Seven global key challenges faced by universities and their leadership teams
Nelson Mandela once said ‘education is the only weapon that can change the world’. Despite an assassination attempt, Malala Yousafzai bravely defied the Taliban, asserting the right of girls to an education and more broadly, the importance of an education for all. Today governments, business, communities and individuals recognise the critical role education plays in supporting political and social cohesion, economic growth and productivity, as well as personal development and fulfilment.
At the same time, the global economic and geopolitical landscape is changing. In many countries, including the United States of America, the cost of providing higher education is increasing faster than inflation, student debt is reaching record and unsustainable levels and competition from new providers, locally and internationally, is putting new pressures on university staff and finances. In the decade prior to FY14, prices for undergraduate tuition and board at public institutions in the USA rose 34%, after adjustment for inflation. Consequently, the current total volume of outstanding student loan debt in the USA is estimated as being over $1.2 trillion, whilst the total volume of student loan debt in default is estimated at $110 billion. More worryingly, 80% of Americans do not believe that the typical college education is worth its cost.
In other regions, such as Asia and the Middle East, robust economies and a growing need to address political tensions is leading to strong investment in the sector. Qatar is a strong example of this. In 2012, Sheikh Abdulla bin Ali Al-Thani described Qatar’s investment in higher education as crucial to ensuring that Qatar was left with a viable, advanced economy once their natural resources were depleted. He notes that the events of the Arab Spring highlighted the dissatisfaction of a young population, with rising unemployment and a lack of opportunities for young graduates.
This is coupled with an ambition to increase the number of world class institutions, identified as those that local students select as their first option, that obtain a disproportionate share of the lucrative international student market and that generate world leading research programmes and enterprise. For example, China has poured an estimated US$33 billion into its higher education institutions to improve their research performance and hence global ranking. The World Class 2.0 program, launched in 2015, aims to have a number of its universities in the top 15 in global rankings by 2030.
Deloitte’s higher education practice works across the world’s major economies. We support government to formulate and implement policy and we work with universities and business schools to develop their strategies, redefine their operating models and to implement major technology transformation. This transforms the student experience by reframing how universities conduct research, undertake teaching and learning, and provide student support. We are able to draw on the firm’s global knowledge, applying lessons learned from other higher education systems to the local context, to derive deep insight for our clients.
We have worked with governments across the UK, Canada, Australia and the USA, advising on how to fund higher education, including analysing the likely impact of a policy shift on sector sustainability. We have advised governments in the UK and the USA on how to widen participation and employability and in the Middle East we have worked with local universities to change the attitudes of certain cohorts to higher education.
Our global centres of excellence focus on the student experience, technology transformation, strategy and policy reform, capital programmes, tax and audit services. Each centre brings extensive expertise, unique tools and methods, deep client connections and other resources to enable us to better serve our university clients, wherever they are.
Our global research highlights seven key challenges faced by universities and their leadership teams.
- Rising student expectations: with an increasingly competitive graduate jobs market and the rising cost of higher education, discerning customer behaviour is causing universities to rethink the whole student journey. UK government initiatives, such as the introduction of the Longitudinal Education Outcomes (LEO) data which directly links employment and earnings outcomes of graduates with their undergraduate degree and the higher education institution, is likely to cement a growing sense of student entitlement. Students will be able to directly quantify the benefits derived or lost through the choice of their degree and provider. Business models are being rethought and new digital models of engagement are being used to drive improved customer-centricity.
- Technology and digital innovation the norm: digital platforms are being used to innovate the teaching and learning experience, revolutionise research through the use of big data and artificial intelligence and to drive improved business operations against performance objectives. Increasingly, universities are investing in Student Information Systems (SIS) and Enterprise Resource Planning (ERP) tools and using analytics to support robust and data-driven decision making. Customer Relationship Management (CRM) tools are being used to improve how the back office supports university constituents.
- Operating in a global context: increasing student mobility and an expanding higher education marketplace means that universities should establish a compelling competitive advantage that resonates beyond their local context. Competition comes in many forms, from policies on immigration, currency changes and geopolitical stability, to changing how and when people want to learn. Universities with international connections, that can offer their students and staff the opportunity to work and study abroad, are increasingly being seen as more attractive destinations, offering additional value add.
- Linking estates strategy and the student: for most universities, the estate is their most significant cost, alongside staff. In FY15, universities in the UK spent approximately 13% on average of academic income on maintenance and capex. Generally, the university estate has evolved over time and hence, may not align with the university’s overall vision. Old buildings may not obviously lend themselves to modern teaching and learning, facilities may not make students feel engaged, nor may they encourage collaboration. What a university’s estate says about its ethos is increasingly being recognised as key to defining the university’s distinct offering. Rather than being a cost, the estate should be seen as an asset that can offer a distinct value proposition, changing change culture and driving up quality.
- Attracting and retaining the best talent: the most successful universities recognise the importance of a rich and diverse workforce. This should bring together academics with the right disciplines and expertise, to create teams that will win more than their fair share of research income and attract the best junior academics and students. This is critical for any university with ambitions to be in the top 100 of global rankings.
Increasingly, university boards are trying to identify the right strategies to reward staff. Drivers of staff motivation are often unclear. Reward should not always be linked to salary, as this may not be the most effective method of driving desired behaviour, nor may the university be able to offer salaries greater than the market average. Rather, alternatives such as creating an environment in which academics can develop their practice and build their reputation and providing appropriate facilities that support research, publication and commercialisation of intellectual property, should be explored.
- Rising costs and shifting funding: the cost of running a Higher Education Institution is frequently increasing faster than the rate of inflation. This is at a time when government expenditure is under pressure, as repercussions from the financial crisis continue to impact public spending. Consequently, the student is increasingly responsible for paying for their education. How to ensure that higher education remains affordable, does not create a massive student debt, nor precludes young people from all socio-economic backgrounds from participating in education, remains a challenge for governments, universities, students and their families.
Life-long learning will continue to grow in importance, as technological change and a rising life expectancy require the workforce to adapt and to remain productive for longer. This will place further pressure on government funding. Increasingly, technology could be used to reduce the cost of delivery and to grow market reach. For example, the Georgia Institute of Technology has teamed up with Udacity and AT&T to offer the first online Master of Science in Computer Science, delivered exclusively through the "massive online" format and for a significantly reduced cost. In addition, new alternative pathways into the world of work are also likely to increase in popularity i.e. through apprenticeships funded by the employer.
- Making research sustainable: governments are progressively scrutinising what research is being funded and how it is being funded. The appropriate balance of pure and applied research and how research outputs should be shared and exploited is also being debated. Increasingly, government research programmes aim to support innovation, drive economic growth and solve the world’s wicked issues of climate change, aging populations, disease, energy supply and security. This is driving a need for closer collaboration and strengthened partnerships between research institutions and business. Across a series of indicators that aim to show which research institutions collaborate most strongly with industry i.e. the ratio of papers co-authored with industry, the proportion of papers cited by patents, the quantity of research income from industry and the proportion of research income from industry, nine out of the top 10 institutions were from the USA or China.
The higher education industry is changing rapidly and the status quo is being challenged. Deloitte’s research has identified seven key challenges facing the sector, ranging from increasing consumer expectations to workforce attraction and retention. More than ever, higher education institutions must think globally and develop a strong student and wider stakeholder value proposition which differentiates them from their competition. This will dramatically impact how universities operate into the medium and longer term.
iBetween 2003-04 and 2013-14, prices for undergraduate tuition, fees, room, and board at private non-profit institutions rose 25%, after adjustment for inflation.
Source: U.S. Department of Education, National Center for Education Statistics (2016). Digest of Education Statistics, 2014 (NCES 2016-006), Table 330.10
The total volume of outstanding student loan debt in the USA is estimated as being over $1.2 trillion. The number of borrowers with a student loan debts is estimated at over 40 million people. The total volume of student loan debt in default is $110 billion.
Source: Consumer Financial Protection Bureau, Factsheet - Borrower Experiences with Student Debt Services, May 2015
iiDovey Fishman, T. & Sledge, L., Reimagining higher education, Deloitte University Press, May 2014
iiiCoughlan, S., Why is Qatar investing so much in education? BBC News, 8 June 2012
ivSharma, Y., Hubs to take elite universities into world-class club, University World News, Iss. 386, 16 October 2015
vHESA are also looking to introduce a new Distance of Leavers of Higher Education (DLHE) survey. This will capture outcomes data at the institutional level, further enabling students to quantify the benefits of various educational options.
viSource: Association of University Directors of Estates, AUDE Estates Management Report 2016: Summary, insights and analysis of the 2014/15 academic year, 2016
viiGeorgia Institute of Technology, Online Master of Science in Computer Science, http://www.omscs.gatech.edu/home
viiiBothwell, E., Which universities are the most innovative?, Times Higher Education, August 2015