Sunday, 21 March 2010

In Praise of Management

Some of the objections to proposed cuts at King’s College London and elsewhere take the line of opposing all managers in all ways. This is too simple: there is a world of difference between good and bad management, and between appropriate and inappropriate management.

It is important to separate the strands, not least because one of the main lines of argument deployed in recent years to control universities has been the “aspic” gambit, claiming that academics only oppose efficient management as practised by the private sector for selfish reasons. They therefore need to be taught a lesson and modern managers are ideal for the job of dragging them into the 21st century.

I would like to suggest here that many British universities diverge from the private sector in key ways which invalidates that argument: the current problems are arising not because university management is efficient, but because it is not.

To be precise: to identify university management with business is something of a slander on the private sector, to which real businessmen should object strongly. This does not mean universities should be run more like businesses, but rather that the conceit of pretending that the business model must be emulated should be abandoned as impractical and irrelevant.

Running any organisation well requires the utmost skill. I have written elsewhere in fulsome praise of the truly effective manager, and about how constructing and controlling a large organisation deserves to rank as one of the most difficult tasks the human mind can take on.

It requires an ability to look at detail and at the larger picture; being able to adjust to circumstance rather than sticking to a predetermined method. It requires an understanding of money and people and structures. It means knowing when to delegate, how far to delegate and when to intervene. It requires understanding the difference between consent and coercion. It means tailoring your methods and style to the particular nature of the organisation you are running. It is a subtle art as well as a demanding science.

Few people have the skills and temperament to do it well; those who do not only deserve high rewards, they will inevitably get them. There are not enough of such people around.

Alas, there seem to be few in UK universities.

Even in the corporate sector, such people are not trusted, however good they may be. Companies work within a system of checks and balances to monitor management performance and correct mistakes: it is not perfect by any means, but it works, enough of the time.

The Chief Executive answers to the board, which is led by a Chairman. The board, in turn, answers to the shareholders, who are (literally) invested in the health of the company but are distant from it. Share prices rise and fall to indicate esteem, and serve as an early warning of something going awry.

And if something does go wrong, punishment follows: the company shrinks in value, and becomes vulnerable to a takeover. Competitors grab market share. Profit dwindles. The chief executive can be thrown out; there may, in extreme circumstances, be a shareholder revolt. Even the possibility of such things keeps the management on their toes.

Few of these factors apply to universities. They do not make profits, so their performance cannot be easily monitored. There is a board, but no “invested outsiders” to keep an eye on things. There are no competitors in any real sense. And there is little scope for external rebellion to enforce a change if management proves inadequate.

The problem with importing managerial techniques into universities – and into the public sector generally – is that it has centralised authority along business lines, but has not at the same time imported the checks which monitor performance and the balances to control managerial power. The result has been conditions which are a gift to the mediocre.

Administrators in universities (and elsewhere in the public sphere) have exploited this, even when they are well-meaning. They have adopted the style, the language, the pay, but not the external disciplines, of the private sector.

This is, I believe, a source of the current problems at King’s College London, although it is far from being unique. King’s has attracted attention because of its efforts to dismiss academics, but many other institutions in the Higher Education sector show the same weaknesses, and some are worse.

Instead of the cautious approach, there seems to have been very little provision for the unexpected in the last few years: rather like the government itself, King’s seems to have been working on the belief that the uniquely favourable conditions of the past decade were both normal and permanent. As we now know, this was an unfortunate assumption to make.

In four areas specifically, King’s has adopted policies which call into question the quality of its management.

Firstly, there are the ballooning administrative costs. Normally, businesses expand in order to cut the ratio of fixed to variable costs and so become more efficient. Ordinarily you would expect administrative costs to fall in proportion to revenue as an organisation gets bigger.

Such things are carefully watched: every unnecessary pound spent on administration is a pound off profits at the end of the year. Private sector managers have a vested interest in keeping administration under control.

Universities do not, as they make no profit and are in a position to transfer money out of “core functions” (teaching and research) without making themselves vulnerable to more efficient competitors.

The result, at King’s and elsewhere, is that expansion in the last decade has been accompanied by a remarkable drop in administrative efficiency. This suggests weak cost controls, and a failure due to inadequate external sanctions.

As a rule of thumb, administration costs should rise at about half the rate of revenue increase; at King’s it has gone up twice as fast. Had it been more “businesslike,” rather than less, then administration costs in the past decade would have risen to around £22 million from about £16 million, rather than to the actual figure of £33.5 million, and the college would have had a safety net of around £11 million a year.

Secondly, there has been a heavy expansion of debt to fund an ambitious development programme. This is where “strategic vision” should be a reality rather than mere words designed to sound good. Expansion should be cautious, sustainable and do no damage to the overall health of the institution. Otherwise it is not a vision, it is a grandiose delusion.

According to the latest figures analysed by the THES, King’s now has total debts of £202.7 million, the second highest in the country. Relatively speaking it is not the worst: at debt-to-revenue of 41.7% there are a fair number of universities in a more parlous position.

King's is not going bust: it is in a position to transfer resources away from teaching and research to cover debt payments for ever, if it wishes. (A positive note: the debt was secured at fixed interest rates, which will be good if interest rates start to rise next year).

But debt is now higher than cash reserves, is high, and that is not at all good in a period of declining revenue and more uncertainty over government block grants. This is especially as an extra £60 million was taken on in 2008, when the outlines of the recession were already clear and cuts were becoming likely. This was the time to be paying down debt, not adding to it.

Were the development programme an investment in the commercial sense, it might be justifiable: spending more on plant and machinery (if done properly) shows up in lower unit costs, higher profits and increased revenue. It gives an advantage over competitors and so helps a company survive.

This is not the case with much of the King’s programme. While it is no doubt desirable to move into Somerset House, or build a sports centre for students, these do not increase revenue in the slightest.

Some programmes are intended to generate increased revenue by attractig more students or more research income, but this is now problematic: there is going to be less money for research in years to come, and the government has switched from encouraging universities to take on more students to fining those that do.

And if they do not generate extra revenue (the difference between a new corporate headquarters and a new factory) such programmes can only be justified if they cut overheads by more than their cost. Buying and fitting out Somerset House will probably cost up to £40 million; it would have to reduce net running costs (utilities and so on) by a minimum of least £3 million a year to be worth it financially. This is ambitious, to say the least.

Such programmes are more likely to be a burden on the balance sheet, transfer money to debt payments away from core functions, without offering matching efficiency gains. They are precisely the sort of expenditure which should be put on hold at the first sign of trouble, becasue whatever their long-term benefits, in the short term they squeeze the money available for teaching and research.

Had King’s not taken out extra loans in 2008, its debt payments would now be some £2.5 million lower. Had it been cautious and mothballed part of its development programme, permitting it to pay off some debt, they would be lower still.

More careful control over administration and a less expnasionist attitude together, in other words, could have resulted in fixed non-academic costs very much lower than they are at present, enough to cover a substantial portion of the cuts currently demanded by the government.

Of course reducing these areas to a more appropriate size now would be painful and unpleasant: there are now no easy solutions. An administrator or a construction worker losing his job is a sadness, as much as it is when an academic does.

But if they are to be compared to the private sector, they cannot be regarded as job creation schemes as well. The main duty of a private company is to protect its core activities – in this case teaching and research – not to sacrifice these to maintain an administrative structure.

The final elements of good business management are the way it handles personnel, and the way it guards its reputation. Both are intangible assets, but of vital importance in the service sector where there is no physical product to serve as the main point of comparison, and where there is a highly educated workforce, the best of which can move elsewhere.

In both of these areas, the management at King’s has made large and unnecessary errors. It is not always true that threats of strikes are ultimately the result of management failure (although it is frequently: people really do not like walking out of their jobs) but it is clearly the case here.

To present the proposed cuts without a parallel programme to trim unnecessary costs, and without giving reassurance that redundancies were the last resort, and without taking account of fears about academic freedom, was a serious error of judgement.

The management has proceeded in a way which was breath-takingly flat-footed. Either no-one saw the protests coming, which would be bad enough, or they thought they could be brushed aside, which would be worse. The effect has been disaffection within, protest without, and severe damage to reputation.

Add that to the other factors listed above, and the overall picture of management performance is not impressive.

The situation could be recovered, not least by the powers-that-be deciding to act as leaders, rather than masters. But that would take more acumen than they have shown up to now. The shareholders would be restless, if there were any.

-- Iain Pears


  1. Dear Iain,
    I have followed your excellent blog about King's College. Today the UCU Union voted for strike action; the email is below. I will be in touch about a related issue soon.
    Dr Aggrieved

    Dear Colleague,
    Our ballot has returned an overwhelming vote in favour of both strike action and action short of a strike in the fight to save jobs and departments at King’s.
    Over two-thirds of staff (70%) who voted supported strike action and over four-fifths (85%) agreed to action short of a strike. The high turnout - 64% - is a resounding demonstration of the strength of feeling among UCU members at King’s and across the country over savage funding cuts and damaging job losses.
    The nature and timing of industrial action will become much clearer in the next few days. A dispute at the University of Leeds was resolved last week following talks between the union and the university. We hope similar progress can be made at King’s and strike action avoided - but this will require firm guarantees from management that it intends to address all our concerns.
    This result provides compelling proof that senior management at King’s have failed to convince their staff of the need for redundancies. Their cuts programme has generated a worldwide outcry and damaged the reputation of the College. The top-down manner in which senior management have imposed the cuts, by-passing proper channels of consultation, has left them isolated and at odds with staff concerns.
    There is now an urgent need for the Principal and his management team to listen to colleagues, halt the redundancy programme and offer firm guarantees that they will now provide a detailed and comprehensive outline of the College’s financial situation and engage in a constructive, reciprocal dialogue about the future of the College. This dialogue needs to be underpinned by a commitment to avoid compulsory redundancies and a resolve to treat staff with the respect and consideration they are due: this has been absent from the majority of consultations to date.
    We are disappointed that some four weeks ago management decided to break off talks with us. This time could have been used to find a solution to this crisis. We do not want to take industrial action, but if management remain unwilling to address the concerns that their flawed strategy has raised, then will we have no option but to act.
    This crisis has come about because senior management have made redundancies their first, rather than last, resort. We intend to defend our colleagues’ livelihoods and the education of our students: today’s result underlines the resolve of our members to do precisely this.
    As UCU general secretary, Sally Hunt, has said: “Industrial action is always a last resort but the bottom line is that serious job losses will impact massively across King’s and result in a far worse experience for students.
    “By refusing to engage in talks and allowing the crisis to escalate, management at King’s have ensured that their credibility is now also at issue. There is an urgent expectation, across the College and in the wider academic community, for King’s to now start meaningful negotiations with us.”
    We are seeking
    Meaningful consultation.
    A halt to compulsory redundancies.
    A moratorium on the redundancy strategy.
    Redeployment and disputes procedures.
    An improved voluntary leavers scheme.
    Further details will follow of the action we intend to take in the absence of firm guarantees from management on all these issues.

    KCL UCU Executive

  2. Management response:

    Dear Colleagues
    College Response to UCU Strike Action Ballot
    As many of you will know, the UCU recently held a strike action ballot in response to the current restructuring programme at King's. We can confirm that the result of the ballot is that approval for strike action has been secured. We believe that the ballot was premature, as many of the issues raised by the UCU are being addressed in the various consultation exercises that are taking place throughout the College. Furthermore, the College has stated that it is willing to continue to engage in discussions. The fact that the UCU has pressed ahead with the ballot when discussions are ongoing is of real concern and leads us to question the Union's commitment to genuine, constructive dialogue on the issues of most concern to staff.
    The Academic and Financial Sustainability Exercise itself is in response to extremely challenging circumstances within Higher Education; King's is one of many organisations having to review its costs, structure and plans in light of recent announcements on Higher Education funding. We have had clear indication from the Government and the opposition that cuts to higher education funding will continue beyond 2010. If King's is to achieve its goal of being an outstanding university institution comparable with the very best in the world, an objective which we believe both colleagues and students support, then we must take action now. It is our belief that on completion of the restructuring the College will be in a position to build on its academic strengths and be able to deal with any further cuts in funding.
    However, we of course understand the impact that exercises such as these have on the lives of those colleagues affected and our goal is to minimise job losses wherever we can. Where job losses are unavoidable, we are providing support and guidance to those impacted and have extended our Voluntary Leavers Scheme at a School level to ensure staff have a range of options to consider.
    As colleagues consider the results of the ballot, our greatest concern is for our students who will be most impacted by any strike action at a critical time in their studies. I urge staff to give serious consideration to how their participation in strike action may impact on their students. Whatever the outcome in terms of action, we remain committed to ensuring that our students are able to continue with their studies and exams with the least amount of disruption.
    In the event that industrial action is called, I believe it important that staff who may contemplate taking part in industrial action are made aware that the College does not accept partial performance of any kind.
    Our desire is to continue constructive discussions with the UCU. We ask colleagues to consider all options before making a decision on participating in industrial action.
    Rick Trainor
    The College's full Code of Practice on the Management of Industrial action can be found at:

  3. Union Response to Principal
    We'd like to express congratulations and thanks to all of you who were directly involved in the Get The Vote Out Campaign during our ballot. The 64% turnout in our ballot was the third highest in the history of the union and over 10% higher than our biggest national turnout. There has never been a higher vote for action short of a strike.
    That 85% were prepared to take some form of industrial action perhaps underlines the achievement of another group of people who played an important role in our ballot: senior management. Their haste to implement a redundancy policy, and failure to take on board staff concerns, has isolated them and united staff.
    The ball is now in the court of the Principal and his central team. Their view, expressed this morning to staff, is that our ballot was ‘premature’. This is not a view shared by the 205 colleagues facing redundancy, many of whom are having to make difficult decisions about their lives and families. They look to their union to defend their jobs, which are at imminent risk of redundancy. We fail to see how colleagues in PSE, Dentistry, ISS, Equality and Diversity or the other areas where staff are at risk now of losing their jobs are being helped by the fact that ‘many of the issues raised by the UCU are being addressed in the various consultation exercises that are taking place throughout the College’. The majority of consultation periods have come to an end. How is management going to address the fact that staff in Arts and Humanities - where there is now at least, thankfully, an aspiration to avoid compulsory redundancies - are being treated differently to other staff, who have been subjected to unfair and arbitrary treatment?
    The questioning of ‘the Union's commitment to genuine, constructive dialogue on the issues of most concern to staff’ is an insult both to your negotiators and to yourselves. We have been stressing the need for constructive dialogue for over a year. The Principal has met with us just once during that time and has not taken part in any discussion with us for the past seven months. The entire management team has refused to meet and discuss our concerns for over a month.
    We also regret that his pleas to consider the effect of industrial action on students strike a discordant note, given that his cuts programme, if followed through, could result in the loss of up to one million hours of teaching, administration and research for them – a loss to their education that is incomparably greater than any inconvenience resulting from industrial action aimed, let us remember, at halting this destructive process and ensuring that meaningful consultation with staff and students can take place in defence of our members' jobs AND in defence of the quality of education we are able to provide students.
    We are pleased, however, that he has reiterated that management’s ‘desire is to continue constructive discussions with the UCU’. All that remains is for him to give these words meaning. We are urging management to make up valuable time and have agreed that we will meet on Thursday 25 March. We are also hoping that a follow-up meeting will take place on Monday 29 March.
    We remain committed to a negotiated solution to this crisis. It requires two things: Firstly, management have to recognise that they have a responsibility to engage in discussion with staff representatives. Secondly, they need to put forward concrete proposals that address our concerns in a serious and comprehensive way. If these two issues are not taken seriously we will unfortunately be left with no other option but to take industrial action. To underline the seriousness of our intent, we have this morning informed the Principal that we plan to take strike action on Tuesday 30 March 2010. Site meetings have been organised to discuss this.
    Further details of the strike will follow, but please make a note of the date now.We view strike action as a last resort and await a constructive and positive response from the Principal, both in deed and in word.