Universities make dramatic gains in efficiency led by the big research programs

INSIGHTS & RESOURCES

Universities make dramatic gains in efficiency led by the big research programs

AUSTRALIAN FINANCIAL REVIEW
by Robert Bolton – Education editor
27 August 2018

Key Takeaways:

  1. Australian universities have significantly improved efficiency with a rise in research volume and students taught for each $1 million spent.
  2. Between 2011 and 2016, universities achieved around 3.25% compound annual efficiency growth, surpassing Australia’s GDP growth.
  3. The Group of Eight universities alone contributed $66.4 billion to the Australian economy in 2016.
  4. Some universities may need to merge or improve leadership if efficiency declines.
  5. A more focused funding model could lead to greater efficiency gains in education and research.

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Full Article:

Australian universities have dramatically improved their efficiency with big increases in the volume of research published as well as some increase in the number of students taught for every $1 million spent.

The data is being made public in a report to be released at The Australian Financial Review Higher Education Summit, 2018, on Tuesday.

Emeritus Professor Keith Houghton, formerly of the ANU and now chief academic strategist at Research Coaching Australia, an independent advisory organisation, says, “Universities delivered around 3.25 per cent compound annual efficiency growth between 2011 and 2016, that’s better than growth in Australia’s gross domestic product over the same period.”

Professor Keith Houghton said if the government had a more focused funding model there could be even bigger efficiency gains at both ends of the education/research spectrum.

His revelations follow the Group of Eight universities report from London Economics which showed the sandstone unis alone delivered $66.4 billion to the Australian economy in 2016.

Professor Houghton said his research shows some individual universities made a massive improvement in performance. About a third of the entire sector improved their efficiency by 30 per cent or more and only three went backwards.

All Australian universities are required by the Commonwealth to undertake both teaching and research. Professor Houghton plots their combined efficiency in a two-dimensional model and identifies them by the group. They belong to the Australian Technology Network, Group of Eight, Innovative Universities Australia, Regional University Network and non-aligned. Half of the Group of Eight were in the 30 per cent-plus improvement category.

In the model a line or “frontier” is drawn by reference to the best performers across the education/research mix. The change in this frontier between 2011 and 2016 clearly shows the gains the sector. Professor Houghton said a component of the improvement appears to be linked to the uncapping of places in 2012.

In 2016 the top performers in research published more than four publications per $1 million spent. That compares to only 2.5 publications in 2011. In 2015 UNSW became the leader in research efficiency and is still on top in 2016.

On teaching, or what is labelled “education efficiency”, Professor Houghton plotted the unis by the total number of students enrolled per $1 million spent. In 2016 the most efficient unis had 60 students per $1 million, compared to about 55 in 2011. Victoria University and RMIT University both in Melbourne were the stand-out performers for education efficiency.

Among the universities that need to focus on teaching efficiency were the University of Adelaide and the University of South Australia (which co-incidentally are in merger talks) and the University of New England.

The biggest gains overall were in research efficiency where there has been an “enormous advance”.

Among possible explanations he pointed to the federal government’s Excellence in Research Australia (ERA) program which evaluates university output and promotes it to business and government. This had an “incentivising effect” on the whole sector.

Universities were also chasing global rankings much harder. In the latest Shanghai rankings, which measure scientific research, three universities gained ground, including Melbourne university which went up to number 38 out of 100 top unis. There are six Australian universities in the top 100 this year, compared to only three in 2011.

Professor Houghton said “workplace agreements were increasingly including expectations of research output”. He said a well-structured enterprise bargaining agreement can be associated with improved research outcomes.

Professor Houghton said the data was valuable because it gave an innovative way to assess the performance of universities and “support their continued improvement in providing value for money for the Australian taxpayer”.

He declined to name the three universities that have fallen in efficiency, but said inevitably in a market system if some institutions do well there will be others which do not.

“There are significant consequences for a university in decline – many stakeholders are adversely affected. In these rare cases some might need to merge or have their leadership rejuvenated. A reforming vice-chancellor can have a substantial effect on an institution and that often comes through in the data, albeit with a delay of about two years.”

Professor Houghton said if the government had a more focused funding model, which allowed some universities to specialise more in research and others in teaching, there could be even bigger efficiency gains at both ends of the education/research spectrum.

Professor Houghton says his research shows some individual universities have made a massive improvement in performance.

Emeritus Professor Keith Houghton will present the latest university efficiency report in full at The Australian Financial Review Higher Education Summit on Tuesday and Wednesday. 

There is growing anticipation that the federal government’s response to the Universities Accord review’s final report will come soon. Given this and the fact that the budget is less than a month away, it is timely to review one of the final report’s key insights.

Recently released analysis finds that one large Group of Eight university outperformed other public universities in its research and education productivity outcomes during the pandemic.

The joint and common cost problem arises where there are two or more outputs that arise from costs that are shared in the production of these outputs. In many situations, the ability to assign costs to these two or more outputs is not complex. But there are instances where it is highly complex. In these situations, there is a need to use advanced analytics to provide a valid and reliable estimate of costs.

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