The current troubles faced by English universities, both reputational and financial, are predictable outcomes of the introduction of fee-based funding and the lifting of student number controls.
That is the uncomfortable conclusion from PA’s latest survey of vice-chancellors, looking back over 10 years of turbulence in higher education policy, funding and markets.
Uncapped access to fee-paying students initially led to windfall gains for most universities. But it also set in train unintended and corrosive market dynamics, undermining the networks of mutually beneficial relationships that had defined the higher education sector for decades.
While most vice-chancellors reported that their institutions had benefited from the shift to fee-based funding, many have come to regret the price paid in terms of less trusting and more instrumental relationships with students, staff, policymakers and ministers.
They see their relationships with students changed from partners in learning to transactions with entitled consumers, and with staff a change from committed communities to disgruntled workers.
Policymakers are seen to have moved from sympathetic investors to controlling regulators and politicians from friendly advocates to implacable critics.
They put this down to the economic imperatives that have pitted universities against each other in beggar-thy-neighbour competition for dwindling student numbers, making promises of individual, social and economic benefits that are in practice largely outside their control.
This has inevitably led to disillusionment with the value of a university education and questioning of universities’ use of public funding which, unlike other public services, has been largely protected from years of austerity. It has also fostered a dangerous division between winners and losers across the sector. Richer and more prestigious institutions have grown their shares of student and research funding at the direct expense of poorer, but no less important, rivals.
It is not surprising, against this background, that many universities have adopted a siege mentality, hunkering down in the hope that the good times might return in the future.
There is, however, a silver lining to these gloomy prognostications. As more universities come to recognise the limitations of business plans built on full-time undergraduate recruitment, they are widening their view of the market for their services and reorienting their strategies accordingly.
Vice-chancellors envisage a much more diverse and differentiated higher education system. This is characterised by a growing range of learning and innovation partnerships with business, employers, local development agencies and other education providers (direct and online).
Many are already heading down this road: 20 per cent reported that they have benefited significantly from collaborations with employers; 13 per cent have gained from business demand for research-based services; and 20 per cent from demand for online and remote learning.
Looking ahead, more than 40 per cent expect links with business and public service organisations to be central to their future strategies, and 30 per cent are prioritising local and regional development programmes.
This shift in strategic focus could be very promising for our universities. Even if, as most are braced for, funding for undergraduate teaching is cut, government spending commitments for place-based regeneration, improved business productivity and the target of 2.4 per cent of GDP being spent on research and innovation will be even greater priorities for post-Brexit Britain.
Universities can and should be at the heart of all these developments. But redirected strategies will only succeed if they are underpinned by effective organisational capabilities and realised through strong market relationships.
This will not be easy. More than a third of universities admit that their progress on innovation has been patchy at best, in large part because of weaknesses in IT and digital expertise. Fewer than 20 per cent rate their capabilities in entrepreneurship, relationship management or customer service management as strong, with 30 per cent to 40 per cent acknowledging significant gaps in these vital capabilities.
Vice-chancellors cite the lack of critical skills and the inertia of institutional ways of working as major constraints to their ambitions, while employers and industry complain that universities struggle to demonstrate the agility and flexibility that they need from business partners.
The answers to this dilemma lie in reimagining and reframing the organisation of higher education on lines already established in almost every other sector of the economy.
Higher education is perhaps the last bastion of many self-contained producers each undertaking in-house almost every aspect of their business operations, even though these operations are duplicated in every other competitor.
Other sectors – from airlines to car production to entertainment – have discovered the benefits of “coopetition”, distinguishing between areas where shared operations and resources make mutual sense and those where they will compete for custom and brand recognition.
They have also rewritten the relationships between producers and customers, especially in so-called business-to-business interactions – such as university/employer links – to share in the design, delivery and benefits of services.
Universities have, at best, only dabbled in these kinds of developments; they (and their partners and collaborators) must learn to make them the new norm.
Mike Boxall and Ian Matthias are higher education experts at PA Consulting.