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Road map

“The challenges of IR to respond pro-actively to new business information needs of Higher Education Institutions and thus contribute to financial effectiveness and sustainability.” An entrepreneurial perspective MJ Brooks. Financial trends in HE

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Road map

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  1. “The challenges of IR to respond pro-actively to new business information needs of Higher Education Institutions and thus contribute to financial effectiveness and sustainability.”An entrepreneurial perspectiveMJ Brooks

  2. Financial trends in HE Research report: Financial Attitude vs Entrepreneurial Intensity The IR role Road map

  3. Internationally a growing number of countries are facing challenges in financing tertiary education, inter alia because the demand for education beyond the secondary level is growing at a higher rate than the ability or willingness of governments to provide adequate public resources to meet this demand. (Salmi and Hauptmann (2006:3). HE Financial challengesDecrease in government spending

  4. 4% of total state finance in 1999 to 2.5% in 2007 Higher Education South Africa (HESA) 0.86% of GDP in 1986 to only 0.66% in 2006 Steyn and De Villiers (2006:2) HE Financial challengesDecrease in government spending on HE (RSA)

  5. The balancing act • Increase in fees • More students • More student debt

  6. Real tuition fees per WFTES (in constant 2000 prices) increased from an average of R5 896 in 1987 to R8 535 in 2003 – an increase of 45%, (Steyn and de Villiers, 2006: 8) Increase in student numbers. The CHE (2009:2) reports that the total enrolments of HE institutions in South Africa grew at an average annual growth of 5.36% from 1991 to 2005. HE response to financial challenges Student fees and Student numbers

  7. The higher costs of HE lead to an increase in student debt (Steyn and de Villiers, 2006: 9) and ultimately government had to increase it’s contributions to financial needy students. The National Student Financial Aid Scheme (NSFAS) was introduced in 1995. Impact on HE sector Student debt

  8. HE response to financial challenges Income streams Source: HESA (2009)

  9. “Since 1990 the number of for-profit, degree-granting college and university campuses in the United States has quietly increased by 112 percent, from approximately 350 to 750 campuses. During the same period at least 200 non-profit colleges closed their doors”. Ruch (2002) HE response to financial challenges Privatisation

  10. The balancing act PRESSURE ON …

  11. How must the institution respond to these challenges? Will a good entrepreneurial orientation help ? Does internal financial policy and procedures have an impact on the entrepreneurial attitude of the organisations? HE Financial challenges

  12. HYPOTHESIS “There is a positive relationship between the financial attitude (FA) and the entrepreneurial intensity (EI) in the core business (first and second income) activities of South African universities.” Research study: Financial Attitude (FA) vs Entrepreneurial Intensity (EI)

  13. Research study: Financial Attitude (FA) vs Entrepreneurial Intensity (EI) Research methodology • Five universities • Faculties of Economic and Management Sciences • Indicators were identified • Qualitative and quantitative • Completed at end of 2007

  14. Research study: Financial Attitude (FA) vs Entrepreneurial Intensity (EI) Financial management in HE Research studies used to build a measuring instrument for financial attitude in HE: • Criteria for fair budget allocation models (Magner et al (2006) • The General Fund Budget model VS Incentive/Performance based budget model (Hearn, Lewis, Kallsenn, Holdsworth, 2006; Whalen (1999), Bruiniks en Kvavik (1999))

  15. Financial Attitude (FA)

  16. Research study: Financial Attitude (FA) vs Entrepreneurial Intensity (EI) Entrepreneurship “Entrepreneurship is the process of creating value by bringing together a unique package of resources to exploit an opportunity”. Stevenson et al, 1999

  17. Research study: Financial Attitude (FA) vs Entrepreneurial Intensity (EI) Entrepreneurial Intensity (EI) A function of the degree of entrepreneurship and the frequency of entrepreneurial activities. Morris and Kuratko (2002:48)

  18. Research study: Financial Attitude (FA) vs Entrepreneurial Intensity (EI) Degree of entrepreneurship

  19. Research study: Financial Attitude (FA) vs Entrepreneurial Intensity (EI) The entrepreneurial matrix Morris and Kuratko

  20. Entrepreneurial Intensity (EI)

  21. Publication growth rate in Economic and Management Sciences for five selected institutions

  22. Cost-effective indicators in Economic and Management Sciences of five selected institutions

  23. FA vs EI – Qualitative study

  24. FA vs EI Quantative study Entrepreneurial Intensity (EI) Financial attitude (FA)

  25. Academic institutions that are managed on profit related financial business principles generally show higher entrepreneurial behaviour in the main stream activities Entrepreneurial behaviour is a far more complex phenomenon than a two variable problem – even more so for academic institutions Summary of results

  26. HE Namibian case study

  27. Strategic role Entrepreneurial perspective Financial focus Systems approach HE Sustainability: What is the role of IR ?

  28. Trends and changes in the external environment New public policies, legislation, national and governmental issues World economy, HE funding trends Public attitudes, demographic changes Latest technology, skills requirements and newest approaches. Where are our strengths, what must we keep on doing, stop doing. Help to identify suitable, realistic and clear goals which are easy to manage. Strategy is not complicated – we make it complicated. Don’t just measure things because they are easy to measure Manage in real time Ensure alignment of strategies and objectives Role of IR – Strategic role

  29. Market analysis: Any new markets te enter / exploit? Where are the gaps in skilled labour and knowledge? How to engage with academics to find and exploit new opportunities Cost analysis / Break-even-points / Economy of scale Quantum upgrade of facilities (eg new lecturing halls) – how much? Give direction with the Return On Investment dilemma – when is it suitable to bridge a gap in funding by usings loans. Role of IR – entrepreneurial perspective

  30. Role of IR – the financial perspective

  31. Research study: Financial Attitude (FA) vs Entrepreneurial Intensity (EI) Financial management in nonprofits “Twenty years ago, management was a dirty word for those involved in non-profit organizations. It meant business, and nonprofits prided themselves on being free of the taint of commercialism and above such sordid considerations as the bottom line. Now most of them have learned that nonprofits need management even more than business does, precisely because they lack the discipline of the bottom line”. Drucker (1989:89)

  32. Need answers related to: Sustainability Real full cost Financial/budget/allocation model Capacity and optimalisation of resources Quality Role of IR – the financial perspective

  33. System approach Integrated information systems to ensure sound business information that integrate all the business functions of the institution Align strategic focus of institution with budget Very close relations with business functions: Finance, Personnel, IT, Quality Control, Registrar, Student recruitement, Student fees, Faculty management, Top management team, HR, Legal, Facility Management, Timetables, Marketing, etc. Technology is not a solution.Effective information systems = technology+people+process. Role of IR

  34. Conclusion • We are heading for turbulent financial times • Only institutions with sound financial discipline and sustainable plans will survive. • Entrepreneurial behaviour can be enhanced by good financial attitude. • IR has to be pro-active to help there institutions to find answers on these burning questions.

  35. DISCUSSION / QUESTIONS

  36. Brooks, M.J. 2007. Die invloed van finansiële bestuur op entrepreneuriese gedrag in die kernbesigheid van akdaemiese instellings. Research report. Business School, University Stellenbosch. Collins, J. 2005. Good to Great and the Social Sector. Colorado, Without Express Permission. 2006. Council of Higher Education (CHE). 2005. Public funding of higher Education in South Africa by means of a formulae. Research report of De Villiers, AP and Steyn, AGW as prepared for the CHE. De Villiers, AP and Steyn, AGW. 2007. The changing face of public funding of higher education, with special reference to South Africa. SA Journal of Economics 75:1, 136-154.  “Exploring…Third Stream Income for South African universities – Conference.” March 2009. Conference report on third stream funding. HESA/The Kresge Foundation/The South African Institute of Advancement. Higher Education South Africa (HESA). March 2009. Tuition fees: Higher education institutions in South Africa. Kruss, G. 2005. Working partnerships in higher education, industry and innovation: Financial or intellectual imperatives. commPress: Cape Town, South Africa. Ruch, R.S. 2002. Higher Ed, Inc: The Rise of the For-Profit University. USDLA Journal, February, Vol16 No2. Salmi, J. and Hauptmann, A.M. 2006. Innovations in Tertiary Education Financing: A Comparative Evaluation of Allocation Mechanisms. World Bank Education Working Paper Series. Washington, D.C.: The World Bank. Steyn, A.G.W. and de Villiers, AP. 2006. The impact of Changing Funding Sources on Higher Education institutions in South Africa. Higher Education Monitor (4). Council on Higher Education. UNESCO Insitute of Statistics. 2004. Global Education Digest 2004: Comparing Education Statistics across the World. Montreal. Bibliography

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