Getting your sea legs

It feels as if – once again – the Higher Education sector is facing something of a perfect storm.

We’ve already reached an agreement on the next pay round, which will deliver pay increases to staff of between 5 and 8 per cent. Pension contributions keep going up, but the USS remains challenging.

At the same time, inflationary pressures and supply chain issues are driving up non-pay spend.

And on the income side, there’s ongoing uncertainty around research funding, plus the freeze of domestic undergraduate fees – with £9,250 worth little more in real terms than half the value it did a decade ago – causing many universities to run that activity at a loss and rely increasingly on international student fee income.

Yes, overall there are more international students in our universities than ever before – but what we are really seeing is a growing gap between the ‘haves’ and ‘have nots’. To put this into perspective, Wonkhe recently published some analysis that showed that 60% of the total sector surplus last year was generated by just seven research-intensive institutions.

We’re seeing the impact of this at SUMS where we’re doing more work in the area of Efficiencies, Transformation and Change area than ever before. The challenges do vary by institution, but nearly always cross over into culture, leadership, systems, structure, processes, data quality, and staff and student experience.

I just want to share with you some real quotations from staff up and down the country about where the pressure points are that they’re experiencing:

“Our income is not keeping pace with expenditure, but to change this we need to invest with money we don’t have.”

“We’re not overstaffed – but so many of our people are feeling the strain.”

“Inflationary pressures and supply chain challenges are having a huge impact.”

“We’ve tried and failed to ‘transform’ so many times that there’s no goodwill left.”

And, perhaps most importantly, “Yesterday’s problems are stopping us taking advantage of future opportunities”.

We’re working with universities that have very real and very imminent financial challenges and which need help to implement the most sensible tactics and approaches for their own circumstances.

Now, for all universities and particularly those with acute financial challenges, it’s clearly preferable to ensure that existing income is maximised and that non-pay spend is optimised before they get too deeply into the realm of cost reduction. We’ve never yet seen an organisation cut its way to strategic success.

Growing and diversifying income has to be part of the conversation. There are three key areas to point to that we’re seeing as trends.

Firstly, taking an in-depth look at your scholarships and bursaries strategy. Your institution will be spending a lot in this space, so do you have good evidence to show that you’re getting return on your investment? Many universities we’ve worked with have re-evaluated their approach and used their scholarships budget to drive targeted international student recruitment.

We’re also seeing a significant number of institutions undergo portfolio review – yes, to prune poor-performing programmes, but more importantly to analyse demand trends, particularly for non-standard provision such as CPD. They are seeing that as a growth opportunity and understand the importance of a demand-led approach to meet skills needs.

Finally, HolonIQ estimates that there will be an additional 2.4 billion students in the global marketplace by 2050. Get on the front foot and analyse which growth territories you are best placed to take advantage of. Use a targeted approach both to provision and pricing so that you can optimise your ability to recruit. Consider differentiated pricing by country to grow your market share. It’s no accident that several UK universities have turned their attentions to Indonesia where the demographic trends and learning levels point to a sustained period of demand to support the developing economy.

And if you do need to make efficiency savings, think about them within the context of long-term financial sustainability rather than simply hitting an immediate savings target. Avoid the salami-slice and get creative. Universities we’re working with are looking at genuine Target Operating Model design rather than tinkering with restructures. Greater consideration is being given to outsourcing and shared services models. Some universities have even created Special Purpose Vehicles through which to employ professional services staff. This may be unpopular – something of a nuclear option – but the long-term impact of reduced on-costs will ultimately help your university. Difficult and complex, but with a sustained impact.

Here are four key thoughts on addressing change for you to consider at the outset of your transformation voyage.

Firstly – get the right people around the table so that you have rounded view of the issues and potential solutions. Ensuring that both academics and students are engaged in the process will go a long way to getting buy-in and long-term sustainability for the changes you make.

Secondly – when you’re looking to make cost-savings do it with a rapier not a bludgeon: be specific about areas you can afford to scale back or stop versus ones you can’t, or even need to invest in.

Thirdly – avoid the temptation to do things intuitively. Universities are awash with management information. Use it to help you and colleagues make more robust decisions that can stand up to scrutiny when challenged or when new services are complained about.

And finally – when you are looking at service design, do it with the future in mind. Think ‘digital first’; get in the zone by looking at the expectations of Gen Alpha – the students of tomorrow.

Major transformation isn’t easy, but sticking to these four principles will help your institution to find its seas legs and navigate its way through the stormy waters to long-term financial sustainability.