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?