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Re-Engineering IIAdvertising and Publications

September 10, 2009

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Project Scope

Examine the operations of the Advertising & Publications Department to determine if components should be outsourced.

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Research Methodology

NYU hired RothPost Advisors to assist with evaluating the department Experienced advertising consultants with a

database benchmarking metrics from 125 advertising agencies

RothPost interviewed 27 NYU employees from 18 Schools and Administrative Units.

RothPost worked closely with A&P to review and analyze their internal operations, management and workflow.

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Department of A&P Overview

Department of Advertising and Publications is the internal NYU division responsible for:

Art Design Copy Writing Print Buying Media Placement

2010 Net Budget: $2,352,965 (Budget less Income) Organized and functions as a traditional advertising

agency Staffing:

32 FTE’s Total Annual 2010 Payroll including fringe: $2.7M A&P staff spent 36,364 hours in FY08 on all projects

Occupies 5,500 sq/ft. Charges 15% commission for any media buy Charges $90 per hour for graphic design services University departments are not required to use the

services of the A&P department, except for media purchases (excluding SCPS & Stern).

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A&P Department - 2010 Budget1

Department Code 02400 & Internal Income Code 02410

51118 Salaries -Un PT Col Work Study (6,000)

45200 Internal Income – Graphic Design (620,980)

45200 Internal Income2 - Media Buys (1,383,124)

51100 Salaries - Admin. Mgmt FT 1,827,961

51115 Salaries- Casual Emp - No Stud 9,365

51119 Salaries- Casual Student Emp 34,716

51104 Salaries- FT Lab Technicians 53,206

51106 Salaries- FT Office/Clerical 181,182

51170 Fringe Benefits-Composite Rate 602,042

TOTAL PERSONNEL BUDGET 2,708,472

60455 Prof Svc - Other -On Site 90,607

60460 Prof Svc - Purchased Ofc Srvc 1,338

60450 Contracted Svcs - M & O 1,181

62110 Purchased - Office Equip 36,154

62140 Purchased - Computer Hardware 17,057

64110 Repair of Office Equip 1,722

64310 Repair: Bldg & Grounds 1,004

64210 Rental of Office Equip 2,006

63410 Books / Periodicals 3,345

63109 Copying & Printing Services 3,456

63110 Office Supplies -Office Supply 40,203

63140 Paper Supplies 5,574

63120 Postage 1,584

63130 Courier Services 3,902

65120 Employee Recruitment 1,673

65130 Employee Moving 112

65110 Adv. & Publication (Internal) 11,483

65410 Purchases For Resale: other2 1,383,124

68588 Auxiliary Deficit Reduction 5,797

65182 Dinner & Meeting 2,459

65510 Travel & Living - Domestic 2,787

65170 Convention Reg & Membership 2,006

65551 Telecomm Services 20,343

65552 Telephone Calls 15,680

TOTAL OTPS BUDGET 1,654,597

NET BUDGET SUBSIDY 2,352,965

1 – Data from NYU Budget Office2 – Data cancels out. This is media bought on behalf of the advertising unit

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A&P’s Primary Clients& Non Clients and Minimal Use Clients

Primary Clients

80% of A&P’s efforts are on behalf of the following four (4) clients.

Non-Clients & Minimal Use Clients1

School/Unit

Dental

Development

FAS

Gallatin

Housing

Human Resources

Law

Nursing

SCPS

Social Work

Stern

Student Affairs

Student Health

Wagner

Tisch

School/Unit

Undergraduate Admissions

GSAS Admissions

Global Programs

Steinhardt

1 – less than 5% of annual work

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Total A&P Volume at NYU

NYU spends approximately $26.5 Million each year on Advertising and Publications (print & media combined) Advertising dollars are not all funneled through

the internal A&P Department

Source of Spend Media Spend Print Spend   Total Amount Spent

SCPS $7,000,000 $3,000,000 $10,000,000

Stern1 $3,700,000

Spend through A&P $2,000,000 $3,500,000 $5,500,000

Other Spend (outside of A&P) $5,500,000 $5,500,000

Subsidized funding of A&P $2,300,000

TOTAL       $26,500,000

1 – Stern’s spend breakout data unavailable

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FTE’s per School/UnitsAssigned to A&P Work

Each of the Schools, and some of the administrative units, have assigned people working on A&P projects

Approximate FTE count of A&P-like personnel within the Schools and Administrative Units, as per PostRoth interviews.

Schools/Units not using A&Peither contract out their work to an agency or perform the function internally, or use a combination of internal and external services.

School / Unit FTE

Dental 2.5

Development 2

FAS 1

Gallatin 1

Housing 0.5

Human Resources 0.5

Law 4

Nursing 1

SCPS 20

Social Work 2

Steinhardt 2.5

Stern 3

Student Affairs 3.5

Student Health 1

Tisch 3

Wagner 1

Undergrad Admissions 5

TOTAL 53.5

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Benchmarking A&PUtilization and Efficiency

RothPost Advisors used two criteria to evaluate NYU’s A&P Department

Time Utilization – The percentage of hours worked on projects vs. available work hours.

Based on a 1,8201 hour work year: Industry Benchmark is 80% (Data supplied by RothPost) NYU is 62% (Data supplied by A&P)

Efficiency – the approximate amount of time commercial agencies devote to a project as compared to the time devoted a project by A&P

NYU is 60% less efficient than a commercial advertising agency

Example: NYU A&P will spend 10 hours to complete a project as compared to a commercial agency that will generally complete a similar project in 4 hours, on average.

1 – Data from NYU HR and NYU Payroll dept

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Benchmarking A&P with Peers

University of Pennsylvania Most similar to NYU’s operation Use of A&P is optional Print purchasing is managed by Purchasing Planning to outsource the A&P operation during 2010

University of Michigan Use of A&P for graphic design entirely optional Agency work outsourced and decentralized Nothing mandated

Arizona State University Minimal in-house graphic design Ad placement done by A&P Print purchasing is managed by Purchasing Planning to discontinue all printed materials

Indiana University Their A&P unit “a shadow” of its former size (not cost effective) In-house print shop dramatically downsized Nothing mandated

University of Virginia No A&P department - Graphic design is outsourced Copywriting done by customer department and/or outsourced In-house print shop – use not required

University of Nebraska Similar to University of Virginia

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Commercial Agency Fees

Question: How much would a commercial agency charge for the same amount of work performed by A&P? Industry benchmarks for commercial agencies are no

more than 10% in fees of the total Advertising/Publication media spend

Example: SCPS pays $650,000 to their agency for a $10,000,000 spend

Their 6.5% rate represents an excellent fee arrangement For the $5,500,000 media spend through A&P, NYU

should expect a commercial agency to charge $550,000.

Currently NYU pays $3,000,000 per year for $5,500,000 of spend.

This represent 55% of total spend NYU has the potential to save $2.5 Million on A&P

fees

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Recommended Re-engineering Structure

Revise A&P’s mission from a full service provider to a “clearing house” and “quality control” assessment group.

The new department will steer an NYU unit to an appropriate agency or freelancer that has been vetted and approved with a pre-negotiated price for their services.

The final product would then be checked for quality and adherence to NYU design standards.

Department or Unit needing A&P type

work

NEW A&P DEPT.

Vendor B

Selected Vendor

Vendor A

Vendor C

Vendor D

Step 1

Step 2

Step 3

Step 1 – Select Vendor from NYU approved list based on Unit’s needsStep 2 – Unit and Vendor collaborate to produce needed workStep 3 – Work is checked for adherence to NYU design standards and quality and then approved

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Composition of Re-engineered Department

A re-engineered A&P unit would be composed of between 5 and 10 FTEs Using the same fringe and salary rates

of the current department the personnel costs would range from $300K to $600K

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Consolidate Print Purchasing

Downsize and transfer the print purchasing operation to Purchasing Services.

Estimated savings: $125,000 Issue an RFP for printing; award contracts to 3-6

firms, and require ALL University departments to use the awarded firms.

Estimated savings: $1 million - $1.5 million This shift would require an implementation and

enforcement of a University-wide policy.

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Conclusion By transforming the way in which A&P

operates, NYU will be able to provide equal or better service and products to the advertising schools/units and save an estimated $1.9M annually $2.5M from A&P restructuring

Less $600K additional expenditures for the new NYU A&P unit

By changing the print purchasing policies, NYU will be able to save $1M to $1.5M through master agreements

Net Savings is $2.9M to $3.4M