Consultation 99/28

Fund for the Development of Good Management Practice

Proposals

Executive summary

Purpose

1. This document describes our proposals for a new special funding initiative to encourage the development and implementation of good management practices in higher education.

2. We invite comments on the purpose, scope and allocation criteria for the fund.

Key points

3. Good management practices are essential if higher education institutions are to continue to improve, and to respond to the needs of their stakeholders.

4. In partnership with the sector and the other funding bodies for UK higher education, we already support a number of initiatives to encourage good practice. We also develop and publish guidance on management activities.

5. We believe that additional funding will accelerate the implementation of good practice, and help the sector to help itself.

Action required

6. Comments on this proposal, and in particular on the issues summarised in paragraph 38-39, should be sent to John Rushforth at the HEFCE by 31 May 1999.

The need for further investment in good management practices

7. Good management practice is now an essential requirement for an effective higher education institution (HEI). Over the last decade the sector has dealt with reductions in funding per student of 35 per cent in real terms, alongside a massive expansion of student numbers. To do so, institutions have made difficult choices, implemented new approaches to teaching and learning, and developed new partnerships.

8. The pressure for change and improvement continues. External stakeholders increasingly need evidence that funds are being spent effectively. Students will also expect more now that they are contributing more to the costs of their education. Government sees higher education taking a more active role in fuelling economic development and widening access for under-represented groups. The sector needs to play its part in equipping the workforce with key skills, and in exploiting the new knowledge created by research. Partnerships with industry and commerce, and increased integration with the rest of Europe, also pose new challenges for higher education.

9. Many of these changes represent opportunities for institutions, but opportunities that call for high quality strategic decision making, and effective arrangements for governance and management.

10. The sector has ample incentive to continually improve management processes, building on past achievements, and to be seen to do so. The proposed Fund for the Development of Good Management Practice aims to help the sector to help itself.

The Council’s current role

11. The HEFCE is charged with promoting value for money in the sector. As Accounting Officer, the Chief Executive is personally accountable for promoting value for money for taxpayers’ funds. Our general approach is described in ‘How the HEFCE promotes value for money’ (HEFCE 98/63). A key element of that approach is to encourage good management processes. At present we identify poor processes through working with institutions, audit and financial health monitoring, and we recommend appropriate good practice. Much of this work is disseminated through seminars and work groups.

12. In partnership with the sector and the other higher education funding bodies we support a number of initiatives to encourage good management practice, in particular:

• value for money studies

• the Joint Pricing and Costing Steering Group

• the Joint Procurement Policy and Strategy Group.

13. We also produce guidance on, for instance, financial management, appraising investment decisions, costing, information strategies, and environmental management. We are currently working on other areas, such as strategic planning and risk management.

14. Our experience suggests that the critical elements in developing good practice are:

• involving key stakeholders in all stages of the project

• defining good practice by using comparisons within the sector and outside

• producing tools that can be quickly used and applied

• using multiple dissemination channels

• learning from failures as well as successes.

Implementing good practice

15. Guidance on good practice is not enough on its own to effect change in institutions. This requires that the proposed change should, for example:

• have top level support and resources

• be owned by the institution, especially by the staff who have to implement it

• have clear benefits that will justify the effort and cost involved

• be easily understood and readily applied to higher education.

16. Progress in implementing good practice guidance has often been slower than the sector would wish. We have therefore decided to review our approach.

17. For the most part we rely on the self-interest of institutions to continually improve. However, we feel there is a role for top-sliced funding where the benefits are clear, and are supported by the sector.

Benefits of the proposed fund

18. We propose to introduce a Fund for the Development of Good Management Practice to accelerate the implementation of management improvements across the sector. The payback for even modest success would be well worth the cost, which we currently expect to be about £10 million over three years.

19. The benefits of such a scheme include the following:

• the sector would set the agenda, ensuring developments were focused on institutional priorities

• duplicated effort could be avoided

• opportunities for worthwhile collaboration could be seized or expanded to capture even greater benefits

• the potential of existing sector-wide professional networks could be better exploited

• some institutions, especially smaller ones, would have better access to expertise and professional support

• the HEFCE could act as a broker, for example where information needs to be confidential, or where access to other sector or international comparisons are required

• institutions could take advantage of our expertise and sector-wide view of management, gained through the work of our regional consultants, auditors and finance staff.

20. If successful, the fund would provide esteem and recognition, motivating greater improvement. It would be an administratively simple way of demonstrating the sector’s commitment to seeking ways to improve value for money. Indeed, some projects could unlock additional government funding from Treasury schemes, such as Invest to Save, or Capital Modernisation. Projects could also act as a counter to the poor perceptions created as a result of isolated incidents publicised in National Audit Office reports.

21. We would also be able to disseminate widely the activities and lessons learned, and thus to promote the interests and standing of the sector.

Objectives of the fund

22. The objectives of the fund would be to improve the sector’s use of resources by promoting the implementation of good management practices through:

• identifying good practice

• providing esteem and recognition for good practice and its further development

• encouraging work on the development and implementation of recognised good practice, particularly involving collaboration.

23. Funding would provide an incentive for senior managers to give greater priority to management issues, and offer a measure of esteem to those awarded grants. It would be a direct way of fostering top level commitment, supporting the work of representative professional bodies, and recognising achievement. It would also provide sector-specific outputs that others could use to improve their own processes. If an approach works well in one institution it is likely to work well in similar institutions, or at least contain major elements that will work well elsewhere.

Size and scope of the fund

24. The fund has to be large enough to be seen as something of value and a mark of esteem. We therefore believe that £10 million should be allocated over the next three years, funding up to 100 projects. Projects would normally be financed at between 25 and 100 per cent of the total cost; we would not normally expect to fund projects of below £50,000.

25. The fund would cover the following areas:

a. Corporate management:

• senior management development

• strategic, corporate and operational planning

• governance

• risk management

• performance review.

b. Functional management:

• financial management

• procurement

• information management

• estates management

• human resource management

• registry and administration

• marketing.

26. The scheme would be open to all HEIs directly funded by the HEFCE.

27. We welcome collaborative bids. Collaboration could be regional, across institutions or through professional or representative groups. In all cases the development would need to be through a lead institution and led by a senior manager.

28. Some projects might best be developed at a single institution or in a small group. These could, for instance, be pathfinder or beacon projects, which could provide valuable insights to the sector as a whole, in terms of what succeeds and what fails or could be improved.

29. Institutions would be limited to two bids.

30. Specific outputs would be required to a specified timescale relevant to each bid. Bids could be for staff, equipment or buildings.

Criteria for allocating funds

31. The criteria for allocating funds would include:

a. Depending on the nature of the project, either proven value (financial and non-financial) of improvement caused by implementing good practice, or potential value of improvement to the sector as a whole or in part.

b. Potential application to significant parts of the sector, and the quality of proposals to help embed the good practice across the sector.

c. Senior management commitment.

d. Number of institutions that would benefit.

e. Probability of improvements being sustained.

32. Institutions would be asked to:

a. Identify the management practice to be developed.

b. Depending on the nature of the project, either provide evidence of improvement in this area over the last three years, over and above that achieved in the sector generally, or describe the proposed development with evidence to support claimed benefits. The potential value (financial and non-financial) to the sector as a whole or in part should, where possible, be quantified.

c. Provide plans for the use of funds, including how implementation would be managed, and outcomes and experiences disseminated.

d. Provide evidence of senior management commitment, which could include support from a number of institutions and/or one or more sector representative bodies.

e. Define outcome measures.

33. Some examples of projects which might be funded under this scheme are given at Annex A.

Method of allocating funds

34. Each bid would be assessed by an independent expert referee. We would then approve allocations to individual projects, advised by an expert panel drawn from HEFCE Board members, nominees from the sector’s representative bodes, and members of the Joint Value for Money Steering Group, the Joint Information Systems Committee, the Joint Procurement Policy and Strategy Group and the Joint Pricing and Costing Steering Group.

35. The membership of the advisory panel would help establish ownership by all the major stakeholders, and as an added benefit would help co-ordinate the activities of the various groups.

36. A two-stage bidding process is proposed: an outline bid, followed by a detailed submission if the panel expresses an interest in the proposal.

Evaluation

37. The fund would initially finance projects for up to three years. We would expect each project to set its own success criteria and assess itself against these. Each institution involved would be expected to provide monitoring information as part of the annual operating statement sent to the Council. Each year we would assess the overall impact of the fund and its projected impact. Every year we would also review the processes used to administer the fund, seeking to improve its operation by learning from experience and responding to the views of institutions. The outcome of these reviews would be publicly available.

Consultation

38. We would welcome any general comments on this proposal. In particular we would be interested in whether:

• you believe this is a good way to tackle the issues at paragraphs 7-10

• the areas of management are properly defined

• the criteria for allocating grants are appropriate

• the two-stage bid process is best

• the levels of funding are appropriate, in terms of both total funding and the minimum for each project.

39. We would also welcome your views on what would be an appropriate timescale for bid preparation and submission.

40. Please send any comments by 31 May to John Rushforth, Northavon House, Coldharbour Lane, Bristol BS16 1QD.

41. We will announce the results of the consultation in July, and if appropriate we will invite bids for the initiative in October 1999.

Annex A

Examples of projects eligible for funding

Institutions are in the best position to identify which projects could exploit the opportunity of the fund. The examples below provide some idea of the potential of the fund but are only illustrative and may not represent the sector’s priorities. We would expect applications to cover a wider range of topics than those given here.

1. The joint value for money study on building maintenance identified one institution that had developed a good web-based information system for managing maintenance. If other institutions were interested the fund could support further development at the lead institution (at 100 per cent) and implementation at other participating institutions (at 50 per cent).

2. A group of institutions might wish to work together to assess the effectiveness of their governance arrangements. The fund might support such a programme at 75 per cent for consultancy, and subsequent dissemination at 100 per cent.

3. A representative body might wish to conduct a survey of a particular area of activity then follow up any identified issues with bespoke training materials, accreditation and subsequent evaluation. The fund could finance the survey at 100 per cent, and the training materials, dissemination and evaluation at 50 per cent. This might, for example, cover senior management training or a sub-group such as heads of academic departments.

4. An institution might wish to transform its approach to environmental management by asking another more advanced institution to assess its current arrangements, to run a series of workshops, and to assist in developing policies and procedures. The fund might finance a project manager in the host institution at 25 per cent for the life of the project, and pay for support from the advanced institution at 100 per cent.

5. A group of institutions might be interested in establishing a benchmarking club to improve management processes. This could involve members from outside higher education. The fund might initially support 50 per cent of the cost of the project.

6. A group of institutions might be interested in implementing the business excellence model. The fund could support 50 per cent of the cost of a pilot project and 100 per cent of the cost of subsequent dissemination.