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Higher Education Review ProcessMeeting the Challenges: the Governance and Management of Universitiesexecutive summaryOver the past decade the environment in which universities operate, and the academic enterprise itself, have changed dramatically. Vice-Chancellors, supported by their administrative and academic leadership structures, have succeeded in guiding their universities through a period of considerable change and uncertainty. Corporate and financial challenges have generally been well managed. Quality standards remain high. The years ahead will present new challenges to the way in which universities are governed, managed and held publicly accountable. This discussion paper examines those issues. The governance framework within which Australian universities operate is highly unusual. State and Territory governments generally have exclusive responsibility for the enabling legislation for each university but provide little of the funding (together providing just 1.5 per cent of total operating revenue). The State and Territory financial accountability frameworks for universities are, in general terms, those applied to any statutory agency. This presents particular challenges. Most universities remain highly dependent upon public funding. In 2000, 64.7 per cent of university operating revenue (including HECS) came from government. It is therefore entirely appropriate that their activities be regulated and monitored to ensure public accountability. However universities are also large-scale business organisations. Increasingly they are diversifying their sources of funding through revenue derived from fees, charges and investments. It is vital that they seize opportunities to commercialise intellectual property of the university through royalties, trademarks, licensing and equity ventures. They need corporate governance structures that can encourage and support such activities, including entering into commercial relationships with the private sector. At present many universities feel constrained in the extent to which they can respond to, and capitalise on, business and innovation opportunities in timeframes appropriate to the commercial world. Governments, both Commonwealth and State/Territory, need to consider the regulatory regime imposed on universities to provide more freedom to pursue commercial opportunities while retaining appropriate levels of accountability. How can an appropriate governance balance be struck between the requirement for accountability and probity with the acknowledgement that the management of commercial ventures always involves risk? How can excessively intrusive approaches to commercial activity be reduced? Commonwealth, as well as State and Territory, reporting requirements place a considerable burden on universities. They are required to provide material on their operating activities, financial statements to acquit grants and, indeed, any statistics the Commonwealth Education Minister requires. Very little of the material collected on university operations, other than the student load data, actually affects the level of funding provided to universities. Most of the reports and plans are published for ‘public accountability’ purposes, but few provide information on outputs or outcomes. Universities feel frustrated and over-burdened by the welter of profiling and reporting. Independent statutory bodies have been proposed to play a role in the regulatory environment for universities and/or to perform part of the accountability framework. Proposals include the re-creation of an independent statutory body similar to the former Commonwealth Tertiary Education Commission, setting up a new advisory body or establishing a statistical agency. There is a danger that such bodies could add to red tape rather than reduce it. Indeed some universities have already expressed concern about the potential additional workload created by the Australian Universities Quality Agency. The value of establishing a new agency to streamline reporting and accountability will depend on whether it can meet all stakeholder needs and remove duplication and inconsistency between jurisdictions. There remains considerable scope for improvement to governance arrangements, despite the reforms of recent years. Boards, Councils or Senates often remain unwieldy structures, unable to provide the support and advice necessary to Vice-Chancellors managing a large-scale organisation. Governing bodies have become smaller as a result of State/Territory legislative reforms, but still average 21 members. Some of these members believe they are representing particular constituency interests rather than acting as the collective leadership of the university. There needs to be a clear understanding and common set of expectations about the contemporary roles of university governing bodies and what is required for them to be able to carry out these roles effectively. The skills and attributes required by members of these bodies should be critical to the making of appointments. Too often members of university governing boards see themselves as representatives, rather than as contributing skills necessary for an effective governing body. Graduates, staff and students are a substantial proportion of the members of university governing bodies. New South Wales and the Commonwealth appoint Members of Parliament to these bodies. Does the need to appoint a wide range of sectoral interests make governance structures too cumbersome? Do the methods of appointment undermine the fiduciary duty of governing members to always put the interests of the university above conflicting personal or institutional interests? Certainly the effectiveness of university governing bodies is reduced by confusion about the role of some members. There is a case for legally codifying members’ duties to ensure they act in the best interests of their university and not as elected delegates or as appointed to represent a particular organisational perspective. Preventing conflicts of interest is important given growth in commercial activities. Key questions remain to be answered. Should there be sanctions for members who breach their fiduciary duties? Should those who serve on governing bodies be required to meet the standards set by the Australian Institute of Company Directors? What are the appropriate levels of remuneration? The Commonwealth Government is committed to reducing bureaucratic intervention in the management of universities. It recognises that reporting can be costly and time consuming. However, the extent to which it can pull back in terms of monitoring and reporting requirements will depend upon two things: (a) the confidence it has in university governance; and (b) the extent to which agreement can be reached on outcome measures to replace unnecessary emphasis on process and inputs. Another challenge for universities relates to the management of their staff and, in particular, their industrial relations. In 2001, there were 83 800 academic and non-academic staff at university. Only 26 000 are members of the major union, the National Tertiary Education Industry Union (NTEU). In the July 2002 elections, just 25 per cent of them voted (The Australian, 31 July 2002). However, the NTEU effectively acts as a gatekeeper on agreement-making at individual universities resulting in a pattern-bargaining approach across the sector. The Commonwealth Government has no wish to determine how universities undertake agreement-making. The primary purpose of the Workplace Relations Act (1996) is to provide individual enterprises and organisations with a range of options, from collective to individual agreements, from agreements made directly with staff to those negotiated through unions. The key should be that each agreement is responsive to the particular needs of the individual enterprise. It is clear that there are significant differences between and within universities and that these should be reflected in different agreements. Unfortunately, that is too rarely the case. Universities are subject to a centrally-determined, pattern-bargain approach which reduces flexibility and undermines effective performance management strategies. The inability of universities to tailor agreements to the unique operating environments of each institution has undermined the achievement of improvements in efficiency and productivity. There is too little opportunity to recognise and reward high achievement by individuals or teams and a very long-winded and complex process to manage under-performance. The Government has already attempted to foster arrangements which reflect the need of individual universities, to promote direct relations between universities and their staff and to improve administrative efficiency. It established the Workplace Reform Programme, allocating up to $259 million over three years from January 2000 for universities which meet a range of criteria relating to measures such as bargaining processes, cost savings, productivity measures and performance management. The NTEU challenged the Programme, arguing that it contravened section 170NC of the Workplace Relations Act (1996) dealing with coercion. Importantly for possible future policy initiatives, in April 2002 the Federal Court dismissed the NTEU’s application. Justice Weinberg said, inter alia, that:
The Programme appears to have had only modest success. University bargaining has continued to yield relatively uniform outcomes largely because of union bargaining approaches. The two key workplace issues raised by universities relate to flexibility and performance management. A number of submissions argue that there is a need for far greater flexibility for universities in determining the appropriate mix of ongoing, fixed-term contract and casual employment for their individual circumstances. Some suggest the creation of new employment types, rather than just maintenance of the traditional dichotomy between ‘academic’ and ‘general’ staff. Universities are restricted in their capacity to create teaching only positions for professionals who have other employment and for young ‘aspiring’ academics who can carry part of the teaching load. Innovative options are worth exploring. Committed and rewarded staff are a university’s most valuable resource. Their performance as teachers, scholars, researchers and administrators needs to be recognised. A stronger focus on performance management to nurture and reward staff would generate significant benefits. Universities argue that they require greater capacity to provide over-award payments to high achieving staff, and less complex procedures to deal with under-performance. Would it be better to replace the Workplace Reform Programme with a performance pay pool that universities could draw on to supplement academic salaries? If so, should such a pool be made available on the basis of an approved performance pay scheme which rewards top performing staff? Universities are equally concerned about the complex procedures to address under-performance. To what extent can termination procedures be streamlined? The structure of governance and quality of management are crucial to the future success of universities as large-scale organisations. While they must remain publicly accountable for the quality of the education they provide, they need less red tape and greater freedom to innovate. Streamlined governing boards need to provide leadership that can deliver the educational mission of universities while supporting the commercial activities necessary to the financial management of a large organisation. Industrial relations need to be decided at the enterprise level. Such reforms are crucial to the success of Vice-Chancellors in managing the change processes that face the higher education sector in the years ahead.
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Any comments or
queries should be sent to:
highered@dest.gov.au
Department of Education, Science and Training
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