Getting more value for money
Wellington Group Meeting,
54th SHEEO Annual Meeting
Chicago, July 18 2007
Don Thornhill
Ireland
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Why are we concerned with VFM?
Financial constraints/revenue
limits
Opportunity costs
Accountability to stakeholders
– especially for public funds
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Potential gains
and risks
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Some potential gains
Clarity of purpose among all actors in
the HE space
Greater effectiveness and more VFM
Diffusion of good practice
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Some potential risks
 Focus on inputs
 Focus on the measurable and overlooking
the important
 Race to the bottom?
 Disincentives to experiment and
innovation
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Focus on productivity -1
Yes … but be wary of the limitations!
Origins in statistical analysis of
homogeneous economic sectors –
agriculture and traditional
manufacturing
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Focus on productivity -2
Not so robust when dealing
with product and process
differentiation, quality
differences and heterogeneity
….and with multiple outcomes
and objectives
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But worth the struggle!
Has the merit of getting
us to focus on added
value
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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?
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HE a desirable good
 Economic
 Social
 Individual
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Economic
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Economic
HE driver of economic performance
Critical to competitiveness and
comparative advantage
Human capital
Knowledge capital
Innovation capacity?
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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
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Higher education - our
systems, institutions and
personnel - the key agents
for delivery
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Challenge for system design
Relating inputs to outcomes
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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
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As well as measuring (ideally
before we do) we need to pay
attention to purpose, to
form (structures and
implementation mechanisms)
and to measurement
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But key agents have different
purposes!
Implementation agents
(higher education institutions
and faculty/ academics) have
different (and essential)
priorities and concerns
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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?
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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
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Features of a market approach
•
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Choice
Competition between providers
Price signals
Product differentiation
Incentives (positive and negative) for performance
Responsiveness to market signals
User pays
…………..
…………..
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Inference?
• Use market where possible –
and reasonable
• Make maximum use of
“proxy market” instruments
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Proxy market approach
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Direct
State funding for
HEIs
Performance
related “core”
funding
Competitive
funding new
initiatives
Experimental
funding
Bedrock funding
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Research
funding
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
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2. Performance related element in
core funding
 focused on very limited number of
public policy objectives

ideally, benchmarked

not destabilising from year to
year
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3. Major new initiatives
 competitive funding
 open and transparent
process
 expert assessment final
 external membership
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4. Experimental and innovative
programmes
 discretionary funding

allow for experimentation

review

abandon or mainstream
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5. Research funding
 non-competitive “foundation funding”

competitive performance-based
institutional funding

competitive funding for research
projects and grants (fellowships
etc.)
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In each case
1. Monitor, measure, review
and appraise
2. Use fit for purpose metrics
3. Try to relate inputs to
outcomes where possible
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Response: Investing in a plan
Stakeholders advise on priorities:
Government (TES), learners,
employers, iwi, ITOs, etc
Quality
assurance and
monitoring of
provision and TEO
TEC establishes investment
approach (IG, EBs)
TEO develops plan to meet
needs as basis for iterative
discussions with TEC
TEO works with regional and
national stakeholders (business,
communities) to identify need,
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TEC monitors
outcomes
TEC and TEO agree outcomes
for the approved plan, areas
for capability building, etc,
and TEC decides funding
TEC engages with
TEO in relation to
contribution to
network of
provision, shifts,
performance of
TEO to date, etc
Some guidelines?
Reflect on
• Purpose
• Conceptual underpinning of system
• Form – structures and delivery
mechanisms
• Measurement/ comparison/
benchmarking
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Otherwise
Risk of
rewarding A
when we want
B!
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