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Australian higher education institutions face the task of maintaining and improving high quality teaching, research and community service in an environment of rapid and profound change, which is occurring both within the sector and throughout the community. This task must be undertaken within constraints imposed by limited availability of resources and must balance institutional autonomy over academic decision making with the needs of the various stakeholders and the requirement for accountability to those stakeholders. Such a task demands effective strategic management.
During the 1980s there was growing emphasis on strategic management in both the public and private sectors. An increasingly competitive environment required a more forward-looking, goal-oriented approach and greater attention to monitoring, reviewing and accounting for performance. Attention focused on four key elements:
The 1986 CTEC Review noted that some higher education institutions had begun to implement strategic planning systems and that others were preparing to do so. In its report, CTEC stated that every effort should be made to encourage institutions to develop strategic plans as a means of enhancing their capacity to utilise available resources effectively and to account both within the university and to the wider community for their activities. It also recommended that:
'1. higher education institutions be encouraged to develop forward planning processes to assist in reallocation of resources and to provide a basis of triennial submissions to CTEC; and
2. institutions be required to indicate in their triennial submissions both the nature of their planning processes and the extent to which there has been consultation with other institutions in the region in the development of their forward plans.'
The 1988 White Paper reaffirmed the importance of strategic management and noted that the agreed education profile for each university should be a central component of the strategic management process. The education profiles describe an institution's course mix and indicate the areas that the institution wishes to develop as strengths in the future. The initial profiles covered six heads of agreement between the Commonwealth and the university, one of which was a description of the institution's broad mission and its objectives. Consideration is also given to research and capital management plans and institutional equity and Aboriginal and Torres Strait Islander education strategies.
The profiles process provided an important spur for universities to pay greater attention to their strategic planning processes.
Within the time available for this review it was not possible for the Review Committee to undertake an assessment of the key elements of strategic management in detail for each university. Instead, the Committee examined all university strategic plans and discussed with Vice-Chancellors and other senior university managers the management structures and practices at their universities.
Effective strategic management relies on the institutional mission and goals being communicated and agreed throughout the institution. University managers must have the skills to provide clear leadership, to articulate the values and directions of the university, both internally and externally, and to maximise the flexibility, responsiveness and innovation of the university within appropriate collegial frameworks.
Many university managers have coped well with these challenges, despite the fact that nearly all of them have reached their leadership positions primarily on the basis of academic ability rather than management capacity. The Committee found that systematic and strategic development of leadership and management skills in senior university managers was uncommon and that the management development that did exist was often not linked to institutional strategic directions or properly evaluated. In this respect the Committee's findings parallel those of the Karpin Report for general Australian management.
The need for management training for all existing and prospective university managers was raised in consultations. The lack of management capacity was an issue of concern to the NTEU and a number of Vice-Chancellors as well as others consulted by the Review Committee. Many academics saw management responsibilities as a burden and considered their importance to be far less than that of their academic work.
Some institutions have made an effort to encourage management training but this does not seem to be the norm. During consultations, the NTEU supported management training and argued that some of the Commonwealth Staff Development Fund should be derived from internal sources and staff development should be linked to the strategic plan. The HEC noted the limited requirement for academics to be good teachers and general lack of management training.
The Review Committee noted the relatively recent initiative of the Australian Vice-Chancellors' Committee to establish a Staff Development and Training Program which directly addresses the issue of leadership development. This is an important first step in establishing a more systematic and strategic approach to developing management skills.
The Review Committee also noted that there appear to be some good cross-university mechanisms developing which provide opportunities for Vice-Chancellors and other senior managers to exchange information and share concerns.
In recent years there have been substantial changes in the way in which universities have approached strategic planning. These are reflected in the fact that today all universities have strategic plans, whereas in the mid 1980s they were the exception rather than the rule. Furthermore, there has been a marked improvement in the quality of strategic planning processes and, in turn, the quality of plans, particularly over the last three years. These observations are supported by the findings of the recent report of the Committee for Quality Assurance in Higher Education which included a special focus on strategic planning issues.
The strategic management practices of many Australian universities compare favourably with those at universities overseas.
The Review Committee found that all universities have well defined strategic planning processes but that they vary in quality across the sector. In particular, some plans are developed with active involvement of the governing body during the developmental stages to provide some external perspectives and guidance on broad directions. However, as noted in the Governance chapter, there are some instances where the governing body participates only at the last stage of the process, when a final plan is presented to it for endorsement.
The level of staff participation also varies. In some universities a bottom-up approach is adopted, where there is strong involvement from staff through the relevant administrative unit, generally as part of the preparation of plans for their own units. These plans are then used in the development of the university wide plan. In others, the university-wide plan is developed first and plans for individual administrative units are developed consistent with it. Some universities adopt a mix of these two approaches. The university mission and broad goals are set and these are then used by individual administrative units as the framework for developing objectives and strategies.
The Commonwealth currently has no formal role in the strategic planning process, although the Committee notes that during the annual bilateral profile meetings between the Commonwealth and individual universities, there is consideration of equity and capital management plans and there can be some discussion of the university's mission statement and broad goals. During consultations, many universities commented that they regard the profiles process as important for the exchange of information and discussion of concerns but that, in general, there was too much focus on inputs and entailed collection of considerable data, the utility of which was questioned.
State government involvement in the planning process varies between States. In some, the government is consulted informally by universities with a view to taking account of its State development priorities. In other States, the State government currently has little involvement but during consultations with the Committee several expressed an interest in doing so to ensure university goals and objectives were consistent with State government priorities.
The Review Committee found that for many universities there is a growing level of sophistication in the planning process. Nevertheless, this trend needs to continue if university strategic management is to approach leading edge practices in the broader public and private sector. For example, the Committee noted that the use of cross impact analysis, in which university strengths and weaknesses are analysed against the opportunities and threats it faces, was still evolving.
While most university strategic plans have clear statements of the mission and goals, below this level the quality of plans varies. In particular, the extent to which an analysis of the university's operating environment underpins the stated goals and objectives is unclear for some plans. Most plans have clearly articulated and measurable objectives but the Committee found several instances where more precision would assist the university to measure its performance.
Strategic plans for individual faculties, schools and other administrative units within the university are now also widespread. The Committee found some instances where these plans are not derived from, or integrated with, the overall university strategic plan. This is, perhaps, a reflection of the fact that many universities continue to operate as a collection of separate academic communities rather than as a corporate whole.
The time horizon for strategic plans varies but is usually between three and five years. The Committee found a small number of plans with no obvious time horizon.
In the United Kingdom, the Higher Education Funding Council for England recently released a report which stated that amongst other matters, the strategic plan should detail the institution's academic aims and objectives, student number policies, staffing and physical resources strategies, information and library systems strategies and financial strategies (including financial forecasts). In addition, institutions should develop from their strategic plans an annual operating statement which identifies how the aims of the strategic plan will be put into action. The report also noted that an institution's strategic plan should be supported by, or translated into, individual departmental plans so that each department will know the part that it has to play in the overall development of the institution.
Strategic management goes beyond the establishment of strategic and operational plans. Institutions must deploy their resources in line with these plans and embed their policies and procedures within the broader strategic framework. Management of academic and general staff, finances and physical assets, which are discussed in detail in later chapters, are examples of operational management which demand a strategic perspective.
The Committee found wide variation in the degree to which a strategic approach is taken to operations. For some universities a fully integrated approach is taken whereby operations including business, human resource development, occupational health and safety, finance, risk management, industrial relations, capital management and access and equity, are linked to strategic planning. Some universities have produced the one comprehensive operational plan with links to the strategic plan made explicit. Some of these plans are published. In addition, there is a clear and strong commitment to implementation, as evidenced by tight monitoring and reporting regimes. For others, on the basis of evidence presented to it, the Committee found that links between operational activities and the strategic plans were tenuous or non-existent. For example, during consultations, several universities gave little indication that they had given much thought to the commercial positioning of the university into the medium- to long-term. This is despite the fact that a rapidly growing proportion of the university's funding is derived from commercial activities. In many instances resource allocation processes, management and development of academic and general staff and management of capital and other assets were divorced from strategic plans. These latter aspects are explored further in other chapters of this report.
In a number of submissions and during consultations the Committee was informed that in many universities, management authority and responsibilities are being devolved. This trend is in line with modern management practices and is being followed in many universities overseas. Such devolution reinforces the need both for enhanced internal accountability arrangements and a consistent understanding by university managers at all levels of institutional strategic directions.
The Committee found that in general there was greater commitment by institutions to establishing strategic plans than there was to monitoring and reporting on the progress of the institution in meeting its objectives.
The Committee noted that in only a small number of cases does the governing body appear to take a leading role in reviewing implementation of the strategic plan and assessing outcomes. There were more instances where the peak academic body, the Academic Board or Senate, played a role in assessing academic performance. However, this was not widespread or systematic, nor clearly linked to institutional strategic plans.
The importance of reporting on performance was widely acknowledged in submissions and during consultations. Several universities made the point that current reporting requirements empower and support management in carrying out its proper functions. However, most universities perceive that there is duplication and lack of alignment in the varying reporting requirements of both Commonwealth and State legislation, increasing requirements of an expanding number of State instrumentalities and separate accountability requirements for institutions with TAFE and higher education components. Many argued that the administrative burden associated with reporting was a significant source of inefficiency.
Many universities now structure their annual reports around the key goals and objectives of their strategic plan. Others report on a previous planning period in their updated strategic plan. However, the Committee found that reporting tended to be primarily input rather than outcomes based. This point was acknowledged by a number of universities during consultations. Several indicated that they were working towards developing some outcomes-based indicators.
Considerable attention has been given to highlighting institutional achievements, rather than to an open and systematic process of defining, measuring and reporting on qualitative and quantitative indicators of performance. In many cases, strategic plans include quantitative targets but these appeared to change over time and were rarely consistently measured and publicly reported. The Committee acknowledges that, in some respects, institutions are still at a relatively early stage in gaining acceptance and understanding of strategic management and this has meant that it has been difficult to establish consistent and meaningful targets and indicators.
Performance measurement is particularly difficult in the university context because of the complex and sometimes conflicting objectives of a university and the inherently imprecise nature of many of these objectives. For example, high student drop out rates could be considered by some a measure of good performance if the objective is academic excellence. On the other hand, it could be a measure of poor performance if the objective is to maximise graduation rates. As another example, no universally accepted measures are available which comprehensively represent student theoretical learning and the capacity for lifelong learning. Despite these difficulties, the Committee notes that many universities have made substantial progress in developing performance indicators.
In Western Australia, universities are required to report on performance using indicators which were developed in consultation with, and are audited by, the State Auditor General. In developing these indicators, the State Auditor General encouraged consistency between the four Western Australian universities but did not insist on the same indicators for each, acknowledging the need to take account of the individual nature of each university and their different goals and objectives.
Whereas the measurement of performance is appropriately undertaken in the context of each institution's unique role and strategic plan, many institutions have recognised that there is benefit in using benchmarking to work towards best practice and to establish appropriate targets.
Most institutions have taken steps towards using national data, or data from best performing institutions, to establish benchmarks in particular areas, such as research performance, or resource usage. Some work has also been undertaken on more detailed benchmarking of processes with a suitable partner, with a view to working towards best practice. Most such activity has been in the areas of administration and student support and services, as these most closely parallel the industrial processes which are reflected in benchmarking literature. Some experimentation has begun with benchmarking academic activities, both domestically and internationally. These efforts hold the promise of encouraging greater institutional collaborations and greater attention on developing world best practice in teaching and research within Australia.
The Quality Rounds have raised the level of awareness of, and emphasis given to, quality assurance. However, several universities commented that the external nature of the exercise and, in particular, the need to furnish the Committee for Quality Assurance in Higher Education with extensive documentation, were drawbacks. Most universities agree that quality should connote continuing improvement and that quality assurance and enhancement should be built into university operations and tackled strategically.
Universities, as much as any public or private sector organisation, must be managed strategically if they are to thrive in today's rapidly changing economic and social climate. While it is clear there is some reluctance in the sector to adopt approaches that are derived from private and public sector management, and the associated lexicon of 'managerialism', the processes and practices of strategic management will need to be adopted and adapted to fit the unique missions of universities. In particular, the growing competitive and commercial environment in which universities now operate requires a pro-active approach to management in which opportunities are created and seized. This will require a fundamental change in the thinking of some university managers.
In addition to looking at institutional strategic plans and planning processes, the Committee gave close consideration to the ways in which key aspects of institutional management and operations were managed strategically. This included examination of workplace issues for academic and general staff and the management of financial resources and assets. These aspects are considered in separate chapters.
While strategic management has improved substantially across the higher education sector in recent years, this largely reflects the high calibre of many of the individuals in leadership positions in universities rather than the quality of the management development and support systems in the sector. This situation is inherently risky since it relies almost totally on recruiting individuals who happen to have the appropriate skills. In addition, it fails to take account of the need for managers to continually update their skills to cope with the changing environment.
Development opportunities should be provided systematically to all senior and middle managers for both academic and general staff in universities to ensure that they are appropriately equipped to take on the challenges facing universities. A systematic approach will also address the need for an ongoing commitment to development, consistent with the need for continuous management improvement.
The Committee noted several instances where senior university managers have undertaken placements in private sector organisations for a period. The Committee believes that this practice can generate substantial benefits to the university and should be considered as part of an enhanced and systematic approach to management development.
In the earlier chapter dealing with governance issues, the Committee emphasised the importance of reflecting the primacy of the role of the university's governing body in institutional strategy and planning. The governing body should drive the strategic planning process and bring a broad external perspective to it. It is particularly well placed to oversight a cross impact analysis of the university and the environment in which it is operating as a fundamental step in the planning process. It is also important that staff have adequate opportunity to be involved in the development of the plan. This should assist to motivate and engage staff to work towards commonly agreed objectives.
The Committee believes that there is scope for institutions to continue to improve their strategic planning. To ensure that strategic plans have an appropriate basis against which to measure and account for performance, they should incorporate:
Operational plans and policies, including those for management and development of staff, resource allocation and asset management, should be linked with the strategic plan.
Universities must be allowed to manage their own affairs without undue external intervention and each must pursue their own place in the higher education sector. Therefore, they should take full responsibility for the development of their strategic plans. However, these plans need to be consistent with the higher education objectives of the Commonwealth and of the relevant State Government, since the Commonwealth funds universities for the achievement of these objectives and the State has overall responsibility for education.
The Committee believes that while it is inappropriate for the Commonwealth to play an active role in the development of institutional plans, universities need to satisfy the Commonwealth that plans are consistent with its policies and priorities. Plans should also be able to provide an appropriate context for the determination of Commonwealth funding, although the Committee notes that considerable work needs to be done before a significant shift to performance-based funding can occur across the full range of university activities.
Some modification to existing profiles meetings could provide an appropriate and convenient mechanism for these purposes. This was suggested to the Committee during consultations. In this context, the Committee notes the 1993-94 Audit Report No.14 by the Australian National Audit Office, which recommended that DEET use the profiles process more effectively to achieve stated Commonwealth objectives and priorities. The report referred specifically to the importance of encouraging universities to relate more closely their bids for growth funding to their strategic plans.
As noted earlier, reliable performance indicators are difficult to develop within the sector, but are crucial in accounting for outcomes. The Review Committee believes that indicators should be developed to measure performance of a university over time rather than to measure the performance of one university against another. This is because the relevance of any particular performance indicator varies depending on the particular goals and objectives of the university. Consequently, performance indicators should be specific to the university rather than generic across the higher education sector. To facilitate trend analysis, the Committee believes that universities should attempt to develop a stable and consistent set of indicators for a number of planning periods.
There is also a need for comparisons across the sector but the Review Committee believes that separate benchmarking exercises should be undertaken. A suitable set of sectoral wide indicators could be developed to enable broad assessments of the state of higher education. In a similar way to initiatives taken in several Canadian provinces, a suite of indicators could be developed in conjunction with the sector. Universities could choose to use a selection of those of relevance to their own activities and/or develop others of their own. The Committee notes the work currently underway by a joint AV-CC/HEC/DEET working party on the development of performance indicators.
The Review Committee considers that the university's annual report should be the main retrospective accountability document for external clients. As such, it should focus on outcomes and analyse performance against the full set of objectives and performance information detailed in the strategic and operational plans. The Review Committee noted the recent reforms associated with the strategic management of Government Business Enterprises (GBEs). These reforms have provided the framework for greater devolution, with the responsibility and authority for making decisions being devolved to those best placed to make them. This increased autonomy is balanced by enhanced accountability systems within public institutions. While the Review Committee recognises the important differences between GBEs and higher education institutions, the tightly integrated strategic and operational planning and annual reporting processes of GBEs provide a useful model for enhanced accountability in the higher education sector.
As the main external accountability document, the university annual report should contain sufficient information to satisfy, as far as possible, the reporting requirements of stakeholders, giving due weight to competitively sensitive information.
The current level of reporting by universities is substantial. The Review Committee believes that an examination is warranted of the extent to which all information provided by universities is essential or important. The Committee notes that a joint Statistics Committee made up of representatives from the AV-CC, DEET, ABS and HEC, has been examining this issue but that little substantive progress has been made to date. It believes that a more focused approach to this matter is needed.
Recommendations
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.
This report has attached strong emphasis to the widespread changes continuing to affect Australia's higher education sector. It has also highlighted the extent to which the pressures for better performance and accountability will require universities on an ongoing basis to manage the difficult tasks of redefining and reformulating their missions and their methods of operation while preserving worthy aspects of the academic tradition.
The key resource for universities is their academic and general staff. In particular, it is the knowledge, skills, attitudes and performance of staff which directly affect the quality of academic teaching, research, consulting and community service, as well as how effectively our universities work in performing those activities.
The nature of work in universities, which is heavily labour-intensive, also means that salary-related costs represent a high proportion of budget outlays in all institutions. These salary-related costs now exceed $3 billion per annum. Given this, and also given the links which can be reasonably struck between individual and overall institutional performance, it would be assumed that a systematic focus on the way in which universities nurture and otherwise manage their staff would have emerged as a major plank in the performance improvement agenda within the higher education sector. This is especially the case, given the interest expressed by a succession of reports which have highlighted the importance of more effective and more strategic approaches to staffing policy and workplace practice across the sector. The contributions of several of these reports warrant specific mention.
The 1986 CTEC Review, which devoted attention to academic staffing issues, noted what it regarded as uniformity and inflexibility in existing staff arrangements and the reduced scope for appointing new staff, as well as the sector's limited capacity to compete for the best staff and to motivate existing staff. The CTEC Review recommended that each institution make its own decisions about the appropriate mix of tenured and limited-term appointments. That same report also noted that systematic approaches for staff assessment were the exception rather than the rule and that any increased emphasis on such assessment should be accompanied by greater attention to staff development.
The 1987 Green Paper suggested two policy objectives for academic staff policy. These were, first, to ensure that conditions of employment did not restrict the recruitment, deployment and movement of staff in response to changes in priorities and areas of demand, and secondly, to increase opportunities for professional development and assessment, advancement and reward, thereby further encouraging motivation, efficiency and productivity.
In order to achieve these two objectives, the Green Paper canvassed three policy responses: allowing a significant degree of flexibility while protecting employment rights; providing an environment in which individual excellence in teaching, research and other related activities are recognised and rewarded and in which inadequate performance is not protected; and recognising the impetus of other Commonwealth policy objectives, notably those relating to equity. While concentrating its attention on academic staff, the Green Paper also suggested that similar principles and objectives should apply equally to general staff.
The 1988 White Paper reiterated most of the objectives and principles traversed in the Green Paper the year before. However, the White Paper did acknowledge the role of general and support staff although, in doing so, it offered the view that general staff conditions were more appropriately determined at the local level. Importantly, the White Paper included as an appendix the June 1988 Second Tier Agreement for Academic Staff, which had followed negotiations over the Green Paper recommendations, including, in particular, matters relating to staff development and training, continuing employment, redundancy and unsatisfactory performance. This was seen by the Commonwealth as '.. a sound first step towards the implementation of essential staffing reforms.'
Notwithstanding these previous efforts to encourage a more strategic approach to employment issues, the Review Committee has a range of concerns about current workplace policies and practices across the sector. At a broad level, the Committee is concerned that the work practices within universities are not keeping pace with the profound societal and economic changes affecting the higher education sector. As a result of these changes, universities are now obliged in a fundamental way to confront the reality 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. In the process they must acknowledge that the climate of industrial relations and the context of financial support has changed and that they can no longer expect to be cushioned from external pressures by continued government-funded expansion of higher education.
The recognition of these fundamentally altered elements of the academic environment does not have to 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 - embracing the development of new knowledge and the provision of education through intellectual frameworks and critical assessment - can be preserved while operating in a more diverse, competitive and uncertain environment.
The Review Committee is not convinced that universities are yet adequately grappling with these fundamental changes. On the contrary, there is evidence that the sector, in its approach to the handling of certain employment and industrial issues, retreats to the practices of an era which, in many other areas of the economy, is regarded as having passed. For example, there still seems to prevail something of a culture of mutual dependence within universities, where 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.
The Review Committee acknowledges the unique role played by universities in society and the distinctive nature of academic work, and is wary of the extent to which workplace practices emerging in the corporate sector or in the broadly-defined public sector may be able, with integrity, to be transplanted into the university sphere.
Nevertheless, the Review Committee believes that in other sectors change has occurred as an inevitable result of factors that affect any large and complex organisation, whether private or public. The higher education sector has been slow to appreciate the importance of these factors and to embrace the principles behind contemporary organisational reforms. Indeed, the Review Committee was struck by the inherent paradox that many of the key players in such reforms are drawn from the university sector, which has by and large not drawn on this expertise to its own benefit.
The Review Committee believes that it is worthwhile acknowledging the major strides currently being made by leading-edge firms in revising workplace arrangements. Those firms which have led the way have looked well beyond the traditional industrial relations arrangements and used the new framework to develop completely new ways of working. This has generally involved heavy emphasis on staff training, an inclusive framework for all staff, increased trust on the part of management, delegation of responsibility to the 'shop floor', much greater emphasis on consultation and communication, the development of a 'learning organisation' approach and a preparedness on the part of management and unions to step out of the traditional 'them and us' framework.
Insights provided to the Review Committee into major developments in enterprise bargaining in other sectors were particularly revealing. These agreements provide a great deal of flexibility at the enterprise level and involve fundamental changes in the way enterprises are organised and work. Best practice organisations are involving all stakeholders in the process of redesigning their future, irrespective of the urgency of the situation. There are many examples in the private sector where staff and unions have been successfully engaged in the process of rethinking all aspects of the workplace - the establishing of customer service and other quality standards, the way work should be organised, the use of technology, the nature of the employment relationships, skilling and career development, performance objectives and management, reward and recognition processes. All of these deal with the objective of achieving world-class performance in what is delivered to customers, how it is delivered and when it is delivered. Such efforts have frequently resulted in dramatic improvements in quality and cost efficiencies while increasing not only customer but also staff satisfaction.
One example given was that of a recent enterprise agreement at a major bank. The agreement with the union is structured to deliver continuous improvements in productivity and consumer service. It involves a partnership between management, the union and the workforce to drive change. The agreement is written in plain language and the term 'Enterprise Development Agreement' is used to distinguish it from the narrower enterprise agreements developed in the general industrial relations framework. At the heart of the agreement is the acceptance by the company and the union that the only sustainable competitive advantage for the company is its capacity to learn and be responsive to a rapidly changing environment.
The bank agreement supports the improvement of individuals, teams and the enterprise itself. It is seen by the parties as a vehicle to continue the shift from traditional industrial relations towards a shared learning relationship. The concept of a 'learning enterprise' is central to the agreement. In a learning enterprise, individuals, teams and the enterprise itself learn together and transfer skills and knowledge throughout the organisation. This allows much more rapid learning than is the case where individuals work more independently. In the bank's case this involves having key values about the organisation's future shared among employees. The status quo is continuously questioned. A learning-based organisation is thus fostered to help transform the culture. Change is linked to learning for continuous improvement and people are recognised and rewarded for their skills, contribution and performance.
Under the agreement, small cooperative work groups are tasked to look at key areas such as the bank's staff promotion system and the use of part-time workers to meet consumer needs at the same time as developing career paths for part-time employees. It has been agreed that these topics can be progressed outside the context of pay negotiations. Pay rises are delivered under the agreement and are dependent on assessment of each individual's performance based on productivity and service measures.
Enterprise development agreements such as those described to the Review Committee are at the leading edge of workplace change and the revitalisation of industry in Australia. The development of an enterprise agreement specifically tailored to the needs of an institution's customers and employees provides an opportunity to engage all stakeholders in the ongoing process of organisational renewal and development in a way that is culturally appropriate to both the university and academic enterprises in general.
While many of the particular arrangements in private sector agreements would not be appropriate and would have to be modified, the Review Committee believes that a way can and should be found to apply some of these practices from another sector to the workplace and employee relations context of universities.
The extent to which the university sector has fallen short of best practice in fundamental workplace issues is reflected in the recent and current sector-wide rounds of enterprise bargaining negotiations. Instead of enterprise bargaining being recognised as providing something of a circuit-breaker, enabling all parties the opportunity to reconsider or reconceptualise their approach to people management, it has, instead, been largely waged in terms of maintaining existing Award conditions and workplace practices. Nor could it be said that the current negotiations over enterprise bargaining have been enterprise or institution based, except in name. While a number of the other sectors of the Australian workforce are now moving toward more genuinely enterprise-specific arrangements, the universities are operating very much under a national framework agreement which is widely criticised for its inflexibility and over-prescriptiveness. Indeed, many of those who presented to the Review Committee characterised the 1995 two per cent enterprise bargaining process as little more than an exercise in pattern bargaining with an emphasis on maintaining or varying Award provisions within a national framework.
Such a characterisation may be a trifle overstated, although the 'national level' influence by both unions and management upon individual institutional negotiations is plainly evident. For example, there have been reports of rejection at national level of enterprise agreement provisions which have been agreed locally.
The Review Committee is of the view that all parties must bear responsibility for the current situation, in particular for the rigid national approach brought to the agenda, and that all parties must commit themselves to a complete reconsideration of their approach to enterprise bargaining.
Genuinely enterprise-specific agreements should be founded on a shared understanding of each institution's strategic directions and budgetary circumstances. They require an emphasis on continuing, participative development of the university and its people. The objective should be an organisation which is outstanding in terms of satisfying its customers and stakeholders. This work must be seen as a key strategic issue requiring sustained leadership by senior management and responsibility for it should not be abdicated. The Committee questions, therefore, the role of national bodies in setting enterprise-specific or overly prescriptive agendas. At most, at sector level, agreements should be about principles, with application and implementation handled at the local level.
Representations made to the Review Committee during its consultations also suggest that the difficulties encountered with enterprise bargaining may merely reflect a much wider set of challenges facing the organisation of work and the management of people inside our universities. While universities over recent years have responded positively to an array of other challenges in respect of bettering their performance and accountability, neither the sector as a whole nor individual institutions have yet responded in a comprehensive manner to the various proposals for improved employment practices which have been aired over recent years, including in the various reports referred to above. For example, there has been no widespread interest in the issue of performance management, although some aspects of staff development have begun to be seriously addressed.
This slow rate of progress on employment and workplace issues was very much reflected in most oral and written submissions to the Review Committee. Many of these representations focused on what were perceived to be the need for more flexible employment practices, and the requirement to manage performance better, including an improved capacity to reward outstanding performance and address diminished or non-performance.
A large number of submissions to the Review Committee focused on the issues of tenure and performance. The Committee acknowledges the symbolic importance of tenure, or as it is now industrially defined, 'continuing employment'. Tenure is linked with the tradition of academic freedom, which encourages the free expression of ideas and the conduct of independent research. The Committee also appreciates that the expectation of continuing engagement provides a degree of underpinning to the quality of university research and teaching. In particular, it has been linked to the capacity of individuals to undertake high-risk, long-term basic research, the strategic benefits of which may not be apparent for many years, rather than confining their efforts to perhaps less significant, short-term projects of easily recognised instrumental value.
However, the Review Committee also recognises that tenure has become much more of an industrial issue than an academic one related to the legitimate protection of academic freedom. It is important that employment policies and practices within universities have the capacity to respond to shifts in student demand or strategic changes in institutional priority, or to the impacts of information technology or changes in the trading environment . It is equally important that institutions have at their disposal useable means for addressing issues of diminished or unsatisfactory staff performance and that these be available regardless of whether the category of engagement of the staff concerned be of a continuing or contract nature.
All of these considerations, if taken together, suggest that the notion of tenure or continuing engagement needs to be reformulated in terms which accommodate the realities of performance, budget and need. It also needs to be considered in terms of the educational goals and strategic priorities of particular institutions, a not insignificant factor for those disciplinary areas subject to volatile patterns of student demand or to declining enrolments.
The Australian university system is, however, yet to grasp in an adequate way this necessary reformulation. The moves toward performance management - including those occurring within many institutions as part of the 1995 two per cent enterprise bargaining negotiations - are still very tentative and limited by existing Award parameters. University managements, concerned about long-term budget prospects and the huge budgetary and human cost of tackling cases of poor performance and equally sensitive to their own uneven record in addressing staff performance issues, have responded to the situation in the way they have found most comfortable, namely, by offering limited-term contracts, some of which have been of an unnecessarily brief nature.
There have been at least two impacts associated with this move toward a higher proportion of contract-based engagement. First, at a practical level it has meant that, because university managements have felt industrially unable to readily intervene in relation to tenured staff, the burden of employment adjustment (induced directly by institutional budget decisions or indirectly via changing patterns of student demand) has fallen entirely on contract staff. Given that many of these contract staff are highly qualified and relatively new recruits to the academic staff, and that many of these staff are also women, the quality of institutions is not likely to be assisted by those on short-term contracts having to bear the full brunt of any funding difficulties which are encountered.
Secondly, the practice of contract engagement has been made unnecessarily rigid by the industrially-imposed system of tenure ratios. These ratios, in practice, do not work and frequently their intended implementation is quite counterproductive. They would seem to work against individual institutions developing their own academic staff profiles in response to their own particular needs, thus also discouraging diversity across the sector. Also, such a system of tenure ratios - if implemented strictly in certain institutions - would be unsustainable from a budget perspective. Thirdly, such a system of enforced tenure ratios is not consistent with the notion of devolving responsibility to universities for their own management.
As previous discussion has indicated, the current engagements covering the management of academic performance are industrially restrictive and operationally complex. It is not evident that the decision on redundancy and other matters by Commissioner Bryant of the Australian Industrial Relations Commission will have a significant practical impact in this regard. Having said that, the Review Committee also notes both the narrow view which is adopted by many within the sector toward staff performance issues, confined as it is to appraisal only, and the reasonably piecemeal approach which is adopted to staff development matters. In particular, the Review Committee is concerned that academic staff development activities are presently separated from important decisions concerning tenure, probation, contract renewal (where appropriate) and the awarding of increments. All of these decisions are intrinsically linked to how well people perform in their roles.
It is evident from the 1995 two per cent round of enterprise bargaining negotiations that universities across Australia are recognising the limitations of their current approaches to performance issues which are typically scattered across a collection of disparate policies and practices. Although many universities are moving to introduce a more contemporary and comprehensive approach to performance management, in most cases progress to date has only reached the stage of discussions of options available. The exception to this is that of a number of universities which have already begun implementation of performance management arrangements for senior staff holding concurrent appointments as academic managers. These latter appointments are not covered by Award provisions.
The Review Committee supports bringing together as far as possible the staffing policies and practices relating to the performance of academic staff, particularly those covering probation, staff development, contract renewal and the awarding of increments. While current arrangements may enable attention to be focussed on each issue separately, many matters overlap and would be better managed in a more cohesive manner. It is especially important that any new set of arrangements enable the review of performance and decisions on tenure and probation to be linked. Equally, performance review discussions should inform contract renewal decisions.
Staff development planning in many universities is currently geared to the promotion criteria, often with valuable discussions occurring between academic staff and their supervisors on these criteria. However, there is no guarantee that academics will receive feedback on their progress toward those criteria, and this lack of guarantee is frequently to their own personal disadvantage. Equally importantly, these discussions do not lead to identification of key performance areas for the period of the development plan and the likely outcomes that can be expected. Therefore, discussions on development, while geared to longer-term career aspirations, do not focus on the performance that can be expected from the individual academic and, likewise, the support that the person will need to achieve agreed outcomes.
In many institutions, staff development and career planning have not been systematic and geared to the emerging needs of the institution. Rather, these activities have been focused on traditional academic development through mechanisms such as study and conference leave, made available as options whenever academics have the time or inclination. A single-track model of academic career development is commonly espoused, whereby staff are initially carefully selected and placed under pressure to perform with rewards for progress towards international disciplinary standards. Under this model, expectations of high performance are reinforced but less attention is paid to enabling individual academics to perform better.
Other systems of higher education are beginning to develop a wider range of career paths for academic staff. For example, the American Association for Higher Education has begun a major project looking at new pathways for academic careers and employment. This project is being developed in acknowledgement that changing circumstances require a wider range of developmental opportunities for academic staff than the traditional single career path.
In view of all the above, the Review Committee supports the phased introduction of a comprehensive performance management system, that is, one involving a total approach to managing people and their performance and doing so in conjunction with organisational planning and review. As such, a performance management approach will enable an institution to integrate the management of people with the management of the university. It also follows that the principles of such a system will embrace both academic and general staff.
In order to be effective, any such system must be implemented as simply as is practicable and should be phased in over a period, in the first instance applying to the most senior members of staff and those others most immediately requiring feedback on performance - for example, people on contract approaching possible renewal and those on probation.
The Review Committee suggests four broad areas for any such performance management system:
Because it is the academic staff who are seen as delivering teaching programs or undertaking research, there has been a traditional tendency for universities not to take as seriously as they might the people management issues facing that group of people currently known, perhaps somewhat unsatisfactorily, as general staff. This lack of interest by many institutions in general staff issues was evident to the Review Committee. The submission from the ACTU was one of the very few that made specific mention of general staff issues , despite the fact that this broad category of staff comprises a majority of the people employed in most Australian universities.
The need for a focus on general staff issues was self-evident to the Review Committee: it is general staff who, as a group, not only support and facilitate the core teaching and research activities but also contribute in a fundamental way to how effectively our institutions work. They work in research laboratories and in the field and provide professional computing support. They also contribute policy expertise and management skills and support in areas ranging from student administration, curriculum development and research management to the management of university budgets, large-scale building programs, marketing and asset stock. In many universities, the term 'general staff' also includes highly-qualified and specialist researchers who, for various reasons, are not categorised as members of the academic staff.
It is also the case that, in a number of areas of university activity, the boundary lines 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 - through their specialist expertise - play a key role in 'academic' areas such as the use of multimedia in course delivery and design. This blurring of boundary lines underlines the importance of teamwork between academic and non-academic staff. However, the development of such teamwork is not likely to be assisted if the non-academic staff do not perceive their role as being valued as highly as that of their academic colleagues.
The Review Committee is of the view that the performance management agenda is as important for most areas of work of general staff as it is for their academic colleagues. The Review Committee also believes that general staff located at the middle and senior management levels should enjoy equivalent access as middle and senior academic managers to staff training and development. This is especially the case in the context of a more devolved decision-making environment.
The Review Committee is also aware of the frustrations felt by many general staff who perceive themselves as being trapped by their job descriptions, the extent of task specialisation required of them and their lack of access to training and development opportunities to increase their skills or diversify their experience. The Committee notes that considerable progress on these issues is occurring in some universities, but others have made limited attempts to address general staff re-organisation and development.
In particular, the Review Committee acknowledges the gender issues associated with general staff, women being concentrated heavily in particular occupational groups which involve either or both lower-paid positions and little opportunity for career development. It is important that there be much more explicit priority given to these issues by institutions.
Significant efforts have been made by all universities across the sector to redress staffing gender imbalance and to actively support equal employment strategies for the various target groups defined by the Commonwealth and relevant State legislation. Preceding discussion in this report has referred to the importance of equity issues in the context of university governance, while this chapter has already referred to the need to improve career development and skilling opportunities for various categories of general staff, in particular, women.
The Review Committee has noted the evidence and accompanying concerns which have been raised that undesirable gender imbalance still remains within university academic staffing profiles. These concerns have been comprehensively highlighted in the 1995 NTEU 'Limited Access' Report. Women academics are still concentrated at the lower levels, with a relatively high proportion of them in short-term contract employment.
This is not encouraging, but the prevalence of short-term contract positions is at least partly understandable. Universities - faced with rapid changes to the teaching and learning environment and confronted with more diverse and competitive, and hence less predictable, budgetary circumstances - are understandably preoccupied with ensuring that they have a level of flexibility in terms of their staffing arrangements and therefore a preference for short-term engagement. The other relevant factor, and one already considered earlier in this chapter, is related to the impact on contract staff of the perceived industrial inability of university managements to spread the burden of employment adjustment associated with changes in budgetary or other circumstances.
These realities work very much against women, particularly given the very limited numbers of new, continuing positions which have become available in recent years. The position of women is not assisted by the lower levels of resignation occurring from the sector and , potentially, by any unintended consequences of the recent abolition of compulsory age retirement. In particular, the Review Committee accords with the concern frequently expressed that the right of staff to continue in salaried engagement (vis a vis honorary appointment) beyond age 65 limits the opportunity for new staff to enter at the lower levels.
The above factors, taken together, have consequences for the sector's overall ability to rejuvenate and for the practical capacity of individual universities to develop more gender balance and diversity in their academic staff profiles.
The Review Committee is of the view that the position of women academics is not likely to improve until there occurs an increase in the participation and completion rates by women in doctoral programs. More women also need to have access to a range of flexible postdoctoral opportunities providing for the development of research and teaching experience. Because of academic selection expectations, and because of the way academic careers are structured, it is the increase of these participation rates at both doctoral and postdoctoral levels which is critical to the number of women available in the applicant pools feeding into the more senior academic levels.
However, these measures alone will not create career opportunities for women in universities. They need, as stated above, to be accompanied by a greater freeing-up of staffing profiles at middle and senior levels and the provision of flexible employment conditions which recognise explicitly the traditionally disproportionate demands on women of households, children, elderly parents and the dual pressures of family and career.
Throughout this report, the Review Committee has emphasised the organisational changes taking place in universities and the challenges facing the sector as a whole. Equally, the Review Committee has emphasised the importance of people, both to the innate purpose and performance of universities.
The importance of these two sets of factors requires that staff development and training needs in universities be given a high priority and that they have a strategic focus. This recognition has already occurred in many corporations, which have realised that their staff are more important than much of their investment in physical infrastructure.
Notwithstanding the improvements that have occurred over recent years in respect of the involvement of universities in staff development programs, it is still the case that, overall, universities are less interested with the explicit development of their staff than many other organisations.
The Review Committee recognises that universities are already involved in supporting a range of traditional activities, such as academic sabbaticals, conference leave detachments, and teaching skill fora. However, the availability of these varies greatly as between academic and general staff and as among senior, middle and junior staff. There has emerged across institutions a recognition of the importance of middle and senior management training, an importance the Review Committee wishes to underline, particularly in the context of greater accountability for the performance of managers in an environment of devolved decision-making. However, it is equally important for staff development and training opportunities to be available to all other staff including keyboard staff who would like to develop their clerical skills, personnel officers or library staff who feel trapped by their specialisations and academic staff experiencing mid-career frustration and insecurity because they feel unable either to progress upward or to succeed if they were to move out of the sector altogether.
In view of the above, and as already noted earlier in this report in the context of management, the Review Committee strongly supports a much more strategic, systematic and broad-ranging approach to staff development and training activities in universities. Given this view, it is critical that part of the performance management of executive and senior managers will involve development of their own competencies in managing and developing people. It follows that they would then be held just as accountable for their professional nurturing and development of staff, as they would, say, for their stewardship of an academic department or their responsibility for the maintenance of a computer facility.
A similar point applies to the responsibility of managers for employment equity. Regardless of institutional rhetoric or government reporting requirements, the employment equity agenda will only really progress if university managers at all levels embrace and, indeed, own that agenda. This involves an appreciation that good equity policies and practices are part of good management practice. Again, managers should be held to account for their performance in this area as they should for their other activities.
The Review Committee believes that there would be benefit in exploring a number of superannuation issues affecting the sector. Any such exploration should embrace unintended consequences associated with recent anti-discrimination legislation prohibiting compulsory age retirement and people being able in certain circumstances to collect their retirement age benefit yet also continue to receive salary. These current arrangements encourage people to defer their retirements and thus discourage rejuvenation of university leadership.
It is also important for people who have occupied leadership roles in universities to be able to move out of these roles back into teaching or research without being disadvantaged in terms of their superannuation benefit levels. Current superannuation arrangements are perceived to require people to exit the system effectively at the highest possible salary point available to them. The Review Committee recognises there are alternatives within the current superannuation rules but believes they should be better publicised and the opportunities for greater flexibility should be investigated.
The Review Committee recommends clearer methods of phasing retirement. This might involve, for example, phased payment of retirement benefits corresponding to reduction from full-time to fractional or sessional engagement.
The Review Committee also believes that it is important for superannuation arrangements
not to disadvantage: those who take a break during their careers; those who move between
universities; those who move between industry, government, and higher education during the
course of their careers; or those who are engaged on either a contract or fractional
basis. Equally, it is important that such superannuation flexibility be available to
general staff as well as their academic colleagues.
Recommendations
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.
Since the 1980s most enterprises, whether in the public or private sector, have been faced with tightening financial circumstances and the need to demonstrate greater productivity and accountability. This has placed a great deal of pressure on managers to find ways to improve the efficiency and effectiveness of their operations.
In the private sector the poor business practices and performances of the 1980s provided an additional spur to tighter financial management and enhanced accountability.
In the Australian public sector major budgeting and financial reforms have been introduced progressively over the last 15 years to:
Significant financial and asset management reforms have also occurred in the higher education sector in recent years. These have occurred in the context of changes to the mix of funding sources for universities and greater control by institutions over the use of funds. The need for enhanced management of resources has been heightened as institutions have grown in size and range, placing ever increasing strains on university infrastructure.
Total Commonwealth funding to the higher education sector in 1995 is in excess of $5 billion. Over 90 per cent of these funds are provided as operating grants, the remainder as grants for research programs, the Open Learning Initiative, the Capital Program and evaluation and investigations.
As noted earlier in this report, single line operating grants were introduced in the 1989 Budget to allow flexibility for universities to decide the best use of their resources, consistent with the Commonwealth's broad objectives. A university's operating grant is applied to the educational profile which is agreed between the Commonwealth and the university. To enable the overall operating grant to reflect the different discipline profiles of universities, a relative funding model was developed in 1990 as a basis for adjusting funds to universities, recognising variations in the costs for different disciplines.
Further consolidation of funding arrangements occurred in 1994 with the roll-in of most capital grants to the operating grant and consolidation of various special categories of recurrent grants (including equity, quality enhancement and advanced engineering).
Also noted earlier in this report is that since the mid 1980s there has been a sharp increase in the diversification of university income sources and the size of university budgets, largely as a result of university involvement in commercial activities through:
Budgets for many universities have more than doubled over the same period. Ten universities now have annual budgets over $200 million.
Fixed assets are defined as those physical facilities which enable services to be provided and which have a life greater than one year. They include land and buildings, plant and equipment and other infrastructure, including libraries.
The 1986 CTEC Review found that at that time most of the capital expenditure over the past thirty years had been directed to construction of additional facilities and that replacement and renovation had not been addressed properly. The Review also recommended that institutions investigate ways of using fixed assets more intensively.
The 1988 White Paper also stated that higher returns could be achieved on the public investment through innovative approaches by institutions to the use of their capital facilities and equipment.
The growing commercialisation of university activities, the greater flexibility afforded university management as a result of Commonwealth funding changes and the growing pressures for financial efficiency and enhanced accountability have combined to necessitate a more businesslike and professional approach to financial and asset management in universities.
The Committee was not able to examine in detail the budgeting, accounting and information systems operating in each university. Consequently, the Committee's findings are necessarily general and the conclusions should be seen in that light.
Generally, universities are satisfied with current arrangements and appreciate the increased flexibility they have as a result of recent changes by the Commonwealth to roll in to the operating grant a number of previously separate grants. However, it was pointed out to the Committee during consultations that some inflexibilities remain. For example, the need to spend funds by the end of the year created some frustration for one university. In this case the university wanted to spend some funds over a three year period and while special dispensation was eventually received, this was a drawn out process.
The Committee found a variety of processes used by universities to develop their budgets. There are several examples of good practice which had the following features:
In this context, the Committee regards the Priority Base Budgeting process used at the Northern Territory University as an interesting example of a strategic method of resource allocation (details provided at Appendix 7).
A number of universities have adopted a performance-based resource allocation approach. This is something the Committee believes should be encouraged across the sector, though internal models should reflect local priorities and not be simply a reflection of external allocation processes.
Some universities allocate funding internally on the basis of the relative funding model, which was developed to adjust funding between universities some years ago. The Committee believes that such an approach is inconsistent with the need for universities to tailor their resource allocation flexibly to their individual circumstances. Other universities have opaque funding allocation processes.
The Committee noted that the growing level of sophistication in strategic planning in universities has seen an increase in the integration of budget processes with strategic planning processes. However, for some universities integration can be enhanced and should remain a major priority area.
The Committee noted that in a number of universities a small percentage of funds is withheld from faculties in order to fund new or emerging priorities, generally at the discretion of the Vice-Chancellor or the Senior Management Group. At McGill University, in Montreal Canada, the process is taken a step further by distributing the discretionary funds on the basis of submissions from faculties and on judgements about the performance of the relevant faculty and the extent to which it contributes to the university's goals. A similar arrangement is in place in some Australian universities, including the Queensland University of Technology.
The Committee considers the practice of publishing budget information as good practice since public disclosure enhances transparency and acts as a useful discipline in itself. Few universities currently publish budget information. The practice of Monash University of publishing detailed information and analysis of its budget is noteworthy.
The rapidly growing commercial nature of university activities demands a businesslike approach to financial and asset management. While most universities have introduced business planning, the Committee notes that for some universities the use of business plans is still evolving.
Concerns have been expressed that lack of clarity in the identification and charging for commercial activities may lead to public subsidies of commercial activity and unfair advantage for universities in the market. This issue will receive increasing prominence, particularly for commercial operations of universities, as the States implement agreements under the National Competition Policy. The full implications of competition policy are not clear. In any event, the Review Committee believes that universities must be able to separate their commercial activities from their noncommercial activities and be able to assess the full cost of resources used in commercial activities.
All universities have now introduced accrual accounting. During consultations several Vice-Chancellors expressed a view that in accounting terms, depreciation of assets used in university operations does not provide meaningful information because the depreciation charge is not funded.
Universities have made substantial improvements to their management systems in recent years. During consultations, some universities indicated that while financial information systems, many of which are standard commercial packages, were generally working well, there was some way to go in developing comprehensive student information systems and integrating these with other information systems.
Several universities in submissions indicated that they were not expending much effort in enhancing management information systems because of the impending introduction of CASMAC (Core Australian Specification for Management and Administrative Computing). During consultations several participants expressed doubts about the practicality of such a large scale system and noted the slow progress made and high cost in its development to date.
The Committee noted that following the review by the Western Australian Auditor General of university consultancy services, many universities have improved the monitoring of these services, including improving the transparency of information systems.
As noted earlier in this report, in recent years financial reporting by universities has been streamlined, as part of a Commonwealth/State Agreement, by aligning State audit and Commonwealth financial reporting requirements. At this stage not all States have agreed to a consistent reporting format.
During consultations some universities expressed concern that State government public finance standards prescribe minimum generic standards for statutory authorities and do not address specific issues for universities, do not sufficiently support internal reporting requirements or recognise their uniqueness.
Several stakeholder groups, especially students and staff associations, complained of lack of transparency in funds utilisation and financial management processes. They urged the development of a special financial reporting format for universities to achieve transparency.
An increasing number of universities are looking to contract out a range of activities, including cleaning and security, in an effort to improve efficiency. In its submission to the Review and during consultations, the NTEU argued against this approach on the basis that any savings achieved have largely been as a result of a reduction in the number of jobs and/or working conditions, particularly of the lower paid. The NTEU also argued that in many instances contracting out has led to a marked decline in the standard of services.
Most universities are devolving an increasing amount of decision making to faculties or departments. These moves highlight the importance for institutions to adopt sound risk management practices. The increasingly commercial nature of the university enterprise gives added impetus to the need for sound risk management practices. For example, the Western Australian Auditor-General noted the possible legal exposure of universities as a result of poorly developed consultancy contracts.
The Committee found that a number of universities had moved toward developing risk management strategies, including establishing internal audit offices and creating risk management positions. However, for others the development of risk management strategies remains deficient. During consultations, very few universities indicated that they had given much thought to contingencies against major market shocks and yet several highlighted the potential for such shocks in areas such as international students. This last point was emphasised in a recent report by the Higher Education Funding Council of England:
'..the overseas market for students is a volatile one and a high level of dependence on this market involves risk, especially now that more institutions are entering it.'
The 1988 White Paper stated that there was an urgent need to refurbish and upgrade many existing facilities, particularly on inner urban campuses. The Review Committee was not in a position to establish whether this was still a requirement. However, the change in funding arrangements means that universities should now be taking responsibility for this.
While asset management plans are now widespread, for some universities the percentage of the budget set aside for infrastructure maintenance falls far short of realistic needs. During consultations and in several submissions concern was expressed by universities that the tight financial circumstances in which they find themselves made it difficult for sufficient funds to be found to maintain infrastructure. The Committee heard anecdotes about the failure of some universities to set aside sufficient funds for annual maintenance only to be faced with a much larger financial liability after a period.
A general view put forward during consultations and in submissions was that there is substantial potential for university assets to be used more intensively. Many universities indicated that summer courses and continuing education courses had been introduced to varying degrees but that there remained potential for more intense use. Two cautionary notes brought to the Committee's attention were the need for sufficient 'down time' each year to enable buildings to be repaired/renovated and the need to cost the use of assets at traditionally abnormal usage times (such as air conditioning costs for courses held in mid-summer). The latter raises the possibility of considering funding per semester rather than per year. Several universities suggested that the notion of a third semester was worth considering but that this should also take into account education and academic priorities and employment terms and conditions of staff.
Several consultation participants noted the territorial attitude of some faculties/schools within some universities which prevented more efficient use of assets. Some suggested that the use of lecture theatres, main teaching and tutorial rooms should be centrally managed. This practice is supported by the Higher Education Funding Council of England in its report on financial good practice.
In the early 1990s, the Commonwealth funded the development of the Space Planning and Management (SPAM) model to assist in determining the allocation of capital finding to universities. With the roll-in of capital funding to the operating grant the imperative for an allocative model was no longer necessary. However, work is continuing on an Indicative Space System Module of SPAM which will assist universities in estimating demand for space on the basis of student load and type. Several universities advised that they are looking to introduce their own centrally managed system.
Some Australian universities have gone a step further and have introduced charging for space. Several overseas universities have been charging for space for a number of years with interesting results. For example, over the last three years Leeds Metropolitan University has accommodated a 23 per cent growth in on campus Full Time Equivalent student numbers matched by a 12 per cent reduction in space allocated to faculties. One faculty achieved a 43 per cent reduction in space per student. A key factor in achieving these results has been the re-assessment of the academic delivery process with a reduction in the number of hours of formal academic lectures. Important features of the model are that it devolves to faculties the timetabling of space and incorporates a direct relationship between reduced space and an increase in the expenditure budget provision at the faculty level.
In Australia, the impact of new technology in teaching on utilisation of space is difficult to assess. To date it has not made significant penetration into the mainstream of teaching practice, and where it has, its effect has been driven more by desire to improve effectiveness rather than efficiency in the usage of teaching space. The possibilities for the future are for information technology to change the relationship between full-time and part-time and on and offcampus study and by doing so to affect substantially the demands on physical facilities.
Apart from some research collaborations, and externally imposed and/or funded initiatives, such as the Co-operative Research Centres and the Australian Academic Research Network (AARNet), sharing of resources between universities and with other institutions is ad hoc and largely generated at the local level within the university. With some notable exceptions, such as CANDIP, and several instances of cooperative arrangements with TAFEs (including Curtin and Monash), very little strategic attention is currently paid to this issue. Indeed, many Vice-Chancellors stated that the increasingly competitive environment was acting against enhanced cooperation.
One major area in which the Committee sees substantial benefits in developing strategic approaches to resource sharing is that relating to libraries. Libraries are among the most heavily used of university assets, being open for extended hours each day and over weekends. They typically represent about 8 per cent of recurrent expenditure and are operating in an increasingly tight financial environment.
In 1990 the Ross Report noted the potential for cooperative arrangements between university libraries. Several examples of successful cooperation were brought to the Committee's attention, including a consortium of Victorian universities called CAVAL (Cooperative Action by Victorian Academic Libraries). CAVAL uses common cataloguing and operates a cooperative store at La Trobe University which is a repository for books in low demand.
Novanet is a similar arrangement to CAVAL operating in Canada. Novanet is a company of nine academic libraries and one hospital in Nova Scotia. A recent cost-benefit analysis of the initiative reveals that capital costs of the system are 63 per cent of those if systems were separate. Annual operating costs of Novanet are 47 per cent of those for separate systems.
One issue brought to the attention of the Committee was the inflexibility associated with calculating the research quantum as it affects the sharing of assets. Currently, there is no adequate provision to allow for the sharing of research infrastructure, which must be attributed to just the one university. Several Vice-Chancellors suggested that more flexible arrangements be made to accommodate and encourage greater sharing of resources.
Another issue brought to the attention of the Committee during consultations relates to
the approval of borrowings by universities. Currently, borrowings must be approved by the
relevant State Treasury but several State Treasuries advised that they have insufficient
information on the financial position of the university to make a sound judgement.
Furthermore, under current Loan Council arrangements, university borrowings are currently
included within State borrowing limits, thereby reducing flexibility.
The short time frame for this review precluded an in-depth examination of university finance and asset management practices. On the basis of consultations and submissions and the Committee's own research, it appears that, in general, universities have made substantial improvements in recent years, particularly in the areas of management information systems and asset maintenance. Many universities have, or are working towards, integrated management information systems, including linking student systems to financial and other systems. Asset management plans are now widespread.
Nevertheless, the Committee found that there is substantial variation across universities in the quality of financial and asset management. It found instances where:
The Committee believes that more thorough investigations of financial and asset management processes and systems are necessary before decisions on specific enhancements should be made.
The Committee believes that this work should be driven by the university governing bodies rather than imposed externally and uniformly across the sector. Enhancements to university financial processes and systems should be introduced from within to ensure such processes and systems are tailored to the specific needs of the university and so as not to erode management flexibility. The proposed University Change Implementation Scheme, discussed in the following chapter, provides a mechanism for incentives to be provided for change, including encouraging greater collaborations and sharing of resources across the sector.
The Review Committee believes the following should be considered in any assessment of current practices:
financial allocations within universities should be made on the basis of budget processes that are linked to the strategic plan and operational plans; are participative and transparent; are based on a three or more year planning horizon; analyse and identify the full costs of activities, including new and enhanced activities; set priorities on the basis of agreed strategic directions; and include performance indicators and benchmarks to assess resource use. All budgets should be controlled and monitored regularly;
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;
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;
comprehensive risk management strategies should be in place. These should include contingency plans for action in the event of a serious unplanned deficit. Some universities may judge they have only limited scope to increase reserves or to make provision for strategic developments and contingencies. In such cases contingency plans are all the more important;
universities should have a comprehensive information strategy to provide a framework for innovation and exploitation of information technology. This should address areas such as networking, library provision, management information systems, access to information sources, electronic information dissemination, and computing facilities for research. Information strategies should be dynamic and kept under regular review;
Recommendation
17. Each university should review existing financial and asset management arrangements against the following key elements of best practice:
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.
A key finding of this Review is that universities have made substantial improvements in management practices in recent years but that for many there remains appreciable scope for further improvement. Furthermore, the rapidly changing environment in which universities now operate demands a commitment from all universities to continuous management improvement.
The era of sustained growth in government funding for new places is over. Competition is growing in the higher education sector and will continue to do so irrespective of attempts to restrain it. The protected environment of yesterday is passing - technology and globalisation will see to that.
The education market place is also changing. Universities are now involved in community wide education and no longer just serve traditional markets. The work place of society is also changing, with continuous skilling and 'learning' corporations becoming more important considerations.
The interactions of these changes will inexorably impact on higher education institutions. In order for them to be able to respond to these changes, such things as governance, managerial capacities and workplace practices have to be truly contemporary. Thus, universities must exploit the opportunities available and not see them pass by.
The Review Committee believes that the impetus for change needs to be strengthened.
There are a number of ways in which this could be achieved. In its submission to the Review, the Department of Finance put forward an option to withhold a proportion of university operating grant moneys and redistribute on the basis of performance, however that may be measured. The Review Committee does not favour this approach since it is likely to exacerbate the difficulties of the lesser performing universities and provide additional resources to those universities which have made substantial progress.
The Review Committee 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 Quality Rounds have had in focusing university attention on quality matters, including management.
The Review Committee recommends that the Commonwealth establish a University Change Implementation Scheme with the aim of encouraging and assisting universities to improve management practices. The Scheme should be independent of existing government advisory and executive mechanisms since sector-wide and broader policy and program perspectives may detract from the individual institutional focus of the Scheme.
The Scheme would:
Assistance would be provided to universities on the basis of self-identified management improvement plans to improve governance, organisational forms and structures, general management capacity, accountability, financial and asset management and workplace arrangements. Plans would be developed on the basis of, but not limited to, the recommendations of this Review. Specifically, attention should be paid to:
To encourage universities to participate, the Scheme should publish reports highlighting the advances being made by participating universities. Reports may also note deficiencies in practices in non-participating universities.
To drive the Scheme, an independent body would discuss with universities their plans for assistance, identify initiatives to be funded, monitor in broad terms progress of funded initiatives and report to the Minister for Employment, Education and Training. Members should have the necessary skills and background to be able to mobilise university governing bodies and senior university managers.
To cover running costs of the Scheme and sufficient funding for at least one substantive project for each university annually, the Review Committee estimates that $10 million would be required in 1996-97 and $15 million annually for 1997-98 to 1999-2000 inclusive.
Recommendation
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.
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| CASMAC | Core Australian Specification for Management and Administrative Computing |
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| COAG | Council of Australian Governments |
| CQAHE | Committee for Quality Assurance in Higher Education |
| CRC | Co-operative Research Centre |
| CTEC | Commonwealth Tertiary Education Commission |
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| UNS | Unified National System |
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