Improving financial performance and mitigating risk in post-secondary restructures
Post-secondary education systems regularly change as a result of new government policy, or the introduction of initiatives to tackle under-performance in student outcomes or financial terms.
For example, England’s post-secondary area reviews effectively forced a consolidation of the sector’s institutions in order to bring about efficiencies and improve student outcomes. Following regional reviews and recommendations, some institutions entered merger arrangements voluntarily, others as part of a mandatory process, whereas some institutions put forward business cases to continue to ‘go it alone’. One of the key problems faced by 'lead' institutions in merger processes was how to perform due diligence across two or more entities that invariably had different structures, cultures and working practices. The process demanded the data-sets of the merging entities to be compared side by side in order to establish the shape of the new entity and identify efficiency savings. It also gave the governing boards an accurate set of evidence-based KPIs and suggested ‘distance travelled’ metrics to give confidence in the long-term strategy as well as the means to monitor management’s delivery of the strategy.
Those institutions wishing to ‘go it alone’ used their benchmarking analysis to prove their financial sustainability and inform the business case presented to governing and government bodies.
Institutions that have decided to merge face certain challenges pre and post-merger:
- Pre-merger - accurate financial data modelling is required as part of the due diligence process.
- Post-merger - accurate benchmarking data helps to identify where savings might and also where investment should be targeted to improve student performance.
The “new”, larger institution should benefit from economies of scale, so benchmarking the “new” larger institution against other large institutions helps to show where economies of scale might be realised without negatively impacting student performance. Post-merger, the “new” entity needs regularly refreshed benchmarking data to monitor the progress of the restructuring process and demonstrate whether expected savings have been made.
“The most recent exercise delivered by Tribal’s FE Benchmarking team provided the Group with valuable insight into how the merged organisation compared to other large providers across a wide-range of measures. As individual colleges had previously engaged with the team prior to merger, the availability of historical data proved to be very useful as both the impact of strategic decisions driven by the merger, and the implications of funding outcomes, could easily be measured with a focus on value for money and quality. Of most interest to us was the ability to review curriculum performance at departmental level across the Group; offering insight into performance compared against similar departments in other Colleges thereby raising an awareness within and promoting accountability amongst our academic leads.”
Nirmal Borkhataria, Chief Operating Officer at Capital City College, England
In New Zealand, although recent mergers were largely voluntary, the same benchmarking mechanism has supported management and sector leaders alike in establishing what new entities (such as Ara Institute of Canterbury and Toi Ohomai Institute of Technology) could look like, in terms of:
- resource profiles
- productivity levels
- group sizes
- staff utilization rates
- pay and non-pay costs, and
- what form early indicators of performance should take
The current ongoing plans for Institutes of Technology & Polytechnic (ITP) sector reform in New Zealand are targeted at ensuring that ITPs remain sustainable and effective in delivering high quality vocational education and training. In the current climate, following a decade of a significant decline in student numbers (domestic enrolments have dropped by almost a third in this period), organisations have used benchmarking data to support ‘right sizing’ exercises.
Meanwhile, Australia’s approach to sector reform continues to develop as New South Wales implements its OneTAFE plan, effectively creating a single entity from the state’s existing 10 TAFE institutes. This, along with relatively recent reform in other states, creates a compelling case to compare activities, costs and outcomes against other comparable organisations; to understand where performance improvements are required, and to provide the evidence that supports strategic decisions.
Despite the differences in political forces at play, the structure of the post-secondary sector, and the funding mechanisms employed, one constant we can observe in almost every educational system in every country is the need to achieve continuous improvement with limited funds and what feels like ever decreasing finite resources. What differs significantly, is the way in which post-secondary institutions invest, measure and approach continuous improvement (from a discrete ‘one-off’ initiative to a ‘way of business’). This makes it challenging - but by no means impossible - to benchmark performance and identify best practices that would benefit education providers, wherever they are in the world.
Download the white paper to read more about how globally accepted and proven benchmarking techniques are being used to tackle today’s post-secondary education challenges, including:
- Improved effectiveness and efficiency of delivery
- Higher level of governance through greater transparency and accountability for the expenditure of public funds.
- A holistic view of individual institution's costs and performance relative to other providers
- Better, more objective plans for business and quality improvement
- Greater strategic decision-making and increased commercial capability.