Underlying tension between mission and money in our universities

Pearls and Irritations
29 Oct 2020

The corporatisation of the Higher Education System is complete. It is no longer driven by the community of science but by money. Public higher education institutions are run as “businesses” in a higher education industry where revenues account for approximately 2% of GDP.

Corporatisation has meant that power and influence has shifted from scholars to managers in the managerialist paradigm that started in the broader public sector 30 years ago.

Corporatisation has enabled universities to grow into large profitable enterprises. The overarching mission of corporatisation is to source as much money as possible, generate a specific financial return, and meet benchmarks set by accountants, ratings agencies and auditors.

But the system is now in crisis on a number of fronts:

• The mission of university based higher “education” is shifting to one of “training” centred on delivering “job ready graduates”. The scholarly connection between academic staff and students is being eroded and the value of an education in the arts and humanities is being diminished. The base of industry development and social progress over the last two centuries has been the inextricable link between science and technology and the arts and creative practice. But that link is being lost. Higher education is losing its differentiation from other forms of vocational training.
• This is creating a gap between rhetoric and reality. Higher education has always relied on a narrative that describes the benefits of a university education. But narrowing the narrative to just getting a job is not welcomed by all groups in society.
• The flow of money has tightened. Demand from domestic students for university based higher education has stagnated. Scarce public funding means that grants have become more targeted and rules driven. The boom in international education that funded research to drive international rankings and expensive capital programs, has collapsed.
• In addition, the figures reveal high attrition rates, falling completion rates, and little growth in indicators of SES and Indigenous participation. Business and industry are concerned that higher education is not delivering the “soft skills” required for innovation and growth in the knowledge economy. Australian universities, compared to international higher education organisations, are relatively small. The largest, Monash, has a student population of 84,000. Most aspire to continuing growth in student numbers. Only one Australian University placed a cap on its enrolment numbers.
• Universities are required to behave, financially, just like any other business organisation. They are expected to work to a target operating margin (which appears to be around 6% annually) which indicates financial viability and help retain their AA credit ratings.

As their revenues have grown there has been a trend towards internal specialisations with an increasing professional disconnect between corporate managers, administrators and academics. There is roughly a 50:50 split between these roles across the system, although corporate and administration roles are growing more quickly.

Vice-Chancellors (Presidents) and senior executives (Vice-Presidents) have been rewarded with remuneration packages of similar-sized private organisations, creating community disquiet.

From a business perspective, there are two principal generators of money: “effective full-time student load” (EFTSL) and research income.

Current strategies are built around maximising both. Money is spent principally on salaries which universities try to minimise through sessional and casual appointments and reducing standard hours for teaching activity.

This focus on financial drivers works against achieving high standards in the mission of teaching and learning. In particular, universities have been criticised for becoming disconnected from their students. Some universities have tried to redress this with specific “student experience” strategies.

Australian higher education institutions constitute a growing and economically significant industry. As an industry grows it tends to segment into components that focus on specific market sectors that reflect the structure of demand, distinctive capability, and the strategies in place to respond to that demand. A few higher education organisations have progressed some way in this direction, but in the absence of policy guidance or incentive. Segmentation is constrained by the straitjacket of the rules driven Unified National System.

There is no clear policy differentiation between research universities, technology universities, comprehensive universities, regional universities, private and not for profit universities, or non-university higher education providers. Policy follows a “one-size-fits-all” approach. However, differentiation would provide for greater diversity of education service offering and student choice.

Additionally, over the past 20 years, a small number of universities have become very wealthy on the basis of access to private money (through feepaying international students) and their judicious management of public money.

With only two exceptions, since 2003 every university has generated a cash surplus on operations which has been used to buy property, plant and equipment and invest in financial assets. Property investment has filled a gap created by the withdrawal of Commonwealth capital funding, particularly around research infrastructure.

The 2020 Job Ready Graduates Package is fundamentally about money. The Government is reducing the amount of money going to Higher Education, as is also happening in Canada and the US. The government is also creating a clear separation between its funding for education and for research.

Despite a drop in government funding, the higher education industry will continue to grow, but in a different way. New “products” will be supported (such as short courses), and online education will expand as content and technology advances. These developments will encourage further segmentation of the industry as disruptive influences take shape. For example:

• In the US, new business models are emerging, supported by private equity capital, that focus on the corporate higher education market.
• The growing number of online learning platforms including Coursera, Udemy, edX , Skillshare, and FutureLearn. Several of these platforms have Australian partners.
• The formation of organisations that help employers re-skill the workforce across multiple areas, often in specialised or cutting-edge fields, including for example, Pluralsight, LinkedIn Learning and Udacity.

The growing abundance of new approaches and players will lead to more affordable and convenient options. This is a familiar theme that disruptive innovation has fashioned in numerous other fields.

Australian Higher Education policy has a role to encourage and support the growth and development of specific market segments in a Diversified National System which will complement the disruptive forces that are underway.

For these reasons Australian Higher Education must not only be profitable for its own survival, but it must also define and address its specific mission. It must also be fair and equitable. Achieving this will require a fundamental transformation of the Higher Education System into a framework where money is the enabler of system performance – not the driver.

The currently narrow debate about university funding must shift to a broader engagement with the community about developing a system of higher education that underpins a modern civil society, supports economic development, and enables the growth of the new industries that will provide the jobs of the future.

But there can be no turning back from the corporate university: the pressure is possibly in the other direction – perhaps towards privatisation in some of the very profitable institutions. The immediate challenge is to make the system work for the benefit of students, staff, industry, government and the broader community.

One way forward would be a complete separation between domestic and international businesses, the ending of the cross-subsidy for research (which Job Ready does), and a segmentation that includes a re-invention of teaching only/polytechnic models and greater recognition of the role of non-university Higher Education providers in practice-based fields, such as in the performing arts, design, and creative practice.

The new Provider Category Standards and the Australian Qualifications Framework can facilitate this progression from the strait jacket of the Unified National System to a Diversified National System that offers wide choice of delivery options with each segment meeting demand for higher education in ways that make best use of distinctive institutional capabilities and capacities.

This is an extract from a larger project that addresses the Corporatisation of Australian Higher Education and the Growth of a National Industry: Policy Issues, Implications and Options.