Universities Are Not… Like Businesses

With the previous posts, I may not have proved, but I’ve shown why I think, that the modern UK university is not really a business. It doesn’t offer a product to consumers, or rather it does, but it doesn’t charge market rate for it and it’s not the end consumers who pay for the product; furthermore, the product isn’t measurable or quantifiable like a normal business’s product. Given all this, therefore, it’s really quite peculiar that the direction of travel over the last few decades, probably, but accelerating fast since the introduction of tuition fees in 2005 has been to try and either turn them into, or at least run them like, businesses.1

This tends to be described pejoratively as ‘marketisation‘ or ‘managerialism‘, and it’s worth being just a bit more explicit. The UK’s universities indubitably do now operate in a market: tuition fees are around half their income, those fees come from students (even if they don’t usually quite pay for those students – but apparently economies of scale still make it better to have more students than fewer) and there are only a finite number of students entering the system, for whom therefore universities compete. But it’s a closed market: the fees universities can charge are limited, sometimes the places they are allowed to offer are limited (until it becomes clear there’s a crisis and the cap is suddenly lifted with only just enough time to hire the temporary staff to replace the ones laid off because of the cap, and hire the spare accommodation to fit all the students in… but that is a this-government problem, not a system problem). Furthermore the tools universities have to influence those choices are very limited: basically building facilities, investing in workplace placement schemes and support services (for some reason not an option usually pursued by the big universities despite the likely returns and the fairly low cost, presumably because it is expected that their graduates will sort themselves out without the help), free lunches and good talks at open days and, perhaps most of all, changing their course offerings.

That last is a minefield, however, as what students appear to like is wide choice of modules, which implies a consequently large staff pool to teach them, who have to be paid. So it is in the university’s operating interest to keep that offering as narrow and standardised as possible but its recruiting interest to make it look otherwise (or, in extremis, actually to provide the choice and breadth the students appear to want, but actually don’t always use). By analogy with business, then, stocking a wide range of goods hurts this particular sort of shop, because they must then be stocking more than people will actually buy and they can’t even necessarily let any more customers in to buy them. Oh yeah, and every product costs the same irrespective of its quality, but there are tests that settle whether or not customers can buy them. If one of these shops doesn’t have enough customers, though, it may have to let more people buy its product, and this actually costs it prestige, which the shopkeepers seem to fear will actually stop people coming in. Let’s do that again: allowing more people to shop there is thought likely to drive customers away. So there is a fight to allow as few customers as possible to choose each shop, and then to get as many as are allowed through the door anyway. As an analogy to business this is insane; but these actually are the economics of student recruitment to universities in England.

There are other tools of the modern business that don’t work very well in universities, too. Performance reviews are one such, because of how immeasurable the product of university work is. If someone’s students consistently do better than someone else’s, that looks indicative; but is it because their teaching is better and more inspiring, or because their subject is more familiar to the students? If their feedback is better than someone else’s, is that because their classroom is more inclusive and effective, or because they are white or male or both, or because they give the students an easier ride?2 Challenging students can really hurt one’s ratings, even though it makes their results better; it’s been proved in tests.3 But that is, as we’ve said, the nature of the product, which is to say, intangible.4

Research outputs don’t work very well either. Quantity and quality don’t have a clear relationship, for a start.5 If someone produces lots of research, is that good or bad? The Research Excellence Framework used only to require four submissions per seven-year assessment period; I usually average two outputs a year so have quite a lot to choose from when the census comes. As a result, I have before now been told to produce less and spend the time on making it better. Of course, this is not based on anyone deciding whether my work is good enough or not; it must just not be as good as it could be, because I still had time to do other stuff as well. (I don’t any more, though, so that must be OK!) We don’t, after all, have good measures for what’s better, because universities don’t usually maintain two people who work in the same field together, so who can evaluate the work of the ones they have? And the humanities are pretty uncertain about what quality actually is in the first place.6 Since then, of course, the last REF abandoned numbers per researcher and instead set quotas per unit of assessment, i. e. department. Now we need some people who over-produce, to make up for those who under-produce; but the worry still remains that this will dilute the quality we can’t measure. When you add in the fact that the REF consumes an immense amount of staff time, enough to chew up most of the money that is awarded on its basis, and that experiment has suggested you could get basically the same rankings using publically-available metrics data in a matter of hours, it is fair to ask what business would ever put itself through such a nonsense.7 Any reasonable business would use the cheap quick metric of how they’re doing that gets nearly the same results, rather than cost themselves so much working time. But English universities are not in a position to behave reasonably, because they all have to respond to the same central dictats about how they assess themselves or abandon a decent slice of their income as the price of efficiency.

So not only are we not very clear about what we do, we’re not really able to measure it; but we still spend vast amounts of time trying to do so, in order to secure income from people who are not our customers or using our product that may just about constitute a profit on the costs of those vast amounts of time. We also can’t charge prices that cover our costs, and all the other points I’ve made. This ain’t no real business.

In fact, of course, it’s not a business, or even a service; like the railway system, the energy sector, the National Health Service, and most of the other things which were once nationalised government concerns and have since been entirely or partly privatised by both Conservative (mainly) and (New) Labour governments, it’s actually a public utility. You can tell this, because the government doesn’t dare deregulate it or stop subsidising it. It believes that it must still control and allocate universities’ income, even as it tries to make the private sector, in the form of the student customer, bear the burden of their actual operation. If universities were businesses like any others, they would not need their money run through Westminster or their operations overseen by a Westminster-based office, rather than the normal array of consumer watchdogs and the usual operation of the law. The burden of regulation on all such utilities, but perhaps universities most of all, indicates that the government knows that really, they are national concerns that can’t be allowed to work in a free market, because they might then become unaffordable to all but the affluent and lots of them would go out of business, shrinking provision to just those unaffordable places. No government wants to be seen letting that happen either to higher education or to energy provision, but they also don’t want to pay for either of them, so they try to make the private sector or the customers do so (though the student loan has proven again and again to be a bad way to offload those costs). And of course, such concerns are also not supposed to make (too much) money. If a supermarket or a car manufacturer or whatever records huge profits, that’s a triumph for them; but if universities, rail companies or energy providers do, that’s profiteering and exploitation. That moral judgement shows that what the latter are doing is not running a business; it’s providing a service for the good of the country, which it’s therefore government business to watch over.

So while they are sometimes run like businesses, and obviously would ideally be able to cover their own costs, it’s perhaps no wonder that universities have not really got better for the introduction of business expertise to their management, because they aren’t anything like real businesses. I suspect that no business expertise can adequately prepare you for the constraints on both revenue and operation and the burden of centralised regulation under which such a ‘company’ must operate. The natural response is towards ‘agility’ and cost-cutting in operation and capital investment with the savings to attract students; but these things tend to hurt the generation of the university’s actual product, that knowledge stuff we mentioned, a product which however isn’t paid for from our income streams. These are not problems business acumen can solve. It must be very frustrating to be asked to do so using it. Whether the old-style, and disappearing, form of academic governance by democratic bodies of actual academics, recognised as the people who know best what it is they do and what its value is—which goodness knows I sometimes doubt myself, as even in these posts—is the best alternative, I don’t know; but it’s not clear to me that boards of external directors with no real stake in the success of the venture or experience in its customer-facing environment were ever likely to work better.8

But the problems don’t, sadly, end there. In the next post I want to look to the future and see where all this is probably taking us. And then I want to hope I’m wrong.


1. Examples of lamentation of this are too numerous to mention; as well as the two linked, there’s Rajani Naidoo, “Universities in the Marketplace: The Distortion of Teaching and Research” in Roland Barnett (ed.), Reshaping the university: new relationships between research, scholarship and teaching (Maidenhead 2005), pp. 27–36, Alessandra Lopez y Royo, “Free market principles have changed (and ruined) the academy” in Times Higher Education no. 2115 (22nd August 2013), pp. 24–25; and meta-study in Mark Erickson, Paul Hanna and Carl Walker, “The UK higher education senior management survey: a statactivist response to managerialist governance” in Studies in Higher Education Vol. 46 (London 2020), pp. 2134–2151 (which shows that staff don’t, in general, think their managers are any good). Some more serious analysis in Sarah Amsler, “Beyond All Reason: Spaces of Hope in the Struggle for England’s Universities” in Representations Vol. 106 (Berkeley CA 2011), pp. 62–87, or Vik Loveday, “The Neurotic Academic: anxiety, casualisation, and governance in the neoliberalising university” in Journal of Cultural Economy Vol. 11 (Abingdon 2018), pp. 154–166. A speech for the defence in Terry Young, “An industry-style focus on teaching costs is vital to survive the pandemic” in Times Higher Education (THE), 11th September 2020, online here.

2. The recognised problems with student feedback are now so numerous that one can resort to meta-studies about it, such as Anne Boring, Kellie Ottoboni and Philip Stark, “Student Evaluations of Teaching (Mostly) Do Not Measure Teaching Effectiveness” in ScienceOpen Research (2016), DOI: 10.14293/S2199-1006.1.SOR-EDU.AETBZC.v1, Y. Fan, L. J. Shepherd, E. Slavich, D. Waters, M. Stone, R. Abel and E. L. Johnston, “Gender and cultural bias in student evaluations: Why representation matters”, ed. Heidi H. Ewen, in PLoS ONE Vol. 14 (San Francisco 2019), e0209749, DOI: 10.1371/journal.pone.0209749, or Troy Heffernan, “Sexism, racism, prejudice, and bias: a literature review and synthesis of research surrounding student evaluations of courses and teaching” in Assessment & Evaluation in Higher Education Vol. 47 (Abingdon 2022), pp. 144–154, DOI: 10.1080/02602938.2021.1888075; and reportage such as Susan Bassnett, Katie Eichhorn, Peter Solomon, Emily Michelson, Andrew Moore, Jessica Welburn Paige and John Tregoning, “Is student course evaluation actually useful?” in Times Higher Education (THE), 16th April 2020, online here; and John Ross, “Student evaluations of teaching ‘methodologically flawed'” in Times Higher Education (THE), 8th April 2021, online here. Even the UK government has now begun to realise that its student feedback data from the National Student Survey is junk and may be having deleterious effects on the sector: witness Simon Baker, “‘Radical’ review for NSS as ministers say it drives down standards” in Times Higher Education (THE), 10th September 2020, online here.

3. Here I think especially of Louis Deslauriers, Logan S. McCarty, Kelly Miller, Kristina Callaghan and Greg Kestin, “Measuring actual learning versus feeling of learning in response to being actively engaged in the classroom” in Proceedings of the National Academy of Sciences Vol. 116 (Washington DC 2019), 19251, DOI: 10.1073/pnas.1821936116, which finds that students prefer modules where they have to work less hard even though they demonstrably learn more from working harder.

4. While searching for links for this post, I came upon an excellent article about this from an Australian perspective, Tony Aspromourgos, “The managerialist university: an economic interpretation” in Australian Universities’ Review Vol. 54 (Perth 2012), pp. 44–49. For obvious reasons this doesn’t feature the particular insanities of the English regulatory situation, but it does add one more obvious problem with the business analogy that is worth including here. As part of a lengthy comparison of competition in the market for the manufacturers of beer and for university degree providers, he points out:

A further impediment to competition between universities being capable of beneficially shaping the degree product is that the quality of the product is to a considerable extent opaque, or non-transparent, even after it has been consumed. This is not only because it is a one-off consumption item, but also because it is in the nature of knowledge- or information-rich products and services that they entail an information asymmetry between supplier and consumer. The potential consumer, in making a choice, is reliant upon the advice of the potential suppliers, causing thereby also an asymmetry of power. This asymmetry between the ‘demander’ and the supplier is intrinsic to the situation. Most consumers of car repairs cannot know precisely what service has been provided, and whether it was required. When one attends a medical doctor with an ailment, one asks this supplier of medical services: what do I need to purchase? Similarly, to a considerable extent, the one-off consumers of degrees will never know if it was worth it. Whatever degree of satisfaction graduates may record concerning their degrees – one, five or ten years after graduation – they will not have any very clear and definite conception of what their education could have been, better than that which they received.”

The similarities of this case to the one developed here are coincidental, and therefore comforting to me; but of course, here we are a decade later and it doesn’t appear that anyone running these systems paid any attention to views like these or we wouldn’t be where we are.

5. Samuel Moore, Cameron Neylon, Martin Paul Eve, Daniel Paul O’Donnell and Damian Pattinson, “‘Excellence R Us’: university research and the fetishisation of excellence” in Palgrave Communications Vol. 3 (London 2017), 16105, DOI: 10.1057/palcomms.2016.105; Yves Gingras and Mahdi Khelfaoui, “Why the h-index is a bogus measure of academic impact” in The Conversation, 8th July 2020, online here.

6. Michèle Lamont, How professors think: inside the curious world of academic judgment (Cambridge MA 2009), online here.

7. Again, indictments of the REF or its predecessor the Research Assessment Exercise are so rife as to be impossible to collect here, but two especially sharp ones are Derek Sayer, Rank Hypocrisies: The Insult of the REF (New York City NY 2015) and James Tooley, “A fitter rival would soon make the REF extinct” in Times Higher Education (THE), 11th April 2019, online here, both arguably beaten by Anne-Wil Harzing, “Running the REF on a rainy Sunday afternoon: Do metrics match peer review?”, White Paper, Harzing.com: Research in International Management, 2017, online here, which came close to predicting the REF outcomes using only publically-available data in a weekend’s work by a single person.

8. A statement for the old model is Terence Kealey, “Only academics can run universities effectively” in Times Higher Education (THE), 21st January 2021, online here; but it is also arguable that administration of a university in this regulatory environment became a job that effectively precluded academic activity long ago. In this respect, Sue Shepherd, “There’s a gulf between academics and university management – and it’s growing” in The Guardian, 27th July 2017, Education section, online here, seems to have had it right to me. I would love to see our vice-chancellors undertake to teach just one module a year – under someone else’s management! – to keep in touch with the ground level provision like that, but I can’t imagine I’ll ever see it happening.

3 responses to “Universities Are Not… Like Businesses

  1. Pingback: Universities Are Not… Really Supposed to Make Money | A Corner of Tenth-Century Europe

  2. Pingback: So Universities Are Not… The Probable Shape of the Future | A Corner of Tenth-Century Europe

  3. Pingback: (Why) Universities Are Not… Giving Way to their Staff | A Corner of Tenth-Century Europe

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