How can your FE college avoid weak financial management?


With calls from Further Education (FE) leaders for more transparency in the recently reported Education and Skills Funding Agency (ESFA) grading of financial and overall health, and strong sentiments from Peter Lauener’s call for colleges to engage in more effective self-assessment, the need for colleges to incorporate self-assessment into their organisational DNA now seems key to their financial resilience.

Measurement and comparison will always be part of a mature education system, but the more transparent the outcomes are, the better.

FE sector leaders have lambasted the recent discovery (reported in FE Week April 20 2017) of the ESFA secretly monitoring providers’ financial and overall health. But Peter Lauener’s letter to Principals emphasising the need for strong financial management and governance suggests there is still much work to be done in the area of finance.

Given Peter Lauener’s letter and the fairly damning nature of the FE-Week-reported ESFA grading (563 of 1,025 private training providers, colleges and councils with agency contracts are either being watched closely by officials or receiving formal intervention, as of January 2017), then whatever model is being applied by the ESFA, there should be cause for concern. The problem however, is that until the methodology is made more transparent, it is difficult to see how providers will react.

The FE sector is good at sharing information to develop good and best practice, and when it comes to finance that same ethos holds true – over 70% of colleges have engaged in Tribal's benchmarking services, giving us a unique set of data against which colleges can compare their operations in order to plan improvements and react to changing market dynamics. Leaders of those colleges have been better able to perform due diligence on their proposed response to area review recommendations. They have been better informed to make spending decisions and they have been able to model the impact of further changes so their budgeting processes are more robust.

So how could there still be so many providers in weak financial health?

Part of the answer to this is the uncertainty caused by unexpected shifts/tweaks in funding policy – a perennial issue for FE. Part of the answer might be the uncertainty caused by area reviews making it difficult for college leaders to plan and communicate long term strategies.  The other part of the answer is that colleges need to take their benchmarking data and use it as part of a continuous improvement cycle. Benchmarking has the greatest impact when it is part of a culture of continuous self-assessment and performance improvement rather than a one-time event.

Research into business benchmarking has found that world-class organisations share several common characteristics. Self-evaluation is part of the organisational DNA, continuous improvement is simply part of the way an organisation does business, they utilise a continuous performance measurement system – of which benchmarking is an integral part to identify opportunities, quantify benefits and confirm progress.

Peter Lauener supports this in his letter to Principals, pointing out that ineffective self-assessment often “contributes to instances of weak financial management”.

Those colleges already employing benchmarking as a continuous tool are more likely to able to react to Lauener’s comments, improving their performance and financial health by using objective benchmarking data; they also have the tools to model the impact of financial change and refine their strategy accordingly. Those colleges not benchmarking effectively may find it harder to react, and will have to wait to see if the ESFA’s ‘profile and assessment tool’ is made more transparent before they can make any effective comparisons against other providers.