European Universities
Diversifying Income Streams
Thomas Estermann
Head of Unit
Governance, Autonomy & Funding
“Towards financially sustainable universities II:
Diversifying income streams”
University of Bologna
13-14.09.2010
Pillars of financial sustainability
Financial
sustainability
1
•Identification
of costs of
activities and
projects
• Diversified
income
structure
• Sufficient &
sustainable
public
funding
EUDIS: diversifying income streams
 State of play of income diversification in European
universities
 Role of public authorities:
• Regulatory framework
• Funding modalities
• Incentives
 Proactive universities:
• Strategic drivers for income diversification
• Challenges and obstacles
• Success factors
EUDIS data collection
• Online questionnaire (Summer 2009)
• 3 seminars (2009-2010)
• Site visits & case studies (2009-2010)
• Additional questionnaires (2010)
…4…
Monitoring of
the economic
downturn
Income diversification
Generation of additional income (through new or
existing funding sources) that contributes to balancing
the income structure of the institution.
Increase of existing
funding
Public sources
Project/
Block grant/
targeted
line-item
funding
Increase in core
public funding Diversification
Creation of new funding
stream
Diversification of public funding
Private sources
Diversification
Diversification
State of Play
Average income structure
4.50%
3.04%
4.14%
Public funding (national and
regional)
Student contributions
6.48%
Funding coming from contracts
with business sector
International public funding
9.05%
72.78%
Philanthropic funding
Service-related income
Income structure – direct public funding
Block grants
• Most countries deliver core funding through block grants
• Funding formulae tend to be mostly based on input criteria –
however, increased use of output criteria => influences
university’s strategic choices (RAE exercise in the UK)
Competitive funding
• Increasingly relevant for universities in context of stagnating
budgets – success rate may even be criterion for funding formula
• Requires universities to invest in their research support capacities
Targeted funding
• With economic dowturn: some authorities tend to cut in block
grants and re-introduce targeted funding geared towards the
achievement of specific objectives => restricts auonomy
Alternative income streams
Alternative income streams
Contracts with the private sector: 5-7% on average
but wide range (up to 25%)
Philanthropic funding: 3-4% - importance of
competitive funding from foundations
Income-generating services: 4% - UK leader –
facilities & catering; consultancy highest sources
Financial activities
International public funding (mostly EU)
Alternative income streams
International public funding: mostly made up of EU funds
Increasingly complex financial management
Expectations on income streams evolution
The sources that are most widely expected to increase are:
80%
70%
74.07%
67.31%
60%
65.00%
62.82%
61.25%
Contributions
(fees) from
International
students
Income generated
by lifelong
learning activities
50%
56.92%
40%
30%
20%
10%
0%
European Union
funding
Philanthropic
income from
alumni
Contracts with
business sector
…13…
Philanthropic
income from
foundations /
charities
(including
competitive
grants)
Expectations on income streams evolution
50%
45%
40%
Public funding in its different forms is the source that is most
widely expected to decrease:
43.04%
35%
30%
25%
30.77%
28.57%
26.53%
20%
18.18%
15%
16.36%
10%
5%
0%
Teaching: national Infrastructures /
Research:
Teaching: regional Infrastructures /
Research:
public funding facilities: national national public public funding facilities: regional regional public
public funding
funding
public funding
funding
…14…
Crisis Monitoring
Data collected is often partial, not considering:
 Increase in costs of activities and changes in inflation
Trends represent 6 categories:
MAJOR CUTS: Latvia, Italy, Greece
CUTS 5-10%: UK, Estonia, Ireland, Lithuania, Romania
CUTS 0-5%: Czech Rep., Poland, Croatia, Serbia, FYROM
NO DIRECT CUTS YET: Norway, Sweden, Finland, Denmark,
Netherlands, Switzerland
 GOVT. COMMITMENT DISCARDED: Hungary, Austria, Belgium (NL+FR
com.)
 GOVT. COMMITMENT UPHELD: France, Germany (some Länder)
,Portugal




…15…
The role of public authorities
Autonomy as a pre-requisite
 Correlation between level of financial autonomy and degree
of diversification (share of alternative income)
 Financial autonomy is key to allow university to develop
partnerships, borrow from banks, create satellite entities
 In turn, a diversified funding base enhances autonomy
(reduced dependency towards the funder)
 Authorities see autonomy reform as a key driver for income
diversification
 BUT not enough: needs to go with appropriate support for
skills and structure development
Funding modalities
Impact income diversification:




Funding formulae
Competitive project funding
Excellence schemes
Targeted funds
BUT no sustainable income diversification if:
 Excessive complexity and administrative burden
 Extreme complexity of European funding schemes
 CO-FUNDING requirements
Co-funding
Requires the university to self-finance part of the activity
– in effect does not drive diversification as universities will
take from the core resources
Typically applies to competitive funding, notably at EU level
But increasingly used by main public authorities
Universities with diversified income structures are more
confronted to co-funding: this is not sustainable.
Co-funding
1.35%
Only for funding coming from European
schemes / other international sources
14.86%
28.38%
For a minority of the funding coming
from public sources
For most of the funding coming from
public sources
16.22%
For the funding coming from private
sources
39.19%
Both for public and private funding, this
is common practice
Measures taken by public authorities
Reforms increasing the degree of
autonomy of HEIs
55.9%
Specific funding for lifelong learning
activities
23.5%
48.5%
Tax exemptions
45.5%
Favourable regulations on intellectual
property rights
45.2%
Matched funding schemes
31.1%
0%
10%
existing or under implementation
20%
7.4%
44.1%
4.5%
50.0%
12.9%
41.9%
8.2%
30%
40%
20.6%
60.7%
50%
60%
70%
under consideration
80%
90%
no
100%
Recommended measures
Matched funding schemes: instrument with much potential,
under-used in Europe
Improved funding modalities:
 Simplification of funding schemes
 Funding on a full cost basis
 Support to development of full costing in universities
Improved framework conditions – autonomy and
governance reforms
Support to leadership development and professionalisation
of management
Universities
What drives institutions to diversify?
General economic context
Risk management and dependency on state funding
Mission expansion
 Additional funds to exisiting activities
 Funding new activities for which there is no external support
Need for flexibility and “unconstrained” money
Enhancing competitiveness
 Academic prestige of certain competitive schemes
Internal obstacles
Lack of information/awareness among academics
80%
Divert academics from core mission/activities
72.84%
Internal structure/Lack of specific structure
67.86%
Lack of managerial expertise/competence
67.07%
Negative attitudes towards diversification
66.67%
Limitations set by law
61.45%
Uneven distribution of possibilities in the institution
60.53%
Negative attitudes towards relations with business
59.52%
51.25%
Conflict with academic ethics
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Measures taken by universities to support
income diversification
Creation of spin-off companies & science parks
70.24%
Orientation towards lifelong learning activities
65.48%
Internal funding allocation mechanisms
64.29%
Training/information campaigns for staff
58.02%
Creation of development office/equivalent structure
55.81%
Creation of foundation
49.41%
Internal reward mechanisms at individual staff level
34.15%
Internal reward mechanisms at faculty level
29.63%
Market new activities
28.57%
0%
10%
20%
30%
40%
50%
60%
70%
80%
Integrating income diversification in the
university’s strategy
1. Identify the strengths & specificities of the university to
develop a branding strategy – strategic approach
2. Analyse perspectives for income generation of your
activities
3. Invest in people, leadership and management
 Professional HR & staff recruitment – bringing experts in, including
from outside higher education
 Investment in new positions at all levels (from research administrative
support to fundraising director and vice-rector for enterprise)
 Define leadership roles, both academic and professional
4. Communicate
 Internal (creating the case for change and raising awareness)
 External (projecting the brand)
Integrating income diversification in the
university’s strategy
5. Change structures and organisation
 Creation of specific units (Advancement/fundraising offices)
 Reorganisation of governance structure or specific competences for
groups within governing bodies
 Investment in information tools to guide the process
 Good data and reporting/monitoring systems
6. Provide internal incentives
 Individual rewards and incentives – eg. promotions, remuneration
 Faculty/departmental rewards –eg. commercialisation revenue
apportionment
 Seed money for new initiatives
 Making things easy for academics through better support
In a nutshell:
Integrate income diversification in
your strategy in line with missions
and identity
Invest in people: training of
academic and administrative staff,
establish strong & stable
leadership and management
"in" strategy
Incentivise your faculties & staff
to take an active part in income
diversification
Interact smartly:
set up professional stakeholder
management and communication
strategy
All actors need to work together!