New Zealand’s HE landscape is in a strong position to unlock value and tackle shared challenges
In this article, University of Waikato Finance Director, Anthony Robertson, discusses the value of Benchmarking institution performance, and we examine the conditions that exist for New Zealand’s universities to take full advantage of their Performance Benchmarking participation.
Before joining University of Waikato as Finance Director, Anthony Robertson, had worked in the tertiary sector in the UK as Director of Finance and then Vice Principal Finance and Resources at Swansea College, which is when he first engaged with the Financial Benchmarking approach. Firstly, being new to the sector, the benchmarking provided an understanding of the financial drivers of Swansea College and their relative performance against others in the sector. Then, Swansea College’s 2010 merger with Gorseinon College created a single further education college for the region, and similarly to many institutions, Swansea College sought a way to compare the financial performance of the two institutions, and get a feel for how the new merged structure might work financially.
The value of Benchmarking to Finance leaders
When Anthony first moved to New Zealand he was CFO at Te Whare Wānanga o Awanuiārangi, an indigenous tertiary education provider. Whilst experienced in tertiary education, being new to the wānanga sector Anthony was keen to understand the financial model. He was pleased to learn that the wānanga sector also utilised the same Tribal benchmarking that Anthony had been used to. This enabled him to quickly understand the financial drivers of the organisation and add value.
Anthony’s next role was at Bay of Plenty Polytechnic, another sector in New Zealand that utilised the Tribal Benchmarking tool. Not only was he able to utilise the tool within the organisation – he was involved in the 2016 merger of Bay of Plenty Polytechnic and Waiariki Institute of Technology, when again he used Financial Benchmarking to inform decisions around the cost-base, right-sizing, efficiencies and effectiveness of the merged institution. So, he certainly has a strong appreciation of the value of benchmarking in tertiary institutions.
“I've been across the three different types of tertiary institutions in New Zealand, and I think it is the best like-for-like comparator that I've seen in the UK or New Zealand. And that’s because it's independent, and it categorises upon a particular, consistent structure that can be applied to all institutions in order to compare like-for-like.”
When he moved to New Zealand, Anthony naturally wanted to get a feel for the drivers of financial performance, and as such used Financial Benchmarking to develop a greater understanding of the levers for performance. Being familiar with the tool itself certainly helped, and, combining that with his own spreadsheet model and analysis, was quickly able to scrutinise those levers and the underlying data. Being able to compare performance and levers over the years and against the sector meant he was able to quickly get under the skin of the university and start making informed decisions based on clear evidence.
“Very quickly it gives me insights into the new organisations. I've only been in eight months, but within the first 3-4 months at University of Waikato, by using the benchmarking information, I was able to confidently say this particular factor is what's driving that particular aspect of our financial performance. So, I love it - I think it's a very, very valuable tool.”
Anthony explains what this means in a practical sense:
“It gets you to ask the question and point you to a particular place. It doesn't give you the solution, but what it does do is tell you where you're higher or lower than the benchmark, so let's have a look at that particular area. So, if we're running at a deficit, how does that deficit compare to other institutions’ deficit? Is it in teaching or support? If it's in support, which particular support areas? And I think it’s important to clarify, I'm not saying that we need to be like the benchmark – an average - but we do need to ask ourselves, why are we different to the average and is that giving us a bit of a benefit or otherwise?“
Without such hard evidence and granular analysis, institutions will often find themselves hearing similar narratives across the organisation. For example, if costs are high, teaching staff might say it's the support, and conversely support staff will point to the teaching costs – they may come up with their own information and narrative, comparing with static data from other institutions. But their comparison can be flawed because it’s not necessarily comparing like-for-like, or taking into account the context of the respective institutions; do they have a centralised or decentralised approach to support areas, do they have in-house student accommodation or not; have they got interest costs; have they got different grants that are coming in. In Anthony’s experience, that’s the kind of important detail that benchmarking irons out and narrows the focus for finance leaders, helping them in their decision-making.
The evolving role of Benchmarking in New Zealand TEC
In all instances Benchmarking is used to identify financial improvements that can lead to positive institutional change. In New Zealand, we have worked with the Tertiary Education Commission (TEC) for over 10 years developing the approach to help improve business process and educational outcomes from the $4 billion annual investment in New Zealand tertiary education.
All TEI’s participate annually, and now benefit from at least 5 years of data, and over 10 years for many. Not unusually, each institution receives their analysis as a whole, as well as each individual faculty, school, or department, providing comparisons year-on-year, and benchmarked against others in the sector and against relevant specific comparator groups such as metros or regional ITPs or UK universities. Where the approach has evolved, however, is in the introduction of qualitative measures – adding in the benchmarking of educational performance measures alongside the financial benchmarked data to give greater levels of insight into institutional performance.
New Zealand setting the bar for the conditions for success
Another nuance of the New Zealand approach is the openness to collaboration when it comes to the sharing of benchmarking analysis. Nine ITPs are already providing each other with “full” access to help them learn from each other. Sharing data helps these TEIs understand exactly where they may have opportunities for improving cost efficiency, as Anthony explains,
“One of the most the powerful things with benchmarking is finding out who the comparator institutions are and asking them what they're doing differently. We’re basically 80% the same, so it's asking the question, What levers are you pulling on to get that result?”
This level of sharing allows other institutions to see performance results across all areas of a TEI’s operation including individual teaching units. NB: It does not allow other institutions to have visibility of the underlying confidential source data.
Interestingly, this more collaborative model is also beginning to gather pace in the UK with a group of the region’s largest colleges adopting a similar approach to glean ever greater value from their benchmarking analysis. [You can find out more about the UK Large Colleges project here.]
An opportunity to achieve sector ambitions?
A November 2023 article, Professor Cheryl de la Rey, Vice-Chancellor at University of Canterbury (where Anthony believes benchmarking is leveraged in a similar way to his own approach) and Chair of the New Zealand Vice-Chancellors' Committee, discussed the need for any funding reforms to “unlock more value for the country, while simultaneously contributing to financial sustainability.” She warned against chasing organisational efficiencies at the expense of the actual value able to be unlocked by universities, going on to outline how any Higher Education Funding Review must satisfy not only financial sustainability goals, but also goals aligned with: protecting the core mission of universities – namely to generate world-class teaching and research; preserving core capability for the country – socially, culturally and academically; and avoiding uncertainty so universities are able to invest in staff, programmes of study, technology systems, and built infrastructure.
In a separate article responding to the Government’s plans to address university and science system challenges, Chief Executive of Universities New Zealand, Chris Whelan, echoes the view on unlocking value, “Our universities and their role in the wider science system are the key to navigating many of the challenges New Zealand will face in the coming decades. We just need the support to unlock that value. This work offers a chance to explore how universities can deliver much greater value with different funding settings and investment levels.”
Professor de la Rey and the wider university sector is clearly ambitious to do more for the country and its communities, and any insights that can be uncovered that enable the sector to fully understand the dynamic relationships and interdependencies between the financial inputs and the educational outputs, must surely be a welcome contributor to the funding model debate. In this sense, New Zealand has an opportunity to further harness its use of performance benchmarking in order to achieve its ambitions for the sector. As Anthony puts, it, “Funding reform may well be the answer, but it won’t be easy – to tackle the current financial difficulties it's in what we deliver, how we deliver it, and where we deliver it – if we are to totally restructure how we operate to answer this, then knowing about the historic comparative benchmarks driving the performance of individual universities, all dissected year-on-year, is a great place to start.”
The sector conditions, the collaborative mindset of university leaders, and the adoption of an evolved approach to benchmarking in New Zealand certainly make for an interesting mix – one that is not so unimaginable in other countries around the world. So, what’s to stop other sectors following in New Zealand’s footsteps and evolving their use of performance benchmarking to reach their own, probably not too dissimilar, ambitions?
