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Challenges for the Tertiary Education Sector

Hon. Steve Maharey

1 July 2003 Speech Notes

Responsiveness and Innovation:

Challenges for the Tertiary Education Sector

Speech to the Association for Tertiary Education Managers Conference 2003. Auckland University of Technology.


Thank you for this opportunity to address your conference.

As you probably know, my involvement with tertiary education began long before my parliamentary career and I have considerable admiration for ATEM and the work of your members up and down New Zealand. In significant ways, that work is at the heart of our tertiary system.

Each year, for the past three years, I have presented this conference with a snapshot of the tertiary education reforms as they were emerging, and discussed their implications.

This year I would like to walk you through some of the important features of the reformed tertiary education and set out some thoughts on what they mean for you as managers and administrators.

In particular I want to focus on addressing the following questions from an institutional perspective:

- "How do I relate to government?"; and

- "How are we going to have to adapt?"

In relation to the second question, I'll focus on the need to work with others, and the move from a focus on student numbers to a focus on quality.

Finally, I will say a few words about the way the funding system has been altered to support organisations to behave in different ways.


Let me begin, though, by saying a few words about the overall tertiary education framework that is now in place.

The government has worked with the tertiary sector and stakeholders over the last three years to build three new emphases into the system.

- Excellence because increased skills, knowledge and research outputs are not sufficient alone.

- Relevance because without a focus on our nation's needs, tertiary education will not be able to contribute effectively to New Zealand's development.

- Access because to get ahead both socially and economically, New Zealand must make the most of all of our peoples' potential.

The reforms are also designed to encourage tertiary education organisations to take a more strategic leadership role amongst their own communities and within the nation as a whole.

Through the 1990s we had a tertiary education sector where providers were encouraged to pursue their own goals and to compete for funding and students. While participation undoubtedly increased, these policies led to a fragmented sector, whose effectiveness was undermined by unnecessary competition, duplication and poor collaboration.

We need to pool our resources, align our leadership and co-ordinate our efforts to meet broader national objectives. A fragmented and overly competitive tertiary education system was not going to get us there.

Aligning the tertiary system to the national goals of New Zealand, and bringing about collaborative linkages across the system, were the key reasons for the tertiary reforms.

With the development of the Tertiary Education Strategy every five years, and the establishment of the Tertiary Education Commission, the reforms will bring a more strategic sector that is focused on the role it can play in building our nation as a knowledge society.


A big question for a lot of you in the sector is how those sort of aims alter the relationship between yourselves and the government. I want to answer this in three parts: by looking firstly at the Tertiary Education Commission, then the Minister, and then the key document connecting the Minister and individual tertiary education organisations - the Charter.


What the government is looking for from TEC is firm but unobtrusive steerage of the whole system towards relevance, excellence, access, capability, and collaboration.

I know "steerage" makes some people nervous.

Steering the system does not mean that we want to build a centralised, dictatorial system. A micro-management approach by the Commission that impinges on the freedoms of organisations would be counterproductive.

We want a system where providers take responsibility for their activities and provision, and exercise strategic leadership over the future direction of tertiary education provision, both locally and nationally.

We also need a degree of stability about the direction of future national strategies in order for providers to undertake effective strategic planning.

To ensure that the sector has certainty about the general direction of tertiary education policy in the future we've placed into legislation a set of objects that must now underpin every Tertiary Education Strategy and tertiary policy developed by every government.

If you add sections 160 and 161 of the Education Act, you have legislated protection of academic freedom, respect for institutional autonomy, and promotion of the "critic and conscience" role¡K all balanced with the obvious need to be accountable for the efficient use of a massive amount of public resource.


The reforms have also been carefully designed, based on TEAC's recommendations, to set up a clear demarcation between the role of the government and the role of the Commission. This limits the direct connection between politicians and individual providers. The Minister sets the policy and strategic parameters for the Commission, but it is the Commission that then interacts with individual organizations within these parameters to advance the Tertiary Education Strategy.

Except in a very few instances, such as at-risk institutions, the only times that the Minister makes decisions with regard to individual tertiary education organizations are:

- The exercise of statutory powers around establishment, mergers or changes of institutional type; and

- Approval of charters.


Kaye Turner, who is not only the Deputy Chair of the Commission but was also the Chair of the Working Party that designed the Charter and Profile system for us, will be speaking to you shortly and will say a few words about charters then.

However, as I am the person who approves the charters, and as this is the only instrument that directly connects me with individual institutions, I want to say a few words too.

The charter is a fundamental document for any tertiary education organisation, and getting it absolutely right will take time, consultation and quite a few iterations. Undoubtedly many or your organisations will want to refine their charters with amendments, after they have been approved this year.

But there are some things we really need to be getting right first time.

The Commission has released guidelines that will help you a lot. But I thought it was worth talking briefly about the things that I'm particularly looking for in your Charters this year.

The key, for me, is that you get the core right and that means focusing on the first five sections of the charter, particularly the first two. These are the ones that say WHO you are. Everything else can be honed further down the line.

The first two things that every charter needs to outline are your mission and your special character. You all really need to think hard about these, and challenge yourselves. What is it, other than an accident of history, which really justifies your existence in the sector?

How are you different from everybody else? It will be particularly important that you can articulate what distinguishes you from the organisations that you are most similar to.

This is, in particular, a challenge for the universities. It is easy to articulate what it is that all the universities have in common. The Education Act does a good job of this:

(i)They are primarily concerned with more advanced learning, the principal aim being to develop intellectual independence:

(ii)Their research and teaching are closely interdependent and most of their teaching is done by people who are active in advancing knowledge:

(iii)They meet international standards of research and teaching:

(iv)They are a repository of knowledge and expertise:

(v)They accept a role as critic and conscience of society;

But what is it that makes each university unique? This is a challenge for each institution to resolve but, as one example of how it has been handled, I would point to the recent Charter revision at Victoria University undertaken under the leadership of TEAC Chair Russell Marshall.

This revision moved the university towards positioning itself as "the capital university', identifying the special nature and implications of being solely located in the nation's capital as a theme underpinning may - though not all - of its offerings.

Once mission and special character have been determined, this should flow naturally into answers to the next questions:

- Contribution to New Zealand's identity and economic, social and cultural development; and

- Contribution to the tertiary education system as a whole.

Here once again I will be looking for distinctiveness, and an awareness of being situated within a wider tertiary education system.

Fifthly, I will be looking at your organisation's approach to collaboration and cooperation with other tertiary educations. A key part of these reforms is the move from a competitive to a cooperative system. It will be up to the Commission to oversee this on a day-to-day basis, but I will be wanting to see some clear and specific indications of a commitment to working together in your charters.

I will also be looking for absences from this section, and the possible competitive tensions that they may be implying. These cannot just be high-sounding words, either. The Commission and I will be expected that you have actually worked through with your collaborators.


Let's shift our focus away from the relationship with government and ask what the post-reform environment is going to mean for leadership at the institutional level. New Zealand tertiary institutions are large, multi-faceted organisations requiring a sophisticated level of management and governance.


As we look for a model to understand what this means in a most-managerialist post-market era, it's worth looking at the work of Burton Clark at the University of California, Los Angeles.

Admittedly it is now some five years old but the research found five common features emerging from the "organisational pathways of transformation" in five European and British universities over the last 15 years:

- a strengthened steering core - the development of an administrative capacity to respond quickly and decisively to changing circumstances;

- an extended developmental periphery; including the most obviously entrepreneurial efforts like companies that exploit intellectual property;

- a diversified funding base, involving a widening and deepening portfolio of support from a range of funders;

- a stimulated academic heartland - the leadership needs to win the hearts and minds of its academic community;

- and an entrepreneurial culture, taking root throughout the institution.

Clark observes that as universities come under greater pressure to change their traditional character and become more innovative and entrepreneurial, the successful implementation of new managerial perspectives is important if they are to succeed.

These are themes I intend to return to with a conference on "innovative institutions' in 2004.


In the challenging environment in which modern TEIs operate, more needs to be done to ensure that those involved in their governance are well equipped to face the future.

International research shows that effective governance cannot be achieved simply by set prescriptions and compliance mechanisms, or by adopting a "one-size-fits-all" approach. Good governance is about strong relationships and shared understandings among people.

The recent independent review of TEI governance, undertaken by Professor Meredith Edwards from the University of Canberra, recommends a new framework to achieve good governance practice for tertiary education institutions.

The report focuses on securing clarity of roles and responsibilities of Councils and their members, improving the balance between Councils, Chief Executives and Academic Boards, sharing of good governance practice across the sector, and optimising stakeholder governance.

Many of the recommendations can be implemented by tertiary education organisations now.

Over the next few months we will be discussing the challenges and suggestions from the Edwards Report with the sector as we decide how best to proceed, and I look forward to hearing your views.

Once Ministers have made decisions on the recommendations, a number of legislative changes relating to the governance of TEIs are likely to be included in an Education Amendment Bill to be introduced in 2004.


I'd now like to move from the broad issues of overall organisational culture to some specific areas. As I have said, I'd like your Charters to show a clear outward orientation, embracing collaboration both within and outside of the sector. I'd like to sketch some examples of what this means in practice.


The Collaborating for Efficiency project has helped tertiary institutions to develop collaborative strategies through working together, and with industry sectors and Crown Research Institutes.

Four sub-groups have worked on key areas where our institutions can do better by working together. The Steering Group is yet to report, and some of the sub-group reports are still being finalised. That said, here are some quick previews of outcomes from the work of a couple of these sub-groups:

The Capital group has recommended

- Long term alignment of the nation's tertiary institution capital stock with future national training and research needs and an agreed strategic vision for tertiary education;

- Collection of capital capability information and the development of policies to encourage the effective and efficient use of capital assets.

The Entrepreneurial Group recommendations included:

- Small TEIs be strongly encouraged to collaborate in establishing viable commercialisation units or to outsource their requirements;

- Guidelines for developing internal culture and establishing incentives for researchers to co-operate in identifying commercialisation opportunities and to assist with developing research enable proof of concept; and

- More autonomy for TEIs to invest in the commercialisation of IP and knowledge.


Collaboration in the research arena carries a number of opportunities and collaboration between universities and CRIs is increasing.

I was really pleased when the Association of Crown Research Institutes (ACRI) took the initiative to foster dialogue between CRIs, Universities and Research Associations. At a workshop in February, ACRI facilitated agreement to a joint work program addressing issues of common interest. Such collaboration can help to maximise the benefits from the public investment in research through Vote RS&T and Vote Education.


While the reforms refocus providers on national objectives, they also encourage responsiveness to community and regional needs. Charters and profiles provide the opportunity for communities to shape their local providers and influence their direction and purpose. They also provide the opportunity for providers to identify how they can shape their organisations to best serve their communities.

An example of government working with regions to meet both regional and national needs is the work TEC has been involved in, developing a "seafood cluster" based around Nelson - Marlborough. The cluster aims to raise the competitiveness of this sector by networking businesses and better aligning the government's investments in education and research to the needs of the sector.

Part of the success has been in bringing together a diverse range of organisations from both within and outside of the local region, including firms, educational organisations, research organisations, and a wide range of other stakeholders.


A second challenge I'd like to focus on is a change in orientation from an EFTS-growth focus to one that is much more about building excellence at what you are already doing.

The last decade has seen the largest proportion of the population studying tertiary education in New Zealand's history as people respond to the need for higher levels of skills.


While it is critical to ensure access, it is also critical that the overall quality of learning is maintained and enhanced. Tertiary education provision must be of high quality if it is to make a real difference to the well being of communities and the nation as a whole.

The pursuit of quality must be an ongoing quest. Quality is not the achievement of a minimum standard or a one-off measure; rather it's continual self-improvement to meet ever-increasing quality demands. Quality learning outcomes must be the focus of all tertiary education organisations.

The contribution of the quality assurance system will be critical to the achievement of excellence in our tertiary education. The Ministry of Education, New Zealand Qualifications Authority and Tertiary Education Commission, in consultation with the sector, will scope a review to enhance quality arrangements in 2003, and will conduct the review in 2004.


Similarly, to make certain that the emphasis of the New Zealand tertiary system remains fixed on quality and relevance, we've recently introduced measures to manage growth in student numbers.

We have largely an open system here and it will stay that way, but the tertiary portfolio of provision must remain balanced, and I must make sure fiscal risks are managed

So, from now on individual providers will receive public funding enabling them to grow year-on-year at 15% or 1,000 domestic equivalent full-time student places per year, whichever is the greater, using 2002 enrolments as a baseline.

This does not mean that we are turning off growth at either a provider or sector level. There may be good reasons for growth over and above that limit - for example, when providers merge. The growth rate limit will be a trigger for dialogue with the provider and investigation by the Tertiary Education Commission (TEC). It is, in essence, a precautionary measure, with sustainable future quality as its goal.


Growth has not been limited to domestic enrolments -- international student numbers increased at around 60% per annum from 2000 - 2002. Growth to March 2003 (over March 2002) was around 30%.

This growth has brought increased revenue to providers, and the nation, along with opportunities for enriching the learning environment and campus life.

However, the international student market is volatile, as we are now seeing. It is now timely for providers to revisit their international policies, with a view to better diversifying their portfolio of markets and the distribution of international students across programmes.

Without wanting to be alarmist, I think tertiary managers should be adopting a very cautious approach to estimating the revenue likely to be earned from foreign students over the next 18 months.

Having made that point, I am very positive about the ongoing contribution of foreign students and international academic linkages to New Zealand's growth and innovation.

I believe we should be looking for clearer links between our international and domestic education objectives, driving more non-fee-related benefits off the engagement and looking to longer term outcomes in terms of relationships, knowledge flows and skill development.


As I often said before, in emphasising a new focus on qualities such as responsiveness and innovation, we are not claiming that institutional leaders such as yourselves are neglected these qualities.

The lack has been at system level. Government policy has not promoted or rewarded responsiveness or innovation.


This is now changing, with the emergence of what we call a Strategic Development Component to tertiary funding, specifically designed to support these kinds of initiatives.

The Polytechnic Regional Development Fund was established in 2002 to enable and encourage polytechnics to collaborate with local industry and enterprise. The aim is to develop skills-related initiatives that will support regional economic development.

$28 million over four years has been committed to an e-Learning Collaborative Development Fund is available to tertiary education organisations to improve the tertiary education system's capability to deliver e-learning, and help achieve widespread adoption and uptake of e-learning.

And $40 million over four years has been committed to an Innovation and Development Fund. This is designed to foster new and innovative ideas to improve the operation of the tertiary education system, and deliver on the Tertiary Education Strategy and national goals.

The Tertiary Education Commission will hold a briefing for those interested in applying for the funds to help smooth the application process, discuss the criteria and eligibility and facilitate collaboration.

Keep an eye on the TEC website for updates on the funds, the eligibility and general assessment criteria.


I'd also like to take this opportunity to remind you that we are now considering fifty-five submissions on the proposed fee/course costs maxima system as part of the process of finalising the fee and course costs maxima for 2004. The Tertiary Education Reform Act 2002 requires government to Gazette the proposed fee and course costs maxima so that interested parties can comment prior to them being finalised.

The period for government to consider comments on the proposed schedule ends on 22 July, and I will finalise the fee and course cost maxima shortly after that.

There has been some concern expressed that the fee maxima policies should have followed, rather than preceded, the Funding Category Review. However, we cannot wait until the ground stops shifting to introduce new policies such as the fee maxima policy.

It is important to realise that the Funding Category Review is not going to lead to huge shifts in funding for particular categories of courses. We have signalled that we are seeking evolutionary, not revolutionary changes to the funding system. The Funding Category Review and fee and course cost maxima are further steps along that path.


In conclusion, the new environment poses significant challenges and opportunities for both government and the tertiary education sector.

There are many opportunities for well-led tertiary education organisations to renew themselves as dynamic and community responsive organisations, to build on their distinctive strengths and to offer more relevant, high quality programmes in diverse settings to meet community needs.

A clear sense of institutional mission within the local and national context, a well-crafted and well-executed strategy, sound governance, and on-going quality improvement will be critical for the successful tertiary organisation of the future.


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