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Vest Answers Questions about Re-engineering

By Jeremy Hylton and Sarah Y. Keightley
Staff Reporters

At a town meeting on Wednesday, President Charles M. Vest and other senior administrators reviewed the progress of the Insitute's re-engineering effort and answered questions from employees in attendance.

The re-engineering effort was started about two years ago to correct the Institute's growing budget deficit. Re-engineering is intended to simplify and improve the Institute's administrative and support efforts and to reduce the cost of these programs.

Most of the questions at Wednesday's meeting related to employees' concerns about how re-engineering will be implemented - and how and where the Institute will reduce its workforce to reduce the budget deficit.

The meeting, held from noon to 2 p.m. in Kresge Auditorium, began with prepared remarks from Vest, Senior Vice President William R. Dickson '56, and Vice President for Information Systems James D. Bruce ScD '60, project manager for re-engineering.

Provost Mark S. Wrighton also served on the panel of administrators.

Dickson described re-engineering as the fundamental rethinking of what the Institute does, a radical redesign of support services, and an opportunity to achieve dramatic improvements.

Questions about downsizing

The most pointed questions of the afternoon came during the morale and personnel discussions. Audience members asked how many jobs would be eliminated as a result of re-engineering and where and when cuts would come.

Vest said that more than 600 jobs would probably be eliminated during re-engineering, based on reports from individual re-engineering teams. Vest had originally estimated that about 400 jobs would be cut, but at Wednesday's meeting he emphasized that the original estimate had been rough.

The cuts will come over a three to four year period, Vest said, but he could not be more precise about when and where the cuts would come.

However, Tuesday's announcement that the Office of Laboratory Supplies will close on July 1 seems to be an indication that cuts will be made as they are identified by re-engineering teams.

Despite the closure of OLS, "It's unlikely that entire operations will go away," Dickson said. "It's an unusual case."

"I don't know where" the cuts will come, Dickson said. "If I did, then we could stop all of this and just do it."

Vest also noted that changes in research funding could have an effect on the size of the staff that would be independent of re-engineering. For example, there were "two very significant down-scalings at Lincoln Laboratory because [federal] sponsors cancelled the programs," he said.

Though the size of the administration and support staff will shrink, Vest said that he did not expect to reduce salaries. "Over the past three years, we have tempered the cost of salaries and increases we have given. Those increases will continue to be modest at best," Vest said.

Questions on four issues

The question and answer part of the town meeting was organized around four major issues: finance, morale, personnel, and reputation. Questions came from audience members and from a collection of questions submitted before the meeting.

Vest answered most of the 18 or so questions, occasionally deferring to the other panelists. Victoria V. Sirianni, director of Physical Plant, served as moderator.

Several issues related to morale and personnel were discussed. In response to questions, Dickson explained that though much of the early re-engineering work has focused on operations and Physical Plant, each section of the administration and support staff would be studied.

Vest said that there were no plans to use early retirement incentives to reduce the workforce, and also explained that he did not believe that older employees would be more likely to be let go than younger employees.

In response to another question about personnel, Vest said that he remained committed to promoting diversity and pluralism within the Institute during downsizing. "It is in fact a deep concern of mine personally," Vest said.

"When we began this activity, the provost listed six points, one of which was that there would be no retreat from growing diversity," Vest said.

Vest said he did not know if re-engineering teams had been specifically charged to consider diversity, "but if they aren't then, they are right now, at least as far as a word from the president goes."

Deficit cutting measure

Answering several questions about financial matters, Vest described the re-engineering process in greater detail. The primary goal of the re-engineering process is to bring the Institute's $40 million budget deficit under control, Vest said.

Vest hopes that re-engineering will be the major contributor to reducing the deficit. But small decreases in the academic budget and a fund raising effort that has remained at the same level as during the strong Campaign for the Future funding drive have also had an effect, he said.

One complication in the budget process is that the Institute is currently reimbursing the government for overcharging indirect research costs in the late 1980s. Indirect research costs are costs associated with supporting research efforts that cannot be directly linked to a specific project; they range from electricity bills to library costs.

Indirect costs are billed to research sponsors as a percentage of the direct research costs. MIT's real rate will be about 63 percent next year, but it will charge the government on 58.5 percent to correct for the over-recovery, according to Wrighton.

The costs of re-engineering are currently being billed as indirect research costs, Wrighton said. "It is appropriate that our sponsors share in the cost of re-engineering during the down years as they will benefit" after re-engineering concludes, he said.

Dickson estimated that about $6 million is being invested in the re-engineering effort, but these changes would save about $1 million a year, making this a "sound investment."

MIT will recoup its investment some time in fiscal year 1998, Vest said.

The indirect cost rates in 199799 will be about 60 percent, Wrighton said. The change in the rate will be a function of finishing repayment for over-recovery and finishing re-engineering.

Answering questions near the end of the meeting, Vest re-emphasized the Institute's commitment to re-engineering to reduce the deficit. "We will succeed," he said. "We have not talked about what to do if we do not succeed. We do not have Plan B in our hip pocket."

Earlier in the meeting, Vest also said he took personal responsibility for the re-engineering effort. "I feel very personally and directly accountable for its success," he said.

Vest also restated his goal of maintaining MIT's reputation as the world's premiere institution polarized around science and technology. "Our goal is very simple to maintain and enhance the excellence of MIT in a time of great change and financial restraint."

In addition, Vest remarked on MIT's many recent achievements: four Nobel Laureates in the past four years, several number one rankings of graduate departments, and cutting edge research. It is critical to "band together to keep the Institute viable in the future as it had been in the past," Vest said.