DIRECTING EDUCATION Tertiary Sector Governance – Will a private sector model work?

If you want to find really grunty argument about what constitutes good governance, take look at the tertiary education sector.
Private enterprise objections to the spectre of more regulatory governance controls are expressed just as forcefully by our universities and for similar reasons. But there’s also the argument that tertiary education institution (TEI) governance is fundamentally different to that of the private sector and should not, therefore, be subject to the same governance models.
Overlaying that is the pervasive presence of sizeable shareholder/stakeholder called government and understanding what its level of influence might be; the diversity of the institutions themselves and concerns that compliance costs involved in tightening up their governance systems will detract from the institutions’ primary teaching and research activities.
A review of TEI governance was commissioned last year as part of an overall exercise to beef up the governance framework for Crown Entities. It came up with 48 recommendations (see box summary) designed to enhance what it described as practices that were “not seriously flawed” but could do with some improvements.
Review author Meredith Edwards, director of the National Institute for Governance, University of Canberra, suggested that both those within the TEIs and the key stakeholders had difficulty understanding the overall purpose of governance structure and processes. “I believe that some TEI Councils in New Zealand have tendency to pay too much attention to conformance and the ticking of boxes rather than to lifting institutional performance through following good practice and developing effective relationships,” she wrote.
“In some cases, the links between governance cultures and institutional strategic positioning appear to be tenuous. In addition, there appears to be considerable room for improvement in aligning with Government’s identified strategic priorities and engaging relevant stakeholders.”
Concerns included the “unclear relationship of TEIs to Government, particular in terms of the tension between autonomy and accountability”, the presence of “overpowering chief executives usually alongside under-performing chairs or councils”, lack of balanced relations between CEOs, council and academic boards, and over-prescriptive regulation.
The review’s recommended changes met with mixed reception from the sector. At least one university described most of them as “unnecessary, unjustifiable, potentially costly and inappropriate”.
One of the issues, and it’s one that is shared with the private sector, involves identifying the extent to which governance practice should be enshrined in law.
Edwards says that while the recommendations include legislative changes, the emphasis is on what institutions can do themselves – including proposals to ensure better practice is shared across the sector.
But some commentators believe the review includes too much legislation – about one quarter of its recommendations involve law changes. In its submission to the review process, the University of Auckland Council says that, bar one proposed change, there is “no demonstrable need for further legislation as recommended in the Review – particularly as much of it replicates present legislative provisions” (in the Education Act).
And then there is the contentious point of whether the review takes sufficient account of the diversity of New Zealand’s tertiary sector. While its executive summary eschews “one-size-fits-all” approach and notes that “at its heart, good governance is about strong relationships and shared understanding”, the University of Auckland Senate accuses it of rejecting homogeneity in theory but recommending it in practice.
The Senate submits that; “there must be clear differentiation in the sector at least as regards genuinely and demonstrably research-led institutions”. It believes that, as they stand, the recommendations would “seriously damage New Zealand’s research-led universities in general and the University of Auckland in particular”.
The concerns centre around the autonomy/constraint spectrum, in particular recommendations that involve increased Ministerial power. These, say the Auckland Senate, “would impose degree of central government control on research-led universities that is not only fundamentally at odds with their independence, as enshrined in the Education Act, but would also strike at their capacity to contribute powerfully to New Zealand’s development as knowledge-led society”.
Universities, it says, “need active, decentralised management to ensure best resource use and to continue providing world-class research”.
The issue of autonomy is dilemma, says Stephen Watson who heads the UK’s Henley Management School and whose areas of expertise include governance in the higher education sector.
Studies of successful entrepreneurial universities (not necessarily the same as research-led) suggest that governance doesn’t really figure. “In some cases it’s evident that the ones who really succeeded do so by getting around governance structures,” Watson told The Director when he was in New Zealand last year.
The success of Warwick University could, says Watson, be largely attributed to the leadership and drive of key personnel who were able to persuade the governing body that their plans were in the university’s best interests. The corollary to that success is the near failure of another British university (Lancaster) whose entrepreneurial ventures – including being the first university to launch bond on the stock exchange to raise funds for capital infrastructure – proved disastrous.
One problem with external councils and governance structures that give too much authority to people who only think about the entity once every two months, is difficulty they have coming up to speed on the various proposals they must make decisions about, says Watson.
On the other hand, being entrepreneurial involves some risk. “The introduction of market forces into universities necessarily means there is going to be some failures because that is what market forces are all about. And if the University of X, pride and joy of the City of X, an important employer in the region of X goes belly up, that becomes big social problem.”
There really isn’t an extant blueprint for success. Cambridge University, for instance, has enjoyed long successful history with no external input into its governance at all. Despite enormous pressure from the government to change, its council is still composed entirely of faculty members.
Which raises the issue of whether TEI governance should follow private sector models.
Edwards says in the review’s executive summary that, while models for corporate governance in the private sector contain “many useful insights for good practice” that are applicable to TEIs, they “cannot be uncritically translated” to New Zealand TEIs because of fundamental differences between public and private sector bodies.
Waikato University vice-chancellor Bryan Gould has reservations about how that is reflected in the review. “The review proceeds on the basis that tertiary institutions should be governed more and more as though they were private sector organisations. Too little attention is given to the reality that the councils have rather different functions from that of [commercial] company boards, are drawn from much more diverse range of people with much more varied range of skills and background, and that they are responsible to range of fairly ill-defined stakeholders, rather than shareholders interested in the single bottom line.”
He points out the inconsistency that while universities are encouraged to behave more like commercial companies in competitive markets, they are also treated like public sector organisations. They are, for example, obliged to conduct most of their business in public.
The need to represent multiple stakeholders supports the view that to simply import pri