Universities as a business – but which business

Last week I gave a presentation to new academic staff at CQU, a part of their “induction” process. The presentation was titled Some possible futures of e-learning: Lessons and enablers.

The basic premise was something along the lines

  • Current e-learning practice is far from good.
  • Future e-learning practice will look nothing like it.
  • What are some the contextual factors, the lessons and the enablers that might guide the creation of that future practice?

One of the lessons I proposed was that the idea of the “University as a business” was a bit limited.

University as a business

The literature in and around higher education has, for at least 20 years, included a large percentage of discussion that universities should be run as businesses. Actually, I’m pretty sure I’ve seen references that this has been a complain, typically from business and politicians for a lot long than that.

This following quote summarises much of the current rationale behind that idea (Dodd, 2004)

Declining revenues and public support … coupled with increased competition, performance requirements, constituent accountability, globalization and changing political climates. All of this has forced a new reality for higher education … one that requires greater efficiency, effectiveness and business-like processes.

So if we adopt business-like processes then universities will be better value for money and all will be right with the world.

The main problem I have with this is that not all businesses are the same. Which type of business should a university borrow its practices from?

Types of businesses

I don’t believe it is possible to treat all businesses the same. The strategies and tactics required to run IBM are different from those to run a supermarket chain, a local corner store or a professional sports team.

I also don’t believe that each business or organisation is so unique that it needs to be entirely individually catered for. I think/hope that there is a useful middle road. McKelvey & Aldrich (1983) seem to agree, at least the quote in Rich (1992) indicates this

Classifying organizations into types presents an alternative to the idea that organizations are either all alike or are all individually unique.

University as a professional service firm

An ex-Harvard Business School professor, David Maister has made a name through working with professional service firms and is the author of the book Managing the Professional Service Firm. His description, from this book, of the professional service firm has, for me, striking similarities with universities.

Two aspects…create the special management challenges of the professional service firm. First… a high degree of customization in their work … Second, … strong component of face-to-face interaction with the client

Straight after this description comes the quote which strikes at the heart of the current “efficiency” emphasis in university management.

Management principles and approaches from the industrial or mass-consumer sectors, based..on standardization, supervision, and marketing of repetitive tasks..are not only inapplicable…but may be dangerously wrong.

What does that say about the adoption of such practices as quality assurance and Enterprise Resource Planning (ERP) systems by universities?

The Oxford Said Business School has an article online about professional service firms.


David Dodd (2004). Decisions, data and the universities as a business. College Planning & Management

B McKelvey and H Aldrich (1983) Populations, natural selection, and applied organizational science. Administrative Science Quarterly, 28: 101-128

Philip Rich (1992). “The Organizational Taxonomy: Definition and Design.” The Academy of Management Review 17(4): 758-781

4 thoughts on “Universities as a business – but which business

  1. I think you need to distinguish the teaching and research functions of a university. The teaching function is repetitive (at least at undergraduate level) and so are most of the back office functions like enrollment, fees and accomodation. I would have thought that ERP systems are just the thing. I once audited a University which didn’t use ERP, and it was a complete shambles.

    The similarity to a professional services firm is far from obvious to me. I would have thought the universities would be much better off developing their own business models.

    There’s no doubt they need business disciplines but these are only going to come once they are out of state ownership. Trying to make a bureaucracy behave like a business never works. It just adds more layers of bureaucracy.

  2. G’day,

    Thanks for the comment. I have to admit that the above is a work in progress.

    But the main problem, I was attempting to address is the tendency for universities to adopt simplistic interpretations of business practices without really questioning just which is the most appropriate. It is essentially the problem of trying to make a bureaucracy act like a business.

    With respect to ERPs, I do question whether they can automatically make a place not a shambles. Many of the Universities I’ve seen haven’t really been using ERP systems all that well, the technology isn’t a solution to bureaucracy.

    Also, I think you can already see the writing on the wall with Universities questioning whether they can really afford the business model encapsulated by most ERPs.

    The last point is whether or not teaching is repetitive. In a lot of universities, it probably is. Recent experience at CQU over the last 10 years, which has been feeling the brunt of many of the factors I mentioned (e.g. globalisation etc), is that it shouldn’t be. That teaching requires, in some cases, as much customisation as research.

    Another response is that, in his book, David Maister does mention that professional service firms can encompass a range of tasks with varying levels of customisation. One of the problems such firms have to solve is what is the right mix of such tasks for them, and how best to handle that mix. To some extent, you can see this at different universities that have made decisions about the level of research they perform.

    Still early days in formulation. Actually, on the question of whether universities should formulate their own. This is a strong possibility. BUt I also think it is easier for folk to adopt and change existing models than creating an entirely new model from scratch.


  3. You’re certainly right that ERP is not an automatic solution. If it’s done badly it may well make things worse, although I should point out that this is true of ERP in a widget factory just as much as in a University.

    I certainly take your point about blind acceptance of an alien business model.

  4. For various reasons based on my experience at CQU it’s going to be very hard to convince me of the value of ERPs in the university context, especially for an organisation that is ill-defined and rapidly and continually changing. To some extent there is a need to separate out how it is implemented and the notion of an ERP. However, to some extent, I believe that the nature and expense of ERPs influences how it is implemented.

    Some of my previous writings give some insights into my views

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