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Setting university finances on the optimum trajectory post-pandemic – how to strike the right balance of financial strategies?

UK HE is facing a range of financial challenges, like never before. Changes to policy and university funding are only part of the problem. Even before the outbreak of Covid-19, a record number of 114 universities were reported to be in deficit. The recent release of financial data for 2019-2020 has also provided some early indicators of how the pandemic is affecting the sector, with a significant rise in costly, short-term borrowing and the sharp decline of residences, catering and conferencing making headline news. For the first time, even universities with large reserves that have embraced commercial ways of thinking have felt the loss of income from students and ‘associated activities’.

Three logical strategies for building financial resilience in the post-pandemic world are clear – operational efficiency, profitably scaling-up, and income diversification. Balancing these approaches to ensure you take the right action is key to building a robust strategy for your institution – and this requires an external perspective, that gives sector context to your financial performance. Understanding your cost per student or per pound of income, and how that compares to other universities, can provide vital objectivity.

It’s why more and more universities are engaging in financial benchmarking analysis to aid decision-making and help to shape strategy to ensure the institution is making the most of all relevant financial opportunities available to it.

"I'm really keen on benchmarking because when you do an internal assessment - let's say, marketing costs this year against marketing last year - internal relatives are interesting, but they only get me so far; they're not even half the story. What I need is that external perspective: our university, wherever possible, compared against similar institutions. [Benchmarking also highlights] if there is a big shift in the sector in terms of diversification of income and if we're not doing that, well, what tricks are we missing? Why is everybody else doing something and we're not?"

Ben Browne, was Chief Operating Officer, De Montfort University at the time of interview

Read Ben's comments in full

By digging into the detail of the university structure, benchmarking reveals operational improvement opportunities, and highlights options for scaling profitable activities – helping you make the most of your institution’s resources.

"If you've got limited resources, which most of us have, benchmarking tells you that you’ve got an issue or an opportunity, and where to look. Particularly in a £400M university there's a lot of nooks and crannies where problems can arise... For example, benchmarking tells you you've got a problem in this department, which is only £20M. So, suddenly you don't have to look across the whole £400M university; you can just focus on that particular area and find out what the problem is there. And that's why I think it's incredibly useful."

Jeremy Lindley, Finance Director, University of York

Watch Jeremy's 5 minute video

However, it’s widely considered that a revenue diversification strategy provides a significant opportunity for sustainable income growth – whether that’s technology-enabled diversification, or the more traditional commercialisation of physical assets. What financial benchmarking does here is shine a light on how other, similar sized universities drive revenues through associated activities such as residences and catering, crèche and conference facilities, hotels, cinemas, and science parks etc. The benchmarking data paints a picture of what diversification of income could look like, and the profit margins other institutions are achieving: the ‘art of the possible’ for Finance Directors.

"We don't see it [benchmarking] as a cost-cutting exercise… it's more strategic than that. The good, rich data source has really started a debate. It provides robust, objective management information to sit alongside the changes and strategic and structural improvements we want to make at University of Derby. And because it’s not a theoretical exercise, it seems to have gained a lot of traction across the organization, and barely a meeting goes past without somebody referring to the Tribal benchmarking work and findings. So, that's a good sign."

Craig Jones, Director of Finance, University of Derby

Watch Craig’s 5 minute interview

So whilst benchmarking, done right, will almost certainly identify opportunities for savings - do you, for example, need to negotiate your contract with your university’s telco provider; or is a particular department over-resourced based on what others are spending, relative to size – real value can also be found in helping to decide where to make strategic investments for growth, by modelling scenarios and understanding the ‘what if’ analyses’ impact to the institution’s financial health.

Some universities that also use our i-graduate services are now able to layer their benchmarking analysis with student satisfaction levels to holistically consider costs, income, and quality of provision to further inform their improvement strategy and action planning. Context, is of course, vitally important when considering your benchmarking data. The analysis might reveal your library costs are comparatively high, but if that’s what attracts students, then it’s money well spent. Conversely, benchmarking can also reveal where you are particularly efficient, which may pose the question as to whether your services are poorer for it and it warrants investment? Tribal fully believes in putting your benchmarked data outputs into context, and it forms a big part of the final presentation we make to your team.

"Ultimately, benchmarking can't be the sole determination of decision-making, but it is one piece of vital information that will go forward as part of the decision-making process, and it gives me an edge. I think it helps conversations - conversations with individual directors, many of which report to me in my COO role; or conversations with senior academics, when there is that fight for resources. We can talk about relatives - we can talk about them compared to benchmark. We're having more informed, honest conversations. Rather than me debating a position from what I think, with little foundation of evidence, at least this way, we are having informed conversations, and more informed decision-making processes. It’s why we benchmark regularly."

Ben Browne, was Chief Operating Officer, De Montfort University at the time of interview

If you’re ready to benchmark your university and inform the blend of strategies you deploy to improve your financial health - you’ll need a set of accounts (full, or part actual/part forecast) and a staff list. It’s as simple as that. You’ll have a preliminary meeting with our benchmarking team, we’ll verify your data, and then go through it with a fine toothcomb and apply income and costs to our university structure model, which measures and compares over a thousand data points. This ensures our analysis is robust and consistent. And you have a detailed, accurate data set on which to base your decisions and ensure the university’s finances are on an optimum trajectory.

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