University Business: directing and managing a university
Universities are in a period of change. Change is always hazardous for existing businesses and one of great opportunity for new entrants. Those unaware of the competitive forces acting on them may fade away, while those identifying new value-adding business models may flourish. In this environment, alert university trustees and professional management teams are at a premium. More
Digital communication technologies and social networks are transforming marketplaces. Many traditional business models are becoming less effective as market power is redistributed among market participants. The pace of technological change is not slowing—to the contrary—it shows every sign of speeding up, and its transformative effects on markets, policy and government is set to continue. For this reason, there can be little doubt that universities need to adapt their traditional business models, and develop some new ones! The big challenge confronting Boards of Trustees is how to respond appropriately to these changes.
While the many contemporary examples in this book help convey the current dynamics and vitality in higher education, these are given in the context of principles. For example, Porter’s ‘five forces analysis’ is applied to the traditional university businesses: education, research and gifting. Using this approach, we get a grip on the competitive landscape for each business. Then to deepen our understanding, a new cooperative analysis is introduced to show how cooperation modifies the competitive landscape. Having defined the principles, we then move step by step through an example strategic analysis. We define the processes for discovering ‘internal consistency’ in the business, and then how to optimise ‘external consistency’ to control the competitive forces acting on the organisation.
Organisational culture is crucially important in achieving organisational outcomes. We first develop a competitive-cooperative framework, defining the cultures found in exploitative and exploring organisations. We discover that because of complex university missions, cultures are usually mixed. This presents university management with many difficulties. We then identify the ‘organisational levers’ for shaping organisational culture.
All aspects of university governance and business management are covered. Accounting and business analysis are explored, with a focus on understanding the levers for improving financial performance. Highlights of this chapter are approaches to investment analysis and value management, value estimation and debt management, and a new method for estimating the value created by a university. The fundamentals of risk management are outlined, and an approach to risk management based on portfolio management is given.
But to be effective requires good governance. Unfortunately, it is found that traditional collegial governance systems do not represent best practice, and that alternate governance systems may well deliver better organisational outcomes. In the meantime, many university CEOs are caught in less than ideal organisational positions. The difficulties faced by CEOs are identified, some operational modes described, and case studies are used to define milestones for a hypothetical waning university.
The performance of a university is approached from the perspective of academics. It is discovered that effective time management is crucially important, and to optimise each university business requires greater specialisation of staff. Detailed examples are provided on how to align the various university businesses.
Finally a chapter on ‘long-term value generation’ considers the broader context in which universities operate. Baumol’s theory is used to better understand evolution in the structure of national economies. The focus is on human capital formation and other productivity enhancing contributions universities can make to national economies.
This book asks the questions, identifies underlying principles and proposes solutions. It is designed to help directors and managers make decisions.