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Universities through the Looking GlassMeasuring success in the new economics of higher education
HESA Benchmarking seminar1st March 2011
© PA Knowledge Limited 2011. Page 2
Past conditions for success will not be the same in the future
“FUNDED WORLD” “MARKET WORLD”
Business Imperatives Maintaining and supplementing public funding
Self-sustaining business portfolio
Conditions for Sustainability
Break-even or slightly better for solvency
>5 -10% surpluses for self-sufficiency
Competitive Success Factors
Peer-rated teaching and research
Value-adding service propositions
Organisation Models Discipline- and function- based
Open and flexible resourcing structures
Resource Management Budgets as spending limits (or targets)
Budgets as devolved business plans
Cost Drivers Staff and other fixed operating costs
Optimal inputs for competitive pricing
Performance Measures Delivery of HEFCE and other public contracts
Differentiation, value, cost- effectiveness
© PA Knowledge Limited 2011. Page 3
Universities need to develop new, capability-based business models
EXPECTEDFUNDING
“THIRD STREAM”REVENUES
CORE OPERATIONS
BUDGETALLOCATIONS
ContractedActivities
Inherited Cost
Structures
IncrementalResources
EXPECTEDFUNDING
“THIRD STREAM”REVENUES
CORE OPERATIONS
BUDGETALLOCATIONS
ContractedActivities
Inherited Cost
Structures
IncrementalResources
DISTINCTIVEASSETS
INCOME &MARGINS
OPERATINGSTRUCTURES
COMPETITIVEPROPOSITIONS
MarketInsights
SharedPurpose
IntegratedDelivery
Investment& Renewal
DISTINCTIVEASSETS
INCOME &MARGINS
OPERATINGSTRUCTURES
COMPETITIVEPROPOSITIONS
MarketInsights
SharedPurpose
IntegratedDelivery
Investment& Renewal
The current funding-led business model is geared to sustaining a fixed cost base, and
depends on continually rising revenues – this is not sustainable
A capability-based business model would be self-sustaining and inherently adaptive to
changing market opportunities
© PA Knowledge Limited 2011. Page 4
In this world, success will be measured by results, not inputs
STRATEGIC OBJECTIVES CRITICAL CAPABILITIES SUCCESS MEASURES
Protect core teaching income (UG and PGT/R)
attractive learning/study experiences strong employer relationships excellent student services
Extend domestic education earnings
employer and professional body links agile programme design marketing and channel mgt.
Grow international earnings ( in UK and offshore)
effective brand management productive overseas partnerships excellent student service
Maintain research and development profile
targeted research priorities leverage of research strengths managed R&D relationships
Develop new services and business opportunities
business account management external relationships (HE &
business) enterprise mgt. systems/skills
Improve operating efficiency and margins
flexible and productive staffing innovative delivery models year-round operations
demand vs. places fee revenue/student high employability ratings
part-time and work-based offers CPD and short course numbers e-learning and flexible channels
positive brand associations strong in-country relationships reputation for student success
top-end research capacity research earnings per academic private research income
earnings from knowledge services
income from new services collaborative partnerships net costs/margins from T and R output per academic (T, R and KX) value from service operations
© PA Knowledge Limited 2011. Page 5
What does all this mean for benchmarking?
• Benchmarks that were important in a funding-led world will not necessarily be valuable in a capability-based world
• We are currently in an uncertain no-man’s land, equipped only with data from the old world but without a benchmarking framework for the new world
• If universities compete on differentiation, who will they compare themselves with?
• In a world of diversified and differentiated choices, how will stakeholders judge the relative performance and success of institutions?
© PA Knowledge Limited 2011. Page 6
A quick look shows the diversity of the sector
© PA Knowledge Limited 2011. Page 7
League tables represent the worst of benchmarking…
• No single version of success …
• What about part-time, on-line, and post-experience students, work-based learning, international students?
© PA Knowledge Limited 2011. Page 8
Benchmarking will become more important for….
Pricing
Contact hours and other inputs
Outcomes
Where price becomes a complex calculation of ‘sticker price’ minus bursaries, discounts and awards, calculated in terms of repayment amounts and periods ..
… and value considers contact time, learning modes, placements, skills-training, extras, timetabling and course dates …
… plus greatly increased interest in data around outcomes. What % get employment? When? With which types of organisation? On what salary? What happens to them over 5 years?
The student ‘deal’
Is there an RoI metric for students which combines prices and outcomes?
© PA Knowledge Limited 2011. Page 9
Benchmarking will become more important for….
Assessing market opportunities
Market share
Mar
ket s
ize Grow
ing
Shrin
king
Growing Shrinking
Maths
Eng
Media
Geog
LawBus
© PA Knowledge Limited 2011. Page 10
Benchmarking will become more important for….
Assessing portfolios
Invest for profit / cross
subsidise
Close?
Grow /sustain
Invest for quality/
cross subsidy
Profitability
Qua
lity
© PA Knowledge Limited 2011. Page 11
…and will be used in different ways
• A strategic process and not as an end in its own right
• Increasingly part of business as usual decision-making
• Based on sources from outside the sector as well as inside
• Using more recent data
• Internal benchmarking across departments and faculties
• Benchmarks woven in to KPIs and strategic performance assessment