Modern university governance – a national perspective

http://www.dest.gov.au/archive/highered/otherpub/mod_uni_gov/default.htmhttp://www.dest.gov.au/archive/highered/otherpub/mod_uni_gov/default.htm



Paper presented at
The idea of a university: enterprise or academy?
Conference organised by The Australia Institute and Manning Clark House
Session on:
Values and governance in Australian universities, How should universities be governed and what is the role of government?
The Australian National University
Canberra, 26 July 2001
Michael Gallagher,
First Assistant Secretary, Higher Education Division,
Department of Education, Training and Youth Affairs

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This paper outlines a number of factors affecting the changing role and organisation of universities and associated shifts in higher education policy. Against that background some comments are made about expectations of university governance, leadership, management and administration.

There are many and varied definitions of terms in the literature and a good deal of ambiguity. I am using the following working definitions: Governance is the structure of relationships that bring about organisational coherence, authorise policies, plans and decisions, and account for their probity, responsiveness and cost-effectiveness. Leadership is seeing opportunities and setting strategic directions, and investing in and drawing on people’s capabilities to develop organisational purposes and values. Management is achieving intended outcomes through the allocation of responsibilities and resources, and monitoring their efficiency and effectiveness. Administration is the implementation of authorised procedures and the application of systems to achieve agreed results.


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Observable developments in Australian higher education
Government expectations
University autonomies
Accountability requirements
Governance
Footnotes

Observable developments in Australian higher education
Looking back just over a decade we can observe several major shifts in Australian higher education, notably:

growth in the student body, diversification of student backgrounds and rising expectations of students (most of whom now pay a share of costs);
more exacting public accountability requirements on universities, including for planning, performance reporting and quality assurance;
increasing reliance of universities on non-government sources of income, especially through expanding involvement in the business of international education;
accelerating application of Communications and Information Technology to teaching, learning, research, student services and administration.
Associated with those big shifts we may also observe several main effects:

stronger corporate management of universities;
greater instrumentalism in curricula for workforce skilling of graduates;
closer research links between universities and industry;
more aggressive competition and the beginning of increasing differentiation among universities;
improved productivity (higher student throughput for lower unit costs without apparent diminution of quality);
increasing threshold capability costs (for infrastructure and expertise) involved in world class research;
changing nature of academic work, including a shift from ‘cottage industry’ to ‘mass production’, specialisation of curriculum design and assessment functions, and rising expectations of output and self-generated earnings.
Looking at emerging trends we can see further shifts ahead:

Governments are seeking more tangible social and economic returns from science and expecting that universities address social and environmental priorities;
the domestic market will (over the next two decades short of a major spurt in participation rates and/or boost to immigration) provide only limited demographically-driven growth in demand for higher education, mainly confined to a few geographic areas;
firms and professional bodies, both within Australia and internationally, are increasingly prepared to make their own arrangements for workforce training and professional development (a substantial part of the lifelong learning market) if they cannot secure suitable provision from universities and colleges;
the fast-growing global markets are attracting increasing investment interest from across many nations, with new forms of e-education (mainly involving a mix of contact and virtual modes) proliferating through new providers and collaborations among established and new providers, from education and other industries, in globally distributed consortia networks;
the new providers have characteristics that challenge the markets of established universities and require them to transform their operations and organisation. Such features are: borderlessness; earner-learner focus; convenience; customisation; modularisation; applied learning; practitioner-teachers; and disaggregation of design, teaching, assessment and student service functions.
Associated with those developments are some implications for public policy:

the higher education policy framework will need to accommodate the diversification of supply, including boundary blurring across provider types and sectors, beyond its current focus on the social protection of public universities. Extensions to demand-side financing will involve strengthening consumer protection, and prudential and quality assurance regulation;
a more coherent, whole-of-government policy agenda is increasingly required, involving the Education portfolio more closely networking with other Commonwealth agencies, alongside more integrated inter-governmental cooperation;
arrangements for mutual recognition of higher education qualifications need to be inherently robust in order to protect national interests, including through revisiting bilateral agreements entered into before the onset of e-education; they also need to be renegotiated in the understanding of potent international developments, including the emergence of IT and other qualifications that are recognised outside national frameworks, and opportunities for Australia to access global markets and the reciprocal rights of foreign providers to service domestic markets.
There are also profound implications for universities and the higher education system. On the one hand

universities are losing their monopoly over teaching, research and the award of qualifications;
some traditional vertically-integrated, locally-focussed universities will find it increasingly difficult to compete in the new global era;
several universities face difficulty sustaining the overhead cost of their current range of domestic course offerings and research aspirations. Some will need to rationalise their provision, by positioning themselves differently and/or collaborating with others;
universities with limited capacity to invest in new educational technologies, and with cultural, governance and industrial restrictions on their operating flexibilities, will find the future ever more difficult.
On the other hand, there are exciting new possibilities for universities to renew themselves as dynamic, community-engaged institutions, to focus and build on their distinctive strengths in scholarship, and to develop and offer educational programs that are attuned to student needs, enriched by creative applications of new technology and extended by practical experience in diverse learning settings, thereby

widening student access and choice;
improving quality of learning experiences and outcomes for students;
contributing more effectively to the development of regional communities and to national innovation; and
strengthening their international links with the scholarly community.
To some extent we are already seeing a more outward-looking approach and service orientation among Australian universities, with some internationally pace-setting innovations in educational design and delivery. This is partly driven by their greater need for self-reliance in respect of revenues, causing them to face the market rather than be too dependent on government alone. The increasing engagement of the universities interestingly gives rise to higher expectations of them and from more diverse interests, as knowledge becomes more integral to social and economic activity.

However, some expressions of this interest are double edged. On the one hand, engagement of universities with the practical concerns of enterprises and communities has beneficial two-way flows, including for teaching and research. On the other hand, service contracting links costs and benefits to discrete activities that involve some parts of the university more than others, requiring sensitively hard-nosed policies for the internal distribution of resources. Various government bodies too -- Commonwealth and State/Territory, departments and agencies, across several portfolios – are developing specific-purpose relations with universities with tighter conditions attached to their financial contributions, including matched funding and dedicated use of resources, so reducing university discretion. At the same time, new forms of constraint are operating on universities’ commercial activities through changes to corporations law and other State/Territory regulations. And some are now pressing for even tighter conditions on funding, including input controls, greater external directing of IP management strategies and stricter regulation of commercial activities.

Questions of balance arise, both for universities in managing their internal tensions according to their diverse missions and values while adjusting to market realities, and for public policy in maintaining universities as organic institutions while purchasing outputs from them as service providers. In socially valuing the role that universities can play as contributors to national innovation and cultural vitality, prudent policy would give them adequate room to experiment and explore, adapt and diversify – while expecting that they will function responsibly and cost-effectively and be publicly accountable for so doing. The quid pro quo for allowing universities a high degree of autonomy is that they themselves have the necessary capabilities for professional governance and competent management. If universities cannot themselves initiate and carry through the necessary reforms to their organisation and operations either they will not survive in their current forms or outsiders may make decisions for them through very restrictive service purchase arrangements or administrative prescriptions.

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Government expectations
Special accord is given in Australia to universities as institutions. The Commonwealth and States/Territories agreed in 2000 to protect the term "university". They also agreed on a statement of expectations of universities as organisations, as part of a set of national protocols for higher education approval processes:

An Australian university will demonstrate the following features:

authorisation by law to award higher education qualifications across a range of fields and to set standards for those qualifications which are equivalent to Australian and international standards;
teaching and learning that engage with advanced knowledge and inquiry;
a culture of sustained scholarship extending from that which informs inquiry and basic teaching and learning, to the creation of new knowledge through research, and original creative endeavour;
commitment of teachers, researchers, course designers and assessors to free inquiry and the systematic advancement of knowledge;
governance, procedural rules, organisation, admission policies, financial arrangements and quality assurance processes, which are underpinned by the value and goals outlined above, and which are sufficient to ensure the integrity of the institution’s academic programmes;
and sufficient financial and other resources to enable the institution’s programme to be delivered and sustained into the future.
For its part the Commonwealth has articulated a statement of higher education purposes. The Government regards higher education as contributing to the attainment of individual freedom, the advancement of knowledge and social and economic progress. The main purposes of Australian higher education are to:

inspire and enable individuals to develop their capabilities to the highest potential throughout their lives (for personal growth and fulfilment, for effective participation in the workforce and for constructive contributions to society);
advance knowledge and understanding;
aid the application of knowledge and understanding to the benefit of the economy and the society;
enable individuals to adapt and learn, consistent with the the needs of an adaptable knowledge-based economy at local, regional and national levels; and
enable individuals to contribute to a democratic, civilised society and promote the tolerance and debate that underpins it.
The Government has also articulated its objectives for higher education, as being to:

expand opportunity;
assure quality;
improve universities’ responsiveness to varying student needs and industry requirements;
advance the knowledge base and university contributions to national innovation; and
ensure public accountability for the cost-effective use of public resources.
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University autonomies
In law universities effectively own themselves and are essentially autonomous. They are able to determine whom to admit as students, whom to employ as staff and the conditions of their employment (subject to relevant industrial legislation and awards), what to teach, how to teach and how to assess learning (subject in several fields to the requirements of professional bodies regarding accreditation of graduates to practise) what research to undertake and how to conduct it (subject to competitively winning funds for major projects from research funding agencies), what to publish and how, when and where to publish research findings (subject to peer assessment). They can normally (subject to State/Territory laws and regulations) invest, divest and borrow in respect of property and commercial ventures. Their assets, whether obtained through private donations or government grants or the proceeds of investment, unless specifically encumbered as to their use purposes, belong to the university and can be used or disposed of, consistent with State and Local government regulations, in accordance with the purposes of the university and the powers of the council. In effect, public universities can and do operate commercially; however, the proceeds of their activities must be directed to the public purposes of their establishment.

Legal opinion[1] suggests, on the basis of courts’ interpretations of legislation as ‘always speaking’ and the recognition of ‘incidental power’, that the fact that legislation establishes a university means that it impliedly authorises the carrying out of the functions of a university, including engaging in profit-making ventures in order to be able to carry out its core functions:

A university can do what a university can do. It is ascertaining the boundaries of these activities that is problematical for a university’s commercialisation activities. In the absence of express powers, assistance as to what can be done by implication is to be gauged from the collective experience of universities in Australia. So the fact that universities generally exploit intellectual property generated by their employees can be taken to indicate that this is an activity that falls within the ambit of university activities. The absence of an express power would not therefore prevent a university so acting. But it would be necessary to establish that it was a recognised university activity.
(Phillips Fox, 2001)

Australian universities generally enjoy greater degrees of freedom than their international counterparts in Europe (less so for the UK), North and South America, Africa, the Middle East and Asia. Practice varies across countries but the following features are common to many: universities are obliged to admit students who meet centrally-determined criteria; staff are public servants engaged under conditions that universities cannot influence; course offerings and curriculum content are subject to central government approval; assessment is based on central examinations; research is permitted only in designated institutions and publications are subject to government clearance; university budgets are allocated annually on a line-item input basis; universities cannot commit expenditures to projects of more than one year’s duration. University assets are owned by the state; universities cannot invest, borrow or divest without project-specific central approval.

The autonomies of Australian universities underpin academic freedom and international competitiveness.

The extent of university autonomy enjoyed in Australia is occasionally queried on the grounds that universities by their actions are insufficiently responsive and accountable. University autonomy seems presently to be under attack from various quarters whether for being insular and self-indulgent, or insufficiently contributing to community debate on and resolution of social issues, or inappropriately risking public assets, or inadequately responding to industry needs or economic development opportunities.

In defence of autonomy (without being romantic or normative) we need to appreciate the special contribution that universities can make to the intellectual and creative culture of the society, as well as to national and regional economic development, and acknowledge the latitude they need to so contribute in diverse ways. We also need to value plurality in higher education as an ingredient of a functioning democracy while accepting the fact of rapid and unpredictable shifts in the formation of knowledge across disciplinary and institutional boundaries. We are wise to take a long-term view and conceive broadly of humanity and social values to permit intellectual pursuits that may not have apparent application nor be fashionable or comfortable at a particular time, while also enabling speedy application of ideas to develop market opportunities and address social needs.

We should also acknowledge that for the bulk of their business the universities are practically oriented, whether in preparing graduates for entry to professional occupations or in undertaking research and consultancy services relevant to industry and community needs. The ability of universities to operate across the range of these activities is important to functional coherence, operational efficiency through the internalisation of costs, and risk reduction through the spreading of investments. Hence the sense in taking a whole-of-university approach in state-university relations, focussing on obtaining educational outcomes rather than preoccupation with accounting for inputs. That said, the universities need to be able to explain why they have exercised their discretion in various ways and account for the ways they have used the resources available to them and the results they have achieved. They should also be prepared to provide information that assists the community in appreciating what they are doing, including information about student access, course provision, student success and staff achievements. Community support for universities and their activities is likely to reflect the visibility of their contributions.

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Accountability requirements
The Commonwealth as a major stakeholder has certain interests and responsibilities in ensuring public accountability at least in respect of the funds it provides to universities (directly and indirectly) and the services it buys from them, and more broadly in sustaining a cost-effective national system of internationally recognised quality, and promoting institutional responsiveness to varying student and community needs.

However, universities have several external stakeholders, including their alumni, employers of their graduates, professional associations and international research collaborators. Not the least important external stakeholders are the State &Territory governments that establish universities by statute, define their purposes and powers, and determine and make appointments to their governing councils. The annual reports of a university are required to be tabled in the Legislature that established it and its financial statements of revenues and expenditures, assets and liabilities, including for its controlled entities, are subject to audit by the respective State/Territory Auditor-General.

The Commonwealth obtains copies of the audited financial statements, annual reports and strategic plans of universities. These are analysed by the department and discussed with each university during the annual rounds of institutional profiles discussions. The Commonwealth provides both general purpose operating grants to universities for teaching and related purposes, and specific-purpose grants for particular projects, including research activities. Performance-based formulae are used for allocating funding for research student places, research infrastructure, equity and Indigenous education support. Universities provide financial acquittals annually to the department.

The Commonwealth also requires, as a legislative condition of operating grant funding, that universities furnish planning documentation according to prescribed formats annually, including:

a profile of student enrolments for the current year and the next triennium, including commencing and all students in Commonwealth subsidised places by course type; non-overseas fee-paying undergraduate and postgraduate students by course type; research students places; and all students by funding source;
a capital management plan;
a quality assurance and improvement plan, including some mandated performance indicators (published annually and made available to the Australian Universities Quality Agency for audit purposes);
a research and research training management report, including some mandated performance indicators (published annually and subject to audit);
an equity plan (published annually); and
an Indigenous education plan.
The claims that universities make about the quality of their teaching, research and administration are subject to external verification by an independent audit agency, the Australian Universities Quality Agency. Additionally, the department publishes comparative university performance information on a regular basis, including information designed to assist student choice. The department also invests in analysis and evaluation of developments, the dissemination of good practices and the development of tools to assist in management improvement (such as costing methodology studies, benchmarks, and surveys of graduate destinations and graduate and employer satisfaction). Australia is regarded within the OECD as a world leader in the regular public provision of higher education information and analysis.

All in all, Australian universities operate within a rigorous and comprehensive public accountability framework, balancing their considerable autonomy. This framework extends beyond the publicly-financed functions of universities which now represent only around half their activities.

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Governance
The establishing Acts provide for a Governing Body, Council, Senate or a Board to manage and control the university. The governing body is ultimately accountable for the actions of the university. The Hoare Commitee in 1995 identified "a widespread lack of clarity about the primary roles of the governing body". That Committee defined the roles of the governing body in what may still be regarded as ‘best practice’ terms:

The governing body exists to oversee the development and adoption of institutional strategic plans and key policies, to monitor and review the institution’s overall performance and to bear ultimate accountability for the institution. Its activities should be principally those of guidance and review, rather than executive management, and its members should recognise their overriding responsibility to bring diverse viewpoints together for the advancement of the institution rather than to represent sectional interests.[2]

The Hoare committee drew attention to the need for smaller, more capable councils better supplied with information on which to base decisions and equipped with people having the skills they need to do their job, through improved processes for appointment, induction and training. Modest improvement has been made in several universities since Hoare reported. Yet the roles of councils (except in a few universities) are still not clearly defined. There continues to be a tension between the ‘trustee’ (custodian) role expected of a council member to progress the best interests of the university and the basis on which some of them are appointed, and continue predominantly to act, as ‘representative’ (delegate) of internal interest groups. This is a serious matter. Several Vice-Chancellors in recent years, who endeavoured to make management improvements for the strategic advantage of their university, have been rolled on the vote of representative interests of council members. Were these people subject to the normal requirements of company directors they may well now be suffering penalties.

There are also some operational deficiencies. It is not common practice for university strategic plans to be linked with budgets and performance measures, nor for councils to receive regular financial reports. While universities should be able to improve their net operating results from their various business undertakings and demonstrate to their current and potential partners that they have business competence and transparent management practices, not all investments are adequately assessed for costs-benefits and risks nor adequately monitored for their performance.

Scope also exists for management improvement in various areas, notwithstanding the significant advances made over the past decade in the development of policies, procedures and systems, and the gradual professionalisation of central administration, including for commercial activities where performance has been volatile. Admissions are closely controlled in most universities but less so in others, as reflected in excessive levels of over-enrolment. Student services are efficient and customer-sensitive in some universities but not in others, and most have yet to develop customer management systems. Market analysis is undertaken well in several institutions but not at all in others. There is variability in the efficiency of financial, asset and human resources management. Universities are on the whole lagging well behind other institutions in identifying and collaborating on ways to reduce back office inefficiencies, such as for transaction processing, fleet and property management.

The role of the NTEU as a national gatekeeper in respect of enterprise bargaining, in setting normative salary outcomes (irrespective of institutional capacities) and vetoing agreements of local staff to more flexible organisational arrangements, is a serious restraint of bargaining autonomy and, hence, impediment to institutional responsiveness and diversification. Since enterprise bargaining commenced in the university sector in 1995 very little progress has been made in the critical areas of performance management (such as for dealing with under-performing staff) and operating times (such as a three session year and weekend classes) despite changes in the characteristics and circumstances of students. Universities risk losing market share if they are unable to match competitors who can offer convenient programs (7days/24 hours is now international practice) customised to suit individual needs (including options to pay for additions to their core requirements) at reasonable prices and comparable quality. Indeed, this is already happening.

The imperative is not for more external regulation and restriction, which would fetter universities, reduce their flexibility and diminish their capacity to deliver the contributions the community needs and for which it affords them special status, but for greater internal coherence and competence.

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Footnotes
[1]“Study of the Regulatory Environment Applying to Universities”, interim report to the Joint Committee on Higher Education, Phillips Fox Lawyers, June 2001

[2]Hoare, D. (chair) Higher Education Management Review, AGPS. Canberra. 1995