performance funding and agreements across the globe: myths … · some uas are large, comprehensive...

14-10-2015 1

Presentation at the EURASHE Seminar

‘Innovative Professional Higher Education –

New Trends for the Future’

Hans Vossensteyn

Warsaw, 14 October 2015

Performance funding and agreements across the globe:

Myths and realities

Performance Funding and

Agreements - EURASHE 2015

14-10-2015Performance Funding and Agreements - EURASHE 2015 2

HANS VOSSENSTEYN

Director of CHEPS, Center for Higher Education Policy Studies,

University of Twente, the Netherlands

Professor / programme leader at MBA Higher Education and Science

Management, University of Applied Sciences Osnabrück, Germany

Partner in the Erasmus Mundus programme:


OUTLINE

Public Value Management

Diversity, differentiation and profiling in higher education:

Stimulate through performance agreements

Funding and performance orientation

Performance agreements: an international comparison

General observations

Intended and unintended outcomes

Contested but useful ?!

Extensive research report: http://doc.utwente.nl/93619/

http://doc.utwente.nl/93619/


FROM NPM to PUBLIC VALUE

New Public Management: from bureaucracy to a market approach

Results and efficiency:

Professionalisation

Measure results and outputs

Disaggregate units

Competition & business-like management in the public sector

Greater discipline in resource usage

Public Value paradigm

New pragmatism:

How can higher education best serve society?

How can government steer HEIs to do this?


THE STRATEGIC TRIANGLE OF PUBLIC VALUE

Collective preferences instead of aggregating individual interests

Incentives

Regulations

Policies

Stakeholders

Resources

Staff

Finance

Expertise

AUTONOMY

Strategic goals of

Government

HEIs

Stakeholders


PUBLIC VALUE:

TO CREATE DIVERSITY & PROFILING in HE

Diversity & differentiation in order to serve a greater variety in

needs of students, the labour market and society

Profiling: Institutions / programs to show how they are different

Priorities and strategies

Target groups, types of degrees

Employability of graduates

Modes of delivery (traditional, online, internationalisation, PBO, …)

Research priorities

…


BUT …

WHO STIMULATES DIVERSITY & PROFILING AND HOW?

Transparency tools - Rankings? e.g. U-MAP / U-Multirank

Who in charge? Ministry or HEIs? Relate to funding?

Changes in Funding Systems (modernisation)

Performance-based funding &

Performance agreements

8

OUTLINE

Institutions

Taxpayers

Framework to analyse HE financing

Student Financial Aid System

- Loan schemes- Grant schemes

Allocation of Public Subsidies to Institutions

- Block grants / funding formula- Targeted funds- Line-item budget

State

Private sector

Students and families

Funding Tertiary Education

Governing Tertiary Education

Decisions

-Tuition fees-Institutional financial aid-Investment funds

Institutional efficiency

- Time-to-degree- Completion rates- Student-staff ratios- Programme duplication / underenrolment

Context- Expansion of/demand for TE- Limits to public budget- Competing priorities for public budget- “Technology” / Unit costs in TE

Goals of tertiary education- Access to and equity in TE- Quality of provision- Relevance of programmes- Internal efficiency of system

Constraints- Difficulties in determining ‘need’- Ability to collect loan repayments- Private capital markets- Income distribution of population

QualityAssurance

R&D andinnovation

“Third mission”activities

LabourMarket foracademics

Tertiary Education Outcomes- Size- Efficiency

- Equity- System responsiveness

- Quality- Innovation

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EUROPEAN AMBITIONS AND DEVELOPMENTS

IN HE FINANCING

Europe’s Modernisation Agenda for HE (2006 & 2011): Funding

1. Ensure financial autonomy

2. Encourage partnerships with business

3. Spend 2% of GDP on higher education to reduce the funding gap

4. Revise student fees and student support schemes

5. Base funding more on outputs than on inputs

6. Examine the balance of core, competitive and outcome-based

funding

7. Ensure portability of student support


INTERNATIONAL DEVELOPMENTS

Many countries struggle to find a right funding mechanism to

enhance quality, diversity, profiling and performance

Public funding models in constant change – introducing or rethinking

performance incentives in allocating public funds.

Performance-based funding (PBF) and Performance Contracts (PC) new for

some countries, but for many years already in place in others (e.g. United

States, Finland, Germany-NRW)

Difficult to balance between national and institutional priorities and objectives


PUBLIC BUDGET ALLOCATION

Performance-based allocation refers to the part of funding that is based on

qualitative or quantitative output indicators

Input-based

(incl. fixed costs)

• Historical

• Formulae

Output-based

Ex post:

achieved performance

• Formulae

Ex ante:

future performance

• Innovation funds

• Agreements


DUTCH MINISTRY COMMISSIONED RESEARCH




INTERNATIONAL COMPARATIVE STUDY:

PBF / PA IN 14 HE SYSTEMS


INTERNATIONAL COMPARATIVE STUDY:

PBF / PA IN 14 HE SYSTEMS

Australia: Mission-based compacts (2011)

Austria: Ziel- und Leistungsvereinbarungen (2002)

Denmark: University Development Contracts (2007)

Finland: Performance Contracts (1994)

Germany: Ziel‐ und Leistungsvereinbarungen (NRW, Thüringen, late 1990s)

Hong Kong: Performance and Role‐related Funding Scheme (2005)

Ireland: Structural system change (2012); Institutional Profiles

Netherlands: Performance Contracts (2012)

UK: Scotland: Outcome Agreements (2012);

England: Research Evaluation Framework (2014) (replacing the RAE)

United States: Louisiana, South Carolina, Tennessee: PBF (late 1970s)


PERFOMANCE AGREEMENTS ARE …

Two partners negotiating in a structured process (ministry & HEI)

Both sides contribute to the defined (public) objectives

Financial rewards/punishment related to performance (large/small/zero)

Complementing – replacing formula-based funding

Pre-defined future objectives oriented (based on strategies)

A written and signed agreement/contract: transparent and binding

…


OBSERVATIONS: GREAT VARIETY IN AIMS

to improve performance in core activities – higher quality (weeding out

underperformers; increase efficiency)

to enhance accountability and transparency (informing stakeholders; support

dialogue and trust)

to encourage HEIs to strategically position themselves: diversify

to align national and institutional policies and activities (institutions

contributing to the national agenda)

Aims are likely to have an impact on the design and implementation

Multiple aims will complicate the design, implementation and evaluation

(effectiveness)


OBSERVATIONS: GREAT VARIETY IN FEATURES

Time span: PBF and PA vary from two-year to six-year contracts

Experience: from the early 1980s (USA) and 1990s (Finland, Germany) to the present

(Ireland, Scotland, the Netherlands)

Content and Comprehensiveness: kind and number of topics addressed

Rewarding under- and over-performance

Level of detail: (mainly broad) intentions or specifying activities / performance in detail

Size and balance % of funding; input-based and output-based funding

Selection, number and weights of performance indicators used

Orientation: apply to the whole sector or differ from one institution to the other

Institutional contribution: fixed set of targets and indicators for all or institutions

picking targets and indicators (e.g. from a given set: ‘menu-approach’)

Stakeholder involvement: developing templates and guidelines, priority setting,

drafting contracts, data processing, reporting, evaluation of outcomes vary


FINANCIAL IMPACT


OBSERVATION: GREAT DIVERSITY IN INDICATORS

Core indicators

# graduates / degrees (A, FI, NL ,NRW ,Th ,Ten, …)

# credits passed (A, DK, FI, Ten, Lui, SC, …)

Underrepresented students (AU, IRL, Th, Ten, ..)

Duration of studies (A, DK, NL, Ten, …)

# PhDs (AU, DK, FI, NL, Th, …)

Research productivity (AU, DK, FI, UK, …)

Research Council contracts (AU, FI, HK, IRL, Scotl, Ten, …)

External income / knowledge transfer (A, AU, DK, FI, NRW, Th, HK, Scotl, …)


OBSERVATION: GREAT DIVERSITY IN INDICATORS

Less frequently used indicators

Knowledge transfer (A, AU, Scotl., …)

Internationalization (FI, Ten, …)

Student satisfaction (FI, Ten., NL, …)

Graduate employment (FI, )

Research quality (HK, Engl., Scotl, … )

…


MAIN DIFFERENCES BETWEEN RESEARCH

UNIVERSITIES AND UAS

PA’s are often associated with stimulating (a) individual institutional

profiles, and (b) excellence.

Institutional profiles: UAS stand in various positions

Some are specialised in a certain area (e.g. business, fine arts, engineering).

They are in a good position to develop their strengths better or more explicitly

by PA’s;

Some UAS are large, comprehensive (in terms of disciplines covered) and have

mainly a regional role, i.e. to educate youth (+ LLL!) in the region where they

are located. For them it may be difficult to develop a specific profile that stands

out in PA’s.




Excellence: in many countries understood as ‘research excellence’ =

citations and publications in international top scientific journals =

Mode 1 research

UAS in many countries think they have to emulate this, and this race

they lose. Because they do not have the facilities, the critical mass of

excellent researchers, and the teaching staff do not have time to

engage seriously in research




So… for UAS define research as application-oriented research, and

builds on the developing practice of Mode 2 research in UAS’s

Close connections between your UAS professors) and their business

world clients and principals

Develop ‘centres of expertise’ in the UAS sector in applied sectors

such as ‘automotive’, ‘health’, ‘creative industry’,…

Excellence in teaching: e.g. student satisfaction


OBSERVATIONS: PITFALLS

Tendency to focus on quantitative indicators (only)

List of national objectives overly long and prescriptive (contradictions)

HEI tempted to list too many initiatives

No priorities set by HEI => mission overload

Policy-makers stress activities & inputs, focus should be outputs

Changes in environment (after signing PA) will affect PA

(ruling coalition, economic climate, …)

HEI has to prioritise => strategic profile

Reflect on objectives (in-period) and discuss with experts


EXPERIENCES … Myths and Realities

Challenges …

Balance PA with other funding components

Too many dimensions & indicators may make all institutions look “good”

Generic indicators make all institutions develop in same direction

PA can compensate simplicity and ex-post character of formula funding

PA to give state-HE dialogue a formal structure

PA reinforces role differentiation of HEIs

Primarily accountability instrument, legitimize funding, restore public trust in HE

Creates extra accountability (burden)

Non-realisation of contract goals: who to blame? what to do?


RECOMMENDATIONS

Performance agreements …

Require complex design questions, due to often qualitative character of

objectives

Require time for dialogue (preferably mediated by independent commission)

Experiment with PA (‘Learning by doing’): don’t rush to conclusions

Require a transparent way to measure and quantify clear objectives through

performance indicators and clear expectations

Require process of checks and balances accepting substantial transaction costs

and controlling mechanisms

Monitoring is required: “In God we trust. All others must bring data!”


THANK YOU FOR YOUR ATTENTION !

QUESTIONS ?

Contact information:

Prof. dr. Hans (J.J.) Vossensteyn, University of Twente

Center for Higher Education Policy Studies (CHEPS)

PO Box 217, 7500 AE ENSCHEDE, The Netherlands

tel: +31 - (0)53 489 3809

e-: [email protected]

inet: www.utwente.nl/cheps

performance funding and agreements across the globe: myths … · some uas are large, comprehensive...

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