Diversifying the university ‘business’
While some of the most prominent universities internationally have an array of activities that include teaching, research, consulting, managing intellectual property and so forth, and while their financial accounts often reflect this diversity, overwhelmingly most universities are heavily dependent on income from one particular activity and one source of revenue: teaching undergraduate students, funded by the state. In this role universities are public agencies providing a vitally important and strategic service to national goals.
But they are also financially highly vulnerable. Their organisational health depends on the ability of their key funder to keep increasing their income in line with both inflation and the university’s strategic development goals – but almost no state can guarantee that kind of financial stability, and pressures on public money will quite regularly force governments to cut higher education funding, usually moving the funding baseline downwards as they do so. In the meantime the reliance on teaching prevents the institutions from developing a high profile reputation globally, which is really only achievable through high value research. Therefore a teaching-focused university threatened by public funding pressures has little with which to market itself to other potential funders or customers. The same may even be true of a privately funded teaching-only institution, which would still be vulnerable to market shifts affecting its customers and a lack of alternative products.
The answer to this problem is to behave, at least in some respects, more like the prominent high value research universities – while at the same time managing to find a set of priorities and values that distinguish them from those institutions. This view of how universities should behave in order to be sustainable was suggested in a recent comment on the US system in the Washington Post. The author, a former editor of the Chronicle of Higher Education, suggested that ‘the strongest universities are those that depend on more than just students for their revenue’, and that institutions should in particular ‘double down on their research efforts to attract new dollars.’ Of course there are many different ways of tackling a research strategy, and there are other ways also of developing revenue streams based on skills and knowledge; for example an increasing number of universities are now presenting themselves as commercial consulting firms.
It has been suggested for some time that an increasing number of universities may be financially at risk. To avoid slipping into this state and to ensure sustainability, higher education institutions would do well to diversify and to ensure that their portfolio is not excessively focused on just one particular activity.