Money down the silo

Although the chancellor has just announced £200 million in cuts across the higher education budget, on top of cuts announced by the last administration, there is concern that with a new government and an empty Treasury, more reductions lie ahead.

Spending on higher education, research and student support comprises two-thirds of the £20 billion budget of the Department for Business, Innovation and Skills. The additional budget cuts announced on 24 May and the loss of extra university places mean we will need a strong ministerial team to ensure that universities, which have already taken financial cuts, are not caught with a running budget tap.

As universities scrutinise their own finances with an eye to making savings, they often miss a trick. Too often, budget reviews do not focus on holistic cost-saving methods. Anecdotal evidence from our partners and customers shows that the funding squeeze is affecting a wide range of projects, even those that can demonstrably save money. This is because budgets are being reviewed in a narrow focus in many organisations – but how much money can be saved in a specific budget line?

IT can only get better

IT, as a large discretionary budget line, is coming under scrutiny, and we’re finding that managers are struggling to cope with shrinking budgets. There are senior management teams making sweeping cuts across departmental budgets, and individual department managers resting their heads in their hands, worrying about how to cut their own project list in a way that does least damage. The money-saving projects are often left down at the bottom of the list.

Consider one example. There are software solutions available on the market that reduce energy consumption by computers and other electronic equipment; these can deliver highly visible and measurable savings. In real-life pilots, universities have found that the return on investment period, to cover the cost of the software, can be less than one week, although it is typically one month. And yet, suppliers report that such ways of saving costs are not being implemented.

Why is this happening?

The reason for this short-sightedness is that individual managers are thinking about their own budgets, while facilities managers are thinking about theirs, student services are thinking about theirs, and senior management teams are cutting or restraining them all. There are not enough teams looking outside their budget silos and thinking across the campus. The individual teams, departments and heads need to work together to solve their budget problems, rather than offering some advice and suggesting that it’s someone else’s problem.

During the recession, organisations have had to focus clearly on cutting costs without reducing customer service. Not just as a one-off exercise, but repeatedly over the past 18 months. The result has been organisational re-engineering, which has fundamentally changed the way that some businesses operate.

Blue sky ahead

We need to start encouraging the different budget holders in universities to work together and to recognise that investments in one budget line could save large amounts in another – making huge potential savings for the institution. This could include reductions in energy consumption, savings in course delivery costs and efficiencies in a range of other areas.

We need people to stop thinking that budget decisions end with the individual departments and engage with additional teams, management and directors, and any other department that has the potential to save money through innovation.

The new government has to make the sensible decision to create a bridge between budgets and merge responsibilities so the weight of the efficiency savings is shared across the shoulders of many, and not carried by individuals.

Breaking down the budget silos, sharing ownership for cost savings and seeking out best practice could deliver cost savings through targeted investments where the payback period is weeks, or even months, not years. We need to change the budget-cut conversation from “what can we do” to “why aren’t we already doing it, and how quickly can we move now to save money?”

Ray Fleming is education marketing manager, Microsoft UK.