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Australia's universities have experienced widespread and profound changes, including an unprecedented expansion, particularly over the last decade. In 1995, they preside over a far larger and more diverse student body and undertake a wider range of activities than in the past. While there has been considerable growth in Commonwealth funding to the sector, an increasing proportion of total funds is being raised from other than Commonwealth grants. Over recent years our universities also have made progress toward more contemporary management practices, largely through the development of strategic planning and a focus on improving quality. However, this progress has not been even.
The Minister for Employment, Education and Training, the Hon. Simon Crean MP, announced on 5 June 1995 that a review of the higher education system would be undertaken with the objective of developing excellence in management and accountability for the resources available to the sector. Given the short time frame for the review, and the necessity to consult widely, the Review Committee has focused in the main on broad sector-wide issues. Recognising the evolving pressures on the higher education sector and the changing nature of the academic enterprise, the Committee identified five key areas of higher education management: accountability; governance; strategic management; workplace reform; and finance and asset management. The universities themselves have confirmed the importance and relevance of these matters. The Committee believes that effective management depends not only on attending to each of these areas but also on recognising and acting upon the links between them. Submissions were received by the Committee and extensive consultations held with stakeholders, structured around the areas identified above.
This review seeks to build on the contributions of several previous investigations or analyses which have shaped the direction of Australian higher education or sought more specifically to improve operating practices within universities. Most noteworthy amongst these are the 1986 Commonwealth Tertiary Education Commission (CTEC) Review of Efficiency and Effectiveness, the 1987 Green Paper and 1988 White Paper and the more recent reports arising from the reviews by the Committee for Quality Assurance in Higher Education.
Although management improvement in recent years has been significant, the evidence is that the pressures on higher education - like those facing many other sectors of the community - are relentlessly evolving. These pressures will continue to force universities to deal with change and to manage the difficult task of refining and, probably, reformulating their fundamental missions.
These pressures on the sector include:
The pressures identified above mean that universities are being required to operate in a different manner than even a decade or so ago. They must balance the traditional benefits of collaboration and collegiality with an environment of increasing competition for domestic and overseas students, staff, research funds, industry support and status.
Apart from the need to absorb the impact of changing economic and demographic trends, universities also must take into account both the shifting emphasis of government priorities toward the expansion of the vocational education and training sector, as well as the impact on higher education of the forces of globalisation and information technology presently transforming the international business environment.
The increasingly competitive higher education environment has led, in tandem with moves by government, to ever-increasing attention to quality assurance mechanisms and the re-positioning of the student as a customer or client. Focus on employment prospects of graduates also has meant growing pressures on academic staff to demonstrate relevance of courses.
These developments suggest that the distinctions between vocational and professional education and between preparatory and continuing education are being blurred. Consequently, the relationship between higher education and the vocational training sector will develop in significance. These changes raise fundamental questions about the nature and purpose of higher education and the structure of undergraduate and postgraduate programs.
The future development of university teaching will focus closely on flexibility in curriculum development and delivery. Developments in information technology will have a profound impact on the capacity of institutions to develop and deliver programs, with more open learning and modular arrangements among the strategies likely to be used increasingly by institutions.
Changes are also occurring in the nature and role of university research. As research funding becomes more competitive and as the strain on research infrastructure continues, the common expectation that all academics be involved in research becomes harder to sustain. Meanwhile, universities will continue to balance the incentives for more applied research while preserving the traditional role of university research as the independent pursuit of basic knowledge.
The general theme of preserving institutional and individual academic autonomy is a recurring one in higher education. At an institutional level, autonomy has always been situated within the context of the interaction of the university with the outside world, both in terms of governments and the professions. This context has been altered as Australian universities have come to service mass higher education and interact far more with a variety of external communities. In this changing environment there is a need to consider what institutional autonomy should mean. The Committee takes the view that it is best defined by institutions themselves deciding their missions and goals and pursuing them to meet the various needs of their communities. Institutions through the involvement of their governing bodies in the strategic planning process should take greater responsibility for their own destiny. At an individual level, autonomy has long been cherished as academic freedom to pursue independent critical inquiry and to undertake, for example, longer term basic research. The notion of lifelong tenure as a necessary condition for the protection of academic freedom is increasingly being questioned due to the necessity to make decisions about employment in terms of institutional need, the availability of resources and the performance of staff.
Universities are extremely complex organisations, with multiple missions relating to the development of knowledge and its transmission. They have a myriad of roles, including theoretical education and professional training, the discovery and dissemination of new knowledge, critical reflection on society and contributing to the community and to the national economy. Their goals are set within long time frames and are inherently difficult to measure. They incorporate disparate professional disciplines, to which academics may feel stronger allegiance than to their employing university. Within this already complex organisational structure, rapid changes are being experienced in the nature of the academic enterprise. The pace of these changes will continue for the foreseeable future.
Universities have a wide range of stakeholders, including the Commonwealth Government, from which they receive more than $5 billion in funding each year. They are also part of a society which is demanding greater accountability from all its organisations.
This accountability has been shaped by both external and internal forces. Externally, institutional accountability has been determined in the light of:
Internally, institutions have needed to develop more transparent and accountable systems of resource allocation and stronger mechanisms for accountability as management responsibilities are delegated within the university. Professional accountability has long been accepted in research through publication and peer review; attention is now turning increasingly to accountability for teaching and service.
The Review Committee sees enhanced accountability as a key factor underpinning its recommendations on governance and strategic and financial management.
Under current arrangements the Commonwealth provides the vast bulk of funds to the higher education sector but States have legislative responsibility. There is a widespread view that these arrangements can work effectively as long as there are suitable consultative mechanisms in place to promote a co-ordinated approach by government. This point was highlighted in a number of submissions to the Review Committee and during consultations.
The Review Committee identified a number of issues relevant to the roles and responsibilities of State governments. These issues are taken up in discussion on governance, strategic management, workplace reform and financial and asset management.
Thirty-four of the thirty-six higher education institutions in the Unified National System (UNS) are established under State legislation and two under Commonwealth legislation. Under these State or Commonwealth Acts, responsibility for the governance and management of the institution is vested in a governing body, in the form of a Council or Senate.
Governing bodies are accountable to the State or Commonwealth government for the operations of the institution. The enabling legislation also provides for the establishment of a Vice-Chancellor as a chief executive officer and for delegations of authority.
The principal strength of governing bodies is that they can bring the viewpoints of a range of external and internal stakeholders to bolster relations between the university and the community and to focus on the operations and directions of an institution, thereby helping to enhance its accountability and shape its strategic development. The Review Committee found that in practice several factors were working against the most effective operation of governing bodies.
Foremost among these was a widespread lack of clarity about the primary roles of the governing body. This occurred both within and outside its membership and was reflected in the agenda of many governing bodies, their subordinate committees and in the activities of their members. The governing body exists to oversee the development and adoption of institutional strategic plans and key policies, to monitor and review the institution's overall performance and to bear ultimate accountability for the institution. Its activities should be principally those of guidance and review, rather than executive management, and its members should recognise their overriding responsibility to bring diverse viewpoints together for the advancement of the institution rather than to represent sectional interests.
Much of the work of governing bodies is undertaken by committees in most universities. These committees may meet more frequently than the governing body, involve a wider range of members, and can focus on specific aspects of the governing body's functions. However, care must be taken that committees do not undermine the effective operation of the governing body in discharging its responsibilities by reducing the role of the governing body to endorsing work produced elsewhere. Standing committees should be kept to a minimum and, in many cases, work that needs to be undertaken on behalf of the governing body should be performed by task groups with defined sunset clauses. Where committees of the governing body exist, the Review Committee considers that it is essential that their operations are considered to be an integral part of the responsibilities of members of the governing body and members should be encouraged to participate on them.
In a number of institutions, governing bodies have reviewed their own structures and performance to assess whether they are fulfilling their core roles and to re-focus their efforts. Such reviews should be a regular exercise for every governing body. They should examine how well the governing body is defining strategic directions for the institution, monitoring progress in following those directions and establishing appropriate measures of institutional performance. They should also examine whether they have appropriate and accountable systems in place for the devolution of decision making. Such reviews should extend to the committees which report to the governing body.
The relationship between the Vice-Chancellor and the governing body is a key element of the link between governance and management. The Vice-Chancellor has a stewardship role on behalf of the governing body and acts as its chief executive officer. The 1988 White Paper set out the Commonwealth Government's expectation that clear responsibility and authority would be delegated to Vice-Chancellors and that they would be held responsible for executive implementation. An agreed set of delegations, performance criteria and arrangements for formal appraisal should be established between the Vice-Chancellor and the governing body to ensure that this can occur.
The size and composition of governing bodies has been the subject of much attention. The 1986 CTEC Review considered that bodies with '20 or so members' could provide adequate representation of institutional and community interests and observed that a majority of members from outside the institution was an important part of the institution's accountability to the wider community. The 1988 White Paper stated that an appropriate size for a governing body would be in the range of 10 to 15 members. Most institutions have between 18 and 25 members, though nine institutions have 30 members or more.
The Review Committee came to the conclusion that the size of the governing body was less important than the quality of the membership and the quality of the information made available to them. Nevertheless, it believes that there is scope for rationalisation and that an appropriate mix of members can be reached in most institutions typically with between 10 and 15 members. If the size and structure of the governing body is to change then there will be a need to ensure that the widest possible range of stakeholder views can be considered, either through direct involvement on the governing body or through committees and advisory groups or consultative arrangements.
A number of submissions to the Review highlighted the importance of having motivated, talented and effective members on governing bodies. The Review Committee agrees that membership should comprise a mix of skills, knowledge and attributes appropriate to the institution and the role of the governing body, including an appropriate gender balance, and that it is important that there be a majority of external members. There should also be clear requirements for probity of members, through declarations of interest and clarification of fiduciary responsibilities. Governing bodies should develop proper induction and training programs on the roles and responsibilities of members, in particular, highlighting the importance of a corporate focus as opposed to representing sectional interests.
The Review Committee considers that some amendments to university enabling legislation would be desirable. At present most Acts are too general about the roles and responsibilities of the governing body and yet are overly restrictive in other areas, particularly in relation to the appointment of parliamentary members and where there are requirements for external approval of appointments of key executive officers or of statutes, by-laws and rules. These matters should be raised in appropriate Commonwealth and State/Territory fora with a view to amending legislation consistent with these principles. The Committee also believes that further consideration of the appropriateness of the role of the University Visitor and grievance procedures in higher education institutions is warranted.
Recommendations on governance
1. The governing body of higher education institutions should have ultimate responsibility for strategic direction and development of the university and external and internal accountability, including monitoring and review of institutional strategic performance. It should also ensure that:
a. accountability for implementation is appropriately delegated;
b. there is an appropriate academic body to monitor academic policy and standards and protect academic freedom;
c. there are adequate and effective separate fora available to determine stakeholders' opinions, particularly for those of staff and students; and
d. it reports on progress against strategic directions.
2. The role of the Vice-Chancellor should be to exercise stewardship of the institution on behalf of the governing body, and he or she should be formally accountable to the governing body for performance according to an agreed set of objectives, arrangements and criteria.
3. Governing bodies should, on a regular basis, review their own role and performance, and that of the Vice-Chancellor.
4. The Minister for Employment, Education and Training, through appropriate Commonwealth and State/Territory bodies, should recommend that States amend university enabling legislation, where appropriate, so that:
a. the primary responsibilities and roles of governing bodies and their members are explicit;
b. members elected or appointed to the governing body have fiduciary responsibility and must disclose interests in matters under consideration;
c. the size of the governing body is typically between 10 to 15 members;
d. the governing body is able to co-opt members;
e. external independent members outnumber internal members;
f. the governing body can fill vacancies by appointment on a temporary basis until elections can be held or external appointments are made; and
g. the governing body can make ordinances, statutes, by-laws and rules without requiring government approval.
5. Changing the focus and structure of the governing body will require greater attention to the nature of appointments and membership:
a. members of governing bodies should be chosen on the basis of their demonstrated ability and preparedness to contribute and the required mix of skills and attributes for the body, taking into account considerations such as gender equity;
b. potential external members should be identified through an independent professional process;
c. a proportion of members should be replaced regularly and appointments to the body should be made on a three or four year rolling basis with a usual maximum of, say, no more than two or three terms;
d. the governing body should ensure that its members and potential members can meet all their responsibilities effectively by having:
- clear guidelines on the roles and responsibilities of members;
- proper induction; and
- continuing skilling and development; and
e. in relation to government appointments:
- the institution should provide a short-list of names for discussion with the Minister/Governor, and
- the Minister/Governor should ensure appointments are timely.
The ability of an institution to identify and achieve its core purposes in a complex and rapidly changing environment will depend on how well it can strategically manage its resources. Strategic management consists of the ability to develop strategic and operational plans, marshal resources towards the achievement of those plans, monitor and review performance and regularly review and update plans. It relies on commitment throughout the institution, which in turn depends upon the leadership of academic managers and upon the collegial processes used to develop and implement plans.
While acknowledging that substantial improvements have been made in institutional management in recent years, the Committee is not convinced that all institutions provide sufficient attention to equipping their managers with the skills needed to manage change, people and risk. The growing competitive and commercial environment in which universities operate demands continuous quality improvement and a pro-active approach to management, whereby opportunities are recognised and seized. This will require a fundamental change in the thinking of some university managers. To move to the forefront of contemporary management practice and to adapt principles of sound strategic management to the higher education environment, a systematic and strategic approach to management skills development is needed.
The 1986 CTEC Review found that continuous forward planning was not a widespread feature of the Australian higher education system at that time. Since then, government and institutional interests have combined to see strategic planning adopted as a universal feature of Australian university management. An important spur to this process came with the 1988 White Paper, which introduced education profiles, setting out each institution's course mix and the areas it wished to develop as strengths in the future. One of the heads of agreement for education profiles is a description of the university's broad mission and objectives.
The Review Committee found that all institutions now have defined strategic planning processes, but these vary in quality across the sector. Responsibility for strategic planning should rest with the governing body, yet in some cases the governing body was not involved until late in the development of plans. As a result, the external contributions intended by the formation of the governing body were not provided effectively. There was also variation in the extent to which plans were developed from 'top down', or aggregated from 'bottom up'. In many cases a combination of both approaches was used. It is important that strategic plans be developed to provide a basis for accountability for performance against stated intentions. They should also motivate and engage staff throughout the institution to work towards agreed objectives.
The Review Committee believes that there is scope for institutions to continue to improve their strategic planning. The better strategic plans include: a medium- to long-term time horizon (including three-year financial projections); analysis of the operating environment; clearly defined objectives and strategies to achieve those objectives, including resource management strategies; and a review against past plans and targets. The extent to which institutional budget and operational planning is linked to strategic plans is variable. Review of strategic plans, based on honest appraisal of successes and failures and weighing institutional strengths against changes in the operating environment, is also inconsistent. The Committee recognises the difficulties in measuring performance against some objectives in higher education, for example, in developing lifelong learning attributes in students or community service, but notes that substantial progress has been made and that work in this area is ongoing.
At present the profiles process includes consideration of research and capital management plans and institutional equity and Aboriginal and Torres Strait Islander education strategies. The Committee heard views that the profiles process was in general too focused on inputs and entailed collection of considerable data, the utility of some of which was questioned. The Committee believes that the profiles process should be reworked to include a stronger focus on outcomes relevant to institutional strategic plans. This would enable the Commonwealth to be assured that strategic directions were in line with national objectives and targets and should enable better alignment of resource allocation with institutional strategies and performance.
A number of submissions highlighted the interest, not only of Government but also of staff and students, in seeing that institutions operated consistently with national policies and with their own stated plans.
Proper accountability for the content and implementation of plans is essential for ensuring that higher education institutions have the confidence of their internal and external stakeholders. The Committee notes the level of detail and the range of existing reporting arrangements and recommends that in improving non-financial accountability, the overall system of reporting should be streamlined and reformulated to provide clearer and more focused accountability for outcomes. In particular, reporting should be closely linked to strategic plans and should include progress against quantitative and qualitative performance indicators relevant to each institution.
Recommendations on strategic management
6. A more strategic and systematic approach to management and leadership skills development should be adopted at all levels and across all organisational units of each university.
7. In their strategic plans, universities need to ensure that they are able to meet the accountability requirements of the Commonwealth for the funding they receive from the Commonwealth. The profiles process will need to focus on those outcomes relevant to Commonwealth policies and objectives.
8. To ensure that strategic plans have an appropriate basis against which to measure and account for performance, they should incorporate:
a. a medium to long term horizon (including three year financial projections);
b. analysis of the operating environment;
c. clearly defined objectives and strategies to achieve these objectives, including the availability of resources;
d. quantitative and qualitative performance indicators and targets;
e. review against past plans and targets; and
f. an outline of accountability and reporting processes.
9. Institutional annual reports, as the key retrospective external accountability report, should:
a. report outcomes and achievements against objectives and performance information established in the strategic plan; and
b. contain sufficient information to satisfy, as far as possible, Commonwealth, State and other stakeholder reporting requirements.
10. There needs to be a review of all reporting requirements with a view to streamlining and reducing the administrative burden and ensuring that all data collected have some genuine use.
The key resource of universities is their staff, both academic and general. The knowledge, skills, attitudes and performance of staff directly affect the quality of academic teaching, research, consulting and community service. In addition, there are obvious links between individual and overall institutional performance.
Given the importance of staffing matters, it would be expected that universities would take a strategic focus to the way in which they nurture and otherwise manage their staff. This focus should have emerged as a major plank in the quality improvement agenda within the higher education sector, particularly given the recommendations contained in a number of previous reports which advised universities to become more interested and more strategic in their approach to staffing issues. However, the Review Committee did not see strong evidence to suggest that this was occurring to any major extent.
The Review Committee has a range of concerns about current workplace policies and practices within Australia's higher education sector. The Committee is concerned that, at a broad level, the work practices are not keeping pace with the profound societal and economic changes affecting the sector. Universities need to confront the fact that the way in which they have operated and organised themselves in the past may not enable them to adapt to a rapidly changing future. They must also acknowledge that the climate of industrial relations and the context of financial support has changed.
The recognition of these fundamentally altered elements of the academic environment should not mean the abandonment of various worthwhile and valued traditions. But it does mean some reconsideration or reformulation of these, so that the unique nature of universities can be preserved while operating in a more diverse and competitive environment.
The Review Committee is not convinced that the sector is yet adequately grappling with these fundamental challenges. For example, there still seems to be a culture of mutual blame and dependence within universities, whereby university managements and the relevant unions blame each other, or even federal or State governments, for their inability or unwillingness to tackle major workplace and work practice issues. This can be seen in the current rounds of enterprise bargaining negotiations. Instead of enterprise bargaining being recognised as providing something of a 'circuit-breaker' opportunity, it has been rigidly circumscribed by Award conditions and workplace practices which were established in the circumstances of a different era. It could not be said that the current negotiations have been genuinely enterprise-based.
The Review Committee is of the view that all parties must bear responsibility for the current situation and that all parties must commit themselves to reconsideration of the organisation of work in universities.
A large number of submissions to the Review and much discussion during consultations focused on the issues of tenure and performance. The Committee acknowledges the importance attached to the symbol of tenure, linked as it is with the tradition of academic freedom, thereby encouraging the free expression of ideas and the conduct of independent research. However, the Committee also acknowledges that when areas become redundant or where staff performance is unsatisfactory then there must be mechanisms to terminate even continuing employment. It is important that the burden of all employment adjustment does not fall on contract or fixed-term staff. The Committee believes that core university values, including academic freedom, can be preserved in other ways and that the notion of tenure or continuing engagement should be reformulated in budget-aligned, need-aligned and performance-aligned terms.
The current system of tenure ratios seems to work against individual institutions developing their own academic staff profiles in response to their diverse needs. Prescribed tenure ratios are inconsistent with the notion of devolving responsibility to universities for their own management.
The Review Committee acknowledges the concerns raised in many submissions about the potential impact of legislation relating to compulsory age retirement, particularly when viewed in conjunction both with the apparent inability of the sector to deal appropriately with issues of performance and with the need for universities to be continually reinvigorated. The Committee accords with the concern that the right of academic staff to continue in salaried employment beyond age 65 limits the opportunity for new staff to enter at the lower levels. Action is also required to address the situation where, in certain circumstances, people have been able to collect their retirement age benefit yet also continue to receive salary.
There is little doubt that the current arrangements covering the management of academic performance are industrially restrictive and operationally complex. It is not clear that the recent decision on redundancy and other matters by Commissioner Bryant of the Australian Industrial Relations Commission will have a significant impact in this regard. Having said that, the Committee also notes both the narrow view which is adopted by many within the sector toward performance issues, with an emphasis on appraisal rather than development, and the piecemeal approach which is generally adopted to staff development issues. Further, many staff development programs seem to be separated from important decisions concerning tenure, probation, contract renewal and increments, all of which are intrinsically limited to how well people perform in their roles. Many staff may be disadvantaged by the present arrangements, which do not guarantee feedback, particularly for those on contract or in casual employment. This lack of systematic feedback is a key issue in the current poor level of management of contract staff.
It is the Review Committee's view that a much broader approach to the performance of staff, both academic and general, needs to be adopted. This approach should seek to link the management of people and their performance with organisational planning and review, that is, it should be an approach which enables universities to integrate the management of people with the management of the university.
The broad aims of such a system for academic staff (which in its detail would be tailored by each university according to its needs) might be to identify the relationship between the performance of staff and the direction of the academic unit (department, school, faculty or university, as appropriate); to inform and provide feedback to staff on the level of their performance and results they should seek or continue to achieve; to discuss and identify strategies for future development of staff; and to generate data to assist the making of administrative decisions about probation, increments, tenure, contract renewal and the management of diminishing or unsatisfactory performance.
The Review Committee considers it important that people management issues for general staff are not neglected. The need for careful consideration of general staff issues seems to be self-evident, given that it is these people who not only support and facilitate the core teaching and research activities but also contribute in a fundamental way to the effective operation of university administrative systems. In certain areas of activity, the boundaries between academic and general staff work are becoming increasingly blurred. This is occurring in both directions, as academic staff perform a range of administrative duties and general staff are involved in academic activities such as curriculum design.
The Committee believes that the performance management agenda is as important for most areas of general staff work as it is for their academic colleagues. The Committee also believes that general staff, particularly at the middle and senior levels, should enjoy equivalent access to staff training and development as their academic colleagues. Explicit efforts should be made to improve career development opportunities for all categories of general staff, in particular, women. Women are heavily concentrated in occupational groups which are lower paid and where there is little opportunity for career advancement.
The Review Committee noted the concerns that an undesirable gender imbalance remains in university academic staffing profiles, with women academics still concentrated at the lower levels and with a relatively high proportion of women in short-term contract employment.
There is clearly a commitment across the sector to redress gender imbalance and to actively support equal employment opportunity. However, many universities - faced with rapid changes to the teaching and learning environment and confronted with more volatile budgetary circumstances - are understandably preoccupied with ensuring that they have flexibility in their staffing arrangements. This preoccupation works very much against women, particularly given the very limited numbers of new, continuing positions which have become available in recent years, and the lower levels of resignations from the sector. The position of women academics is not likely to improve unless the current rates of doctoral and postdoctoral completions by women increase. If these do not improve, the number of women available in the applicant pools feeding into the more senior academic levels will be reduced because of the way academic careers are structured.
Recommendations on workplace reform
Universities are continuing to face major changes which affect not only their operating circumstances but also the very nature of the academic enterprise. These changes require universities at a fundamental level to reconsider their approach to work practice and organisation, and it is essential that universities individually have both the capacity and preparedness to develop policies and practices appropriate to their own particular environment and circumstances.
This array of changes will require strong and sustained leadership at all levels and, in particular, at that of the Vice-Chancellor. It will also require the involvement of staff throughout the organisation as well as acknowledgement of the appropriate role of the relevant unions.
While responsibility for the change process must lie with each university, it is appropriate for government to assist in the facilitation of changes. This facilitation and support role is detailed in the recommendation associated with the final chapter of this report.
Specific recommendations in relation to workplace changes are as follows:
11. a. The alignment of people practices with the vision and strategic objectives of the institution should form part of the performance objectives agreed between the Council and the Vice-Chancellor.
b. Stakeholder and employee satisfaction should form part of the assessment of the performance of the Vice-Chancellor and leaders at every level of the university.
c. Senior management must find appropriate opportunities to involve all staff in the continual realignment of the university to changing demands, and in the concomitant redesign of the services it offers to its communities and of the workplace (for example, work organisation, the use of technology, skilling and career development, reward and recognition processes).
d. As a prerequisite, senior management should review all current communication processes for their effectiveness in building shared vision and commitment.
12. All universities should phase in a comprehensive approach to performance management for both academic and general staff. The aims of any performance management system, which must be based on agreed performance and developmental objectives for the individual, should be to:
a. identify the relationship between the performance of staff and the direction of the relevant department, school or faculty, or where appropriate, the university;
b. inform and provide feedback to staff on the level of their performance and skill development within the context of the overall strategic direction of their area and the university. This would include feedback from appropriate individuals or groups which might include supervisors, colleagues, staff, students and other persons with whom staff members deal;
c. identify areas of future development for staff and formulate action plans for fostering their career development; and
d. generate data for making decisions on matters such as probation, increments, tenure, contract renewal, and the management of diminished or unsatisfactory performance. As far as possible, the consideration of these matters, currently undertaken in a disparate manner, should be brought together.
13. A much stronger focus is required on staff development and training needs in universities. This focus should embrace:
a. targeting of training and development needs, and enhanced career development, for all staff. This might include: broadening the access opportunities of general staff to Commonwealth and institutionally-funded staff development funding; specific measures designed to broaden skills and rejuvenate general staff, including opportunities for lateral transfer and staff interchange; and programs designed to improve skills and broaden career opportunities for women general staff, particularly those at lower levels or in specialised roles with restricted career opportunities;
b. middle management training for both academic and general staff, particularly in the area of interpersonal skills. This is a critical issue in the context of a more devolved decision-making environment; and
c. enhanced executive performance arrangements which ensure that part of the rating of performance should involve an assessment of how well supervisors have developed their competencies in managing and developing people.
14. In developing their staff and implementing workplace change, institutions should underline and reinforce existing commitments to the promotion of women academic and general staff. Measures should include:
a. further progress on strategies directly targeted to support women undertaking and completing doctoral programs, and providing flexible postdoctoral opportunities for research and teaching development;
b. the further development of flexible (including family friendly) employment arrangements; and
c. ensuring that women are adequately represented in decision-making processes.
15. Superannuation arrangements are unsatisfactory and, in conjunction with the relevant authorities, should be altered so that:
a. people can change roles without having their benefit levels diminished. It is important that people can step into and out of leadership roles; currently, the perceived incentives within the system do not encourage people to do this;
b. clearer methods of phasing retirement be provided. These might involve, for example, phased payment of retirement benefits corresponding to reduction from full-time to fractional or sessional engagement; and
c. those who take a break from their careers, those who move between universities or into and out of the sector, or those who are in contract-based or fractional appointments, are not disadvantaged.
16. Reforms to management and development of staff should be facilitated by an overhaul of industrial relationships in the higher education sector, including:
a. amendment of the current enterprise bargaining arrangements, emphasising a much stronger involvement and determination of arrangements and outcomes at local (that is, individual university) level, based on a shared understanding of the direction of the institution and the needs of its constituents;
b. amendment of industrial awards to allow the establishment of performance management arrangements as described above; in particular, the revised arrangements should ensure that formative and summative processes can be handled together; and
c. amendment of industrial awards so as to remove tenure ratios from parent awards.
The changing academic environment and the growing commercial and competitive aspects of higher education have reinforced the imperatives for universities to manage their resources efficiently and effectively. The nature of the task of financial and asset management has changed in recent years as the Government has consolidated funding, passing greater control over their resources to institutions, while in turn expecting close accountability for the use of public funds.
As control has been devolved, and institutions are defining and moving in their own strategic directions, financial and asset management systems will increasingly be tailored to reflect the individual nature and profile of each university. The suitability of the Core Australian Specification for Management and Administrative Computing (CASMAC) should be reviewed in this context.
In the time frame available to the Review, the Committee was not able to undertake close examination of the policies and practices within each institution. By necessity, its observations have been general and recommendations are framed in system-wide terms.
Overall, the Review Committee found that the sector had adopted many features of sound and contemporary financial and asset management, with some notable examples both of good and poor practice.
The Review Committee believes that good practice in financial allocation should include the linking of resource allocation with strategic plans, a three year or more planning horizon, and the use of performance based measures as a component of the allocation of budgets.
The Committee is concerned to see that all institutions adopt appropriate measures to manage risk. This has become of particular importance as universities have extended their operations into the commercial domain and have become increasingly dependent on non-government sources of funding and where increasing devolution of management authority is taking place. During consultations concern was expressed about the operations of commercial arms of universities not being subject to the same scrutiny as publicly funded aspects of the university. Risk management measures should include provision for contingencies in strategic planning, proper development of business plans for commercial activities and establishment of regular internal audit.
As higher education becomes more flexible in its delivery, spurred on by the rapidly developing capacities of information technology, institutions will be required to determine new and efficient ways of using teaching space. The Committee noted the use by some institutions of asset utilisation systems, including computerised planning of the use of teaching space and timetabling. It considers that such practices should be extended throughout the sector. Such changes also highlight the need to co-ordinate academic and capital development strategies. The Committee also considered proposals for the extended use of teaching and related facilities by adopting a summer term. However, it recognises that this is a complex issue where the benefits and costs will need to be weighed for each institution.
The Committee believes there is scope for more inter-institutional sharing of assets. While there have been some encouraging developments, for example in co-operative library arrangements, the marketing of international education and some co-operative arrangements in research and large equipment use, sharing of resources is generally not considered to be a high priority. A number of submissions commented that the increasingly competitive higher education environment worked against co-operative arrangements. The Committee considers that this need not be the case and that overseas experience suggests that greater scope exists for institutions to derive real benefits from sharing resources. Strategic alliances in the private sector are nowadays understood as a usual feature of the competitive environment.
Another area where the Committee wishes to see more attention is the ongoing maintenance and refurbishment of capital and equipment stock. This issue was noted some ten years ago by the 1986 CTEC Review. While considerable progress has been made in attending to the backlog of deferred maintenance and replacement, there is still scope for more explicit and active measures by institutions.
Recommendation on financial and asset management
17. Each university should review existing financial and asset management arrangements against the following key elements of best practice:
a. budget strategies and financial allocations within universities should be made on the basis of processes which are linked to the strategic plan and operational plans;
b. universities should have budget guidelines which define how responsibilities for the calculation, control and monitoring of budgets in cost centres are to be carried out and establish the annual cycle applicable to these tasks;
c. business plans should be in place for all discrete university commercial activities. These should include an analysis of the strengths, weaknesses, opportunities and threats relevant to the business;
d. comprehensive risk management strategies should be in place in each university;
e. universities should have a comprehensive information strategy to provide a framework for innovation and exploitation of information technology;
f. management information systems should be transparent, timely, user friendly, linked to reporting requirements and integrated. Systems should be designed to meet the needs of the institution. The suitability of CASMAC should be reviewed in this context;
g. financial reporting should be transparent but should give due weight to competitively sensitive issues. It should encompass all university activities, including joint ventures and private companies where there is any public subsidisation either directly or indirectly. All reports prepared for external audiences should be publicly available and easily accessible;
h. asset management plans and effective asset management systems are essential. Such plans should be integrated with overall strategic planning processes; and
i. sharing of resources should be tackled by universities strategically. Sharing library resources deserves special attention given the potential for sharing and the level of investment in libraries.
In order for universities to respond effectively to the many environmental changes they face they must adopt truly contemporary approaches to governance, managerial capacities and workplace practices. Universities need to be able to exploit the opportunities as they become available.
The Review Committee believes that the impetus for change needs to be strengthened and favours the introduction of a mechanism that encourages universities themselves to initiate change in an iterative but continuous way. It believes that effective and continuous management improvement can only come about if internally driven. It also believes that the time is now right for universities to place greater emphasis on internalising management improvement processes, building on the noticeable impact the reviews by the Committee for Quality Assurance in Higher Education have had in focusing university attention on quality matters, including management.
Recommendation for progressing change
18. The Commonwealth should establish a University Change Implementation Scheme with the aim of encouraging and assisting universities and/or groups of universities to improve management practices. The Scheme should be managed by an independent body drawn from the higher education and private sectors.
The Scheme would:
a. require each university to assess governance, management and workplace practices and, on the basis of this assessment, develop proposals for management improvement;
b. assess each university's management improvement proposals to ensure that they are appropriate and achievable;
c. provide funds to universities to implement management improvement initiatives;
d. provide advice on these initiatives and be a clearing house for information on national and international best practice and continuous improvement in university management and support the development of mutually beneficial networks and alliances; and
e. monitor and report on progress by individual institutions.
PURPOSE OF REVIEW AND
TERMS OF REFERENCE
The Minister for Employment, Education and Training, the Hon. Simon Crean MP, announced on 5 June 1995 that a review of the higher education system would be undertaken with the objective of developing excellence in management and accountability for the resources available to the sector.
The Minister requested the Review Committee to address the following specific matters:
(The Terms of Reference for the Review are at Appendix 1.)
Given the short time frame for the Review, and the necessity to consult widely, the Review Committee had to confine its activities to a focus on broad, sector-wide issues. It was not possible to pursue the extent of detail that would be required to make comments about the management arrangements at each university.
The Minister requested that the Review Committee consult with all universities, relevant peak bodies and government departments. To make sure that all appropriate bodies and individuals had a chance to contribute to the Review, correspondence seeking submissions was sent to all Chancellors and Vice-Chancellors as well as peak bodies and State and Territory governments (copy at Appendix 2). An advertisement seeking public submissions was also placed in the higher education press. Information was sought on eight major issues concerning management in higher education:
Following receipt of submissions, the Review Committee met with virtually all Vice-Chancellors (or their representatives) and about half of the Chancellors of Australian publicly funded universities. Meetings were also held with State and Territory government representatives and key peak bodies such as the Australian Vice-Chancellor's Committee, the National Tertiary Education Industrial Union, the Higher Education Council, the Australian Council of Trade Unions, the Australian Higher Education Industry Association, the National Union of Students and the Council of Australian Postgraduate Associations. The Review Committee also consulted a number of expert managers on specific issues of university management including finance and workplace reform. Details of consultations and submissions are at Appendix 3.
From these meetings and submissions the Review Committee was able to obtain a good overview of the sector and a clear understanding of the major issues facing universities in relation to the Terms of Reference for the Review.
To assist the Review Committee to gain an appreciation of the standard of management practices of Australian universities internationally, a consultancy was commissioned to examine specific aspects of practice in universities overseas. The consultancy was undertaken by Management Frontiers Pty Ltd.
It was clear to the Review Committee that universities have developed into large and complex organisations. They are organised in ways which recognise the special nature of the academic enterprise and the often subtle features which epitomise the institutions, the people within them and their relationship with society. Australia's universities have experienced a period of major change and have, in the Review Committee's view, generally coped well with these challenges. Indeed, the Review Committee formed the conclusion that the dimension of the change that has faced universities over recent years would have tested the capacity of the best private sector management. It will be necessary, however, for academics to accept that, given the increase in size and complexity of universities, effective institutional management will be an essential platform for effective academic pursuits.
This report focuses on four major aspects of university management: governance; strategic management; workplace reform and financial and asset management. The Review Committee has developed recommendations to assist universities to improve their management in each of these areas.
The Review Committee does not believe that there is necessarily one desirable approach to any area of management change. Each university should determine the approach which best suits its particular needs. To set the framework for this to occur, some changes will have to be sought through relevant Commonwealth/State/Territory fora. To facilitate management changes the Review Committee recommends introducing a mechanism to assist universities to tackle management improvement in an iterative way. This could be achieved by the Commonwealth establishing an independent process to assist institutions to implement relevant recommendations. It is important that a process be established to encourage and assist institutions to make these changes.
The Review Committee is aware that a number of the matters included in this report have also been identified in previous policy statements and reports both in Australia and overseas. However, to date these matters have not been progressed sufficiently. The Review Committee believes that the imperatives for change are now more substantial, given the increasingly competitive and commercial environment in which universities operate. Indeed, the very survival of some universities may depend on a more efficient and effective method of operation.
Over the last decade in particular, the Australian higher education sector has experienced widespread and profound changes including unprecedented expansion. While there has been considerable growth in Commonwealth Government funding for the sector, an increasing proportion of total funds is being raised from other than Commonwealth grants. Australian universities have demonstrated their capacity to respond to these changes. The evidence suggests that in 1995 they preside over a far larger and more diverse student population more efficiently than before and that overall they have made progress in modernising their management practices through development of strategic planning and a focus on improving quality.
Notwithstanding these gains, the progress has not been uniform. For example, the focus on quality has been very much at system and institutional level, despite the obvious links between individual and overall organisational performance, especially given the large proportion of university budgets devoted to staffing. There has been a reluctance by the sector to adopt a systematic or even strategic approach to the way in which universities nurture or otherwise manage their academic and general staff.
Pressures on higher education are relentlessly evolving. They will continue to force universities to deal with changes and to manage the difficult task of refining and, probably, reformulating their fundamental mission.
As Australia's universities move toward the next millennium, they will continue to be confronted by a series of related and, sometimes, contradictory pressures including:
A turning point in the development of the modern university in Australia came with the 1957 Committee of Inquiry into the Future of Australian Universities, chaired by Sir Keith Murray, the chairman of the British University Grants Committee. In line with the recommendations of the Murray Report, the Commonwealth Government accepted greater responsibility for universities and allocated funds to the States for both capital and recurrent expenditure. The Australian Universities Commission was established as a statutory body in 1959 to advise the Commonwealth on university matters, including the allocation of funding.
These changes heralded a rapid expansion in the university sector. In the ten years from 1956 to 1966, the number of universities increased from nine to fourteen, the student population trebled and the proportion of gross domestic product allocated to university grants doubled. This sustained growth increased pressure to contain the costs of higher education. Following the 1965 Martin Report, CAEs were established, founded on existing technical and teachers' colleges, principally to provide vocational education to the diploma level. The Commonwealth funding system was extended to CAEs, although the funding arrangements were different for each sector. The CAEs were not funded for research.
A further period of expansion occurred over the years 1968-78, mainly in the advanced education sector. University enrolments increased by 59 per cent to 159,500, while enrolments in CAEs increased by 242 per cent to 153,500. Public outlays on higher education increased by approximately 250 per cent during this period.
The Australian Constitution vests in State Government responsibility for education and Australian universities are generally established under State or Territory legislation. In 1974 the Commonwealth Government assumed full responsibility for capital and recurrent funding for universities and abolished tuition fees, which then represented around 15 per cent of total funding. The States continued to have a significant and direct involvement in coordinating the development and operation of the advanced education sector. Their role with respect to the university sector became very similar to their modern role, although in some States (notably Victoria) local legislation gave the State the power of veto over some university course proposals.
In 1977, the Australian Universities Commission was subsumed into the Commonwealth Tertiary Education Commission (CTEC), which advised the Commonwealth on universities, CAEs and TAFE institutions. The following year, the Williams Report on national education and training recommended that the three sectors of tertiary education be continued and that future growth be directed towards advanced education and technical and further education. It also proposed measures to increase student access, emphasising external study and credit transfers.
The post-war expansion in higher education participation had seen numbers of university students increase to 166,700 by 1983 and those in CAEs to 171,800. During the early 1980s the rate of growth stabilised as a result of demographic factors, economic restraints and a decline in demand for higher education by younger males. A major rationalisation of the number of advanced education institutions took place in 1981 following the 1981 Commonwealth budget, with 81 institutions being reduced to 45.
An increasing focus of the new Labor Government, elected in 1983, was on participation and equity objectives in higher education and the application of financial management reforms which were being introduced across the public sector. The latter were characterised by concerns with efficiency and effectiveness. In 1985 the Government commissioned CTEC to undertake a Review of these aspects of the higher education sector.
The CTEC Review of Efficiency and Effectiveness in Higher Education was exceptionally broad in its scope, encompassing efficiency in the use of institutional assets, rationalisation of external studies activities, institutional strategic planning and performance assessment, academic staffing procedures and the management of research. It made numerous recommendations designed to encourage universities to improve their practices but did not endorse any fundamental changes to higher education, arguing that the binary system should be continued and that scope for further efficiencies was limited. It noted that Government outlays on higher education had not risen significantly in real terms over the decade from 1975-85, despite a 33 per cent increase in student numbers and a 25 per cent increase in equivalent full-time student load. It also made special mention of the poor state of capital stock in universities arising both from inadequacy of funding and insufficient attention to replacement and maintenance programs.
The impact of the 1986 CTEC Review was overshadowed by the widespread reforms to higher education which arose from the 1987 Green Paper, Higher Education: a policy discussion paper and the subsequent 1988 White Paper, Higher Education: a policy statement. These reforms had their basis not only in the concerns with efficiency, effectiveness and equity, but also in a view by the Government of the importance of higher education in underpinning national economic growth. The most significant aspect of these reforms was the move to reform the existing binary system, in terms of the number and type of institutions and also in terms of their activities.
Over the previous decade the length, range and type of undergraduate teaching offered by CAEs had been converging with that of the universities. Under the new Unified National System (UNS), the forty-seven CAEs and nineteen universities were recast as thirty-five (now thirty-six) public universities, through a process of amalgamations and re-designation. Participation in the UNS, and full Government funding were contingent on negotiation of an institutional profile, covering the university's mission statement, enrolments, range of courses offered, response to national priorities (for example, equity and national course priorities), research and capital management.
In 1988 the Department of Employment, Education and Training took over responsibilities from CTEC for profile and other negotiations with the institutions. The National Board of Employment, Education and Training was established to advise the Government, with subsidiary councils including the Higher Education Council (HEC) and the Australian Research Council (ARC). CTEC was abolished at this time.
In setting out the framework for the restructured higher education sector, the 1988 White Paper laid down specific arrangements for Commonwealth-State relations in higher education. Responsibilities were shared between the two levels of government. States had responsibility for the legislation establishing the universities and governing their operations, decisions on the establishment of new institutions and the acquisition of land for the purpose and the accreditation of private providers. The Commonwealth had responsibility to ensure that funds were allocated in line with overall national goals and policies, having regard to the competing demands of States, regions and institutions. Bilateral Commonwealth-State Joint Planning Committees were established as the vehicle for Commonwealth-State consultation, with an obligation to provide advice to State and Commonwealth Ministers on matters such as:
In 1991, the Special Premiers' Conference (now the Council of Australian Governments - COAG) set in train a major review of Australian federalism, which included a review of all major functions where both levels of government had a role. A CommonwealthState agreement on higher education was endorsed by COAG which described higher education as an area of shared responsibility between the Commonwealth and the States. The agreement stated that the Commonwealth had primary funding responsibility and, with it, the primary responsibility for policy making in the area. The State had a role in legislation, governance and in identifying broad priorities for the development of the sector, taking account of its obligations with respect to other levels of education, regional development, planning and infrastructure provision.
The agreement also dealt with two other matters. It set up a structure for multilateral consultation between the Commonwealth and the States on higher education matters (the Joint Working Group on Higher Education, which reported to the Higher Education Council and the Australian Education Council). It also secured an agreement from the States to change the way Commonwealth funds were paid to institutions, to enable payments to bypass State governments and be paid directly to institutions. Agreement was also reached to simplify the arrangements for financial reporting which had prevailed up to that point, resulting in an alignment of reporting requirements of State Auditors-General and the Commonwealth.
Total Commonwealth funding in real terms for the higher education sector has increased significantly each year since 1983, particularly in the period since 1988. In total, Commonwealth funding grew from $3.15 billion in 1983 and $3.55 billion in 1988 to $5.14 billion in 1995 (December 1995 prices). By 1997, Commonwealth funding will have reached $5.32 billion, an increase of almost 70 per cent in real terms over 1983. Total Commonwealth funding per student to higher education institutions increased by 3.2 per cent in real terms from 1983 to 1995 (measured by funding per EFTSU - Equivalent Full-Time Student Unit). This total funding includes operating grants, capital and research as well as funding for quality, open learning, and multi-media.
Between 1983 and 1988, funds available through the operating grant per EFTSU (that is, excluding funding for specific programs such as capital, research and open learning) declined by 5 per cent. The 1989 Budget, following the White Paper, provided substantial additional funding but provided for an even greater increase in student numbers. Thus the level of operating grant per EFTSU declined by a further 4.3 per cent from 1988 to 1991. Between 1991 and 1995 operating grants per EFTSU have risen by 2.2 per cent and are projected to increase further so that by 1997 it will be higher than in 1991, but will still be around 7 per cent lower than in 1983. However, trends in funding since 1989 are complicated by changes to the operating grant. With the addition of the ARC 'Clawback' funding back into operating grants, the trend in operating grant funding per EFTSU since 1989 is much smoother. Using this method, operating grants per EFTSU returned to the 1988 levels in 1994. (The Minister for Employment, Education and Training, the Hon. Simon Crean MP, released a statement on Commonwealth Funding for Higher Education, 1983-97 in October 1995 which contains further details on these trends. A copy of the text of the statement is at Appendix 4.)
A significant shift has also occurred in the mix of funding sources. There has been a progressive reintroduction of student contributions to the cost of their education, through the Higher Education Contribution Scheme (HECS) (1989), and the introduction of full-cost fees for overseas students (1985, with subsidised intakes removed in 1990) and some postgraduate students (1988, with revised guidelines issued in 1993). Institutions were also encouraged to become more entrepreneurial, seeking income from non-government sources. This has resulted in operating grant and other revenue provided under the Higher Education Funding Act (HEFA) and related appropriations accounting for only around 60 per cent of total revenue. The balance is made up of competitive allocation of national research funds and overseas and postgraduate student fees, as well as other commercial activities, donations and bequests. The nature of the Commonwealth funding has also changed: in 1989 institutional financial flexibility was increased by collapsing four earlier categories into a one-line operating grant and in 1994 most capital funding was also 'rolled-in' to the operating fund allocation.
In the early 1990s, Commonwealth Government attention turned to a focus on quality assurance, in line with developments that were occurring in other Western countries. The Committee for Quality Assurance in Higher Education undertook three 'rounds' of investigation into procedures and outcomes relating to quality from 1993-1995, with dedicated funding available for allocation on the basis of the results. While there has been some criticism of the nature and the depth of the Commonwealth quality assurance process, it has clearly focused the attention of universities on principles of continuous improvement and meeting the needs of stakeholders.
The 1988 White Paper explicitly stated that the Unified National System would 'promote greater diversity in higher education rather than any artificial equalisation of institutional roles.' Conversely, critics of the system have claimed that it established greater intrusion into institutional autonomy, conflicted with the development of institutional excellence, and encouraged a 'culture of compliance' with national standards and processes, both in teaching and research. While there has been a redistribution of resources within the system, and greater uniformity in accountability procedures and course structures, the finding of the 1994 report from the Review Committee for Quality Assurance in Higher Education was that a 'significant amount of diversity' in institutional missions and activities existed within the higher education system, notwithstanding similarities found in the missions and objectives of those universities that shared a similar historical and developmental background. This impression is supported by the 1995 Good Universities Guide to Australian Universities, which notes the 'increasing diversity of Australia's higher education system.'
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