Month: March 2023

Reports suggest that the University of East Anglia (UEA) is in “financial turmoil” and facing a £30m deficit this year rising to £45m within three years.  Clive Lewis, MP, for the constituency in which UEA sits has spoken of the university being in a “death spiral”, is seeking a meeting with the Education Minister and calling for a possible public enquiry.  A deeper dive offers some thoughts for other institutions on leadership, governance, cutting losses and getting the value proposition right. 

Matching Reward and Responsibility

Vice-Chancellor David Richardson, who tendered his resignation last week and left with immediate effect became a university Pro-Vice Chancellor in 2011 and Vice-Chancellor in 2014.  He had been at the university for over 30 years and taught in the famous Lasdun Teaching Wall for much of his career.  It would be difficult to suggest that he is not an insider and has no culpability for long term decision making about the institution and its future.

For that experience the rewards were substantial.  Richardson’s emoluments have increased by around £90,000 since he took office in 2014.  In 2019/20 when the “…mean paid basic salary for the heads of all [university] providers was £219,000”, his salary was 23% higher at £270,000 so exceptional performance was to be expected.  Salary and benefits are also only part of the story with pension contributions rising even more quickly in percentage terms over his tenure to achieve total emoluments of £343,000. 

In addition, the University reported that from 2018 to 2021, when he might have been expected to be focusing solely on the institution’s increasingly perilous financial situation, he was earning an additional £13,000 a year as a non-executive member of the Norfolk and Norwich University Hospital NHS Foundation Trust board.

Another point about the upward trend in his salary is its comparison, as a multiple, to that earnt by others in the University.  The multiple grew every year with the exception of 2021 when the Executive Team “volunteered a 10% reduction in salary for the first six months of 2020-21 with the vice-chancellor volunteering 15%.” The figures suggest the vice-chancellor more than made up for it the year after and just before resigning.

NB: Measure is the multiple of the vice-chancellor’s basic salary on the median pay of staff (excluding student workers who could be paid through a third party) where the median pay is calculated on a full-time equivalent basis for the salaries paid by the provider to its staff.

Most would say that Richardson was well paid and had a long-term understanding of the university, its potential and its challenges.  As far as I can see the resignation announcement and personal statement on the university website contains no sign of accepting responsibility for its financial collapse or the impact on those who had been his colleagues for, in some cases, decades.  When Chair of UEA Council, Dr Sally Howes stated, “I’m sure I speak for the whole community when we thank David for his commitment and service to UEA for these many years” it is abundantly clear that she does not capture all views on his tenure as VC.  

Seeking Good Council (sic)

Richardson was supported on the University’s Executive Team by six pro-vice chancellors, a provost and deputy vice-chancellor, and four senior administrators.  It is not entirely clear how this overlaps with the key management personnel who the Financial Statements describe as “..those ten individuals having authority and responsibility for planning, directing and controlling the activities of the University.”  What is clear is that in 2017/18 there were nine of them with £1,296m compensation and by 2021/22 there were 10 with compensation of £1,813m.

Other key figures in terms of oversight were Dr Sally Howes, the University’s incoming Chair in August 2021 who became the first Chair of the University’s Council, for at least ten years and possibly ever, to receive remuneration (recorded as £30,000 in the 2021/22 Financial Statement).  On making the appointment the University noted that she brought “… a wealth of experience in strategic roles in the UK space industry.”  Mark Williams had been Treasurer on Council since August 2016 and was previously a partner at Deloitte, one of the UK’s big four professional services companies, so was far from a newcomer.

There were, arguably, quite a few people who had taken positions of responsibility to lead the University.  However, anyone familiar with higher education will recognize the issues raised in a 2020 report “Universities Governance: A Risk of Imminent Collapse” and the urgent need for reform.  It’s summary notes points like, “Council members and VCs rate themselves highly, but in reality are cumbersome and fail to devote adequate time to critical governance issues” and “The office of Vice-Chancellor (VC) has gained tremendous power, while its counterbalance – the university council – is poorly-structured and outdated in approach.”  

Pathed with Good Intentions

The signs that UEA might be sleepwalking over a cliff seem apparent on reviewing the Financial Statements.  In 2018 and 2019 David Richardson and Mark Williams signed off the Business Review including the sentence, “The University remains confident that it has in place adequate funding to support the operational and development plans, and to provide a reserve for managing financial risks, over the next three years.” 

For 2020, 2021 and 2022 the wording changed to, “The University remains confident that it has in place adequate funding to support the operational and development plans, and to provide a reserve for managing financial risks, over the next five years.” (my emphasis).  It is difficult to understand what drove this change in the timescale of their confidence at a point when the world was going through, then recovering from a pandemic where everyone’s future was in turmoil.  Their confidence proved to be ill-placed.

Some of the Council minutes are equally concerning in retrospect.  In November 2021 they report that the “Chair indicated that there is no end-to-end responsibility to management of risk.  It was Council’s responsibility to set the risk management appetite.”  The following sentence, “VC indicated that risks will be managed more closely in future” but a later revelation that the internal audit had found areas for major improvements for the second year suggests a lack of attention to critical detail.

At the next meeting in January 2022 a note from the Audit Committee comments, “concerns about red risks was noted and concerns were expressed about risk management and the extent to which it is embedded in the organization.”  Perhaps prophetically given current circumstances Council “..suggested that staff morale might be considered to be added to the risk register.”  In just three months the approved budget deficit set at £20.8m for 2021/22 had increased to £25m.

There is a sense in going through the set of  2021/22 Council minutes that the risk of failure and a diminishing hold on core management disciplines was being flagged but repressed.  There does not appear to be much sense of mounting urgency over critical issues and while the danger of over-optimistic forecasting is flagged the abiding confidence in having “adequate funding” overwhelms it.  Whether this was just happy talk, an attempt to obscure reality or simply a failure to comprehend is unclear.  

Basics In a Bind

Meanwhile, the basics of running a decent university seem to have been forgotten.  At a point in time when many universities have adjusted their recruitment strategies to secure significant financial advantage UEA seems to have been stranded as a high-priced, non-Russell Group outpost of misguided thinking.  International student income in 2021/22 was lower than in 2016.

Just by way of comparison it is worth considering, say, the University of Leicester’s performance.  In 2016 the income from international students was £52m but in 2022 it had reached £71.8m.  Leicester is of comparable quality optically at 29^th in the Complete University Guide compared to UEA’s 27^th , it is non-Russell Group and its fees for international PGT are generally higher than UEA.  There seems to be a failure of international recruitment strategy at UEA that management should have addressed.       

Meanwhile the University performance on Research Grants and Contracts has been flat for five years and while the Home Full-Time Student increase looks strong the university notes in its 2021/22 financial statement that it “…fell approximately 8% short (2021:17% short) of entry targets..”.  Taking these alongside the failure to tackle international student recruitment and the continuing decline in the real value of Home student fee tuition suggests an inability to control key revenue lines effectively. 

NB: Research Grants and Contracts are University only to provide a like for like comparison over the period.

Along the way, the joint venture with INTO University Partnerships fell into serious difficulties with losses accelerating and the path to profitability seeming to extend from three years in the 2019/20 Statement to five years from 2021/22.  In 2019/20 the words used were, “..there will be no distribution in respect of 2019/20 nor for the next three years (my emphasis) whilst the joint venture recovers and builds up surpluses for distribution” which implied a distribution by 2023/24 at the latest.  In 2021/22 the words had changed to say, “…there will be no distribution in respect of 2021/22 nor for the next five years (my emphasis) while the joint venture recovers and builds up surpluses for distribution” which suggest no distribution until 2029/30.  The slippage in forecasting recovery is baffling when for the privilege of maintaining the relationship UEA has also become co-guarantor for half of a loan of up to £7m to the joint venture. 

Challenging Times or Chumps in Charge?

Nobody should underestimate the difficulties caused by the pandemic but it is clear that many institutions responded quickly and effectively to changed circumstances.  It should not be a surprise to universities that international student dynamics were always likely to favour Russell Group universities for brand conscious candidates while those from many growth markets are more interested in lower cost tuition and accommodation.  You can’t buck the market and shouldn’t consider your aspirations and ambitions as any guarantee against the cold reality of competitive markets.

Suggestions that problems and costs associated with the Lasdun Teaching Wall have exacerbated the situation are far from new.  However, the 2006 Conservation Development Strategy for the University of East Anglia noted the issues and that solutions would “…require the expenditure of resources by UEA.”  Whether university leadership failed to respond sufficiently at the time or later is a matter that the possible “public enquiry” espoused by local MP, Clive Lewis could consider.

Either way, the recriminations will go on.  In a relatively small community like Norwich the prospect of compulsory redundancies after a £13.5m loss in 2021/22 had already sent shock waves through the city.  The rapid escalation of the scale of loss from £37m in three years to £45m undoubtedly requires action that will be far more draconian than if the problems had been isolated and acted upon earlier.  It is troubling that the lack of confidence in University leadership extends to the interim Vice-Chancellor who has been part of recent decision making.

A UEA Council Minute of November 2021 suggests the VC should bring forward a summary to each meeting of “what was keeping the VC awake at night”.  With the decision to resign we might never know the answer to that question but the difficult times ahead will cause many academics and administrators to rethink their own futures.  It may also be interesting to see if the Education Minister is kept awake at night by the HEPI article in September 2021 suggesting, “Why the Government should never bail out a university” and the past rhetoric of the Office for Students.

NOTES

1. The headlines is from a quote by ex-Norwich City manager Daniel Farke responding to claims of complacency in October 2020. They were promoted that year. Then relegated the next season with Farke leaving in November 2021.
2. Financial information about the University, Vice-Chancellor emoluments and other compensation are taken from the University Financial Statements
3. Information about INTO UEA is taken from the annual returns to Companies House.

Image by Arek Socha from Pixabay 

Amendments

On 2 March the reference in the third paragraph from the end to the constituency MP was amended to Clive Lewis (from Charles Lewis).