Unis must be run like a business, whether academics like it or not

Clark Kerr, the renowned president of the University of California, once joked that a university is “a series of individual faculty entrepreneurs held together by a common grievance over car parking.”

Apart from their titles, the professor of neurosurgery has little in common with the professor of cultural studies.

Their disciplines are worlds apart, their priorities often clash, and yet the president or vice-chancellor must somehow reconcile them — while also placating governments, students, unions, alumni, and employers.

This is the predicament facing vice-chancellors at the University of Technology Sydney and the Australian National University, who are announcing job cuts amid declining revenues.

The staff unions are mobilising, newspapers are lamenting, and politicians are hand-wringing. But anyone who has run a university knows the arithmetic is unforgiving.

For decades, international students have been the higher education sector’s financial lifeline. They paid higher fees than local students, they kept the lecture theatres open, and they provided revenue for research. Governments were perfectly content to let universities balance their budgets this way.

Then came COVID, followed by visa slowdowns and sudden policy reversals, and the business model that had sustained entire institutions was suddenly crumbling. Vice-chancellors were left holding the bag.

Universities have lofty purposes, but universities are businesses. They purchase equipment, consume supplies, and employ labour to create products and services, which they sell at a price.

If their income fails to exceed their expenditures, then universities go broke. In short, they have all the characteristics of a normal business.

Yet to many academics, treating a university as a business is a kind of heresy. Suggest that revenues must match expenditures, and the vice-chancellor will be accused of ‘neo-liberalism’ or some other thought crime.

But accounts, unlike ideologies, must add up.

Balancing the books is harder than it looks. Academic research is expensive, and most research papers are rarely cited.

Teaching is costly too, structured around one of the shortest working years in the economy.

Long, languid summer breaks leave expensive buildings standing empty. Imagine a hotel that closed for a third of the year but kept all staff on full pay.

And productivity gains are unknown in universities. It takes the same amount of time to deliver a one-hour lecture today as it did centuries ago when universities were founded.

The government does not make the vice-chancellor’s job easier. Universities are Australia’s most over-regulated industry. Ministers turn over frequently; I dealt with 15 of them during my career. Not one could resist tinkering with the system.

One week, universities are told to produce job-ready graduates; the next, to defend free speech; the next, to be commercial innovators or regional job creators.

Tertiary education ‘commissions’ are created, disbanded and then created again. The rules change constantly, funding formulas are rewritten, and reporting requirements multiply.

Universities are like Lego in the hands of a child — forever pulled apart and reassembled in new shapes, never left to settle.

Is it any wonder, then, that vice-chancellors fall back on the only lever still available: staffing levels?

It is not that they enjoy cutting jobs. Quite the opposite. Vice-chancellors know each redundancy means hardship for colleagues and disruption for students.

But ignoring financial reality does not pay the bills. Unlike governments, universities cannot print money.

Of course, staff will protest, and unions exist to defend their members. But the public should not confuse understandable dismay with evidence of managerial malice.

Vice-chancellors are not villains twirling moustaches while gleefully slashing budgets. They are closer to airline CEOs: everybody insists on cheap fares, no cancellations, and world-class service — but nobody wants to pay what it costs to deliver them.

The truth is, we cannot have world-class universities on the cheap. If we want institutions that produce cutting-edge research, train skilled graduates, and contribute to national life, we must allow them to raise the money they need.

Pretending otherwise simply guarantees another cycle of boom, bust, and recrimination.

Right now, staff see livelihoods at risk, students see disruption, and vice-chancellors see balance sheets collapsing. Everyone is right — which is precisely why nobody is happy.

Clark Kerr once observed that of all the organisations ever created, the university is the hardest to manage. Having been in the job, I can confirm he was right.

Vice-chancellors walk a tightrope between competing, often contradictory, demands. They will never please everyone.

But unless we let them make hard decisions — even unpopular ones — Australia’s universities will soon have no staff, no students, and plenty of free parking.

Emeritus Professor Steven Schwartz AM is a Senior Fellow of the Centre for Independent Studies, and the former Vice-Chancellor of Murdoch, Macquarie, and Brunel University of London. 

Image by Jason Tong