In the UK, these institutions need to consider how they can respond to market challenges and pressures, with those who govern them leading the way.
The standard pedagogical mode in UK universities has not changed for decades, if not centuries; teaching is directed from a learned authority to ranks of assembled students in a lecture theatre or seminar, and then tested in exams. The universities themselves are established as autonomous institutions with council and senatorial governance, reflecting their academic mission and status as charitable organisations. Many universities occupy grand old buildings in our major cities, or listed modernist architecture in landscaped rolling hills – it all feels rather perennial, fundamental and eternal.
However, in the last ten years the value that universities bring to British society has been queried. The outcomes of an industry that's valued at nearly £40 billion seem frustratingly hard to articulate and transmit to the public, media and politicians. With the rise of marketisation in higher education in England and Wales, the idea of what constitutes a model for good governance has come under pressure. Universities have been exposed to and have taken on greater risk, without a corresponding coherent story of the positive outcomes that should result.
Crucially, this risk is as much a result of globalisation as it is of conscious government policy. Even if a future British government was to reverse student tuition fees and reinstate a cap on student numbers, the challenge from overseas will only increase. By 2030, Chinese universities will be common features in the Top 10 of international league tables, and will be displacing previously dominant western universities. Or, there is the opportunity for a disruptive model to offer a genuinely different route to learning – one driven by artificial intelligence and augmented reality.
Either (or both) of these events could fundamentally undermine the business model of many UK universities. After all, why should any international student travel halfway around the world to the UK when the best universities are nearer their home, or even in their home?
Today the most pertinent question a well-governed university board or council can have on their collective agenda is 'what is our competitive advantage?'
Board members should be asking themselves that question, and whether they can convey their institution's newly-relevant value to students, parents and society generally. To raise this question and answer it well requires a review of board skills and competencies. They need to be functioning as well as possible.
There have been notable governance failures recently in higher education, not least around the salaries of vice-chancellors. The rise of private, alternative providers in the sector increases the likelihood of such failures, as investors are more likely to walk away if profits don’t materialise. The sector, however, cannot risk such failures because of the reputational harm they bring and the intrusive regulation that can increase as a consequence.
The Office for Students (OfS) may be under pressure to become a more interventionist regulator, stepping in to counteract the perceived retreating level of trust in universities. OfS is responding to pressure from politicians, who for different reasons feel that the present structure doesn’t serve Britain’s interests as well as it should: some think it's too elitist, others that it’s not elitist enough.
Surveys have shown the limitations of the public’s understanding of universities, especially outside the undergraduate experience. A survey carried out for Universities UK in November 2018 demonstrated that the key unprompted outcome of universities for the public is jobs, career success and perceptions of debt1. The same survey showed that less than half of the population (48%) admitted to feeling positive about universities. Ultimately, this view will permeate through to politicians, and it is how they will measure the contribution of the higher education sector to the UK’s competitive advantage.
There is a need for the higher education sector to come together and speak with one voice to the public and politicians, but the competitive market hinders coherence and co-operation. Meanwhile, the OfS is driving the creation of new degree-awarding institutions, making this process even more difficult.
For generations, students attending university have assumed that it is a stepping stone to a career and a healthier life, with greater stability and security. With the introduction of tuition fees, politicians had no compunction making this assumption explicit – a degree was a promise of future success, paid from a personal investment badly branded as student debt. However the higher education sector, operating in the current global economy and with its current governance practices, may not be able to make good on this promise.
Is the academic community alert to the risks of international or disruptive competition? Competitive businesses facing high fixed costs would respond by merging, selling divisions or consolidating. But the three-part constitution of universities – as academic bodies, charities and as businesses – seems to be inhibiting that consolidation.
The academic community is a particular and peculiar limiting factor for reform. Some board members feel as though the eternal nature of tenured traditional academia isn't grounded in commercial reality. This then gets transmitted to the students, who now go to university not only to learn but also to see a return on their investment.
In a well-governed university, the role of the audit committee is to shine light on other decisions that get made. The audit committee is not there to vet or revoke decisions taken by the board, but to isolate, understand and mitigate any larger strategic risks being taken. It is one area where boards need a wider range of skills and broader experience, and where business market experience is going to be fundamental for the future and for navigating that risk.
To discuss this further, please contact Debbie Watson.