Beyond Efficiency Savings … What Does Meaningful Organisational Transformation Look Like?
By Joel Arber, Chief Executive Officer, SUMS Group
A quick glance at UCU’s UK HE Shrinking web page tells a tale of a sector in crisis. 96 of our institutions are listed as currently undergoing ‘redundancies, restructures, reorganisations, and closures’. Research intensives, teaching focused, small specialist – few are immune.
Such is the scale of the challenge that Universities UK has formed a Taskforce on Efficiency and Transformation in Higher Education, chaired by Sir Nigel Carrington. The taskforce is exploring how ‘universities can partner, collaborate and deliver transformation and cost savings through new models and ways of working’.
Knowingly inefficient – the reality check
The taskforce was created on the back of Secretary of State for Education, Bridget Phillipson’s letter to vice-chancellors in the autumn where she called for “sustained efficiency and reform”. This was something of a reality check for universities. The sector feels underfunded and squeezed, yet a government sympathetic to HE and its impact pointed to the lack of real pain the sector has felt – certainly relative to cuts in further education, schools, local government, et al. If you take a look at real term incomes, the 21st century has been incredibly kind to universities: essentially a story of steady, sustained growth. The challenge is that costs have been allowed to grow to an unsustainable level.
Take a step back from the day-to-day and you can appreciate how this is the case. Talk to professional service colleagues in pretty much any HEI and they will speak to myriad systems challenges: poor systems implementation; a systems landscape where key systems are not integrated with each other; extreme customisation with an overreliance on ‘Barry’ or ‘Carol’ in the IT team who designed in the changes 20 years ago. They will also talk about processes characterised by waste and undermined by poor hand-offs between siloed departments. And the solution? Typically to recruit more staff to work around the problems.
You can’t cut your way to success
The fragility of our institutions’ reliance on international student fee income has been exposed by the immigration policy of the previous government. With flatter income lines, the need to deal with rising costs has become a necessity. But what we are still seeing, is a focus on efficiency savings rather than a more fundamental reshaping – getting right-sized and ready to rebuild. Too many institutions are in crisis management mode, not looking at meaningful organisational transformation. They are dealing with the immediate, without being able to see the long term. Yet you cannot cut your way to strategic success: it can quickly spiral into death by a thousand cuts. Being efficient is non-negotiable and a point of professional responsibility for university leaders. The key to future success is aligning them to realistic strategic goals. For some institutions, those goals as currently stated are not achievable.
There are some clear indications that student recruitment demand will grow again soon. We are past the demographic nadir of 18 year-olds in the UK – the ONS predicts that there will be 100,000 more 18 year-olds in 2028 than there were in 2018 and this age group is still applying through UCAS in record volumes (although regional disparities mean a more challenging picture in Scotland). Longitudinal market research on the global demand for post-secondary education points to burgeoning demand in developing economies between now and 2050. HolonIQ predicts than six major economies will make up 80% of global demand by this point: China, India, USA, Nigeria, Indonesia and Brazil. With China driving for HE self-sufficiency and the USA less welcome to student immigration – at least in the short term – the opportunity is there for UK HEIs to compete for business in this global market, just so long as our own immigration policies don’t make the UK look just as unwelcoming. And there are plenty of other fast-growing markets to service, too. For instance, it is worth noting the explosion of UK university campuses in Kazakhstan where De Montfort, Coventry and Cardiff have committed to build.
While incomes will likely rise, that doesn’t mean we should just deal with immediate cost pressures with a short-termist mindset. As stewards of our sector’s institutions, we need to do the right thing: do the hard yards that will make our universities more sustainable in the long run. And that means playing on both sides of the ball: yes, making efficiencies, but also going beyond and reshaping for future success.
It's time to roll up our sleeves
Most universities’ transformation efforts focus disproportionately on professional services. It’s just easier. Staff and trades unions are more accepting of cuts made on that side of the house. Yes, this is fertile ground for efficiency savings – it feels instinctively wrong that the ratio of professional services to academic staff across the sector is 11:9 – but it fails to recognise that the number one driver of professional services inefficiency is an overly complex academic model.
To move beyond efficiencies, begin by understanding your business: the academic offer.
This is an exercise to undertake through multiple lenses: finance, marketing and market research, strategic planning, academic leadership. There are some fundamental issues to get under the skin of. Which activities deliver a surplus? It is far easier to make informed, strategic decisions about cross-subsidies if you really understand your business model. SUMS Consulting helps universities achieve this with tried and tested tools to help look at cost of delivery all the way down to module level.
Portfolio review is essential for long-term financial health. Our programmes are our products and just like in other industries, our products have a lifecycle. They need regular review, refreshing and an objective view on closure based on a set of agreed success criteria. As a sector, we need to go on a journey from a supply-driven approach to portfolio where we deliver what academics want to teach, to one where supply is balanced with demand: external drivers, such as skills demands and workforce planning shaping the programmes we develop. Several Russell Group institutions are leading the way with horizon scanning market research to help shape their future portfolios, while we’re supporting others with simulations modelling different size and shape scenarios.
Beyond programme delivery, you also need to understand the return that your TNE relationships are providing – an area keeping SUMS Consulting International busy at the moment. Many institutions are seeing TNE as a way to boost income, but are the deals you’re doing good ones? Are the resources you’re investing fully costed? The margin you will make on this activity needs to be towards the top of your decision-making criteria.
Beyond teaching and learning, it’s broadly accepted that research barely covers its costs. But is your university doing enough with your academic community to generate third stream income (IP, commercial research, spin-outs – even land deals to lease assets with development rights for an ongoing revenue stream)? Still too often seen as the poor relation, the ability to generate significant revenues at favourable margins more than justify it having parity of esteem with research.
Taking a holistic review of your academic provision, understanding its costs and its returns, and reshaping it for future success is the work that needs to be done. It is only once you understand what you have and how this aligns with where you want – and need – to be, that you can work out what is required to get there. This is true of your academic resourcing, workload model, contracts and structures, along with the supporting infrastructure required to deliver it.
Why do we find it so hard to ‘play nice’?
The taskforce is encouraging the sector to work together – through innovative collaborative structures, sharing services and infrastructure, and by leveraging sector buying power. But for a sector that is very good at sharing information and talking to each other, we don’t have a great track record in shared services and successful mergers. City St George’s and ARU Writtle have shown us the art of the possible. Still, the taskforce will be lobbying government for a transformation fund to grease the wheels. This either suggests that while squeezed, the pips aren’t squeaking quite yet, or that despite the pain, we’d rather go under alone than play nice with others.
Universities aim for self-sufficiency, in many cases even when it’s more expensive. Now is the burning platform to drive more meaningful transformation rather than rearranging the deckchairs for the umpteenth time. Is it really justifiable for universities in the same region to each be spending money on non-competitive professional services? Is the pooling and sharing of back office functions something that should just be taken forward? The likes of the Ensemble Purchasing VAT exempt cost-sharing group, the University of London’s Careers Group and APUC’s Universities and Colleges Shared Services are all well-established regional models showing it can be done. Do we even need to limit our thinking to local geographies?
Think bigger
Whether your institution is working through existential cost-cutting challenges or you’re trying to make changes before circumstances dictate you do, think bigger. Let us focus our institutions on what they are good at: the three-legged stool of academic endeavour. Then design cost-effective support structures that enable them to operate. Where that means merger or shared services play a role, don’t resist. In the private sector, Global University Systems shows how a federation of institutions under one corporate banner enables institutions to keep their individual essence whilst more control can be exerted over policies and processes. Do what is best and what is right for students, for taxpayers. Trying to do everything ourselves is not brave or heroic; it’s expensive and hubristic.
Our sector is special and does need defending, but sometimes that means defending it from our own misplaced loyalties.
Introducing SUMS Group
Joel Arber is Chief Executive of SUMS Group and a respected leader in higher education strategy, with a track record of delivering sustainable transformation across institutions. Drawing on his experience as a university Pro Vice-Chancellor and commercial director, Joel now leads SUMS in supporting universities to navigate complex challenges and seize opportunities for lasting impact. SUMS Consulting works alongside institutions to deliver tailored, evidence-based solutions that improve efficiency, align with strategic goals, and enable long-term success. Find out more about how SUMS helps universities plan for efficiency and transformation at sums.ac.uk/universities-efficiencies.
