Opinion- 05 June 2012

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Tony Guttmann*-- Busted: The Broken Business Model of Australian Universities


Professor Tony Guttmann


pdf file-available from Australasian Science


Australia’s universities, according to a recent piece in The Economist, are ‘decent and dependable, but seldom excellent’.

What is required to foster excellence in our universities? One common answer to this question would be funding, and the assumed realm of battle would be public funding: universities facing off against parsimonious government bean-counters; inadequate resourcing called on to explain lack of excellence in Australian tertiary standing.

Contrary to this straightforward narrative of external constraint, it is easy to identify a crippling internal problem, requiring internal solutions in order to rectify the current imbalance in university funding. I speak here of the dominant business model adopted by Go8 universities, and many others besides.

Let me take a step back. The widely recognised core functions of a university are: to provide education; to conduct research; and to engage with the community, government and business, providing expertise and informed comment. The reputation of a university is based almost entirely on its success in achieving these three goals.

It seems self-evident, then, that a university’s first priority should be to support and enhance these activities, providing sufficient resources for the employees who carry them out: academics and research staff. This, as almost anyone who works in a modern tertiary institution will tell you, is far from what happens in practice.

Speaking here about the larger Go8 universities, with budgets around the $1 billion mark: administrative, infrastructure and support costs are taken ‘off the top’ of this money, and drain about two-thirds of it. The remaining third is then made available for servicing the core functions of the university: in effect, for Deans to fight over in a zero-sum game.

It hardly seems necessary to point out the incongruity of this situation. The idea of spending only one third of an organisation’s resources in conducting its core activities – and, furthermore, of even that amount being contingent on the needs of support activities (effectively, the ‘leftovers’) – would be unheard-of in any private sector business context. And yet this nonsensical allocation process has been entirely normalised in the Australian tertiary sector (as well as in many overseas institutions, but it is our own patch we should be focusing on).

Under the present allocation of resources, many departments – particularly those that don’t reliably attract full-fee paying or overseas students – are compelled to slash staff; and even those departments that do benefit from full-fee enrolments are badly stretched in terms of workload and student capacity. My own department in a leading Go8 university is typical. In the past 10 years, student:staff ratios have increased from 14:1 to 24:1. Obviously this blowout must seriously affect the educational experiences of the students, as well as pushing staff to their limits. And despite the blowout, the Department’s budget allocation currently fails to meet the salary bill, let alone covering any other expenses. In the same decade, meanwhile, there has been a well-documented increase in the administrative burden on academic staff. Additionally, there is escalating pressure to publish highly ranked research, to increase the number of higher degree students supervised and to attract more external grant funding.

This untenable situation prompts the question: what would be a more reasonable process for allocating resources, and a more justifiable distribution? Firstly, it seems self-evident that academic departments should have the priority call on resources, with departments’ immediate administrative support bases – usually faculty or school offices – next in line, and the remainder allocated to central administration.

Secondly, on the issue of proportional allocation: the current distribution, whereby two-thirds of a university’s budget goes into administrative and support services, should be changed to a ratio of 50:50.

I am not claiming that two-thirds of university budgets are presently wasted –\ many fine buildings and innovative programs are created under the current funding allocation. But a university is not judged primarily on the opulence of its student lounges or the technical innovations on display in its lecture theatres. It is judged on the quality of teaching, the research excellence of academic staff, and the quality and quantity of interaction with stakeholders in the community, government and business. Allocating 50% of university resources to academic departments would enable Australian universities to excel in these defining activities.

Now is the right time to confront the necessity for change. The funding situation seems to be getting worse rather than better – I am often reminded of the ‘Yes Minister’ episode in which staffers defend the generous funding of a hospital without patients. However, if we make the necessary shifts now, we will be in a unique position to build academic departments that are truly world class, hiring teaching and research staff of a calibre not previously available. With the fallout from the GFC, the academic job market is appalling in both Europe and North America, and not much better in Asia or South America. Universities that position themselves to enable academic appointments have been overwhelmed by the quality of applicants.

If there is any substance behind the rhetoric we hear from Vice Chancellors about building world-class institutions, now is the time for decisive action. A reasonable re-allocation of resources to the academic coalface is the strategy that will make our universities not merely decent and dependable, but excellent.


*Tony Guttmann, FAA is Professor in the Department of Mathematics and Statistics at The University of Melbourne and Director of the ARC Centre of Excellence for Mathematics and Statistics of Complex Systems.