Is it reasonable to expect higher education institutions to be more business-like?

There was plenty of nuance in the debate and discussion about higher education finances at last week’s Festival of Higher Education but broadly those who said things publicly and bent my ear behind the scenes divided into two perspectives on how the next few years are likely to look.

The first camp is pragmatic with a lean towards modest optimism: while the economy remains as it is, the funding envelope for HE is pretty much set and it is incumbent on higher education institutions to adapt as best they can. Moreover, if the sector shows it can work with government and demonstrate its value effectively, there may be an opportunity for some further investment around the upcoming Spending Review, or at some future point if or when the fiscal environment improves.

The second camp is much more pessimistic: continued financial pressure cannot but damage higher education’s ability to deliver, it is really quite unreasonable of government to expect more for less, and higher education institutions need to push back on the fanciful notion that this is a feasible proposition and/or, as Huw Morris and James Robson argue forcefully elsewhere on Wonkhe, collectively start planning for a managed reduction in capacity.

I have sympathy with both perspectives (dispositionally I tend more towards the first but then again I’m not trying to run a higher education institution) – but I think I’d articulate the challenge slightly differently. The way I see it, the higher education sector is being asked to be relentlessly focused on realising public value – access, opportunity, research impact – and de facto to manifest public values as organisations in the sense of being good employers, good civic partners and anchor institutions – while at the same time being ruthlessly and robustly business-like and commercial in the management of institutions. This proposition throws up all kinds of tensions in how higher education institutions view themselves and their relationship with government.

Universities have always been enither fully private nor fully public organisations: autonomous and independent but not fully free to be market actors because constrained in the pricing of their “product”; and manifesting broad public value and public values, justifying significant public funding. There can be tensions around this arrangement but by and large the size of the sector and its distinctiveness from other industries has meant that rules can be set in acknowledgement of those tensions, allowing higher education organisations to straddle the public and private sectors, particularly when the funding environment has been fairly benign.

But under financial pressure, unpalatable decisions start to be made and talk of reform picks up. That’s when divisions start to emerge about what universities are, really, at their core, and what that means for how they operate.

The business of higher education is…public value

Historically the notion of higher education institutions “acting like businesses” is seen as being in opposition to the foundational public values of higher education. I’d argue that dichotomy needs to be abandoned. If being business-like means gouging your customers and mistreating your staff in the ruthless pursuit of profit at all costs then definitely let’s not do that. But I don’t think it should mean that, and certainly not in higher education.

What I do think it should mean is the strategic deployment of the available resource to have the maximum possible impact. And where those impacts are public impacts, to fail to prioritise, to streamline, to confront tough decisions, is a dereliction of public duty. We expect charities to make effective use of our donations to get the most benefit for those they are trying to help; I don’t think we at base expect any less of higher education institutions.

An associated reflection that speaks to this theme: I’d posit that “do more with the same, or less” is a reasonable challenge for an organisation – if it is possible to achieve similar outcomes with less resource, thus freeing up additional resource to do other things, you should endeavour to do that. But it is emphatically not reasonable to ask people or teams to do more with less, unless you are prepared to work with them to change the structures and environment in which they work to enable them to do so, otherwise they simply burn out.

Perhaps, I’d hypothesise, many higher education staff are tired and feeling under strain because while the resource has diminished, the expectations have not, leaving fewer people to pick up a larger share of the work. And while there is a real human cost to the kinds of difficult decisions that institutions are taking around portfolio, staffing, and discretionary funding, the cost would be far greater were an institution to become insolvent.

Institutional staffing arrangements and the collective capability of an institution’s people are intimately tied to whether it can achieve its organisational objectives. The other fascinating strand of discussion that came up again and again at Festival last week was about the sector needing to achieve a bit of a step-change in some specific organisational skills and capabilities, and I’d argue that some of those capabilities are very much aligned to that business goal I’ve proposed of strategic deployment of the available resource to have the maximum possible impact.

Skilling up

In no particular order, these are the “business competencies” that I’ve heard chatter about in the last week that seem particularly pertinent to the current moment:

Governance and the management of risk – with OfS Director of Regulation Phillippa Pickford floating the concern that in some (certainly not all) cases the governance arrangements of a provider are not set up to enable the really difficult decisions that need to be made if the institution’s very survival is at stake. If boards of governors are leaning on exec teams to manifest fanciful growth projections as a de facto way of avoiding having to confront the unpalatable realities, then that is one version of the problem.

But there is a more positive conversation about board appetite for entrepreneurialism, and the understanding of the risks involved in trying new things or offering something in a different way. There are mindsets and skillsets associated with taking on calculated risks in expectation of future rewards and managing those risks over time, that boards will be thinking about very carefully, especially in those institutions that are OK right now, but may not be in five years’ time.

Business intelligence and data literacy – the lore of the institutions whose financial data is so poor as to not be able to say which of courses are bringing in money for the institution and which costing money is hopefully entering the realm of apocrypha. But the tendency of the sector to be guided in its data interests by public data returns and league tables has meant that to some extent those who are not professional data people are somewhat alienated from the idea that an institution could draw on a rich range of data sources to guide decision making across the whole institution, not just at exec level.

Currently institutions will complain that they have endless amounts of data and no way to integrate different data sets – essentially a technical problem that the sector as a whole is making progress towards resolving, albeit with a fair amount of pain. But while numeric data is an essential source of business insight, it’s worth reflecting on the richness of qualitative information and stories that can help capture vividly for leaders what is working in their organisation and what is not, as well as explaining how the numbers actually do relate to each other. There’s no point in having a technically flawless institutional data portal if nobody knows what questions to ask it.

Strategic collaboration and external partnerships – and while there are all sorts of very good critiques of why mergers and shared services are not a universal panacea, this is already a very collaborative sector, which suggests it’s not actually that far against the grain to come up with interesting ways to join forces to deliver something that it’s not longer cost-effective to deliver in isolation.

Boiling it down, it’s almost impossible to deliver the kind of public value the government wants to see without working with partners – the social and economic issues are wicked, and will not be resolved by more or higher quality research, or more graduates per se – there will need to be strategies, involving multiple actors in places, on themes, and in specific industries. Some degree of coordination from policymakers would certainly help to galvanise and steer focus, but waiting for government action is rarely a sound business strategy.

Human centred design – whether it’s processes, experiences, learning, or introducing a degree of automation into a process or (learning) experience, the ability to understand and prioritise the end-user is a critical business skill. While the efficiencies you may gain probably won’t dig any institution out of a financial hole in and of themselves, it’s still really worth having people who can do design and think about the things the institution does in an intentional way, because it makes the institution a much nicer place to study, and work, and engage with, which is where you can not only realise public value but also be appreciated for doing it. And when you’re looking at issues of inclusion, it’s business-critical.

Innovation – sorry, I know it’s a buzzword. I think of innovation as being a mixture of permission and space to be creative about the working processes and experiences that you have direct insight about along with the promotion of a mindset that solving problems is everyone’s responsibility and within everyone’s grasp. To that end the organisational capability is probably less about training for innovation (some people’s cup of tea, certainly, but definitely not everyone’s) but about developing people leadership that is able to identify where the blockages are to individuals and teams adopting this mindset and practice. I think it is all but impossible to realise significant strategic change without unblocking these.

I certainly don’t think that “being more business-like” is a panacea – that there is some magic island called “financial sustainability” and every institution can get there if only it updates its navigational tools. There continues to be a real possibility that some institutions do really struggle to survive, not least because some of the factors influencing their survival are not in their control.

But even if you remain sceptical about the value of thinking in these kinds of terms, it’s worth remembering that the ability to tell a story to government about the strategic realisation of public value will be very helpful indeed in building the confidence of ministers that higher education is, well, a sector it can do business with.