Dean's Newsletter
Archive of previous newsletters
People, Space and Money--Part 2: Conceptual Framework
November 13, 2006
This is the 2nd of a 3-part series on "people, space and money" that presents a conceptual framework for optimization of resources using economic modeling tools. Before we jump in, however, I would like to spread the word about two upcoming events this week in the areas of music and athletics.
Music on my mind
The first Music on my mind concert will be held in the Flaum Atrium on Tuesday, November 14 at 4:30pm, and will feature performers from across the University. Sponsored by the Department of Neurosurgery, the Music on my mind concert series is the collective brainchild of many in our academic and clinical communities who have yearned to infuse music into the daily life and culture of our institution. With the extraordinary musical resources available at the University of Rochester, it is only natural that such an initiative has sprung to life.
This concert will feature members of the Eastman School of Music (Dr. Jennifer Gliere, Ms. Pamela Terry, Mr. Min Jin and Mr. Jeremy Samolesky) as well as Berislav Zlokovic, M.D., Ph.D. from the Department of Neurosurgery, and Zora Mihailovich, artist in residence in the College. They will present an hour of opera arias from Cosi fan tutte, Turandot, Idomeneo, LeNozze di Figaro, Rigoletto and La Traviata with piano accompaniment.
These musical events, complemented by wine and cheese, will foster an informal, collegial interchange across the University. Join us on Tuesday afternoon, put your work aside, relax, mingle, and let there be music on your mind.
The "Great Scholarship Basketball Shootout"
This is the second mini-basketball tournament of faculty vs. students vs. residents vs. hospital staff. It's at McQuaid H.S. (1800 Clinton Ave) next Sunday, Nov 19th, at 2:00 pm. It will be fun and it's for a good cause--medical student scholarship aid. Last year, I think that the crowd was impressed by the quality of play (at least among 3 of the 4 teams!).
Now we won't call this a grudge match. Those of us on the faculty team are realistic about our chances. We have some height, but the legs are gone. We promise to play valiantly, however, and absent any victories we hope to emerge at least without injury. But check out the student, resident and hospital staff teams. Last year, the hospital staff was victorious in two hard-fought wins over the residents and the medical students. I know that everyone has been practicing--the hospital staff no doubt wants to repeat their championship performance, and the residents and medical students will no doubt want to avenge their loss. So join us on Sunday for a fun afternoon of basketball that benefits a worthy cause.
A conceptual model of people, space and money
Now on to the modeling of people, space and money--how can be combine these elements to best advance the research mission? The reality of our current situation is that, in a flat NIH funding environment, we have the kind of problem that others would like to have--more funded investigators than readily available space in which they can work. In what follows I will present a model of resource allocation that uses some basic tools of economic analysis. While this might seem a bit abstract, the point of any model is to extract those core aspects of reality that reveal the underlying forces at work and the direction of relationships. With that caveat, here goes…
There are many ways to think about research output--publications, grants, patents, etc. For this exercise, let's think of research output as a quantifiable amount of "knowledge production." We could qualify this phrase to mean "knowledge production that genuinely advances science and/or patient care," but I will use "knowledge production" as shorthand for this output. One could list a detailed set of inputs that combine to produce the output of new knowledge, but a powerful way to summarize them, when you really come down to the core set of issues that confront us, is that there are two key inputs--people and space. Here "people" refers to faculty members, staff and administrators, while "space" refers broadly to square footage of research space, and also to the equipment and specialized facilities within the space.
Expressed in terms of economic concepts, if we were to produce knowledge optimally, we would maximize the production function for knowledge subject to the specific budget constraint that we face. The budget constraint is the amount of funds available to purchase the two key inputs of people and space. There is an important punch line to this, in terms of the important resource allocation issues that currently confront us, but bear with me as I try to explain this idea graphically. In Figure 1, the straight line represents the possible combinations of people and space that can be "purchased" with a specified amount of money. It is negatively sloped because, given a fixed number of dollars, if we hire more people, we can build/renovate less space. Turning this around, if we want to spend more of our fixed budget on space, we can afford fewer people.
The concave-shaped curved line represents the combinations of our two inputs--space and people--that produce a given amount of knowledge. This is referred to by economists as a "production isoquant." What this curve tells us is that a given amount of knowledge can be produced by different combinations of space and people. Starting with lots of space and only a few people producing knowledge (e.g., point A), the negatively sloped concave curve suggests that we could sacrifice considerable space and hire only a few more people to produce the same amount of knowledge (point B). As we move upwards and to the left along the curve, however, we eventually find that space provides a significant constraint. By point C, with only a small amount of space/equipment, hiring more people does not change the amount of knowledge produce much because they have no place to work. At the present time, I would suggest that we are not nearly as efficient in the production of research as we could be. Put differently, in Figure 1, there is opportunity to move to a higher isoquant of knowledge production with the budget available. How would this be possible? That is, what would be the most efficient combination of space and people, given our budget constraint? The answer is represented in Figure 2, which replicates the same budget constraint as in Figure 1, but which shows a series of production isoquants, the optimal one of which is tangent to the budget line.
In general, isoquant curves that are shifted to the right represent increasing amounts of knowledge production, as shown in Figure 2. Each isoquant curve shows the trade-offs between space and people that can combine to produce a given amount of knowledge production. Given our budget constraint, the Optimal combination of space and people is shown as point O, which corresponds to S* amount of space and P* number of people, and which is associated with an amount of knowledge produced by Isoquant I. Isoquants to the right of Isoquant I (e.g., Isoquant III), while representing a greater amount of knowledge production, cannot be reached under the specified budget constraint. The best we can do given the budget available is to operate on Isoquant II at point O.
Now let's add one more concept--related to what happens when the budget constraint is changed--that can be understood in an historical context. In 1996, with Trustee approval of the basic science strategic plan, more funds were made available for research, thus relaxing the budget constraint by a specific amount. As pointed out in the last newsletter, between 1996 and 2002, we were able to construct the Kornberg and MRBX buildings totaling 485,000 sq. ft. of new research space, and renovate 60,000 sq. ft. of existing space. During this time, we hired new investigators, but not nearly enough to fill the newly created space. In Figure 3, this process is shown by a shift in the budget constraint to the right between 1996 and 2001 (note the two straight lines labeled 1996 and 2001), reflecting the fact that we had more dollars available. The slope of the budget constraint, however, becomes less steep, reflecting the fact that we initially expanded space more than we hired people. The optimal combinations of space and people in 1996 and 2001, had we achieved them, are represented by (P96, S96) and (P01, S01), respectively. Across time, more people were hired with additional funds, shifting the budget line even further to the right. Space has now increased much less than people, however, so the 2006 budget line as shown in Figure 3 may now have returned to approximate its original slope.
So here's the punch line: In Figure 4, the 2006 budget constraint is shown along with an optimal combination of people and space that would produce the maximum amount of knowledge, as shown by point O on Isoquant I. I would submit, however, that, because of historical and other factors, we are not operating at O on Isoquant I in Figure 4, but rather on a suboptimal isoquant such as Isoquant II. To the extent that we are operating at a lower isoquant than Isoquant I, we are not taking full advantage of the people and space available to us.
How do we move from where we are towards point O, so that we can take maximum advantage of the budget available in the production of knowledge? The answer is simple to state but hard to implement: department chairs and faculty must think as citizens of the medical school and medical center rather than as members of a research group, department or center. When a faculty member has been successful in obtaining increasing grant support for his or her work, or when there is an opportunity to recruit an investigator with substantial funding, we cannot say, as I did in the opening sentence of the last newsletter, that we can't expand or recruit because "we're out of space," even if only temporarily. The truth is, we're not out of space. We are just not using the space we have in an optimal fashion. We are not combining space and people in a manner that maximizes the production of knowledge.
What are the practical implications of this concept? It implies that when opportunities present themselves to expand funded research in a manner that builds on a critical mass of investigators or fulfills a strategic objective, then given a budget constraint that in the short term contains a relatively fixed amount of space, we will have to evaluate the utilization of currently occupied research space to determine the best mix of uses. Also implied is that as we create new research space in the future--two floors totaling 45,000 sq. ft. in the new Wilmot Cancer Center, 85,000 sq ft in the new Cardiovascular Research Institute, a new Clinical and Translational Science building, renovation of MRBX-ground for research laboratories, and other renovations and upgrades of existing research space--we must also insure that we are combining space and people across departments, centers and disciplines in a manner that maximizes research output.
Will this be an exercise that is entirely formulaic, resulting in draconian shifts in space allocation? Absolutely not. Economic models are useful in pointing to directions of change, but in the context of the medical school's research goals relative to its overall allocation of resources, we must consider and respect the need to fulfill our other three missions and to meet past commitments that have been made to Chairs and faculty.
There are many other corollaries to the fundamental conclusion that we must combine space and people in a manner that maximizes knowledge production. For one thing, we must attempt to build interdisciplinary teams, as discussed last week. Moreover, we should try to recruit new faculty who could fill key gaps in existing research teams. Just one or two faculty members can often make a big difference in achieving the kind of critical mass that could substantially advance knowledge production. This would keep us on the budget line and yet allow us to climb to a higher production isoquant. As another example of producing more knowledge under our budget constraint, if a core-type facility evolves in a specific research group (i.e., expansion of the "space" input), we should facilitate its use by other faculty with appropriate ground rules.
In this week's modeling exercise, we have attempted to lay the conceptual groundwork for thinking about resource allocation. The same conceptual framework for considering people, space and money in the research sector also applies to clinical practice, which will be the topic of next week's newsletter.
I hope to see many of you at the Music on my mind concert on Tuesday and the Great Basketball Scholarship Shootout on Sunday.
Meliora,
David S. Guzick, MD, PhD
Dean, School of Medicine and Dentistry
