Challenges for higher education - an Australian perspective

Sino-Foreign Rector & Entrepreneur Forum
South China University of Technology
Guangzhou PRC
16 November 2002

1. Introduction

It is a very great honour to be able to take part in the 50th birthday celebrations of the South China University of Technology. Allow me to congratulate the University on its achievements and progress. Let me also congratulate you on using this occasion to look forward. We all have a responsibility and an opportunity to help to define the future.

My chief experience is, of course, Australian but I will start with a basic assumption which seems, from my travels, to apply throughout the world. Everywhere I see a desire to expand access to higher education accompanied by a need to set limits on government expenditure. This creates an inevitable pressure for universities to be more entrepreneurial and, personally, I welcome that trend. Many people, however, focus on the danger that this might threaten a proper attention to our core activities of research and teaching.

The true art, as in most things, is to achieve a working balance. Let me describe some strategic issues from an Australian perspective.

2. Role of government

By international standards Australian universities are relatively deregulated. At present 27% of the annual budget of the University of Sydney comes from direct national government operating grant, although significant additional funds are also sourced from government through competitive research grants. We are able to determine our own academic programs and to decide on our own standards. We can enter into business relationships to develop intellectual property and can offer programs to overseas students, setting our own fees.

I have observed that in neighbouring countries such as Thailand, Korea and Japan there is more central government planning but that the governments of these nations are moving to devolve more responsibility to the universities.

At present there is a major review of higher education in Australia and it appears that the present national centre-right government favours increasing the autonomy of universities. Such moves are opposed by the centre-left Labor Party which, although it is in opposition at the national level, controls the state governments. Because the governance of universities is within state government legislation this creates political tension.

In the course of the Review, the Australian Vice-Chancellors' Committee and my own University have both argued (of course) for more government investment but also for several measures which would encourage self-help. These include taxation changes to assist the development of university infrastructure and to reward benefactors, the capacity for individual universities to set additional fees for Australian undergraduates and a more flexible process for negotiating the size and mix of the student load for which we receive our operating grant.

I am sure that most of you are aware that Australian students are able to defer payment of the present government controlled fees so that these are recovered through tax on subsequent earnings. We have argued that this system should be applied to any additional fees and that the threshold earning level which triggers repayment should be raised.

I have already referred to the provision of competitive research grants by government. This system works well for my university (but is under political attack by those who argue for equalization across all universities). Nevertheless, the emphasis on individual project grants which do not carry oncosts provides a management challenge. It is a paradox that successful research universities must find resources from their other activities in order to provide the necessary additional financial support to enable winning projects to proceed.

The biggest systemic problem in Australian research is the low investment by business in R&D. For example government R&D amounts to almost the same percentage of Gross Domestic Product as in Japan but business R&D is only one-third of the corresponding figure for Japan.

Naturally, I argue that the Australian government should use the universities to help improve business R&D performance and I am quite happy if incentives go direct to industry, provided these are used to develop strategic partnerships with universities.

Having given a brief description of the present role of government in higher education in Australia, let me attempt to set out what I consider to be desirable.

It is my belief that the government should provide anchor funding for the university system, but also provide a climate in which each institution will succeed according to its own efforts. Of course, there must be clear accountability for the expenditure of public funds, but the major role of government is to ensure that each university has a robust governance structure in place - including government appointees to the ruling board. Nevertheless, it has to be recognized that part of the value of a university to society is its function as an independent critic. Moreover a university must have the capacity to engage in strategic planning to provide for future contingencies which are not immediate priorities.

Naturally universities have great potential to contribute to economic growth. It is proper for government to set priorities for research areas and for the training of personnel who will benefit industry. In an ideal environment this will be achieved by schemes which provide extra funding beyond the base anchor funds and which encourage the active participation of the business sector.

There is a fashion to demand matching funds from the universities for such initiatives. This has the good aspect of measuring the strength of our commitment but carries the danger of reducing the discretionary resources which give us the ability to engage in effective strategic planning.

I often use the metaphor of "creating a garden of biodiversity" when I describe the strategic challenge of research management which must balance pure research and applied, immediate needs and long-term infrastructure capacity. We must prepare for the next generation of research as well as deliver results which can be used now.

3. Role of university management

Sydney University has 40,000 students and 5,500 staff. By any standards this is a large business enterprise. The management of that enterprise is made more complex by the variety of activities in which we engage and the range of stakeholders. That is why it is so important to keep a firm focus on our core work of research and teaching.

Governance is through the Senate, which has 23 members including elected students, staff and graduates, elected politicians from the State parliament and State government appointees. There is a sense in which this body combines some of the functions of a company board with those of a parliamentary assembly.

It is clearly important that Senate considers major policy issues and has an effective system for delegating management tasks with well-defined lines of accountability. Inevitably, however, this structure slows decision making procedures for engagement in entrepreneurial activities. The challenge for management is to retain the confidence of Senate and the academic community while engaging in vigorous efforts to increase our resource base.

I believe that this requires that the senior management team must provide a combination of academic expertise and business skills. Ideally each member of the team should have both attributes in some measure, although the balance can vary from person to person. We have, for example, recently recruited a Chief Financial Officer and in our search looked for (and found) someone with proven private sector accomplishments and technical expertise but who exhibits sensitive understanding of the academic environment. We are currently seeking two Deputy Vice-Chancellors where a pre-requisite is serious research achievement in some academic discipline coupled with a capacity for effective management of both people and resources.

There is a widespread belief that there is a tradition in universities of community self-governance effected through a structure of committees. If this is interpreted to mean that every decision should be made by fully representative committees, then I believe that it is an obsolete notion which will serve us badly. If, on the other hand, it is interpreted to mean that all important decisions and changes arise from a broad process of consultation, then I believe it is good practice and that we must show the patience to manage in this way.

Although some members of our governing board with business backgrounds and many of the University's industrial partners may feel, from time to time, that our procedures are too complex and slow, there is an advantage in being constantly reminded that our 'business' decisions must incorporate both commercial and academic considerations. Let me give some examples.

Areas of the University which can generate income by offering programs which generate revenue, e.g. business, IT, must be provided with incentives to develop such courses and to recruit fee-paying students. On the other hand we must be prepared to use some of the income from these areas to subsidise other teaching activities. We are currently negotiating the appointment of a professor whose specialty is classical Greek drama. While that person will be expected to engage in outreach activity, we cannot have the same fund-raising expectations as from a chair of international finance.

When we engage in commercialization of our research IP with industrial partners we intend to produce an income stream and must be business-like in our dealings. At the same time, profit is not the sole motivation of the University. Consideration of future research and research-training opportunities may influence how we would prefer a spin-off company to develop.

Consulting work commissioned by companies or other organisations can generate income both for the institution and for the individual staff member. It is desirable that this be linked with research priorities within the university but the work itself must be delivered professionally, on time and to commercial standards. We must also charge full costs, taking account of infrastructure used. In some cases employees might be tempted by the prospect of personal financial benefit although there is a net cost to the institution. In other cases there may be a temptation to engage, without proper cost recovery, in activity which brings prestige to the university or assists some worthy cause. Some government agencies, far from providing oncosts, invite universities to commit to projects where only 75% of direct expenditure will be reimbursed and no infrastructure support will be given.

It is time to summarise what I see as the main challenges for university management. My basic theme is that financial pressures and ever-changing external constraints oblige us to operate with business-like efficiency but that this behaviour must be adapted to an academic culture. We lose our reason for existence if income generation is allowed to displace our primary purpose of nurturing a thriving research environment which respects independence of thought and encourages high quality teaching and learning to flourish.

On the other hand, there is no point in engaging in elaborate strategic planning which is based solely on what we would wish to happen in an ideal setting. It is necessary to adapt our aspirations to what is achievable and to build in a capacity for opportunistic adaptability as external circumstances change.

The demands are great because we must be simultaneously romantic and practical, prudent and decisive, have our heads in the clouds and our feet on the ground. I wish the South China University of Technology good luck for the next 50 years!