15.1 In previous chapters we have explored the challenges for higher education over the next 20 years. We have advocated increasing and widening participation (Chapter 7); a new emphasis on learning and on defining threshold standards for awards (Chapter 10); new ways of funding excellence across the range of research (Chapter 11); a new understanding of the local and regional potential of higher education (Chapter 12); and we have emphasised the importance of more effective and imaginative staff policies and practices (Chapter 14). We have described these issues within the framework of a new compact for higher education, in which the Government, students, employers and institutions will each play their part. In this chapter, we turn to ways in which managers and governing bodies of institutions can best contribute to the work of higher education.

15.2 Our terms of reference asked us to consider how

‘value for money and cost-effectiveness should be obtained in the use of resources’.

15.3 We consider in particular some of the steps institutions need to take to manage and govern themselves over the next twenty years in order to realise the ambitions which we believe they will share with us. The effectiveness of any organisation depends in the long term upon the effectiveness of its management and the arrangements for its governance. This applies particularly during periods of change and especially to higher education institutions in the years ahead. The quality of their management and governance will therefore be a matter for continuing attention.

15.4 Our recommendations on the management and governance of institutions are guided by three essential principles:

  • institutional autonomy should be respected. Whilst we take it as axiomatic that government will set the policy framework for higher education nationally, we equally take it as axiomatic that the strategic direction and management of individual institutions should be vested wholly in the governance and management structure of autonomous universities and colleges;
  • academic freedom within the law should be respected. By this we mean the respect for the disinterested pursuit of knowledge wherever it leads. This too is axiomatic, but needs to be managed responsibly by individual academics and institutions;
  • institutional governance should be conducted openly and should be responsive to constituencies internal and external to the institution.

15.5 Whilst acting to support these principles, institutions should govern and manage themselves to obtain maximum efficiency and effectiveness.

15.6 Those from whom we received evidence demonstrated ways in which the management and governance arrangements now in place are working well and highlighted many achievements. But they also identified ways in which the arrangements could – and need to – be improved if the agenda defined in our report is to be tackled to best effect. This applies particularly to the use of resources in institutions, where sustained effort is required. It applies, too, to institutional governance, where often the arrangements tend to be complex and not well-understood by students, staff and those outside the institution, and do not necessarily seem designed to equip institutions well to address future challenges. We have considered two main issues:

  • improving the use and management of resources in institutions;
  • enabling governance to become more effective.

Improving the use and management of resources in institutions

15.7 We began by acknowledging the huge reduction in costs achieved by higher education in recent years and we express elsewhere our concern that an immediate further reduction could be damaging to the long term effectiveness of higher education. We make recommendations accordingly. Nevertheless, looking ahead to the next 20 years, a sustained effort to improve the effective and efficient use of resources by institutions is required to secure the long term future of an expanding higher education system. Institutions need to satisfy government, students and other funders that they are making a contribution to the total costs of higher education by continually seeking better value from their resources. This is a requirement in almost all aspects of national life and is part of the new compact with higher education. Here, we examine what has been achieved in recent years and some of the ways in which institutions can make the necessary further adjustments.

15.8 The demands on institutions’ staff, estates, and equipment and other resources has increased markedly as the number of students has risen faster than the level of public funding. In some areas, such as libraries, this has caused severe problems for students. The efficient use of resources has been promoted by the Funding Bodies. For example, institutions share their strategic plans, including an estates strategy, with the three Higher Education Funding Councils; and the financial memoranda require institutions to secure value for money in the use of their assets and to follow a maintenance plan for their estates. Several institutions have developed ambitious projects to redevelop their estates, guided by the need to maximise efficiency in their utilisation and running costs as well as their suitability for new learning and teaching methods.

15.9 The efficiency gains achieved across higher education have only been possible because staff productivity has increased and because institutions are using all their resources more intensively. This increasing efficiency has reflected the contribution made through an increasingly professional approach to resource management. To maintain the quality of provision will require a continuing commitment. The National Audit Office (NAO) has noted that institutions have achieved improvements in value for money, but that scope for further improvement remains.1 It told us that institutions ‘need to apply a wide range of management skills and experience if they are to survive and prosper, particularly at a time of tight financial constraints’. 2

15.10 The evidence about how much has been achieved – and how much more could be achieved – varies. We were told that ‘the sector considers that it is both sensitive to maximising cost effectiveness and is deploying advanced managerial disciplines and techniques so as to extract the highest efficiency levels’.3 The international evidence suggests that the reduction of costs has been pursued more vigorously in the United Kingdom (UK) than elsewhere in recent years, but that, our costs are comparable with those generally found overseas. There is also a difference of opinion about the extent of the achievements and the potential for further efficiencies. Those from outside the sector tend to believe that there is further scope for efficiency gains. Some of these respondents are prepared to countenance more systematic sharing of resources and the rationalisation of institutions as a way of improving efficiency. There are certainly examples where institutions continue to adopt traditional and isolated approaches rather than taking a forward-looking, strategic assessment of their developing requirements. Experience in other sectors suggests that, to a varying extent, institutions might be able to move to a different cost curve (that is, where the unit costs of teaching become significantly lower because of a different use of resources) were they able and willing to adopt more radical models for some of their work. This is explained in more detail in Appendix 2.

15.11 Staffing is the largest single cost to institutions, at about 58 per cent of all expenditure. Increased participation has been achieved largely through pressure on the ratio of teaching staff to students. It is true that much higher ratios are to be found in a number of other countries, but the UK compensates for the comparatively short length of its degree programmes by the quality of provision and high completion rates. We do not consider that further incremental increases in this ratio can be consistent with a resumption in growth and maintained standards without the development of new learning and teaching methods. In particular, continuing pressure on the ratio will be dysfunctional unless the benefits from the extended use of Communications and Information Technology are realised.

15.12 We have discussed elsewhere (Chapter 14) the increased commitment and improved management which are necessary for staff development and training, especially in the practice of teaching and the management of learning. In learning and teaching, more institutions would gain from a more corporate approach in which staff with management responsibilities are fully engaged and able to contribute. Whilst we would expect some differences in practice, few institutions appear to have undertaken any rigorous analysis or comparative studies of the best approach to delivering their learning objectives and the resources required. Too often, programme directors and heads of department have inadequate training and are not engaged sufficiently in the quest to achieve greater effectiveness in the use of resources. The National Audit Office (NAO) comments both that ‘the problem may be compounded by the substantial delegation of decision-making within institutions’4 and that ‘a key issue has often been the need to enhance the contribution that academic departments within institutions can make to help the institutions to achieve corporate improvements in value for money’.5 This suggests a need for training and information for those academics with management responsibilities.

15.13 The whole approach to programme design and the most effective means of delivering programme objectives needs the constructive involvement of institutional management to promote best practice. Management, at all levels, needs to put greater emphasis on resource management and ensure that the necessary investments are made in the measures designed to achieve longer term gains. A series of studies of different practices across institutions would contribute to thinking in institutions, and subsequently to the development of useful benchmarks. Institutions should review current departmental approaches to teaching techniques in order to identify the relative costs of differing forms of delivery, with the longer term objective of inter-institutional costs comparators and benchmarks.

15.14 Institutions’ expenditure on buildings and estates represents 12 per cent of total expenditure across higher education, the second biggest single component of their costs. The estate has been valued at 30 billion. It is thus relevant to explore every option for managing these assets well. The potential for further growth in participation, and the implications of the progressive extension of lifelong learning, resource-based learning and different learning and teaching methods, give extra incentives to do so. Mature learners in particular, but also, to an increasing extent, younger people, will in future want to take their programmes in shorter and more intermittent blocks, irrespective of conventional academic terms. Increasing numbers of students will need access to central facilities outside traditional working hours. Consequently, the prevailing model of a standard academic year, a single admissions round and a long summer vacation will be increasingly inappropriate for students and institutions. Imaginative solutions will therefore continue to be required to tackle the constraint that can be presented by a particular configuration or use of space.

15.15 Estimates (based in part on work by the National Audit Office [NAO]) suggest that the utilisation of teaching space is currently about 20 to 30 per cent. The NAO acknowledges that there are legitimate constraints, including the need for specialist accommodation for certain activities, other demands on student and staff time and the suitability of institutions’ estates. Whilst the NAO states that improvements can be made, it acknowledges that a target of 50 per cent would be challenging.6 If utilisation could be raised to 35 per cent, which the Association of University Directors of Estates has suggested is efficient, this would support a significant increase in student numbers broadly within the present approach to the academic year.7

15.16 We considered two options to promote the highest possible level of estates usage. The first is notional capital charging. This has been developed in the Health Service. It rests on charging institutions a notional rent on their publicly-funded assets and redistributing the surplus from asset-rich to asset-poor institutions. However, there are a number of difficulties, including: legal doubts about the applicability of the approach to some of the assets involved; serious difficulties in properly attributing the source of the funding for certain assets; the absence of a uniform basis of asset valuation; and doubts about the possibility of uniform implementation, given the sector’s diversity and the flexible way in which it has begun to use its accommodation.

15.17 Unpublished research by the Higher Education Funding Council for England (HEFCE) concluded that capital charging was unlikely to offer sufficiently large gains over the current approaches already being encouraged and developed within individual institutions and that any gains would not outweigh the costs of implementation. We agree with this view.

15.18 The second option is to extend the academic year. Those who have advocated this option in the past have done so largely on the basis of the apparent anomaly of institutions in which full-time undergraduate teaching, traditionally the primary purpose of an institution as well as the major use of space, conventionally takes place for only 24 to 36 weeks a year. Of course, this is to some extent a partial view: institutions do operate throughout the year, with important activities taking place in the absence of students. Many of these activities make a substantial financial contribution to their budgets, and institutions already often teach extensively outside conventional ‘office hours’. Increasingly, advocacy of change rests as much on the decreasing educational suitability of the model of the traditional academic year as on the possible opportunity costs to higher education.

15.19 Extending the teaching year would deliver teaching in more hours, days and weeks of the year. Particularly for part-time students, more teaching at weekends and in the evening would reflect students’ increasing employment during their studies. It would allow the possibility of a longer first semester or the introduction of three semesters. We noted international practice, in which the Netherlands, for example, has a teaching year of 42 weeks (see Appendix 5). We were mindful of the detailed consideration given to this matter in reports by Lord Flowers 8 and Professor Maxwell Irvine.9 Their studies concluded that there are genuine difficulties in further extending the teaching year. These include: avoiding an unreasonable lengthening of academics’ working year; respecting the time needed for research and other academic activities; effecting parallel changes in the admissions timetable; the possible loss by some institutions of valuable summer conference income; student preferences; and that some mature students with dependants would be likely to find summer study particularly problematic. We acknowledge these difficulties, some of which lie largely within the power of higher education to tackle and some of which do not.

15.20 Pilots of a revised academic year have been run recently at two English institutions and one in Northern Ireland and over a longer period at two Scottish institutions. They are designed mainly for part-time students and work-based learning and are therefore limited in the scale and nature of the activity. Further experiments have probably been discouraged by the current cap on full-time undergraduate student numbers and the current funding methodology, which have left institutions little headroom to finance summer teaching. The experience suggests that unit costs increase initially, and that savings accrue later, when student numbers increase. These institutions also suggest that a general summer semester is not sustainable without the critical mass of students necessary to ensure a positive learning experience for them and realistic unit costs for institutions.

15.21 However, there may be more persuasive imperatives in the future. Financially, in the absence of public funding for additions to the estate, institutions will need to consider where the balance of advantage lies in the span of the year over which their assets are used for teaching. Educationally, there may also be student demand for change and it is likely that Communications and Information Technology will alter dramatically the way space is used. Given these factors, major expansion of the estate across the sector might not prove a good or necessary long term investment and different ways of using space are likely to emerge.

15.22 Institutions are already introducing other flexible learning opportunities for those not on traditional three or four year programmes. This trend will continue. For example, summer teaching could be used for bridging modules from one level or subject to another, repeat modules, remedial work, access activity, additional modules, or ‘outreach’ and ‘inreach’ for school pupils.

15.23 Summer teaching will need to be developed sensitively and with careful preparation and incentives for the staff involved. There will be difficult logistical issues in matching staff deployment to student requirements and in balancing the various staff responsibilities throughout the year. Costs and benefits will need to be broadly equivalent. An extended academic year need not mean that teaching is extended throughout the year for each academic. Many will welcome more flexible learning and teaching patterns in which there will be different ways of organising the time for research and other activities.

15.24 We therefore support the Flowers and Irvine conclusions that an effort of will in higher education could – and should – be applied to address many of the difficulties identified in extending the academic year more systematically. Different models for using the full year and institutions’ estates more intensively will maximise student choice and increase lifelong learning opportunities. These may be particularly relevant to institutions which are not heavily engaged in research, although we would expect all institutions to give attention to the possibilities We consider that, over the medium term, institutions should examine, in consultation with students and staff, new approaches to the academic year, with a view to finding ways of better meeting students’ diverse needs and increasing participation without a proportionate increase in costs. Later on, we also propose that institutions review this matter as part of the review of their strategic objectives and progress which we recommend below.

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