Facing the storm. How will leaders of HEIs deal with the coming cuts?
The ‘Mandelson Letter’, and the latest article in The Guardian (“Universities tell Gordon Brown cuts will bring us to our knees”; Education Guardian 11 Jan 2010) highlight the plight of the HEI sector facing the coming cuts and increased pressure on spending. What are the likely courses of action and how should the leaders of institutions prepare? In this article, Neil Gregory takes a look at the issues; the fear, denial and possible opportunities.
It has been fun. You started thinking about developing your career once you became a Senior Lecturer; since then you have ascended the academic ladder with seeming effortless ease (and lots of hard work and long hours) – personal chair, Dean of Faculty, PVC and now VC. You’ve ridden the wave of continual expansion; more students, more money, better pay, new buildings, increased research grants.
Yet, you are worried. Your institution isn’t on the HEFCE danger list and the Finance Directors ‘dashboard’ you see at the weekly senior management team meetings looks pretty good. But you are worried. It just doesn’t feel right; the Research Office is reporting increased bad debts on commercial contracts and the Research Councils are quibbling over silly things. The fall in Sterling hit the periodicals budget hard and the student hardship fund has taken a real hammering.
The Chair of the Governing Body expresses concern; you are both old enough to remember the 80’s and the cuts then and no one else can. In fact, just about everyone else around you has only ever worked in HE during the ‘long boom’. Everyone tells you to stop worrying as the recession is nearly over. Trouble is you just don’t believe them.
Well, there is good news and bad news. The bad news is you are right, things are about to get a lot tougher for a lot longer than most people have considered. The good news is as my old boss John Ashworth eloquently put it – “a good crisis should not be wasted” – it allows you the freedom to innovate.
Lets deal with the bad news first. Many of us are in denial about it, but the state of the public finances is dire. Expenditure plans built on a set of revenue streams which have evaporated and are unlikely to return will just about limp to the next election. What do we face then? You can expect more efficiency gains in overall resource, possibly ‘in year’ rather than delayed until 2011/12. A cut in funded numbers, cuts in existing and future Research Council grants? The charities might hold up but even their endowments look a little pale at the moment.
Nobody really knows (with the possible exception of Phillip Hammond, Shadow Chief Secretary, and he isn’t telling) but we can say with reasonable assurance that 2010/11 and on will be a lot, lot tougher than most people expect. How bad? Well, I made a few phone calls - most HEIs are modelling 10% cuts in some shape or form and there are interesting refusals to ‘rule out’ redundancies at some well known institutions. My own view is the out-turn will be significantly worse than that – plan for 20% and hope to get away with 15% seems a good rule of thumb. When I floated this idea with a few people there was a lot of tooth sucking and expressions of doubt along the lines of “15 % - sorry Guv, just can’t be done”.
Therein lies the both the root of the problem and the solution to it.
Cuts of 15-20% are different, they require complete reappraisal of your cost and revenue model from first principles – what you set out to achieve (presumably to create and then disseminate knowledge – or is that too old fashioned?), the means to achieve them, who will pay for the activity and how much they will pay? Addressing those points and issues requires overcoming some ingrained learned behaviour and the discomfort that comes from addressing potentially radical change. Not pleasant for most people and not made any easier by the various single issue pressure groups who will argue for exemption from the ‘savage and brutal cuts’ from vigourous positions of unenlightened self interest.
Which brings me back to John Ashworth and his experience at Salford in the 80’s – in particular the central benefit of crises, one might almost argue their Schumpeterian rationale and purpose.
“…a good crisis should not be wasted. Vice Chancellors are paid to lead, identify and publicly support the innovations that the crisis makes possible while preserving the scholarly enterprise and academic integrity of the university.”
In simple terms, a crisis lets you do stuff you wouldn’t have been able to contemplate beforehand. In the case of Salford in the 80’s it was engagement with commerce and industry. At the LSE in the 90’s it was recruiting overseas students at much higher fees. The coming crisis will bring its own set of solutions - phased retirement, semesterisation, credit transfer, foundation degrees, e learning, shared facilities, collaboration…whatever. You name it, in a crisis you have permission to think it, and an opportunity for the leaders of institutions to lead on it.
We also have the opportunity to think about innovation. Put bluntly, the track record of innovation by HEIs in their core businesses – T and R is pretty poor. We had the book in the 15th Century and the microphone in the 19th, and that’s about it for T, so there is plenty of opportunity for innovation. The tricky bit is making sure you preserve the scholarly enterprise and maintain academic integrity. I have no objection to universities being run in a business-like manner as long as nobody confuses that with the delusion that they are businesses.
In the next article I will ponder on what might make a successful innovation in the ‘new normal’ financial climate that HE faces.
Neil Gregory
Neil is a partner in Complexity Partners and has 20 years experience in HE, latterly as Director of Business and Enterprise at the London School of Economics and Political Science. Complexity Partners is a specialist strategy and implementation consulting firm that advises public sector bodies on successful change without compromising core values.