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UK: Run universities like supermarkets: consultant

A senior manager with the London-based strategy and insight consultancy SHM has suggested that universities and other higher education institutions be run like supermarkets. Paul Gillooly presented this provocative idea to an incredulous group of government officials and university leaders at the OECD's Institutional Management in Higher Education general conference in Paris in September.

His ideas were most topical given that the conference had drawn more than 500 experts from 70 countries for wide-ranging discussion on how universities can 'do more with less' in today's cash-strapped environment.

For Gillooly, whose firm has advised a mixed bag of clients ranging from Apple computers to the BBC, the answer is to think less like a deep-pockets public monopoly and more like British retail giant Tesco (also an SHM client).

"Higher education institutions in the United Kingdom are facing significant economic pressure, due to the global financial crisis, and also due to the recent shift in government," Gillooly said, referring to the swingeing budget cuts planned by Britain's new Conservative-Liberal Democrat coalition administration.

"We know there are going to be budget cuts. The real question is, what can institutions do to prepare for the challenges and opportunities posed by the education market?"

SHM's best answer stems from an organisational transformation case study carried out over 2008-09 at North Hertfordshire College, an under-performing further education institution located 50 kilometres north of London.

When college officials asked SHM for advice, the consultancy's answer was simple: "We told them, 'Philosophically, you need to think like a retailer,'" Gillooly said.

SHM brought its full diagnostic toolbox to bear on the college, whose 900 full-time staff provide degree and non-degree courses to 15,000 students.

In the initial discovery phase of the review, SHM-sponsored 'mystery shoppers' called the college to get information on courses for themselves or for children. Other undercover analysts sought to purchase adult continuing education or join executive training programmes.

The mystery shopper results showed the college's performance to be "spotty at best", and pushed SHM to design a new operating model for the college. Its focus? Improving the operational flow between 'customers' (students, and firms that buy training), 'marketing, sales, customer service and corporate staff' (the administration), and the 'supply chain' (faculty).

"Retail sector companies have clear commercial objectives, based on projected sales, revenues, costs and profitability," Gillooly explained. "They know who the customers are and how the supply operates. The implication for the college was that it had to set targets and then allocate resources down through the departments."

Similarly, administrators were told to give high priority to staff who dealt with prospective students or firms seeking adult education services. "Sales, marketing and customer service are key functions in retailing, so administrative staff in direct contact with the customer base had to be treated similar to the teachers," argued Gillooly.

The retail philosophy was even brought to bear on the curriculum, which SHM said should reflect market demand by offering more space in popular courses, and keeping an eye on the type of new classes future students may want.

SHM encouraged the college to install performance-based management, strongly linking employee reviews with pay and incentives that would allow employees to benefit from new revenue sources.

The process was not easy. Another SHM consultant Kate Peden recognised that "there was strong cultural resistance" to the planned reorganisation. "It would be unrealistic to think that there wouldn't be," Peden said.

However, Gillooly said staff members were brought on board through a workshop process designed "to win hearts and minds", and described results as "encouraging" in the first year of a five-year delivery phase.

Indeed, that may be a major understatement: the project has generated £1.2 million in cost savings, representing a huge return on investment. Adult learning courses brought the college £3.8 million of revenue in 2009, 111% growth on the previous year.

Even more importantly, the programme refocused university staff toward "the pursuit of revenue streams that are outside the public purse", Gillooly said.

Despite these figures, a lively question-and-answer period following Gillooly's talk demonstrated sharp resistance to SHM's application of 'retail philosophy' to higher education.

Audience members wanted to know how a not-for-profit and public-supported college could be compared to a private sector commercial venture? Could open admissions policies coexist with financial objectives? And how could the profit motive possibly coexist with higher education's long-standing social objectives, particularly toward economically disenfranchised members of society?

Most of these questions remained unanswered, but Gillooly was unfazed.

He described the combined cost reductions and revenue growth as "reasonable, given the economic reality the college is facing", and was optimistic over the project's long-term prospects.

"Staff have started getting behind the idea. Most people think they do a good job, so they see performance reviews and incentive-based pay as an opportunity for their work to be recognised."
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