Will universities need a bailout to survive the COVID-19 crisis? – this was the question posed by this week’s briefing paper from The Institute for Fiscal Studies (IFS). The report makes very startling and disturbing reading, giving rise to headlines such as “Coronavirus: 13 UK universities ‘could go bust without bailout'”.
In short, the reports authors believe the UK university sector could be facing financial losses of around £3 billion (7.5% of the sector’s overall income); £11 billion or £19 billion (nearly half of total sector income), depending on whether you buy into an optimistic, central or pessimistic scenario, respectively. Most losses will be from operations (including loss of fees through a reduced intake of international students), increases in deficits of pension schemes and losses from long-term investments.
Two things the report is clear about, perhaps not surprisingly, is that the situation is highly uncertain and secondly, that there will be vast differences in the impact on universities depending on their current financial situation and their operating model.
How far could cost savings meet this shortfall?
What the report also states is that identified cost savings – estimated in the report at £600 million across the sector – are unlikely to claw back enough of these losses to avoid universities having to resort to the self-limiting route of redundancy programmes.
However, this estimate is restricted to only those savings from the use of the government’s furlough scheme and from potential cuts in temporary staff, both teaching and non-teaching. Universities are already well on their way to implementing other sources of savings, such as restrictions on travel (maybe not too difficult in a pandemic), a focus on reducing discretionary spend and even voluntary redundancy schemes.
What the report doesn’t identify is that in many places we look in the HE sector, there are operations, structures, procurement and processes in which there are significant cost savings to be made from the elimination of unnecessary costs and waste.
The root causes of these unnecessary costs are varied but include excessive complexity due to departmental silo-thinking and practice, a focus only on ‘local’ process and limited process ownership and accountability. This results in inefficient university-wide end-to-end processes, duplication of activities and structures, errors, rework and high levels of ‘failure demand’. Ultimately, student experience and staff morale suffer.
How do we solve this?
There are transformational change programmes that consistently deliver benefits – they are participative, creative and empowering, producing both hard financial benefits as well as ‘soft’ cultural change – in which staff are fully engaged to identify and deliver the improvements.
These programmes are scalable, no matter the size and type of university, and involve collaboration across the relevant teams and departments, including students and Students’ Unions if required. The teams are cross-functional and brought together to rapidly find solutions and make decisions.
The approach is most effective as a facilitated programme of targeted improvements, or structured rapid improvement events. Included are learning modules to promote changes in behaviour that engender a sustainable attitude of continuous improvement.
True, even this type of approach will never completely fill the gap in the eye-watering financial losses being faced by the sector, but can contribute significantly to saving costs and will do so through the mobilisation and motivation of staff. More strategically, this approach will help prepare the university to be much leaner and effective in the post-pandemic recovery.
Progressive universities can achieve both cost improvement to meet the current challenge whilst simultaneously developing a culture change to one of continuous improvement.