getting more value for money

www.competitiveness.ie

Getting more value for money

Wellington Group Meeting,54th SHEEO Annual Meeting

Chicago, July 18 2007

Don ThornhillIreland


Why are we concerned with VFM?

Financial constraints/revenue limits

Opportunity costs Accountability to

stakeholders – especially for public funds


Potential gains and risks


Some potential gains

Clarity of purpose among all actors in the HE space

Greater effectiveness and more VFM

Diffusion of good practice


Some potential risks

Focus on inputs

Focus on the measurable and overlooking the important

Race to the bottom?

Disincentives to experiment and innovation


Focus on productivity -1

Yes … but be wary of the limitations!

Origins in statistical analysis of homogeneous economic sectors – agriculture and traditional manufacturing


Focus on productivity -2

Not so robust when dealing with product and process differentiation, quality differences and heterogeneity ….and with multiple outcomes and objectives


But worth the struggle!

Has the merit of getting us to focus on added value


In a cost focused and revenue constrained environment do we need to remind ourselves and others why higher education is a concern for public policy?


HE a desirable good

Economic Social Individual


Economic


Economic

HE driver of economic performance Critical to competitiveness and

comparative advantage Human capitalKnowledge capital Innovation capacity?


Policy Response

Development of comparative advantage in economic activities requiring high levels of SkillsCognitive ability (including

organisational capacity, flexibility, creativity, new learning)

Knowledge capital Innovation


Higher education - our systems, institutions and personnel - the key agents for delivery


Challenge for system design

Relating inputs to outcomes


Challenge of relating inputs to outcomes

Unquantifiable, difficult to quantify or indirect but important outcomes

And, for example, even where we can measure ….substantial international differences in outcome/expenditure relationships


As well as measuring (ideally before we do) we need to pay attention to purpose, to form (structures and implementation mechanisms) and to measurement


But key agents have different purposes!

Implementation agents (higher education institutions and faculty/ academics) have different (and essential) priorities and concerns


Purpose – the challenge

System design for optimum outcomes in conditions of multiple objectives, funding constraints, uncertainty about the future and multiple stakeholders with different interests?


What can the market teach us?

“It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest”

- Adam Smith


Features of a market approach

• Choice • Competition between providers• Price signals• Product differentiation • Incentives (positive and negative) for

performance • Responsiveness to market signals• User pays • …………..• …………..


Inference?

• Use market where possible – and reasonable

• Make maximum use of “proxy market” instruments


Proxy market approach


Performance related “core”

funding

Bedrock funding

DirectState funding for

HEIsCompetitive funding new

initiatives

Experimental funding Research

funding


1. Bedrock funding for undergraduate education and learning

capitation based

rates and criteria, rational, transparent, straightforward

equitable as between institutions

reflect cost differences

subject disciplinesstudent categories


2. Performance related element in core funding

focused on very limited number of public policy objectives

ideally, benchmarked

not destabilising from year to year


3. Major new initiatives

competitive funding

open and transparent process

expert assessment final

external membership


4. Experimental and innovative programmes

discretionary funding

allow for experimentation

review

abandon or mainstream


5. Research funding

non-competitive “foundation funding”

competitive performance-based institutional funding

competitive funding for research projects and grants (fellowships etc.)


In each case

1. Monitor, measure, review and appraise

2.Use fit for purpose metrics

3.Try to relate inputs to outcomes where possible


Response: Investing in a plan

Stakeholders advise on priorities:Government (TES), learners,

employers, iwi, ITOs, etc

TEO works with regional and national stakeholders (business, communities) to identify need,

and with other TEOs

TEC monitors outcomes

TEC and TEO agree outcomes for the approved plan, areasfor capability building, etc, and TEC decides funding

Quality assurance andmonitoring of

provision and TEO

TEC engages with TEO in relation to

contribution to network of

provision, shifts, performance of

TEO to date, etc

TEO develops plan to meet needs as basis for iterative

discussions with TEC

TEC establishes investment approach (IG, EBs)


Some guidelines?

Reflect on • Purpose• Conceptual underpinning of

system• Form – structures and delivery

mechanisms• Measurement/ comparison/

benchmarking


Otherwise

Risk of rewarding A when we want B!

getting more value for money

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