Time for universities to get ready for the compliance culture

Compliance is not necessarily the first quality that springs to mind when thinking about universities, once memorably described as “a series of fiefdoms, united by a common heating system”. And yet, through the system of licensing, registration and conditions of operation it creates, the Higher Education and Research Act (HERA) will place a good deal of focus on compliance within providers. This may prove both challenging and ultimately transformative for the culture of universities as we know it.

To recap, HERA requires every registered provider to be subject to a range of general conditions of registration, applicable to all providers or to all providers of a particular type, and possibly also specific conditions relating to that provider alone. These conditions will need to reflect the various matters to which the OfS is required to have regard to, including institutional autonomy, choice and quality, competition and collaboration, and value for money.

Breach of the registration conditions may result in enforcement action and sanctions ranging from a fine through to suspension and/or deregistration. Deregistration is a basis for removal of university title. Put simply; a failure to comply with registration conditions can have serious consequences.

So why might this pose difficulties for universities? Principally it’s because practical compliance with these conditions will require all parts of the university to behave in a particular way. Let’s say a registration condition relates – as the last White Paper suggested it might – to compliance with consumer protection law. Many universities have been working hard to achieve this over the last two years, ever since the Competition and Markets Authority (CMA) published its guidance on the topic for the higher education sector.

I suspect hardly any could even now say with any degree of confidence that they are compliant with the CMA’s guidance. There are still departments and faculties trying to make unilateral, major changes to courses, additional costs that haven’t been properly disclosed to applicants, and unfair terms about not graduating while in debt to the institution.

No doubt in a year’s time these things will still be going on. Universities operate through such distributed centres of accountability and control that the behavioural and cultural change needed to ensure compliance across the board takes a very (very) long time.

Although enforcement action by the CMA in respect of such breaches is increasing, it remains rare. Even where it is taken, the breach has generally been resolved through a voluntary undertaking to change the offending provision or practice. Neither the likelihood nor the severity of sanction thus offers a particularly strong impetus to accelerate the pace of cultural change.

What is new with OfS?

The registration system established under HERA offers a different and arguably more effective route for enforcement action because:

• It is administered by a regulator whose sole focus is the higher education sector, unlike others (such as the CMA) whose cross-sector remit may mean that they lack the time or understanding to get on top of poor practice specifically in the higher education context; and
• The range of sanctions available to OfS go to the heart of what institutions do, and can directly affect their ability to recruit or continue to operate. Enforcement action will thus focus the minds across the institution in a way that mere fines or bad publicity won’t.

So what approach is the OfS likely to take in relation to compliance? Based on my experience of what has happened in a range of other sectors where regulation has increased, we are likely to see the following features:

• An increased focus on outcomes – The OfS will be concerned to see whether students are actually in a position to make informed choices or actually get what they were promised, rather than a focus on systems or institutional frameworks. Evidence of failures in outcomes will be the trigger for a wider review of the provider’s culture, leadership and governance not just of the individual failing identified.
• Culture as king – the OfS is likely to want to be satisfied that institutional culture encourages good compliance behaviour generally, and allows poor practice to be identified and addressed. A culture that encourages or permits non-compliance is likely to warrant strong action.
• A focus on leadership, governance and management – compliance will need to be a board-level issue, and decisions of the board in terms of setting institutional performance indicators as well as the framework of recognition and reward across the institution will need to place appropriate weight on compliance with registration conditions.
• Ever more intrusive and interventionist regulation – all regulators start with a desire to be risk-based and light touch, but it only takes one or two regulatory failures (either a rogue provider, or indeed a sector-wide failure to deliver a desired outcome) and the gloves come off.

These are not features that have typified the approach to the quasi-regulation we have had in the sector to date and, if implemented, they have the potential to change the culture of universities quite substantially, not least because they will focus so strongly on teaching, rather than research. They may (perhaps almost inevitably, will) push universities towards a more centralised, command and control model of management than many have adopted to date.

There are some who might consider this not just unavoidable but positively necessary to enable universities to adapt and move forward in the uncertain political and economic climate that prevails. The challenge, however, will be to ensure that some of the things that make the UK sector great – academic freedom, a curiosity-led approach to teaching and study, the concept of a self-governing, self-critical and cohesive academic community, institutional diversity rather than homogeneity, for example  – are not lost in the process.