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Annual efficiency: a new way of defining an old problem?

HEFCE published details of a new financial data return earlier this month, and it returns to the very contested field of "value for money". Sean Ryan and Chris Taylor at Uniac ask - value for who?
This article is more than 6 years old

Sean Ryan is Uniac Director

Chris Taylor is a Senior Assurance Consultant at internal audit provider Uniac and has previously worked at HEFCE, QAA and NUS.

HEFCE’s recent announcement (on the ADMIN-HEFCE mailing list) that institutions must submit a new ‘annual efficiency’ data return by 31 January 2018 comprising as yet undefined efficiency measures will be at least surprising, and potentially unwelcome, news to many. The sector has been given very short notice – and data for the first return, covering the 2016-17 year, which will need to be compiled retrospectively, with submission at the end of January and guidance available at some point in October.

The timing of what could be a potentially major data return so close to the demise of HEFCE, and in the midst of the recently announced Education Committee inquiry into value for money in higher education, may also raise some eyebrows. After all, one would expect the incoming OfS, and indeed all those likely to be charged with responding to the outcomes of that inquiry, to want to take a good hard look at this topic without finding their hands tied by previous decisions. And we might hope that they would do so in a way that built on a system that already included many measures of some aspects of value (REF and TEF to name just two), and develop a consistent and coherent framework of reporting with shared definitions and a clear articulation of how such returns fit together.

A further potential challenge is that while most of us accept the principle that we must demonstrate to government and wider society that public money injected into the sector – through grants and student loan funding – is being used wisely, HEFCE has been put in the position of trying to second guess what “good” looks like. The government hasn’t articulated what it is looking for so we are all trying to guess what question we need to answer.

Defining our terminology

Value for money, as a public expenditure concept, is at least a century old – but it remains poorly understood and sometimes unfairly, maligned. At its worst, pursuit of value for money leads to price being confused with value, and it can lead to bureaucratic measures and processes being imposed at the expense of efficiency. Private sector colleagues never allow us to forget that “value for money” is not a recognised concept for them. Instead doing things efficiently and economically, and delivering customer value, is just seen as common sense as a core business skill – and not something to be pored over and measured.

To ensure that any potential efficiency data return is meaningful in addressing questions of value for money – and not prone to either unconscious or malicious misunderstanding – it will be vital for HEFCE to be clear on its precise understanding of both ‘value’ and ‘money’. This may seem an exercise in pedantry but value is a clearly a relational concept – and HEFCE (and subsequently the OfS) must therefore be clear about value to whom. Value to students may after all be quite different to value for employers, the government or indeed to the wider public interest. Yet all are no doubt of importance. Failure to define this accurately, or to articulate how any new efficiency data return relates to the chosen definition, is a recipe for confusion.

Value for whose money?

Similarly, HEFCE must be clear about whose money it is referring to (whether student, state or both) as the definition of value will both be affected by, and affect, whose money we are assessing the return on investment of. These are thorny issues, and ones prone to misunderstanding and poor reporting.

Arguably, rather than a whole new data return, the starting point for anyone responding to this agenda needs to be a close review of the wealth of data that is already available at sector, institution, and subject discipline level – which already provides measures of value.

To be optimistic, the new measures proposed by HEFCE could eventually help to shine a light on what the government, and hopefully all sensible managers, mean when they talk about “value for money”. But we should also be very alive to the risk that the new measures, if poorly framed, may lead to dysfunctional reactions which may hinder or distract external stakeholders, governing bodies, and executives alike from reaching a mature assessment of the sector’s approach to delivering value in return for public money. Make no mistake, value for money is vital, but there is a real danger that we are being given a short-term fix rather than a longer-term solution.

2 responses to “Annual efficiency: a new way of defining an old problem?

  1. Good piece – VFM reporting is loose and varied and is based on best views available within each HEI. “Value”, if referring to “price” also has to be viewed in the context of what else the provider is offering. HEIs who teach high cost STEM subjects and/or undertake research are likely to have internal cross-subsidy from lower cost subjects. This isn’t a universal position nor is it typically found with alternative providers, and so better “value” for lower cost subjects may be unfairly perceived at some places.

    It is also the case that HESA collect cost per subject, where expensive is rewarded as being good in some league tables, which is the exact opposite of what cost efficiency is.

  2. Thanks for your comment Alex – some good points there I think. As you identify, the relationship between cost, price and value is by no means straightforward – hence the need for real care in any new data return (or indeed in the use of existing data!).

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