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The corporate university

By Dilan Thampapillai - posted Friday, 11 December 2009


There is actually some justification for the corporate mindset because most Australian universities are statutory corporations. Therein lies the real problem which is the growth of a corporate culture without the corresponding advantage of any of the corporate governance safeguards. If you take a normal corporation there are some basic features that theoretically should prevent managerial malfeasance. It is an imperfect system, failures happen, but since corporate catastrophes are an exception rather than the rule, the system more or less works.

In a normal corporation the shareholders can exercise voting rights at an annual general meeting. Moreover the performance of the CEO is monitored by a board of directors who are in turn answerable to the shareholders. Even better still, since firms can be subject to hostile takeovers there is actually a market for corporate control. Most fundamentally, the discipline of the market applies to corporations because a poorly run corporation will go bankrupt.

The modern Australian university has absolutely none of these features. The head of the university, the Vice-Chancellor, will most likely to be answerable to a university council or a university senate. Technically, the Chancellor is the actual head of the university, but this is really a figure-head position. The university council is the rough equivalent of the board of directors. The university council will be a mix of ex-academics, professional staff, one or two student representatives, some external stakeholders and an all too easily out-voted academic representative.

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The external stakeholders will likely lack the institutional knowledge and experience to fully perform their governance role. The student representatives can be discounted on the same basis due to their inexperience. Further, many of the external members will have been appointed by the Governor in council - and will likely be beholden to those who were influential in their appointment. The lack of a sizable number of academics on the council means that those who are engaged in the core business of the enterprise - teaching and research - play little role in management. The end result is a lack of skilled and independent oversight at the council level.

Worryingly, federal and state governments are lackadaisical shareholders. Basic regulations are in place, but the governments are not overly inquisitorial. Barring a major catastrophe it is difficult to see the government getting massively involved in the management of a university.

Even if the management is generally poor, bankruptcy is never really an issue, because the federal government will continue to fund the university as long as students keep enrolling. Where the government does get involved, in the funding of teaching and research outcomes and student enrolments, it is a little bit more akin to a slightly philanthropic banker than a shareholder. Either way, the government is not going to get a return on investment in monetary terms, it has to find its return in less tangible ways.

It is not that any of the senior management in the university sector would purposely set out to do anything wrong. There is little evidence of any deliberate rorting. But the lack of oversight with bite means that hidden inefficiencies get built up in the system. It also means that one group of university employees is over-managed, the academics and junior to mid-level professional staff - they are, after all answerable to senior management, while another group is under-managed. This is how money gets wasted on ineffective advertising campaigns, internal policy reviews and programs that are not needed, senior professional staff positions that duplicate existing positions and other projects that are not essential to the core business of the university. The absence of the market’s real disciplinary tool, profitability or bankruptcy, means that monies can be misallocated within the university system to redundant or non-value creating tasks.

One of the major problems is that academics no longer really run the universities. Somebody had the bright idea that people from industry made better managers. To be fair, the type of people who choose to do research for a living, and most academics do get into academia for the research and not the teaching, are not necessarily blessed with the best social or inter-personal skills. Management requires people skills. But it also requires institutional knowledge and some senior professional staff, and many of the external stakeholders, lack this type of knowledge or an appreciation of university culture.

The problem is that there is a growing number of professional managers who don’t really appreciate the core business of a university. If this is combined with a lack of real corporate governance the likely outcome is inefficiency.

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It is worth noting that the rise of sessional and short term contract staff has corresponded with the emergence of the corporate culture within universities. The need to use sessional staff has arisen due to budgetary constraints which have been imposed on academic staff. Sessional staff can be useful gap-fillers and they do free up space for tenure track academics to engage in productive research. But, on the downside, finding quality sessional and short term contract staff is very difficult. Staff who lack job security obviously do not contribute well to morale and there is no incentive to train sessional staff to a high standard since they are only short term hires.

The variable standards of sessional and short term contract staff pose managerial problems for tenured staff. Furthermore, as sessional staff have more contact with students (the customers) if they perform poorly this becomes a factor in student turnover, thereby costing the university money through lost enrolments. So in fact, the money spent on overseas agents who procure students and on domestic marketing can wind up being wasted because of the failure to invest in more tenured staff.

If we can fix the corporate governance system at all our universities, then the corporate mindset won’t be such a problem. This is because a properly run corporation would focus on excelling in its core business and maintaining its long term profitability.

This means hanging onto and nurturing staff who create value in the core business.

It means offering a quality product to the consumer and creating brand value. After all every successful corporation, such as Hewlett-Packard, IBM, Microsoft, Sony, Mazda and even the dreaded McDonalds, succeeded by doing these things.

At this stage Australian universities are institutions in a state of transition and it may well be that a real education revolution would involve the federal and state governments restructuring the governance systems of our public universities to promote efficiency and excellence.

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About the Author

Dilan Thampapillai is a lecturer with the College of Law at the Australian National University. These are his personal views.

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