Universities need to play catchup to their business reality

As Mark Corver shows on Wonkhe today, universities are big business. Thanks to the uncapping of student numbers, £20bn of competitive revenue is now in play every year in higher education. Higher education is now one of the largest competitive markets in the UK. Let that sink in for a minute.

Universities are a lot of things, and business is one of them. They are not (generally) profit-making, but in England and Wales at least, now operate in a highly commercial landscape. Some would argue that this change could itself could take universities down an unrecognisable path where the bottom line becomes more important than the purpose and values of higher education. And this might well be the case. However, where a market for undergraduates exists, and teaching them remains core to the mission of most universities, it’s hard to avoid the need to play the competitive game.

The right sort of leadership should be able to navigate these competing pressures and values. It is notable that the traditional route to university senior leadership is through a career in academia. I wouldn’t argue that this in itself needs to change, but it’s not difficult to see how that career journey might not give a vice chancellor a fully rounded preparation to take the helm of an organisation of the size and scope of a university today, which in revenue terms for some you can compare to a massive publicly-traded company like Whitbred (which is only a bit bigger than the University of Oxford), WH Smith which is only a little bigger than UCL. Or Dominos Pizza which is smaller than the universities of Sheffield, Birmingham, Bristol, Nottingham and Warwick and eight even larger institutions.

But universities are now fighting over an enormous £20bn slice of revenue and that’s only getting more competitive each year, and the number keeps rising too as crusts get stuffed with undergraduate student numbers which are set to boom in the next decade.

The speed of the creation of this competitive market is also another notable factor. It didn’t exist ten years ago which means there are some vice chancellors in post appointed to the role in a radically different context, probably requiring a very different set of skills. Some have adapted better than others.

Mark’s analysis shows that most universities in England and Wales are dominated by competitive revenue, income that can be doubled (or be totally lost) by being better (or worse) than your peers. Success has its rewards in this context. But the risks are everything and nothing like other organisations face in the public or semi-public sphere.

Universities are wonderfully idiosyncratic organisations and play a special role in society that is far more important than a measure of their revenues might suggest. But they have been thrust into the cutthroat business world and the skills needed to steward these institutions is clearly starting to lag. As Mark argues, universities first need to understand the competitive context that they are operating in if they are to succeed in it.

Another way of comparing universities against other sectors is the total size of the market. Take domestic electricity which is about £10bn or motor insurance which is around £14bn. Both are substantially smaller than higher education. Now imagine the armies of data analysts operating at a high level of sophistication in order to make companies in these markets successful. We’re not close to having the skills, capacity and understanding inside higher education to face the world as it has changed. Could it be time to invest a bit more in the business end of running a university?

5 responses to “Universities need to play catchup to their business reality

  1. Why not resist this entirely and call on government to fund HE as an investment in the skills we need for the economy, and in the individuals who will benefit from the development and personal growth? The idea that all this is inevitable and can’t be helped, and that we must simply capitulate to the logic and practices of the corporate world is incredibly depressing.

    It would only take, for instance, a Labour government to implement a National Education Service, to completely reverse the slide towards rampant competition between institutions, yet this possibility never seems to be acknowledged, considered or planned for among the policy dweebs in the sector. I find this astonishingly complacent and look forward to the day, if it comes, when the besuited technocrats will have to face up the reality that we have decided that education should not be a commodity.

  2. Its about providing the best we can for the people we are providing a service to, having staff who are skilled and knowledgeable (academic and professional services), up to date IT and education facilities and more besides. All of this helps Universities go beyond the standard corporate frame. The best of the corporate world can help us to achieve that and so much more besides.

    Lets be ambitious and use the tools available to be the best we can be regardless of where they, or the funding, come from.

    A National Education Service would still have to deliver education and would presumably have standards that it would be expected to meet. Not sure it would reduce the competition factor either, suspect that genie is already out of the bottle.

  3. I’m not really sure what your point is? Why is it a given that ‘providing the best’ must come via the corporate model? Wouldn’t a well funded and supported sector be able to achieve all the things you mentioned without having to resort to corporate practices?

    Maybe I should have been more specific – the article talks about competition for fee revenue. Wouldn’t this be better replaced by a healthier and more collegiate form of competition to provide the very best for ordinary people? A National Education Service wouldn’t force institutions to compete against each other for a finite pot of fee revenue – competition could then be focused on developing and innovating an ever better sector based around providing education for all, throughout life. Of course we would need high standards and accountability, but I’m not sure why it should follow so naturally that the corporate world is the only example we would have to achieve this.

    This strikes me as an example of ‘capitalist realism’ – an inability to see beyond hard market logic and acknowledge that there is an alternative way of organising society. Admittedly this is difficult as we have lived under market-based thinking for so long we have internalised it to the point that it seems to be simple common sense – I think we need to break through this if we’re going to create a better HE sector that really serves people regardless of their background or circumstances.

    That isn’t to say that certain types of expertise developed in large organisations can’t be useful to universities – but if they are simply used to help institutions try to thrive in a ‘cutthroat business world’ without doing anything to change this scenario, then we’re going down the wrong path.

  4. This is a thought provoking piece that really got me thinking about how Universities should be striving to lead value creation narratives, rather than adopting traditional methods of reporting financial performance and position, so often employed by businesses. Obviously, profit is an integral part of performance but it is not the whole story. I actually think it is Universities who should be re-framing “business reality” to incorporate value and values based performance with businesses following suit. Particularly given the sustainability agenda. Expect something from me on this Mark! 🙂

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