HE Financial Wellbeing: the Big Picture

Tim Wheeler, Vice-Chancellor, University of Chester

What’s the difference between a Vice Chancellor and a shopping trolley?

• • • • You can get more food and drink in a Vice Chancellor!

A shopping trolley has a mind of its own!

Staff and students will try to get a shopping trolley out of the canal! You might even get £1 back from a shopping trolley!

• • • • •

Role of Governors

Critical friends Determine strategic direction and policy

knowing the boundaries between Governance, Leadership and Management whilst

(University Council or Governing Body) Approval of the annual budget/investments (Finance Committee) Ensure probity, due process and accountability (Audit and Risk Management Committee) Ensure continuity of process (Governance)

Governors’ questions and Institutional Response

• • • • • • • • Asking awkward questions Cost reductions Cost proportionality & speed Political influence Marketing realism Multiple scenarios and choice Flexible and creative responses Concentrating on core business

VC’s Role: “Piece of Cake”

Only six issues 1.

Stay in the black 2.

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4.

5.

6.

Recruit students Generate income Pursue excellence Financial health Market and products Research & Consultancy Academic quality “Keep the troops happy” Staff morale “Keep the clients happy” Student satisfaction Limitations of span of control, time, priorities, projects, due process, unexpected surprises, agility, playing to strengths and keeping focus

Hierarchy of Management Performance Concerns

Academic Reputation Academic Quality Staff & Development Learning Infrastructure Sound Finances External Environment

The Last Decade

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Increasing unit of resource

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Substantial increase in research and science budgets

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50% target, 42% actual and growth

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Stable predictable public funding

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Increasing diversification

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Large staff cost increases

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Successful HEIs have been able to grow

From the years of plenty 2000 to 2009

Factors underlying this improving trend included: • The introduction of student top up fees; • An increase in student numbers in Higher Education, including an increase in foreign student numbers; • Returns from financial markets and investments; and • Increasing research grants and other income

Cost pressures

HEI Costs are forecast to increase by a compound annual growth rate of 6.9% which is slightly ahead of the RPI (5.4%) and CPI (5.0%) and a predicted annual growth rate of c.1% in GDP.

For some HEIs the growth in costs may be higher still because of particular cost structures, reduced hypothecated offsets, the impact of future national pay awards and the burden of defined benefit pension obligations.

Differential pressures

The relatively high fixed component of many HEIs’ cost base increases the degree of vulnerability from reductions in forecast income levels.

This will add further financial risk to some HEIs. This point is acknowledged by HEFCE who concluded:

“There are undoubtedly going to be increased pressures on the sector, and the assumptions within the financial forecasts look optimistic, with HEIs’ anticipation of risks unclear. We are planning on the basis that the

number of institutions at risk will increase over the forecast period, unless HEIs can mitigate some of the risks they

are undoubtedly going to face.”

The art of the possible

“Those HEIs that are unable to increase their income will need to consider restructuring their cost base to protect surpluses and cash flow.”

“Now, more than ever, HEI management needs the right reliable information. The likelihood that the HE sector will face some degree of financial challenge over the next few years is increasing. Government encouragement to focus on income growth strategies is only part of the solution to the challenges that lie ahead. HEIs should be asking themselves what lessons can be learned from other sectors during these challenging times and implementing best practice. Now is the time for HEIs to plan for the coming storm.”

For HE- The Challenges

• Public funding - dire • Private income - reduced • Endowments - down • Finance availability?

• Asset sales difficult • Lower staff turn over • Union militancy/IR Climate • Risk averse ossification • Vicarious vulnerability, e.g. Family incomes, HEFCE, NHS, TDA, commercial income, overseas students context

The New Environment

• Honesty and awareness of the size of the challenge • Strong effective leadership • Need to engage with the whole organisation and external stakeholders • Realistic and detailed plans to resolve the situation • Rigorous implementation (programme management arrangements and monitoring) • Financial control and discipline • Understanding the “business” and its dynamics

UoC Process Model Level 0

A Strategic Direction Setting (Vision and Values) B Business Planning and Performance Management C Organisational Development and Change Management D Stakeholder Relationship Management E Promote and Deliver the Student Experience F Applied Research, Consultancy and Commercial Activity G Academic and Enabling R&D Delivery H Human Resources Management I Financial Management J Information and Business Process Management K Physical Resources and Facilities / Services Management L External Fundraising and Sponsorship

UoC Process Model Level 0

Adaptation Governance A Strategic Direction Setting (Vision and Values) B Business Planning and Performance Management C Organisational Development and Change Management D Stakeholder Relationship Management E Promote and Deliver the Student Experience F Applied Research, Consultancy and Commercial Activity G Academic and Enabling R&D Delivery H Human Resources Management I Financial Management J Information and Business Process Management K Physical Resources and Facilities / Services Management L External Fundraising and Sponsorship Marketing Development of Academic and Professional Accreditation

UoC Process Model Level 0 and 1

A1 develop, vision, values and culture A2 understand environment and capability E1 plan and manage course delivery E2 attract, recruit, enrol and induct students E3 create / maintain student records and authenticate student status to outside agencies E4 collect fees and process loans and bursaries E5 deliver teaching and provide academic guidance, learning resources and learner support E6 assess student achievement E7 progress or graduate student E8 provide student pastoral support and lifestyle services E9 collect and respond to student feedback E10 manage student customer relations and alumni activities G1 create or acquire subject knowledge through non-contract research and scholarship G2 conduct pedagogic research and learning technology development G3 design, validate and update educational provision for target markets A3 identify target market segments and develop corporate plan F A4 design and implement organisational structure and governance framework B1 develop business plans / budgets and performance measurement f’wk G Academic and Enabling R&D Delivery J Information and Business Process Management J1 manage the business information and process architecture related information systems and access H statutory and funding body purposes B2 communicate, cascade and implement plans A Strategic Direction Setting (Vision and Values) B Business Planning and Performance Management E Promote and Deliver the Student Experience C Organisational Development and Change Management Applied Research, Consultancy and Commercial Activity A5 develop and review key strategies /policies Human Resources Management K Physical Resources and Facilities / Services Management J2 develop and maintain key business processes and J3 manage corporate information storage, security J4 support user access to business information and provide planning and management information J5 provide data, information and reports for B3 measure and report ongoing performance B4 review performance and manage in-cycle action I Financial Management L D Stakeholder Relationship Management External Fundraising and Sponsorship H1 manage staffing levels and deployment H2 recruit, appraise and develop staff H3 manage performance, reward and recgonition H4 ensure staff welfare and satisfaction H5 manage employee relations C1 conduct quality assessments C2 benchmark performance C3 prioritise and deliver organisational development projects F1 provide a gateway for linking with business, industry and the region F2 bid for / negotiate and deliver applied research and consultancy contracts F3 promote and sell commercial products / activities F4 collect income due on contracts / activities F5 manage customer relations K1 manage and maintain the estate and optimise the space utilisation K2 manage and develop the ICT infrastructure K3 provide catering, sport and recreation facilities / services K4 provide campus business services K5 manage residential property services D1 manage interface with governors D2 manage funding body relationships D3 manage media relations and public affairs D4 manage partnerships and strategic alliances I1 manage revenue and capital budgets, investment, cash flow and solvency I2 process financial and accounting transactions I3 manage procurement and supplier payments I4 pay staff I5 manage inventory and asset register I6 ensure statutory and regulatory financial compliance L1 build relationships with investors, venture capitalists and corporate business sponsors L2 develop sponsorship and donations

UNIVERSITY OF CHESTER PROCESS MAP Strategic direction setting Business planning Marketing Organisational development Governance, Leadership & Management Delivery of Teaching and Learning Client focused Delivery of Research & Business Development HR Finance IT Services and Estates Enabling/ Infra structure

Knowing the unknowns Planning a Development Strategy 2012/2015 Strategic Internal

Review UoC objectives Assess: Achievements Strengths Weaknesses Opportunities Threats SMARTA Objectives Short Term Revise Objectives: Market Share QAA/HEfCE/TDA/NHS Peer Judgement Application Ratio Graduate Employment Cost/FTE Students Quality of Intake Quality of Output

Evaluate Action Options Define Strategic Plan External

Assess: Opportunities Demand & Supply Demographic, Social Political, Economic Cultural Trends RC/TDA/DBIS/OFFA HMG Policies PR Image Long Term University/ Faculty Structure

Tactical

Style of Management Range of Activities Location Innovation/Diversification Timescale/Urgency Resources Staff Number & Quality Support Infrastructure Revenue/Capital budgets Existing Facilities Staff Development Courses & Related Activities Academic Portfolio Research Activities Renewal& Diversification Income Generation Market Research

Strategic Planning Options 2012 – 2015

Ensuring Financial Wellbeing HE environment: Thriving or surviving Key assumptions Purpose and mission KPIs Politics, processes & people Sensitivity and durability Maintaining flexibility

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Institutional Financial Health

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Sound Finances “Chasing rainbows” Absolute surplus of 3%minimum Relative surplus of 5% Cost control Risk positioning, e.g. FRS 17 Accurate and timely information systems Contingency planning Planned capital allocations & maintenance Operational headroom

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Capital employed

Learning infrastructure

– – – Buildings IT Infrastructure Occupancy and utilisation

Residential accommodation & ROI Sweating the assets Surplus land or land banks Evidence of under capitalisation for a knowledge intensive industry

Course Portfolio Evaluation for 2012/2015 Evaluation Subject Area Attractiveness

Strengths Weaknesses Opportunities Threats Strategic Tactical Operational Market Size Market Growth Rate Market Diversity Competitive Structure Cost Structure/TDA/NHS/HEFCE Optimal University Size DBIS/HEfCE Special Area Industrial Sponsorship University Status Concerns Proportion of PT & Mature Students Income Generation: Student Fees

Strategic Policy Matrix University Strengths in the Area

Size of Faculties & Consistency Market share & Market position Number of Applications Quality of Student Intake Quality of Output (Value Added) Graduate Employment Cost per FTE Student HEfCE/QAA/TTA/Ofsted/NMC/HPC Opinion Reputation: Peer Judgement/League Tables Quality and Demographics of Staff Research Record and Funding Capability Creative Works Image: PR Profile University Key Performance Indicators Resources: Availability and Mobility Income Generation/Cost structures FEC

High Medium

Growth Selective Growth or Consolidation Selective Growth or Consolidation Consolidation or Withdrawal & Redeployment Consolidation Demographic Trends Cultural Importance Technological Trends Social Trends Political Trends Economic Trends Government Attitude Employment Prospects “Chester” Factor Warrington opportunity Synergy Potential Planned Withdrawal and Redeployment

Low

Consolidation Planned Withdrawal and Redeployment Planned Withdrawal and Redeployment

Dashboard for the University of Chester

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Sound finances – timely, accessible MIS/FIS Cost control, VFM, Shortage of capital Student recruitment, course pricing and retention Academic success and student employment Diversification away from public funding Reputation and league tables Staff morale, motivation and capacity Political turbulence: HMG, CWAC, TDA & NHS Warrington – becoming a major opportunity

1. Sound finances – timely, accessible MIS/FIS

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Running a surplus: Budget v. Actual Private companies/Trading arms Monthly student numbers Monthly staffing numbers – net reduction Monthly accounts Treasury and Foundation (15 days) Specialist services on VFM, VAT, Payroll, Audit KPMG/Grant Thornton comparators for 2011 Caritas comparators in 2011 Examine Tribal benchmarks in December 2011

2. Cost control, VFM & Shortage of capital

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Every post is zero based and justified Tender processes VFM reviews Capital from revenue surplus 5.

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Affordable capital on long-term 25 years Riverside Campus Student village (alternative models of funding) Office enhancements at Kingsway (Phase 3) 9.

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30 year site development plan £20M development wish list

1.

3. Diversification away from public funding

Reasons: Reduce Dependency Increase Opportunity 2.

Source HEFCE Research Commercial Chester 40% 1% 23% Sector 37% 2% & 16% 16% & 19% UK/EU Fees 28% 34% & 28% Overseas (% above) 6% 18% & 32%

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Information needs for Governors

Annual Accounts & External Auditors commentary Monthly accounts with any variances explained Budget, assumptions and sensitivity analysis Even more so on special projects Evidence of the effectiveness of the University External independent benchmarks Awareness of risks and opportunities Simple core KPIs to contextualise finance metrics that do not require detailed interpretation of data

Key Performance Indicators

Reasons for the growth of Performance Measurement in HE

 Marked changes in the relationships between higher education institutions and their stakeholders: the growth of accountability and pressure to demonstrate value for money  Government agenda to improve the efficiency and reduce the cost base of the public sector  Competitive pressures on institutions - both national and global  The need for institutionally driven performance enhancement in order to survive … and thrive

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The Governing Body/University Council’s role in relation to KPIs

The Governors/Council has “ultimate responsibility” to the University’s funding bodies and various stakeholders Governing bodies are becoming increasingly involved with monitoring institutional performance and development Institutional managers develop and propose strategy and provide data on KPIs … and governing bodies need to approve and monitor such plans and performance measures Governing Council KPIs must be institutionally specific and, where practicable, focus on outputs/outcomes CUC Report identifies possible KPIs in ten areas: institutional sustainability; market position; teaching and learning; research; knowledge transfer; financial health; estates; staff; systems of governance/administration; institutional projects

Key Performance Indicators

The University’s Corporate Plan defines its broad goals

University Corporate Plan

Top level plans underpin the Corporate Plan to set the defined objectives to reach agreed goals Top Level Plans Academic Finance Estates Staff KPIs are the metrics that help measure the performance of each top level plan

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Essentials in developing a KPI framework

Need a simple format to display data in order to facilitate understanding and engagement Need to use benchmarks to add legitimacy to how KPIs are operationally defined, to enable peer group comparisons, and to assist with the identification of best practice at institutional level Ownership  Need accountability for KPI performance  Need to be able to incorporate KPIs into the larger, strategic University context  Need to ensure that KPIs are actionable

What KPI framework does Chester Use

Governing Council Senior Management Team University Executive 17 Institutional Level Key Performance Indicators (8 themed areas) Senior Management Team University Executive Faculty Management Teams Service Management Teams Faculty Level KPIs (categories mirror 17 institutional level KPIs) Support Service KPIs (15 bespoke KPI data series reflecting range of service provision)

The Student Experience

1. Undergraduate application and enrolment trends 2. 3. Student retention rates Student achievement at end of programme 4. 5. Student destination data six months after leaving University Final year students’ overall satisfaction from National Student Survey

Learning and Teaching

6. Final year students’ satisfaction with the quality of teaching from the NSS

Research, Scholarship and Knowledge Enterprise

7. Publicly reported research and knowledge transfer income

Partnerships

8. Data on partnerships which involve the delivery of collaborative University 9. programmes Income generated from partnerships

Diversity and Inclusion

10. Profile of staff data 11. Profile of student data

The University Environment

12. University spend on facilities and infrastructure

Leadership, Organisation and Financial Strategy

13. Staff retention rate / turnover rate 14. 15. 16. Staff absenteeism rates Staff:student ratio Financial Indicators

External Data

17. League table positions over the last three years

KPI traffic lights Red Amber Amber Green

Problematic: serious concerns threaten this area, high risk to the University’s overall performance Mixed: some concerns which could be damaging if not addressed, medium risk Satisfactory: this is broadly on track with minor concerns that need to be addressed

Green

Good: this is on track, low risk Governing Council Away Day 29/04/2020 | Slide

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Institutional level KPIs 2009/2010 1 Undergraduate application and enrolment trends 2 Student retention rates (were 92% now 91%) 7 8 3 4 5 6 Student achievement at end of programme Student destination data six months after leaving the University Final year students’ overall satisfaction with the NSS Final year students’ overall satisfaction with quality of teaching Research and knowledge transfer income Collaborative partnerships 9 10 Partnership income Staff profile AG A AG AG AG G AG AG G G

Governing Council Away Day 29/04/2020 | Slide

39

Institutional level KPIs 2009/2010 11 Student profile 12 University development of facilities and infrastructure 13 Staff turnover rate 14 Staff absenteeism 15 Staff:student ratio 16 Financial performance 17 League table positions G A G G AG G AG

"Annual income twenty pounds, annual expenditure nineteen nineteen six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery." Wilkins Micawber

David Copperfield

, Charles Dickens

Questions