There is no silver bullet Scotland’s colleges can use in the efficiency and performance improvement battle, but with careful, informed and accurate pulling of the right levers, the sector can be in good shape to meet the challenging targets being set.
Here we explore some of the prevalent issues with views and commentary from two leading figures in Scotland’s FE sector, Jon Vincent (Principal at Glasgow College) and Jim Metcalfe (Chief Executive at CDN), taken from a webinar they co-hosted with Tribal in December 2018.
Shedding light on the status quo?
Five years into its regionalisation, Scotland’s college sector still faces sizeable challenges to hit Government’s substantial year-on-year efficiency savings. Pay-costs and employer pension contributions are just two factors contributing to the challenge, and non-pay costs too have become key, with utilities being a prime example. But in addition to some of those financial pressures of course, social and demographic shifts are adding to the weight of pressure. School leaver populations have reduced, and those that go to college have constantly increasing and changing needs and expectations of what the sector should be providing. There is also the clear directive from the Scottish government that student attainment levels need to increase substantially right across the sector.
In short, and this should be of no surprise to anyone in the sector, Scotland’s colleges need to lead on their efficiencies; need to ensure they have sufficient insights into how others (in Scotland and the wider UK sector) achieve better student performance results; and they need to have the necessary flexibility and agility to make the required changes to be both financially sustainable going forwards, and to deliver on student attainment expectations.
All this might make for a bleak outlook, but a recent webinar co-hosted by Tribal, Jon Vincent and Jim Metcalfe explored how colleges are shedding light on potential solutions and bringing their expertise and optimism to this challenging landscape.
The efficiency challenge
Jim Metcalfe has observed over the last year alone an increased focus on productivity and efficiency amongst the various networks CDN is involved in, as well as an increased desire to pool resources, skills and knowledge. Obvious examples of colleges looking to drive efficiencies are procurement and digital services, but this is extending to sharing resources like training assets and intellectual property. This apparent ‘freeness’ is certainly welcomed by colleges, and Jon Vincent added a note of urgency to such developments,
“Within the next two to three years I think most colleges, unless they change significantly, will see an increasingly growing gap between income and expenditure.”
To some extent this warning is probably drawn from the fact that the low-hanging fruit in the world of college efficiencies has been largely plundered already; annually colleges have been demonstrating to Government greater levels of improving efficiencies, but going forward, how realistic is it to expect those sorts of strides? So where are these significant changes likely to emanate from?
Service redesign and improvement
Service redesign and improvement is widely viewed to be capable of providing substantial opportunities for savings (50% of those polled on our recent webinar identified this area as being most likely to have the biggest impact on college financial sustainability); merging colleges will have undoubtedly already taken this approach, as have other colleges. Prior to driving hard into service redesign and improvement to reduce cost however, colleges should be absolutely clear on what the organisational systems and processes currently are and be aware of their interdependencies. Only then should they seek to refine and improve the efficiency of them. The business improvement techniques required here are not necessarily prevalent across the UK college sector in general, but it is an area where Scottish colleges should seek to heighten their expertise in order to gain the levels of improvement demanded by a sustainable sector.
Jon Vincent acknowledged the effect of service redesign in Glasgow Clyde College,
“If we were to apply as a sector much greater rigor with business improvement techniques I suspect there could be substantial savings from that. And certainly in my own organization we've achieved large savings from efficiency challenges to some of our operational teams.”
Shared services are closely associated with service redesign. The often-mooted answer to the efficiency question, across the UK college sector shared services have largely fallen short of delivering the anticipated savings. National bargaining, whilst rightly bringing about reassurances around job security and pay conservation in Scotland’s colleges, may also pose a constraint on the effectiveness of shared services initiatives. Jon Vincent also drew attention to a key nuance of the sector, calling for the acknowledgement that members of staff in support or corporate areas, with their passion and commitment,
“help to support the running of colleges with vast amounts of discretionary effort. In a shared service context, where maybe there is a less of a direct link between those functions and individual institutions, could colleges expect them to provide those same levels of discretionary effort in which we rely?”
That said, procurement is a shared services area that has delivered significant savings, and elsewhere colleges are collaborating through joint appointments to give them access to a quality of people and expertise that would not otherwise be affordable. However, there is naturally a point at which colleges find themselves procuring at the most favourable rate, so an understanding of how the college’s procurement compares with other colleges, helps identify where diminishing returns are likely.
Revenue and margin growth.
The scale of commercial opportunity for training and development is significant right across the UK, with evidence indicating that where colleges have been able to find themselves a space in that commercial training market, it can be very lucrative for them. It’s important to firstly understand the sort of financial margins that can be achieved through commercial activity; if the college can find their niche then margins are more likely to deliver at the desired level, but without that niche margins may be much slimmer than initial sometimes ‘starry-eyed’ forecasts. Levels of unmet need and weak competition will certainly stack the deck in colleges’ favour, but leaders should be mindful of how those that currently procure their training from commercial training providers actually perceive colleges as an appropriate alternative. Given positive conditions, colleges should then ask the question, “What kind of college structure is needed to support commercialisation?” Again, it comes back to really understanding operations and the effect of pulling any one lever. What is the effect on our core operations of pulling the commercialisation lever; is there a knock-on effect for our students, for our locality?
Sweating the assets
An alternative commercial strategy is for colleges to better sweat their considerable assets. Most colleges will rent their rooms out; some will provide business services to charities and third sector organisations; some will undertake research. Really sweating those assets requires detailed resource analysis and sometimes bold decisions, but the rewards are clearly there, and most importantly they are cash rewards, rather than time rewards. At the same time, colleges might be considering how they manage older parts of the estate to ensure they don't become a huge financial drag and counter their other efforts.
And elsewhere, what of the opportunities presented by the thousands of young people and adults in colleges where other companies might wish to make contact with them?
What is apparent in all of this is the need for a delicate balancing act. Scottish colleges are running some of the highest student satisfaction rates the sector has ever seen, and earlier this year SDS reported that secondary school student preparedness to engage with vocational pathways in their educational futures is getting higher and higher as the apprenticeship system embeds itself in the school system. So clearly some things are working well. Jim’s own sense of the sector is that,
“There is not a vast procurement inefficiency that can be quickly addressed to resolve a funding gap. And commercialization is not some magical panacea where an additional 10-20% revenue can be conjoured into a college with no effect on its core delivery. What we mustn't do is to take measures in these coming months and years that start to reduce student satisfaction and the quality of what we're delivering for our community.”
Both Jim and Jon called for the sector to be quicker to learn from examples from other colleges across the UK and then implement them more quickly. As a relatively small college system, it should be possible to increase the speed of transfer of good ideas around that system.
For our own part, Tribal has been helping the sector collate and share comparable data around financial performance and resource management for 20 years. Our analysis has been trusted by the likes of Jon Vincent and over 80% of UK colleges to inform their strategic decision making, in order to lead to better performing colleges. When it comes to understanding the effects of delicately pulling the levers, our is the most comprehensive dataset in the sector.
To see just how colleges use benchmarking techniques to tackle the efficiency and performance challenges, access the webinar recording below.