Efficiency in higher education
Efficiency is improved when higher education institutions carry out their activities using fewer resources, or use the same level of resources to do more.
Such changes can be achieved through better management, organisation and the use of technology. Common efficiency initiatives include sharing services with other organisations, digitising and automating processes, and using collaborative procurement frameworks.
HEFCE is required to report to government on the efficiency of the HEFCE-funded higher education sector. For this purpose, HEFCE collects data from institutions through an Annual Efficiency Return (AER). This return provides a common framework for institutions to report evidence of efficiency to HEFCE and to inform their own internal value for money reports. It was developed following a recommendation of the Universities UK review of efficiency, effectiveness and value for money in higher education, led by Professor Sir Ian Diamond.
The AER aims to collect data from institutions on new efficiencies delivered in the most recently completed academic year. The guidance for the AER provides institutions with a methodology for identifying activities that led to greater efficiency and assigning them a cash value.
Four types of efficiency are identified:
- Cash-releasing efficiencies are achieved by delivering the same level of activity (or more, or better) at a reduced cost.
- Resource-releasing efficiencies are achieved by delivering the same level of activity (or more, or better) with fewer resources, such as estates space or staff time.
- Additional productivity gains are achieved by using the same amount of resources at the same cost to deliver more of an activity.
- Capital receipt efficiencies are achieved when a redundant asset is sold without significantly affecting activities.
To the results from the AER we can also add procurement efficiency data from the Efficiency Measurement Model (EMM) survey run by the Higher Education Procurement Association (HEPA) and from widespread collaborative procurement initiatives in the sector, such as the regional purchasing consortia and Jisc services.
The total cash value for efficiencies reported by HEFCE-funded institutions through the AER and EMM, and derived from collaborative procurement arrangements, for 2016-17 is £912 million, representing 3.2 per cent of total sector expenditure in the same year.
Efficiencies from the AER, EMM and collaborative procurement 2016-17 (£000)
|Additional productivity gains||47,897|
|Capital receipt efficiencies||120,294|
|Collaborative procurement efficiencies||309,219|
|Total HEFCE-funded sector efficiencies||912,063|
Data from the AER also allows us to examine the efficiencies made in different areas of activity within higher education. Additional procurement efficiencies, reported through the EMM survey and resulting from collaborative procurement initiatives, can be included under the procurement category. Procurement has long been the focus of the efficiency agenda in higher education and the results demonstrate that this continues to be the case.
Efficiencies from the AER, EMM and collaborative procurement 2016-17 by area of activity (£000)
HEFCE-funded institutions reported a wide range of values for the efficiencies they realised in 2016-17. Calculating the value of efficiencies reported by an institution as a percentage of its total expenditure illustrates the efficiency it has achieved in relation to its size. Where institutional efficiencies represent a high percentage of institutional expenditure, this is usually due to large, one-off capital receipt efficiencies.
Efficiencies from the AER and EMM 2016-17 as a percentage of total expenditure by institution (%)
The descriptions of the activities being undertaken to improve efficiency, as reported through the AER, are diverse, from energy saving to organisational restructuring. This reflects the diversity of institutional mission, strategy and size found in the sector, as well as differing approaches to delivering efficiency.