University strategy in an age of uncertainty

• Paul Clark was until recently the Vice-President (Strategy) at University College London, and before that the Chief Executive of the Higher Education Statistics Agency. He is currently working as a consultant and strategy adviser.

That the operating environment for UK universities is more uncertain than ever is now an accepted truth. The reasons for this are also well-known: domestically, universities face the ongoing erosion of their funding base, a challenging policy environment, and political inaction in the face of competing public sector priorities (as just exemplified in this month’s budget). Globally, the international student market for UK higher education is proving more volatile, with conflicting Government policies, anticipated drops of 40 per cent or more in applicant numbers from some overseas markets, global competitors stepping up their activity, and geopolitical uncertainty driving inflation in the cost base.

It would be tempting in such an environment for university leaders and strategists to become defensive, focusing only on the immediate term. This would be a mistake. With the right approaches and adaptations, universities can pivot their strategic planning processes to navigate effectively through this uncertainty and identify the opportunities that will drive growth in the future, as also evidenced by the approaches to change management set out in the recent HEPI report by Paul Woodgates: Change by design.

Strategy is a conversation not a broadcast

To achieve such a switch, universities will need to move away from the traditional, cyclical, highly structured approaches to strategic planning, to processes that more closely resemble an ongoing data-driven dialogue with academic and business units throughout the year. This requires organisation-wide commitment, led from the top.

By adopting the five approaches outlined below, university leaders and strategic planners can support this effort and strengthen the chances of success.

First, the language of probability needs to become the currency of strategic planning. All too often, there is a reassuring but false certainty in annual plans and targets, where a probabilistic approach would better serve the institution and help manage risk. For example, most universities will have a portfolio of major transformation projects in train across the organisation, but research shows that fewer than 10 per cent of these will deliver their outcomes on time and on budget. This leads to unplanned cost overruns, a failure to deliver benefits, and a lack of trust in the institution. Similarly, universities are heavily dependent on their student number plans to deliver robust financial forecasts, while market volatility makes it harder than ever to land accurately on a single recruitment target each year.

In both cases, it would be better to assess the probability of landing within a particular range. For major projects, this could take the form of assessments such as: ‘projects similar to the one we are implementing over-ran by x months in y cases, leading to average cost overruns of z per cent. We therefore need to plan on this basis’. For student number plans, this approach would involve evaluating the probability of landing on a specific target number in a given year, with a range on either side, based on a detailed analysis of previous years’ performance, the impact of market conditions, and student preferences. This approach would lead to the practical benefits of better quantifying the financial risk, building delivery confidence, and improving contingency planning.

This approach may already be adopted in some institutions. If this is the case, it would be valuable to the sector to share experiences of what works and what doesn’t so that good practice can be more widely adopted.

Better to be roughly right than precisely wrong

Second, ‘good enough’ data needs to be made accessible and shared as widely and frequently as possible. In fast-paced environments, decisions need to be based on data and evidence that are high-quality but imperfect. Data is essential in this situation to temper the tendency to make decisions based either on gut feel or on a past that is no longer relevant. However, the temptation to seek perfection in the data also needs to be avoided, otherwise decision-making will become too slow and institutional leaders will become frustrated. Data professionals who understand the data and are in close and frequent contact with senior leadership can manage the balance between timeliness and perfection in the data by rapidly iterating their models and presenting key points and messages in simple, standardised, and accessible formats. This will also require an agile approach to governing and managing the data, often entailing rapid cross-functional coordination, for example, linking real-time, in-country intelligence regarding changes in applicant behaviour by geography with macro and competitor data to assess what is a blip and what is a trend in international student recruitment – an area of particular concern for UK institutions at the moment.

Third, strategists and leadership teams need to look simultaneously through a microscope and a telescope. The microscope focusses on the here and now – what is happening front and centre, and what decisions need to be made as a result. For example, do we cut costs now or redeploy resources? But at the same time, one eye needs to be looking at the future through a telescope, so that the impact of short-term decisions can be assessed over a longer time horizon. Planning simultaneously over multiple time horizons ensures that a focus on future growth and opportunity is retained while addressing urgent short-term issues. This in turn improves the quality of strategic decisions and increases the chance of institutions emerging stronger in the future.

Fourth, universities should practice agile governance. Bureaucracy in universities tends to accrete over time and become set in stone. However, uncertain times require an agile approach to governance, in which decision-making structures are designed according to the immediate need, are quick to assemble, make decisions rapidly, and are decommissioned once their purpose is served. This can be done without having to change existing structures, which can be cumbersome and time-consuming to adapt. Examples of agile governance groups include a strategy or portfolio board for managing time-limited strategic projects, portfolios for assessing competing capital priorities and allocating resources, and cross-functional groups looking at transformation opportunities. To secure buy-in, agile governance needs to be open, transparent, and cross-functional.

Again, these practices may already be being used in some quarters. Can practitioners share advice with the rest of the sector on using agile governance to deal with strategic uncertainty?

Fifth, beware the Concorde fallacy. Once a financial commitment to a project has been made, there is a tendency to want to stick with it even if a change in circumstances makes it no longer economically or strategically the right thing to do. The argument runs along the lines that since x amount of funding has already been spent, the project needs to be seen through, otherwise that money has been wasted. However, this is a fallacy, as the British and French Governments could tell you, based on their experience of funding Concorde. Substantial amounts of public money continued to be ploughed into the Concorde project long after the evidence showed that it wasn’t an economically viable or worthwhile pursuit. Capital in universities is finite and needs to be allocated carefully. This involves redeploying to emerging growth opportunities, being bold enough to write off sunk costs, and relinquishing projects that are no longer viable as a result.

The reality of leadership is making decisions with imperfect information

Uncertain times require a flexible response. They also require leaders to make bold decisions supported by systems and structures that are dynamic, transparent, and data-driven. This applies as much to strategic planning as to any aspect of university operations, arguably more so given its potential to identify the opportunities for growth and sustainability that will balance the current risks and ensure that institutions can thrive in the future. Deploying the five measures described above will increase the chances of successfully navigating through this volatile period.