged anxiety among employees. He said that the administration did not want to issue an RFI without talking with employees first.
Jackie Overton said that this question is not a matter of “us versus them.” She said that attendees should work to obtain a meeting of the minds. She also said that contextually, long-term employees learned two weeks before Student Stores employees of the existence of the proposal through a campus listserv. She noted that Fajack had sounded very flip in a story with the Daily Tar Heel on the Student Stores question. Fajack said that he had repeated a question asked by a reporter and had been quoted for his repetition. Overton said that the overall effort must be to engender trust in a difficult process. She noted that a few years ago, the University outsourced Printing Services, an enterprise that recently went bust. She said that University employees and Printing Services employees were assured that privatization was the best way to handle the department’s problems, and that the University had done its due diligence. She said that the Forum’s actions may seem premature, but in the light of previous promises made, an argument can be made that privatization is not in the interests of staff.
Ives said that Xerox had overbid on its contract for Printing Services. Overton added that Xerox had over-promised and under-delivered. She said that staff are not saying don’t do due diligence on Follett’s offer. She granted that Fajack and Ives have jobs to do. She said that staff want transparency and every consideration for their jobs. Streeter said that staff did not like that the University had cut crew leaders’ positions but did not raise Cain over the question because the argument was well made. He said that the purpose of the Forum’s resolution and proclamation is not to lambaste administrators or the Administration, but rather to clarify the problem and find ways to come to a resolution.
Turner asked for reassurance concerning the University’s recent advertisement to hire a layoff specialist. Felicia Washington said that given the context of the on-going Student Stores discussion on campus, that when she saw the posting of the orientation/layoff specialist position, she wished that a different working title had been chosen for that existing position. She said that the orientation/layoff specialist position has been present at the University for at least five years, but two employees who held the position had recently departed for promotional opportunities on campus and outside of the university. She said that the position was definitely not posted with Student Stores in mind.
Turner also asked about the division of Continuous Improvement in Finance and Administration and whether it had anything to do with Student Stores. Fajack said that this division was the result of a reorganization of duties in Finance and Administration. Turner asked about the drafting of a memo of restructuring. Fajack said that this had to do with PeopleSoft and its effect on campus operations.
Turner asked about the timeline for the RFP. She asked the RFP contain services will be expected, with a detailed, nuanced approach to the process. Ives said that the administration had initially hoped to complete the process by the end of the calendar year. Now, administrators realize that advanced timeline is rash. Instead, there is a February, 2016 window, in order to meet concerns about the May book rush.
Streeter asked the administration to appoint two Forum representatives in the review process. David Fraley noted that there should be two Student Services representatives also. It was noted that John Gorsuch is set to be the Student Stores representative. Turner noted concerns that since Gorsuch is an SPA exempt employee, he would not have the same protections as another, SPA non-exempt employee. She said that there is a fear that Gorsuch may not have the same liberty to advocate strongly on behalf of employees. Fajack said that the administration will consider the request.
Arlene Medder asked if the costs of the Student Stores renovation would be included in the RFP. Ives said that tax-exempt debt must be defeased if that debt is taken over by a private company. He said that there are financial mechanisms to accomplish moving this attachment off the building. This will be part of the process of normalizing the numbers between the different proposals to create an “apples for apples” comparison.
Karen Jenkins asked about the rumor that other departments are being considered for outsourcing. Fajack said that he did not know of any being considered offhand. He said that while at the University of Florida he had a duty to look at outsourcing that University’s parking services following the Ohio State University’s lucrative deal in that area. However, a similar deal did not make sense for the University of Florida. Ives said that UNC-Chapel Hill’s AAA bond rating allow it to borrow cheaply, leading it not to move debt around to borrow at a cheaper rate. Fajack reiterated that there had not been any look at outsourcing of any sort.
Fajack noted an article on professional outsourcing, following on the Tennessee Legislature’s move to outsource all the grounds and maintenance positions at the University of Tennessee. He noted that Governor Pat McCrory had University administrators in for a briefing on this initiative.
Streeter thanked Fajack and Ives for participating in this difficult conversation. He reiterated that the Forum will challenge the administration if needed, but only if the arguments for a position are not strong. He said that the Forum did not mean to attack anyone personally, but rather sought to tackle the issue itself. Fajack said that the goal for all is to do as well as we can.
In the absence of further discussion, the meeting adjourned at 11:04 a.m.
Matt Banks, Recording Secretary