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Aug 25 2017 at 11:00 PM Updated Aug 25 2017 at 11:00 PM Save Article Print License Article

Universities lack the spur of competition to boost efciency and

productivity

The University of Adelaide's Kendra Backstrom says the UniSpace online platform allows for more efficient use of
rooms at her institution. Russell Millard

As pressure to save costs and be more efcient sweeps through

most parts of the economy, one industry stands out as lagging
behind others in productivity improvement

We're talking universities, a sector with $30 billion a year

by Tim Dodd
revenue, but harbouring many inefciencies that hurt the public Executive Jobs in Australia
purse, and hit students who pay from their own pockets, on
Manager Planning Services
average, over half the cost of their university degrees. Latrobe City Council
Morwell, Latrobe Valley

It's not hard to see the evidence of inefciency. Most lecture rooms are used only six
Manager Human Resources
months of the year and universities have rigid work rules and unwieldy management City of Moonee Valley
Melbourne, Melbourne Region
structures.
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Eastern Palliative Care
By-and-large, the universities have not been part of the major productivity push in
Melbourne, Melbourne Region
large companies which has seen major outsourcing of back-ofce operations to places
Managing Director
such as India and the Philippines. Nor have they been part of the move to "agile" Robert Half Executive Search
working, which lets companies cut down on their oor space because employees no Canberra Region, Australian Capital Territory

longer have assigned desks. Group Manager Service Delivery

The Salvation Army
Melbourne

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In 2019 one of the prestigious Group of Eight universities, UNSW, will introduce a new system to boost its Jansen mine
summer teaching. There will be three regular terms of 10 weeks each and a five-week term over summer.
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"Every vice-chancellor has seen an audit
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of the use of teaching and other spaces
which shows the utilisation rate being
really low," Parker says.

"That's partly because people will have Tuesday to Thursday, preferably between
about 10 and 4 [as their preferred teaching times], and all times that fall outside of this
somehow seem to be very difcult."

University efciency is front-and-centre of the political debate after federal Education

Minister Simon Birmingham announced in the May budget that the government
would cut higher education teaching subsidies by 4.9 per cent. Mr Birmingham is a
keynote speaker at next week's AFR Higher Education Summit.

It has become far too difficult for students and their families to access information on the entry requirements of
courses at different universities. Glenn Hunt

Empty rhetoric
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26/08/2017 Universities lack the spur of competition to boost eciency and productivity | afr.com

Empty rhetoric

Universities responded with a wall of opposition but Birmingham was unmoved. He

told them their "doomsday statements are simply empty rhetoric because efciencies
clearly exist".

The minister's problem is to pass his university budget cuts in the Senate, where they
are opposed by Labor and the Greens. But if Birmingham is really determined he can,
if he chooses, freeze growth for university teaching subsidies using his existing
powers without seeking parliamentary approval. Which means that universities are
still under intense pressure to perform.

Few current university academics will speak openly about university inefciency. It's
not a good way to ensure promotion.

The planned new arts and social sciences building at the University of Sydney. Senator Birmingham says
universities have no problem in finding money for new infrastructure. NSW government

One who will is Paul Oslington, a highly respected economist and former associate
professor at UNSW, who has left the mainstream system and joined Alpha Crucis
College, a Christian higher education institution based in Parramatta in Sydney's west.

Oslington, who is the business dean, estimates that, by operating leanly without the
"corridors of bureaucrats" in universities, Alpha Crucis' teaching costs are about two-
thirds of those of universities.

Admittedly the difference is partly in wages. Academic staff at Alpha Crucis, including
himself, are willing to be paid less because of their commitment to the faith-based
college.

But he says the main difference is in more efcient process. "I can do things without
talking to endless numbers of bureaucrats and the National Tertiary Education
Union," he says.

This is not to say that universities have not made productivity improvements. They
have.

Higher education consultant David Phillips, who works with many universities, says
it's important to recognise this. "Universities have been able to nd ways to increase
productivity and will continue to do so."

Research by Keith Houghton, former business and economics dean at the Australian
National University, shows that university productivity, measuring both the
production of teaching and of research improved 15 per cent from 2007 to 2013.

More efcient
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26/08/2017 Universities lack the spur of competition to boost eciency and productivity | afr.com

More efcient

And universities can point to specic changes they have made to use resources more
efciently. For many years Deakin University has run a trimester system which
teaches all year round, including over the summer break. Last year 20 per cent of
Deakin's students did a unit in the summer trimester which runs from November to
February with a short break for Christmas. Not only does it use university
infrastructure more intensively, it allows students more choice, including the ability
to nish their degrees more quickly.

In 2019 one of the prestigious Group of Eight universities, UNSW, will introduce a
similar system to boost its summer teaching. There will be three regular terms of 10
weeks each and a ve-week term over summer.

In another example, the University of Adelaide is tackling its room usage problem
with an online platform, called UniSpace, which records the condition and usage of
rooms throughout the university. It is the basis for many applications which will
improve the efciency of existing space, allowing the university to put off the expense
of new buildings.

"We are trying to use the existing space harder," says the university's associate
director of customer and support services, Kendra Backstrom.

But universities still have a long way to go. In the last decade they missed the
opportunity to outsource back ofce functions, such as nance and human resources,
to cheap labour overseas. Universities "didn't take advantage of that outsourcing
wave," says KPMG technology partner Julian Edwards.

They are now prime candidates for the next wave of efciency improvement
automation of the back ofce which is replacing outsourcing.

Another area for universities to nd productivity improvements is in the way they

assign staff to teaching and research. Oddly enough, the economic theory of
comparative advantage, which is two centuries old, has made little impact on
academic staff management.

At the moment most university academics are required to do both teaching and
research, regardless of their own preference or any judgment about what they are
best at. It's as if everybody in a company had both strategy and sales in their job
description.

Houghton says that even though a university as a whole undertakes both research and
teaching "it does not make sense in terms of efciency, to take this requirement to the
individual academic staff member level".

Productivity drain

"Put bluntly, it is a drain on total productivity. A company would not require all its
employees to cover several roles. People achieve more if they are allowed to specialise
in what they do best," he says.

While it's true that some universities have teaching-only positions, and are creating
more, these are a minority and university culture values research more highly.

Oslington says that higher education would benet greatly from a dose of market
forces. "As an economist I'd say universities are closeted from competition," he says.

His institution, Alpha Crucis, has pushed for years for university status which would
allow it to compete on an even eld with the established universities.

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26/08/2017 Universities lack the spur of competition to boost eciency and productivity | afr.com

At the moment, although it offers recognised higher education degrees, it does not get
the benet of federal government teaching subsidies. And while its students can get
government income-contingent tuition loans through the FEE-HELP system, they pay
a 25 per cent loan fee for undergraduate course fee loans which a student at a
university on a HECS-HELP loan does not pay.

Oslington would love Alpha Crucis and other reputable non-university higher
education institutions to be let loose to compete with universities on an equal basis.

"It would really focus some vice-chancellors' minds," he says.

Federal Education Minister Simon Birmingham will be joined by eight university vice-
chancellors at the Australian Financial Review Higher Education Summit at the
InterContinental Hotel in Sydney, August 29-31.

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