Getting more value for money

1. Getting more value for money Wellington Group Meeting, 54th SHEEO Annual Meeting Chicago, July 18 2007 Don Thornhill Ireland www.competitiveness.ie

2. Why are we concerned with VFM? • Financial constraints/revenue limits • Opportunity costs • Accountability to stakeholders – especially for public funds www.competitiveness.ie

3. Potential gains and risks www.competitiveness.ie

4. Some potential gains • Clarity of purpose among all actors in the HE space • Greater effectiveness and more VFM • Diffusion of good practice www.competitiveness.ie

5. Some potential risks • Focus on inputs • Focus on the measurable and overlooking the important • Race to the bottom? • Disincentives to experiment and innovation www.competitiveness.ie

6. Focus on productivity -1 Yes … but be wary of the limitations! Origins in statistical analysis of homogeneous economic sectors – agriculture and traditional manufacturing www.competitiveness.ie

7. Focus on productivity -2 Not so robust when dealing with product and process differentiation, quality differences and heterogeneity ….and with multiple outcomes and objectives www.competitiveness.ie

8. But worth the struggle! Has the merit of getting us to focus on added value www.competitiveness.ie

9. In a cost focused and revenue constrained environment do we need to remind ourselves and others why higher education is a concern for public policy? www.competitiveness.ie

10. HE a desirable good • Economic • Social • Individual www.competitiveness.ie

11. Economic www.competitiveness.ie

12. Economic HE driver of economic performance • Critical to competitiveness and comparative advantage • Human capital • Knowledge capital • Innovation capacity? www.competitiveness.ie

13. Policy Response Development of comparative advantage in economic activities requiring high levels of • Skills • Cognitive ability (including organisational capacity, flexibility, creativity, new learning) • Knowledge capital • Innovation www.competitiveness.ie

14. Higher education - our systems, institutions and personnel - the key agents for delivery www.competitiveness.ie

15. Challenge for system design Relating inputs to outcomes www.competitiveness.ie

16. Challenge of relating inputs to outcomes • Unquantifiable, difficult to quantify or indirect but important outcomes • And, for example, even where we can measure ….substantial international differences in outcome/expenditure relationships www.competitiveness.ie

17. As well as measuring (ideally before we do) we need to pay attention to purpose, to form (structures and implementation mechanisms) and to measurement www.competitiveness.ie

18. But key agents have different purposes! Implementation agents (higher education institutions and faculty/ academics) have different (and essential) priorities and concerns www.competitiveness.ie

19. Purpose – the challenge System design for optimum outcomes in conditions of multiple objectives, funding constraints, uncertainty about the future and multiple stakeholders with different interests? www.competitiveness.ie

20. What can the market teach us? “It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest” - Adam Smith www.competitiveness.ie

21. Features of a market approach • Choice • Competition between providers • Price signals • Product differentiation • Incentives (positive and negative) for performance • Responsiveness to market signals • User pays • ………….. • ………….. www.competitiveness.ie

22. Inference? • Use market where possible – and reasonable • Make maximum use of “proxy market” instruments www.competitiveness.ie

23. Proxy market approach www.competitiveness.ie

24. Direct State funding for HEIs Performance related “core” funding Competitive funding new initiatives Experimental funding Research funding Bedrockfunding www.competitiveness.ie

25. 1. Bedrock funding for undergraduate education and learning capitation based  rates and criteria, rational, transparent, straightforward  equitable as between institutions  reflect cost differences  subject disciplines  student categories  www.competitiveness.ie

26. 2. Performance related element in core funding focused on very limited number of public policy objectives  ideally, benchmarked  not destabilising from year to year  www.competitiveness.ie

27. 3. Major new initiatives competitive funding  open and transparent process  expert assessment final  external membership  www.competitiveness.ie

28. 4. Experimental and innovative programmes discretionary funding  allow for experimentation  review  abandon or mainstream  www.competitiveness.ie

29. 5. Research funding non-competitive “foundation funding”  competitive performance-based institutional funding  competitive funding for research projects and grants (fellowships etc.)  www.competitiveness.ie

30. In each case • Monitor, measure, review and appraise • Use fit for purpose metrics • Try to relate inputs to outcomes where possible www.competitiveness.ie

31. Response: Investing in a plan Stakeholders advise on priorities: Government (TES), learners, employers, iwi, ITOs, etc TEC monitors outcomes Quality assurance and monitoring of provision and TEO TECand TEO agree outcomes for the approved plan, areas for capability building, etc, and TEC decides funding TEC establishes investment approach (IG, EBs) TEO develops plan to meet needs as basis for iterative discussions with TEC TEC engages with TEO in relation to contribution to network of provision, shifts, performance of TEO to date, etc TEO works with regional and national stakeholders (business, communities) to identify need, and with other TEOs www.competitiveness.ie

32. Some guidelines? Reflect on • Purpose • Conceptual underpinning of system • Form – structures and delivery mechanisms • Measurement/ comparison/ benchmarking www.competitiveness.ie

33. Otherwise Risk of rewarding A when we want B! www.competitiveness.ie