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There is a skills gap in the charity sector and universities have a role to play in filling it. A common complaint from charities is that they cannot find people with the right skills for the sector and yet many graduates are still out of work. Providing undergraduates with greater exposure to those organisations which provide valuable services to society, and the skills required to work within them, can assist in resolving both of these concerns.
In the charity sector there has been a growing demand for skills in four key areas: namely social media, fundraising, an ability to think outside the box, and an aptitude for business development. As social media continues to grow and charities increase their presence online, there is a surging need for graduates who are highly skilled at engaging with supporters, volunteers, and beneficiaries through these channels.
Equally, fundraising is a common concern within the sector and is considered to be one of the most difficult positions to fill. This suggests that more could be done to ensure that graduates are able to contribute to and lead fundraising activities such as through writing grant applications, organising events, and developing and managing commercial activities and partnerships.
Need to think creatively
While these skills for traditional fundraising activities are vital, there is also a need to think creatively to identify ways of meeting growing social needs within an increasingly competitive sector. To do this, graduates need to have an awareness of the factors that are unique to the sector, such as the growing requirement for evidencing social impact and increasing competition for funds.
In an interview for one of my first jobs in the charity sector, I was asked to discuss the organisation's key competitors. I naively responded that I did not see them as competitors because we were all trying to help the same social group. In an ideal world and in the eyes of that young man, all charities pursuing a positive social impact would have the funds they needed to thrive. Unfortunately this is not the world we live in and there are limited funds available for this type of work.
Graduates hoping to work in the sector need to understand its competitive nature and be equipped with the skills required for it. This is where universities can help by increasing students' exposure to the sector, and there are a variety of ways in which they can do so.
Improving links with employers has been a focus for many universities for a number of years. However, charities unfortunately have largely been left out of these initiatives. Universities should put a greater emphasis on building partnerships with charities, which account for 7% of the UK working population.
Universities can do this through various methods such as accrediting work-based learning for students working or volunteering within a charity, assisting students with identifying volunteering opportunities, providing sector-specific job fairs, and setting up live credit bearing projects with partner organisations.
Exposing students to the sector in this way will provide opportunities for them to enhance and further develop the skills required to be successful within charities.
More familiar with charities
Work-based learning can ensure that a wide range of students become more familiar with the sector. The most obvious, and possibly the most effective, way to do this is to accredit extracurricular voluntary work which students are participating in. This will enable students to gain credit toward their studies for work which they are already undertaking and can be evidenced through the development of a portfolio of activity. This could also be extended to students who are employed by these charities.
For students who may be questioning whether the charity sector is right for them, credit bearing work-based learning can provide a low risk way of testing the water. Many students also participate in fundraising activities throughout their studies, which can require a substantial investment of time and can bring great benefit to the charity they are working with.
Accrediting or offering extracurricular awards for these activities would encourage more students to participate and would further develop the creative and employability skills needed in the charity sector.
Many students choose to focus solely on their studies, rather than volunteering or working while undertaking their degree. These students should not be excluded from these initiatives, as many universities still have long summer breaks that could provide further work-based learning and voluntary opportunities. This provides students with valuable work experience and empowers them to showcase their skills to potential employers.
Valuing extracurricular activity
Even for students moving into the private and public sector, demonstrating that they have participated in extracurricular activity, particularly within the third sector, can have a significant impact on their career prospects. What employer interviewing a new graduate does not value that the candidate has engaged in extracurricular charitable work?
Community engagement days and MOOCs (Massive Open Online Courses - online courses aimed at unlimited participation) targeted at meeting the training needs of charities are another great way to up-skill the third sector workforce and act as a tool for recruiting students to fully accredited undergraduate and postgraduate courses.
We recently held a community engagement day of this type, inviting local organisations to come and discover how they can be more productive through the use of digital tools. 25 delegates from local organisations benefited from the training and many enquired about the full-time courses that we offer.
Universities can also engage with charities through setting subject related live projects for their students to complete specific modules. Coursework at university is designed to assess a student's knowledge of a specific subject and ensure that the student has met the learning outcomes for that class. This means that students submit work which in most cases provides no greater benefit than to assess the knowledge they have gained in that period.
Why not then, particularly within business related degrees, develop partnerships between universities and local charities which need assistance with subject related tasks and put student efforts to greater use? For example, students in a marketing class could be given the task of developing a marketing plan or campaign for a local charity moving into digital marketing.
A strategy class could base students' assessment on a charity's genuine need for a strategic plan, or an IT class could require that students create a database for a local charity.
I set up a similar project recently for a class I teach where someone within the organisation presents the business case and the coursework brief to the students. They are then assessed on the work they have produced and given extensive feedback.
Meeting needs of an employer
This alone provides an enhanced student experience, as it exposes the entire cohort to an organisation they may have otherwise not been aware of and engages them in meeting the needs of a genuine employer. The best performing groups are then given training on presenting in a professional context and the opportunity to present their work to the management team of the partner organisation.
This selective process ensures that all students gain sector-specific knowledge, the selected groups benefit from having a high level of engagement with the sector while still within the walls of the institution, and the charity benefits from the work of the best students. This can also assist in reducing recruitment costs for these charities, as this selective process can provide access to high performing graduates.
These close links between universities and charities are critical for ensuring that students are gaining the skills required to thrive in the sector and narrow the skills gap. Universities can encourage this greater collaboration through inviting charities to careers fairs or to host careers events specific to the sector. This provides excellent networking opportunities for the students and the charities themselves.
Solutions for social needs
One of the more challenging skills for universities to assist students in developing is the ability to find creative solutions for meeting social needs within an increasingly competitive sector. However, exposing students to these organisations and the hard-working and committed people within them through live projects, work-based learning, and voluntary opportunities can significantly enhance a university's ability to do so.
These opportunities create a true win-win-win, where:
- Students profit from the experience and exposure to the sector.
- The university benefits from developing greater employer links and an enhanced student experience.
- The charity benefits from the assistance of undergraduate students and access to a cohort of graduates bursting with fresh ideas.
Students are often passionate about social causes and many are keen to develop the skills that will enable them to add value to the sector. We just need to provide the opportunities and give them a little nudge to help them on their way.
"Exposing students to the sector in this way will provide opportunities for them to enhance and further develop the skills required to be successful within charities."
"Universities can...engage with charities through setting subject related live projects for their students to complete specific modules."
FROM THE EDITOR: On this and following pages we present a wide ranging discussion from the university and private sectors on the merits of universities and business working together, and how best this should proceed to produce the optimum results. At the same time, there is mention of cooperation with the charity sector.
What is apparent from this and subsequent pages is a belief by both sides that all parties do need to adjust their thinking some way along the line about how they cooperate, including where this is covered by a collaborative arrangement from the start. The more prepared both sides are prepared to drop inhibitions and move away from restrictive mindsets the more likely joint projects are to be run on the flexible and integrated basis necessary for them to fulfil their true potential.
On this page we start this special feature on university-business relationships with Teesside University stressing the importance of underwriting an ambitious approach with effective working practices; with Glyndwr University showing how the vision for such partnerships can go beyond national boundaries to still bring local benefits; with the University of Westminster demonstrating that results can be achieved when a university actively markets what it has to offer in forming partnerships; and the University of Leicester focusing on the importance of creating and sustaining long term relationships to bring about successful commercial outcomes.
The remaining pages of this feature take the discussion further so that you are left with a practical insight into the considerable commitment required to be made by both sides for university-business partnerships to succeed. Please scroll down this page and then click onto the other headlines after this whole section to read the full feature.
More than just commercial transactions
LAURA WOODS, director of academic enterprise at TEESSIDE UNIVERSITY, comments: It’s axiomatic that universities should be working closely with business. It is, after all, a fundamental part of what universities are for: developing leading talent, ideas, knowledge and expertise for the benefit of the economy and society. And while the current financial climate might in some ways be making it more of a challenge for the higher education sector to engage effectively with commercial organisations, it’s also making it much more of an imperative.
Given drastic reductions in public funding and the need to create more private sector jobs and opportunities, the bottom line is now as critical for the higher education sector as it is for commercial business; and partnership working is set to become ever more important in that context.
Good, sustained relationships are at the heart of all business success, which is why the best business university interactions are about so much more than simple commercial transactions.
For Teesside University, where working with commercial organisations is central to our teaching, research and enterprise agendas, these relationships deliver mutual benefit, from increasing business competitiveness through research and development, innovation or professional workforce development, to keeping academics up to date with industry developments and priorities.
Good business relationships also give students a real understanding of commercial life, and help them to graduate with that all important job-readiness which employers look for. They foster mutual understanding and trust, and with them the prospect of sustained partnership and reciprocal reward.
Making this happen, though, is another issue. Working effectively with business means behaving like a business: good relationships need to be underpinned by the right processes, systems and, above all, people.
Universities’ processes and systems don’t always readily map on to those of commerce and industry – hence the charge often levelled at them by commercial organisations that they are inaccessible, unresponsive and inflexible. They are, after all, large complex organisations with many priorities and powerful governance structures.
But this doesn’t mean universities don’t recognise the business imperative, and a significant number of them have proactively responded to it by transforming the way they operate and interact with commercial organisations.
At Teesside University, for example, an institution-wide change programme led by the vice-chancellor has seen the establishment of a wide range of business practices, from a comprehensive client relationship management system recording all business interactions and providing invaluable management information, to a university-wide business development manager team working at the interface between business and academia.
Key accounts are actively managed by senior staff, and all business activity is delivered to an externally accredited customer service standard (Putting the Customer First).
Many internal processes have been streamlined to increase responsiveness, and the whole has been accompanied by an ongoing programme of staff development and a new marketing strategy.
It has been a highly ambitious approach, but one which has paid off handsomely in terms of new employer relationships, new commercial business, and a strong reputation for being business friendly.
LAURA WOODS of TEESSIDE UNIVERSITY continues: The culture change means that business engagement stands alongside teaching and research in the university mission, and that the message is understood by all staff. It’s an important aspect, because while management systems and processes are central to successful business relationships, it is people who make or break them. And without a talented and committed body of staff, no organisation can succeed.
The benefit of taking such an integrated approach to business engagement is the opportunity it gives for holistic, added value relationships, where university and company can work together to identify the “problem space” and the means of addressing it.
It means that provision can then be developed, tailored and packaged to meet organisational development needs. A piece of applied research on its own might identify improvements to a product or process, for example. But coupled with the support of a graduate and a company development programme, it could transform that company’s sales performance, as well as bringing commercial, research and teaching benefits back into the university.
It’s an approach that is paying off for a growing number of Teesside’s commercial clients, and that makes it possible for the University to present a very clear value proposition.
Of course, it’s not all a bed of roses. A focus on continuous improvement, for example, means inviting and acting on company feedback – not always a comfortable experience, but not negotiable either, if we’re to be truly business-facing.
In addition, at a time when spending is being cut back across the spectrum, ensuring sustained investment in business relationships can itself be a challenge. But there’s no getting away from the fact that the coffee’s made and brewed, and we can’t ignore it.
Broadening opportunities for collaboration
SUZANNE RILEY, commercial manager of GLYNDWR INNOVATIONS, the commercial arm of north Wales based GLYNDWR UNIVERSITY, comments: Against a backdrop of recession, businesses are increasingly looking for ways to get the most out of their staff, and develop without breaking the bank. Enterprises need to innovate if the economy is to get back on track. One area which has huge scope for collaboration between universities and businesses is training and development.
Training can be an expensive investment and one that many businesses are reluctant to pay for, especially with today’s tighter budgets. Under the right circumstances, training can unlock the potential of staff members and lead to the long term growth of a company. Recent relationship management of key contacts within the paper making sector has resulted in a strong relationship between Glyndŵr University and UPM Paper Mill in Deeside.
Ongoing discussions with the partnership identified the need to develop UPM apprentices within the UK as it was thought that no one in the UK delivered paper making training. UPM was sending apprentices to Gernsbach College, Germany – renowned for its excellence in paper technology – but at a huge cost to the company.
Academics and UPM stakeholders designed a bespoke foundation degree in plant maintenance and operations, working to the remit of the company’s requirements. The degree adhered to the rigorous quality assurance processes of higher education, ensuring that what was delivered was also relevant and cost effective. This foundation degree was rolled out in September 2011 and has benefited both the university and UPM.
This is just one example of how universities and businesses can successfully work together, through clear communication and an appreciation of what each party’s expertise can bring to the table.
Just because a training programme relevant to specific business needs appears to be unavailable in the immediate area does not mean that businesses should discount the idea of training. Working creatively with educational institutions can lead to discussions on bespoke training plans for businesses, as happened with UPM.
Working successfully with the commercial sector is not a simple case of one institution telling a company what it needs to know. It is a matter of collaboration and extended abroad. Glyndŵr Innovations is currently working in collaboration with universities in Russia, Lithuania and Latvia to share knowledge and transfer expertise from one country to another working on research projects, exchange programmes and dual degrees.
SUZANNNE RILEY of GLYNDWR UNIVERSITY continues: Glyndŵr University and Bauman Moscow State Technical University (BMSTU) have strong connections with different key manufacturers in the aerospace industry. Glyndŵr has a partnership with Airbus and there is a joint training and development facility near the wing factory at Broughton, north Wales. Likewise BMSTU has strong links with major companies in the aerospace sector.
The university partners have established strong expertise in composites technology – Glyndŵr has strengths in developing and assessing new manufacturing of composites and BMSTU has strength in the design and theory of composites. The impact of this project has been to establish an East-West partnership bringing together two universities whose academic staffs have considerable experience of composites in aerospace structures and whose industrial partners are significant players in the global aerospace industry.
The collaboration has held a workshop exchanging the outputs of scientific and engineering research in aerospace composites and this has had an impact beyond the collaborators as the workshop was attended by other interested parties. Future workshops will disseminate the knowledge generated in these projects. Hence there is significant potential for the wider scientific community and the industrial partners to benefit from this international partnership.
Communication has been a significant challenge but our Russian partners have spent time with us learning English and also about the way in which the British university system works.
Working with local industry is embedded in our own mission and vision of and both sides are keen to transfer their knowledge into industry-technology transfer. Whether providing bespoke training plans for business or driving industry forward into innovative new territories, partnerships between universities and the commercial sector have significant potential for stimulating the economy.
Innovation through knowledge transfer partnerships
DENIS CARROLL, head of the KTP Unit at the UNIVERSITY OF WESTMINSTER, comments: To enable the UK to benefit from the academic prowess of its universities and create wealth, we need people who can translate the different languages academic thinkers and businesses speak. Every university needs scouts who will recognise the commercial potential of an academic department and can sell those talents to the innovators (SMEs) so that the best UK minds can therefore be harnessed to improve the success of UK businesses.
Part of the challenge is that most of the business world is not aware that money is available for them to use for research and development (R&D) purposes. What we now need is increased awareness that these opportunities exist.
Since its beginnings, the University of Westminster has been a well known pioneer in the field of industrial innovation and demonstration of inventions. In the 19th century visitors had the chance to be submerged in the newly developed diving bell, have their photograph taken in Europe’s first photographic studio or see new industrial machines in motion.
Recently Westminster has expanded its entrepreneurial role. It has established a dedicated unit to share the wealth of its academic expertise with external organisations on the basis of mutual risk. These collaborative R&D projects are based on the UK’s most successful government initiative, the Knowledge Transfer Partnership (KTP) programme. This scheme is a leader in Europe because of its track record in exchanging technology and knowledge. Sponsorship comes from government through its innovation agency – the Technology Strategy Board.
The university’s KTP Unit has over 20 years’ specialist experience in forging links between Westminster’s academics and business. The unit has a successful track record spanning science, technology, engineering and mathematics, involving companies such as Addison Lee, Dendrite Clinical Systems, Nelsons Spatone and Eden Group. Recently the unit has widened its scope to include psychology, law, business communication and strategic analysis.
Our unit has extensive experience in project management, networking and communications; is involved in formal government sponsored committees, and we attend many networking events, talking to organisations to see where they are heading. Our aim is to look for gaps in the market where our academic expertise can realise a company’s new ideas, giving it a competitive edge and creating a product or service to sell.
A thousand leads will produce a hundred contacts, resulting in ten opportunities for KTPs as well as a myriad of other opportunities in the form of internships, jobs for project students, and standard or bespoke training to raise the level of skills within companies.
DENIS CARROLL of the UNIVERSITY OF WESTMINSTER continues: Our track record of bringing business together with university brains has shown that we can link university talent at all levels with the needs of commercial enterprise. Thus we are promoting growth in the UK economy as well as proving that universities can sell their capability without compromising their goal of academic excellence.
As an engineer, I champion the belief that knowledge transfer interactions must be business-led in order to create real benefit. We are very cautious and therefore actively assist the business partners to harness the relationship between the academic and business worlds. This helps the academics to understand the dynamic nature of the business world and also enables our business clients to recognise the different priorities that prevail in the academic world. As interpreters we understand the expectations of the various parties and communicate in the appropriate professional language to ensure project delivery.
As facilitators our job is to make sure the partnerships we create work with the personalities involved. What has proved successful is project managing the team regularly so that we know exactly how everyone is moving forward at each point. In this way we can maximise the team's synergy and create real value by producing progressive commercial solutions together.
Over time we establish confidence and trust within the relationships we foster. This is vital as both business contacts and university departments must relate completely so that knowledge transfer happens in both directions.
When the team gels and transformational change occurs, we achieve outstanding results. Two such partnerships include Reynolds Porter Chambelain (RPC) and Concentra which have each won awards for innovation.
Our KTP Unit offers business a wide “bag of tricks”. Knowing the range our departments can provide lets us build the most productive, flexible and responsive partnerships.
Government continues to support more interaction between universities and business. Our mandate to package and deliver academic knowledge to the real world has been confirmed by continued funding for promoting knowledge transfer until 2014/15.
Let’s not put all our eggs in the same baskets. I maintain that, like farmers, we should be spreading the money around. It is far better for UK prosperity to make smaller amounts of money available to encourage many organisations rather than concentrate all the grants on a few. Equally it is important that we recognise the potential throughout the university's academic departments so that they all taste the practical aspects of their innovative thinking. Some connection is better than none. It offers opportunities to more people.
A meeting of minds for commercial success
CAROLINE QUEST, director of enterprise and business development at the UNIVERSITY OF LEICESTER, says: If you were to ask any of the major healthcare charities or global manufacturers how they manage to maintain their competitiveness or achieve their targets, my guess is that most would point to the collaborative work undertaken with some of the world’s leading universities.
In the last twenty years we have witnessed corporate downsizing and at the same time university commercialisation which has created a wealth of opportunities to work together. Whether it is about finding an innovative solution to address a commercial problem, or a research-led breakthrough in healthcare, there has been a seismic shift in the global relationships built between academia and the worlds of charity and business.
We no longer apologise for being academics. We are proud to cite examples of multimillion dollar investment projects in life-changing research which have subsequently been commercialised using university intellectual property.
Top class academics are also top class managers, often handling significant budgets, teams of staff, accountability for targets and impact assessments. They can empathise with the pressures faced by their commercial partners to meet deadlines, maintain confidentiality and handle market constraints. So, when you get a meeting of academic and commercial minds the results are, quite frankly, life-changing.
Astrium, Europe’s leading multinational space company, has worked with the university’s Space Research Centre (SRC) for a number of years. Professor George Fraser, director of the SRC, manages the collaboration between physicists, mathematicians and space technology engineers so that the maximum benefit comes from skills and knowledge exchange. As a result, pushing the boundary of planetary discovery reaches to the humble navigation system in our cars.
UCB Celltech, the global biopharma company, entered into a strategic research partnership with Professor Mark Carr in our Department of Biochemistry back in 2002. The collaborative research work has aided the development of a successful new drug to tackle inflammatory diseases, such as arthritis, and several more candidate drugs are in advanced clinical trials.
Profitable commercialisation by UCB Celltech had been matched by significant career enhancement for members of the University of Leicester research team, leaders in their field, and substantial benefits for patients.
Meanwhile, our career development service has been working hard to build relationships with industry through its employer advisory board. The benefits of this kind of engagement can be seen in confident students appropriately prepared for their destined places of work.
CAROLINE QUEST of the UNIVERSITY OF LEICESTER continues: Let’s be clear. These projects don’t happen overnight, or come without rigorous management. Talk to most leading universities and they will acknowledge the introduction of new internal systems which have helped to accommodate partnership working. But what does this look like in practice?
For the University of Leicester this means the introduction of enterprise officers assigned to each college, as well as a specially dedicated Enterprise and Business Development Office. Where government funding is available for collaborative projects, the university staff are adept at managing the funding application and decision-making which can avoid unnecessary and potentially costly delays.
I believe there are several lessons we can take from working on major ground-breaking projects.
Ranked in the top 20 UK higher education institutions, the University of Leicester has achieved world class research because it proactively supports some of the brightest minds and at the same time attracts partners with significant missions and resources. It is without doubt the ability to create and sustain long term relationships that has enabled Leicester to reach such heights. This combined with a clear definition and understanding of desired outcomes on both sides, has been fundamental to its projects' success.
Then comes the matter of selecting partners with shared values as well as a desire to achieve a win-win outcome. Overbearing pressures from either side won’t build the trust and confidence needed to develop and sustain a real partnership. With a shared vision, clear objectives and recognisable results, the job of assessing impact is made that much simpler.
Getting the right university team to fit the corporate or charity culture is made easier where academics and research students work on inter-departmental and cross-disciplinary projects. For example, the recent discovery by our School of Archaeology and Ancient History of the possible remains of King Richard 111 has provided yet another project for our DNA scientists – as well as historians, psychologists and English academics. I can think of no other institutional model accessible to a business or charity which can make such an offer. And show such results.
Every university has its particular strengths and in the current climate will seek competitive advantage to attract students, research funding and major corporate projects. But by focusing on our academics’ outstanding capabilities and investment in state of the art facilities, including for clinical and pre-clinical research, we are laying the right foundations for success.
We all want to do business better, whether we manage a charity, run a major corporation or lead in an academic institution. It is only when we apply the kind of partnership approach adopted by top international universities, such as my own university, that we hit the targets which change lives forever.
Siemens Industrial Turbomachinery Ltd and the University of Lincoln established the Lincoln School of Engineering in September 2009, with the dedicated building completed in 2011. It is the UK’s first dedicated centre for industrial power generation engineering, providing specialist courses designed to meet the future needs of engineering enterprise and innovation.
The project represents one of the most significant developments in engineering education for a generation and an unprecedented collaboration between industry and academic partners. This innovative approach to enterprise and engagement has led to the School of Engineering becoming a focal point for the reinvigoration and celebration of engineering industry within Lincolnshire.
The gas turbine manufacturer has existed in Lincoln for over 50 years, and is the base for the design and manufacture of world class gas turbines for applications within the oil and gas industry and industrial power generation. The business has an annual turnover of £300 million and employs 1,500 people. A major exporter operating in 89 countries, this Siemens company provides expertise in all aspects of industrial power plant technology.
The main success of this scheme to date lies in the fact that academics and Siemens employees are co-located, meaning that students benefit from real world, practical experience with world class gas turbines alongside the delivery of the theoretical underpinnings provided within an academic environment.
The co-location of a real engineering business within the school also provides an opportunity to extend students’ learning from beyond the lecture room or lab and into a real, professional environment.
One of the headline objectives is to produce graduates with the skills and experience that will enable them to make a productive contribution to their future employment from day one. Siemens, in common with many other quality employers, has noted that new graduates often lack the professional skills required when they first start out in their new career – irrespective of how secure these graduates are in their technical knowledge.
The success of this scheme can be measured in two ways – every undergraduate on these degree courses secured a work placement for the summer vacation, and the majority of them worked in roles that are normally reserved for final year students or new graduates.
Depth of collaboration
The depth of collaboration between the university and company is unprecedented. It ranges from joint interviewing and recruitment of potential staff to the novel course structures developed to meet Siemens’ needs and those of other local engineering companies.
The university shares control over the taught programmes which is also unique. Courses were designed in collaboration with the managers from individual business units. This ensures the technical skills taught exactly match those required by industry, not just right now but those skills that will be required in 5 to 10 years time. The courses are designed to incorporate professional skills into every module, and the staff at Siemens lead the teaching of these elements.
Graduate employability skills are further enhanced by the work placement programme, plus the Monitored Professional Development Scheme is accredited with the Institute of Mechanical Engineers by Siemens. The course provides students with a minimum of 32 weeks monitored professional development which reduces the time they need in employment before applying for chartered status.
Due to the innovative nature of this collaborative partnership, key people within the university have the physical presence of a desk at Siemens and vice versa for key people in the research group at the company. This open access policy between the two organisations means strategic business decisions can be made very quickly, maintaining the momentum of key projects.
The collaboration also extends to research projects and the university is working on the next generation of products for Siemens, and is able to work in the medium to long term horizon on applied research in a way that the company never could before. This includes being able to service the changing nature of resource allocation by providing the facilities in-house and also delivering the research at a lower cost.
The partnership has been mutual from the outset and built upon goodwill and experience stored in a number of other existing areas, including:
• Siemens and the University of Lincoln work together supporting STEM initiatives in schools.
• Members of the Siemens senior management team sit on the various University of Lincoln advisory bodies.
• Scholarships for students applying to study the BEng/MEng course are provided by Siemens including the payment of full tuition fees, a bursary and work placements to enable students to be ready for employment in the engineering arena.
The transfer of knowledge between the two organisations is a key element of the collaboration.
Academics and students have access to the gas turbines located in the Siemens Product Training Department based on the university campus. Siemens employees working in the academic environment have the opportunity to develop their theoretical knowledge and also work towards professional qualifications in teaching in the HE sector.
There are a number of current research projects which are jointly run as part of the collaboration: the Gas Turbine Remote Monitoring and Sensing Projects, and the Sensor Validation Programme.
Reputation for excellence
The collaboration has allowed the university to build up a reputation for excellence in a short period of time, due to the credibility of working with Siemens. The partnership is seen as a unique selling point to any students, researchers and academics who are thinking of applying to the university. The opportunities that exist within the school, from student placements to providing a productive environment for academics, are unlimited.
The courses developed as part of this collaboration have the relevant academic content and quality, with Siemens adding in the technical requirements. By involving Siemens staff, this has ensured buy-in from the business units at the company, and has allowed the university to access employees from Siemens for activities within the university beyond their teaching sessions.
In recognition of this groundbreaking partnership between industry and academia, the University of Lincoln and Siemens received a prestigious Lord Stafford Award for Open Collaboration in November 2011. The award recognises, showcases and rewards the best in collaboration between businesses and universities across the Midlands.
The University of Lincoln is a young institution with high ambitions to be an international player renowned for research engaged teaching and real world partnerships which make a difference in a changing society. This joint venture is ensuring the University’s place as a top institution for delivering employer-engaged education.
As a consequence of the current economic climate, with the need to reduce the public sector deficit and the resultant radical changes being imposed on our universities by the Coalition Government, it is becoming increasingly important for universities and companies to find ways of working together in partnership, to maximise their performance and future opportunities. There are, however, a number of barriers to be overcome if this is to be successfully achieved.
Universities have not traditionally had workforce development at the forefront of their objectives. Although many, particularly the new, universities, would have seen this as a fortunate output, it was not measured as a key indicator of their success. The funding structure due to come into effect in 2013/14 will result in the transfer of a significant proportion of funding from the Government to the student.
It is now being recognised that the longer term impact of a university education is going to become a far more significant consideration for students, who will be more focused on choosing courses which may be more relevant to the needs of the employer and enhance their "employability" after graduating.
For vocational courses, including those such as accountancy and law, there is increasing opportunity for universities to work with the corporates to ensure that there is value driven through the teaching programmes. This is both to help fund the courses, and to ensure that the student can understand the direct value they will obtain from paying their fees.
This changing emphasis, to one where ultimate employment becomes a key driver in student recruitment, will mean a shift in focus by universities to become more consumer driven. This will require greater collaboration with employers to ensure that their needs and requirements are met, but may also need innovation in course design and learning techniques to be developed.
For example, a course that provides or requires workforce secondment as part of its assessment may also enable the corporate to support the student (and the university) by providing an opportunity to earn a salary through the university course.
So working at an accountancy practice for three months of the year in the first quarter of the calendar year, with the course term being extended into the summer, may be helpful for all parties: for the university through additional fees; for the student through wages subsidising their course fees/living expenses; and for the employer through obtaining an employment resource at a key time of the year.
As already mentioned, universities have not previously had workforce development within their remit, so the corresponding incentive structure for the institutions, and those who work in them, is in most cases still not developed. As a result there are some significant barriers that may contribute to preventing universities from engaging successfully with corporates. These include:
• CULTURAL DIFFERENCES – institutions and employers can find it challenging to engage with one another, and good practice often involves committed and enthusiastic individuals who have managed to overcome this barrier.
• INFRASTRUCTURE AND RESOURCE LIMITATIONS – universities are not traditionally set up to deliver the type of provision demanded by employers, which differs significantly from that demanded by the traditional undergraduate/postgraduate market, both with regard to the physical infrastructure and systems and in terms of the ongoing skill set of universities' own staff.
• NO INCENTIVES, INCLUDING FINANCIAL INCENTIVES – to drive culture change from the top and workforce development from the bottom.
• THE NEED FOR ACCREDITING PROVISION – due to the different areas requiring accreditation, such as existing in-house training and work-based learning. The accreditation of these types of learning can add complexity, increase risk to the validating institution and lead to a delay in the ability to respond quickly to an employer's need.
• UNCERTAIN DEMAND AND HIGH COSTS – compared to the more traditional undergraduate and postgraduate markets.
• FINANCIAL ISSUES – such as funding methodology, the costing of different types of provision and the pricing of courses.
More active partnership
The opportunity to engage with corporates on a more active partnership model in certain areas will enhance the opportunity for universities to meet the expectations of students, while helping them remain sustainable in an increasingly challenging financial environment. For corporates, the benefit will be to enhance the efficiency of their own workforce development and ensure they are able to reduce their own costs of training and development, which are traditionally incurred with post graduation training.
Low cost competitors
A final consideration is that universities may not have any option but to ensure they engage effectively, as there will be new low cost providers entering the market which will ensure they can deliver vocational and professional training at significantly lower costs than universities can.
So unless universities have found a way to reduce their own costs of teaching through effective partnership arrangements, they may well find they have a decreasing student population, which will have potentially serious ramifications.
"It is now being recognised that the longer term impact of a university education is going to become a far more significant consideration for students…"
"The changing emphasis…will mean a shift in focus by universities to become more consumer driven."
"For corporates, the benefit will be to enhance the efficiency of their own workforce development and ensure they are able to reduce their own costs of training and development."
Universities and commercial organisations have much to gain by working together. Business can benefit greatly from the objectivity and rigour of an academic approach; and by working together with businesses, universities develop new knowledge about how business operates, as well as adding to their own expertise.
There are a whole range of ways in which universities and businesses can work together, ranging from commercial consultancy, through executive education, Knowledge Transfer Partnerships, student placements all the way to applied research. Through its gateway to business, the Knowledge Exchange, as well as faculties such as the Business School, the University of Hull offers many opportunities for the commercial sector.
As well as all the above, these also include short courses, bespoke consultancy, student work placements, access to state of the art facilities and business incubator services. We support new business development with our Enterprise Centre providing an ideal environment for fledgling businesses – enabling new ideas and creativity to flourish – via individual start-up offices, peer to peer learning, advice, support and workshops.
Consulting and research
Consulting and applied research are, perhaps, some of the more obvious ways in which universities and commercial organisations can work together. Universities provide commercial organisations with an impartial and multidisciplinary approach to problem solving. The objectivity of a disinterested academic approach is invaluable for the commercial sector, and it offers fresh thinking informed by work in a wide variety of organisations and sectors. Successful collaborations develop ideas by the university and partner organisation working together.
Such work is focused on providing solutions for the company, while looking for generic findings across assignments to develop new knowledge. The motivation for the university is in developing knowledge, so costs are lower than a private consultancy would normally offer.
It is important for universities to explore all avenues and Hull University Business School has a proactive approach to working with industry. We tailor solutions to the individual needs of a client, rather than using a one size fits all approach. We create specific education and training programmes which are custom-made to fit the knowledge gaps that exist in individual organisations. When a consultancy group came to us recently for help regarding a conference it wanted to organise (to highlight a significant trading channel across Europe: the E20 route) we not only provided our logistics expertise to form part of the event but also offered to host the conference.
Forging close relationships
Forging close relationships is key and is at the heart of what we do at Hull University Business School, ensuring that our work is in line with the needs of the modern business environment. We include business leaders as part of our advisory board, taking account of their interests and concerns in developing our strategy and our programmes – and work with them on research and consultancy projects.
Vice versa, we participate in industry advisory committees, such as the British Retail Consortium, to help shape policy and benchmarks for particular segments of industry. We work with many key businesses, forming corporate partnerships via shared research interests and goals; and these partnerships play a crucial strategic and supportive role for both parties.
It’s not just the commercial world where links are important; a university can add unparalleled value to the not for profit sector too. As part of our commitment to develop responsible leadership, Hull University Business School carries out many corporate social responsibility (CSR) practices. We are an active member of Business in the Community and this provides an opportunity to engage our students with CSR in practice.
Our long history in business ethics continues to help shape the business leaders of tomorrow – we are committed to the Principles for Responsible Management Education initiative, and improving knowledge and skills in issues regarding responsible and sustainable business. As a result, all our students engage with these issues and CSR in their curriculum, enabling effective learning experiences for principled leadership and practice.
Furthermore, with the charity sector becoming progressively complex and comprising many large organisations, applied academic expertise is becoming of increasing importance. Recognising this, we have forged strong links with the third sector. For example, we worked with a local charity, Dove House Hospice, providing a cost-effective piece of research that investigated how it could make its retail logistics more efficient.
Charity leadership requirements
We also realise that the intricate governance and financial leadership requirements of charities are well suited to the skills of an Executive MBA (EMBA) graduate – yet the current challenging economic climate and the nature of the third sector itself mean that funding for higher level study is particularly difficult for these employees to obtain.
As one way to help solve this issue, we launched a full-fee scholarship for a charity sector manager to undertake an EMBA in 2012 and have committed to do so again for 2013. Scholarships of this kind are few in number and the grant is currently worth £18,400 over two years. The course equips graduates with high-level skills in many areas including problem solving, leadership, marketing, logistics and communication and offers an insight into all areas of contemporary business practice along with networking opportunities with fellow students from the public and private sector.
Naturally, as distinct entities operating in different sectors, there can be cultural differences that need to be navigated between academia and external organisations. Establishing ground rules early on is essential in order to manage expectations. Many of our students undertake work or research placements which can add significant value to the organisation they are working in.
Protocols need to be established so that both parties get what they need from the activity and so that expectations are balanced. The business needs to benefit in terms of gaining knowledge and expertise but students need to add to their own development and/or fulfil the demands of their research project.
There is also a need to raise awareness on both sides: academics may not appreciate the time pressures of a commercial environment and how they can benefit from business interaction. Conversely, businesses may not appreciate how they can gain from the expertise and objectivity an academic can provide.
The current economic climate creates opportunities as well as challenges for universities and business to work together. Today’s financial pressures – and frequently decreasing numbers of staff – can lead to businesses focusing on the day to day challenges of survival rather than taking time to look at the bigger picture. Commercial organisations need to explore how they can benefit from the vision and expertise a university can provide but many are unaware of what universities can offer; academics have a responsibility to engage with and educate business.
We do this at Hull University Business School by attending industry events, networking opportunities, seminars and conferences as well as delivering keynote addresses at business meetings. Also, as one of the small number of business schools in the world to have the prestigious "Triple Crown" of accreditations from the European Foundation for Management Development (EQUIS), the Association to Advance Collegiate Schools in Business (AACSB) and the Association of MBAs (AMBA), we make sure we take advantage of the elite networking opportunities this affords us.
We create our own opportunities for engagement too. We run a "Business Bites" series: an initiative held in partnership with the Institute of Directors which brings together academic research and industry insight through a programme of seminars and debates. There is clearly an appetite for such collaborations as every session held this year was well attended by regional business and we are currently finalising the programme of seminars for 2013.
Closer links between academia and business reap rewards for all involved. Capitalising on every opportunity and adopting a proactive, individual and robust approach are critical for the education and commercial relationship to survive and thrive.
You may already be familiar with the UK Bribery Act… or you may not. There has been plenty of publicity surrounding this legislation over the past year or so, with some independent surveys and reports continuing to highlight that many organisations, their directors and staff are still unaware of the Act and its implications. Universities are as vulnerable as any other organisation, particularly where they are expanding or recruiting students overseas and where contracts are being awarded.
The Bribery Act 2010 received Royal Assent on 8 April 2010 and came into force in July last year. The Act may be applied to those publicly funded bodies which are in essence running a business. If that is the case the particular sting in the tale is the Section 7 offence of not having in place procedures to prevent bribery.
The only defence a body would have if charged with a Section 7 offence is that of proving that in fact it had in place so-called “adequate procedures” to prevent bribery. Guidance issued with the Act sets out six principles to help such organisations proportionately and appropriately implement these procedures. These are:
1. Proportionate procedures – clear, practical policies and procedures.
2. Top level commitment – top down culture where bribery is unacceptable.
3. Risk assessment – assessment of both external and internal risk.
4. Due diligence – really knowing with whom you are doing business.
5. Communication (including training) – embedding the messages.
6. Monitoring and review – auditing and financial controls.
The penalties for both individuals and organisations on conviction are harsh – up to 10 years imprisonment, an unlimited fine and a criminal record and the organisation may be subject to unlimited fines.
Bribery is a global problem, although it tends to be more prevalent in certain regions and countries around the world. Each year, Transparency International, the world's leading non-governmental anti-corruption organisation, publishes what is widely regarded as the most credible measure of corruption in its Corruption Perceptions Index (CPI).
In 2011 two thirds of countries covered by the CPI were given scores of less than 5, which means they are considered significantly corrupt.
The CPI scores countries on a scale of zero to 10, with zero indicating high levels of corruption and 10, low levels. Unsurprisingly, the most corrupt places on the planet are those with unstable governments, often with a recent history of conflict. Afghanistan and Myanmar (Burma) share second to last place with a score of 1.5, with Somalia and North Korea – measured for the first time in the CPI – coming in last with a score of 1.
The world's most peaceful countries score the best with corruption least likely to occur in New Zealand, followed by Denmark, Finland, Sweden and Singapore.
An attractive place
The UK is undoubtedly an attractive place for students to learn, particularly foreign students whose own countries simply do not offer the high level of education. Obviously students attending UK universities come from all four corners of the Earth, but many foreign students are from countries where bribery and ”favours” are common.
Putting aside Transparency International’s annual CPI ranking, there is still a widely held belief among many in the world that you simply cannot operate in certain markets because bribery is the accepted norm. The fact is that anyone involved in bribery and corruption is now at a higher risk of being found out and prosecuted.
It can happen anywhere
Of course, bribery can happen anywhere, because it can simply be an isolated incident perpetrated by just one individual in any circumstance. And the key words here are “associated person” – an individual who performs a service on behalf of a university, for example.
They might be a commercial director seeking overseas students, a contractor, an employee/lecturer or an intermediary such as an agent who represents the university overseas to secure foreign students; someone who perhaps has close ties with the foreign government’s ministry of education.
Academic staff members
The most obvious unethical payments are where academic staff members receive payment in return for higher examination results. But lesser known are those of universities and other educational establishments seeking foreign students.
Often an agent based in a particular country is employed because it is known that they have close connections to that country’s ministry of education and its senior officials. Foreign students paying higher fees to cash-strapped UK universities generate significant revenue and that agent may be crucial to securing a quota from the ministry.
The agent is a person associated with that university, and therefore the university and both its senior staff and those related to a particular bribe transaction, whether they have knowledge of it or not, may be personally liable to prosecution.
Difficulty in recognising malpractice
Unfortunately, whilst there is perception of high standards of ethics in the teaching professions, there may be a lower level of “business savvy” when it comes to recognising and dealing with ethical malpractice. There are several areas where bribes can occur. In this respect, once the opportunity is identified, less ethical people at home and abroad might commit a crime.
Unethical behaviour can also occur where members of staff believe that pay is low, but have the opportunity, if so inclined, to top it up through fraud or receiving bribes. This mostly occurs in procurement where crooked staff and unscrupulous external contractors join forces.
One university – which cannot be mentioned – admits that it has major problems detecting such fraud, particularly overpayments to suppliers. Despite it being a major and recurring problem for the university, it was unable to prevent or minimise such corruption, even though it had instigated several of its own internal anti-corruption processes.
In universities, and even in some colleges and schools, fraud often occurs in the phases of contract awarding, such as fixing bids during the short-listing process, through to false invoicing when the contract has been awarded.
Weak or unenforced policy
Unethical behaviour typically occurs where there is weak or unenforced policy, opportunity and unsupervised delegated powers. An example may be in the purchasing function where there are bids and projects to manage, “cosy relationships” with long established suppliers and weak tender disciplines, especially in low value, repetitive contracts.
One often associates the potential for bribery and corruption among lower paid workers, but actually white-collar crime at senior levels is on the increase. Senior staff under pressure to deliver against tougher targets can potentially be higher risk, especially if associated with markets where corruption and bribery are more prevalent.
Swept under the carpet
In the education sector, management will do anything to protect the reputation of the institute. This means that even if fraud and unethical behaviour are uncovered, it is swept under the carpet, rarely reported and consequently impossible to measure the extent of the problem. The institute will carry out some kind of internal investigation to maintain a "clean" name among the community as well as also to avoid expensive costs.
Furthermore, there is a view in the sector that even if perpetrators are taken to court, there is a chance of no conviction and instead the publicity simply damages the reputation of the institute.
In summary, the UK Bribery Act and other anti-bribery legislation, as well as a concerted commitment by governments and law enforcers around the globe, have placed added emphasis on properly addressing the risks of unethical behaviour and bribery in particular.
Questions you might ask are:
• Does the university engage with agents overseas or other intermediaries including distributors?
• How sure are you they are not involved in bribery?
• Has the university conducted a formal risk assessment of both the impact of bribery and what measures has it taken to mitigate that risk?
• Exactly who in the university has responsibility for ensuring compliance with the Act?
• Are you aware of any bribery or corruption that has taken place in the past three years?
• Does the university have adequate procedures in place to prevent bribery and are you aware of the guidance on this?
• Will the university’s insurers cover the costs of an investigation, and in the worst case the defence?
Steps that a university can take to mitigate risk include:
• Introduce a clearly articulated and communicated anti-bribery compliance (ABC) culture, visibly driven from the top.
• Documentation and evidencing of ABC on the board’s agenda and the risk register.
• Implement policies to address conduct (including sanctions), ethics, hospitality and gifts, facilitation payments, commissions, monitoring and "speak up" mechanisms, political and other lobbying, and conflicts of interest.
• Demonstrate accountability and responsibility, from employees to boardroom including any non-executive directors.
• Robust processes for the appointment, due diligence and management of agents/advisers/distributors; embedded in business strategy and measured in the business process.
• Education of all directors and employees, with sign up to the ABC approach from partners including joint ventures.
• Conduct a university-wide health check of policies and processes.
"The penalties for both individuals and organisations on conviction are harsh…"
"…many foreign students are from countries where bribery and 'favours' are common."
"The most obvious unethical payments are when academic staff members receive payment in return for higher examination results."
"In universities...fraud often occurs in the phases of contract awarding...through to false invoicing when the contract has been awarded."
One university procurement officer recently complained to me that there are three procurement categories which constantly take up a disproportionate amount of his time and appear to be highly emotive with staff. The three he named are car parking, stationery and travel. Why is travel in this threesome? What is it about organising an effective travel programme in universities that makes it different than in the corporate sector? In this article I will try to discuss the challenges which are faced by a travel management company and what can be done to develop an effective travel strategy in this environment.
The first thing that makes universities different is their culture. In a university the academics may see themselves as the income earners of the organisation, through attracting the best students with the reputation of their courses, or securing research grants and funding for the university. Historically many university departments have become used to managing their own budgets with relatively little control from the institution’s management. They see themselves, not management, as the reason the university exists and it is easy to be sympathetic to this view. Our academic institutions are one area in which Britain can confidently claim to be genuinely world class.
Tougher controls and accountability
As a consequence of tighter controls and accountability imposed by university funding bodies, legislation and corporate social responsibility accountability, university management is coming under ever increasing pressure to comply with formalised reporting and management procedures. Areas of accountability and formal control include procurement legislation, duty of care, insurance, budget control and environmental impact reporting. In a competitive environment where funding is allocated as part of a performance review process, demonstrable compliance has never been more important.
Put this together and we have a strong need for compliance and control in a distributed management culture which doesn’t suit being controlled. What can be done to pull these polar opposites together – and is it worth the effort? My personal view is that it is worth the effort and I should like to explain a few reasons why employing best practice with a travel management company can significantly help a university to reduce its exposure to risk, support CSR, save money and, just as importantly, valuable time.
DUTY OF CARE. Travel by its very nature has an element of risk associated with it. This is recognised by legislation which places responsibility on organisations to provide for the welfare of people who they send overseas – from an audit trail of the booking process to pre-trip briefing and support for travellers while away from home. Of course, universities cannot eliminate all risks. They can, however, take steps to mitigate them by, for example, providing pre-trip risk assessments, employing tracking tools to locate and communicate with travellers in the field, and developing contingency plans to manage incidents when they do occur.
The travel management company will also be available 24 hours a day to offer support in an emergency situation. This is a service that many universities find invaluable, particularly during incidents such as the ash cloud crisis, where staff who booked via an online site were left struggling to get assistance, while their colleagues who booked with a travel management company were on the first plane home.
CARBON REPORTING. New rules by the Higher Education Funding Council for England (HEFCE) dictate that all universities must report on their ‘Scope 3’ carbon emissions. This includes business travel, and interestingly it has been stated that correct reporting may be linked to the amount of funding a university receives.
If all travel is booked through one supplier, and the supplier is capable of reporting against the appropriate standards, this procedure is simply a case of asking for the correct report once a year. The alternative is a forensic analysis of every expenses claim receipt and credit card transaction to determine who flew where, when, how far and in which class. Not an easy task.
INSURANCE. When applying for travel insurance the university is likely to get a much better rate if the travel profile is accurately defined based on its profile from previous years. Again, good travel management companies can provide such a report in minutes, saving time and money when it comes to coverage premiums.
Saving money by booking early
Many staff who are not bound by a policy are, by their very nature, spot buyers. This typically means purchasing goods or services instantly without much pre-planning or lead time before travel. Savings can often be missed as a result. By complying with a travel policy and booking through a travel management company they might be able to get a more competitive or flexible fare, or receive better support throughout their trip.
When university staff are told just how much money they could save by booking travel earlier this often comes as a huge shock. To demonstrate this it is often useful to compare their data with a selection of other universities to show how buying behaviour such as late booking has a very real influence on the average ticket price.
The second indirect saving is the cost associated with processing payments to multiple suppliers and through expense claims. It is far simpler to work with one organisation to develop a highly streamlined procure to pay process.
However, if the travel partner is simply viewed as the single and only place to process transactions then the scope for savings is limited. A true travel partner will work out a programme of incremental improvements which both they and the customer can make to systematically drive down costs. This might include use of specialist fares, training bookers on how to save money in order to shift buying behaviours, or developing a bespoke travel programme tailored specifically to the customer’s profile.
No matter which savings strategy the customer chooses to adopt, it is clear that the benefits are only possible under a well organised programme with a single, capable travel partner.
GAINING COMPLIANCE. Given that there is a strong case for managing travel centrally, what can be done to gain compliance in a non-compliant culture? I have listed some of my top tips below:
GAIN STRONG EXECUTIVE SUPPORT. In a university it is unusual to meet a finance director that is able to dictate policy to all staff as is common in the private sector. That said, if the senior management of the university have strongly and publically endorsed the travel programme the project has a far greater chance of success.
INVOLVE ACADEMICS IN DEVELOPING THE TRAVEL POLICY. At an event I attended recently, an academic gave me three words on the subject – “professionals prefer participation”. What he meant by this was that if you want people to accept change in a University, then get the academics involved at an early stage. If you are going to restrict what staff can and cannot do in the name of control and cost savings, explain to them how this will help.
OFFER PEOPLE A CHOICE. Not everyone will want to book using an online booking tool, just as not everyone will want to book via the telephone or email. Choose a travel supplier that is genuinely good at all three methods, so that people can book in whatever way suits them and their busy working day. If they want to search online and then make the reservation over the telephone – make it easy for them to do so.
TELL PEOPLE WHY. If you are asking staff to conform to a single supplier, or giving people rules about what they can and cannot purchase, sell it to them. Pick your five top reasons for running the travel programme, present them to stakeholders at the start of the implementation. Then develop and run a communication plan that spans the length of the contract and that reinforces the benefits of the programme. When you get non-compliant behaviour, keep pointing people back to the five reasons and the executive support it has received.
LET PEOPLE COMPLAIN. One of the top reasons for non-compliance is “I found it cheaper somewhere else”. Travel is an odd sector where prices change daily based on seat or room availability. Agree a procedure with the travel company where staff may ask for a price match directly to the booking team that handles bookings. Nine times out of ten any variances can be resolved there and then. If the travel booker remains dissatisfied they should raise the issue with the university procurement team. When implemented successfully, this strategy significantly reduces the agitation people can sometimes feel about whether they are genuinely getting good value.
Is it all worth the effort?
There is an argument to say that travel just isn’t worth the trouble; that the procurement team’s desire for control cannot be forced onto an academic’s need for creativity and independence. Experience shows that this can be done, and it has been possible to achieve on-contract spend increases of 30%-40% per cent over the past two years through following just such a structured process. Feedback in these situations from bookers and academics alike has been positive, and the procurement teams finally feel as though they can state the benefits and savings associated with the travel programme.
"In a competitive environment where funding is allocated as part of a performance review process, demonstrable compliance has never been more important."
"When applying for travel insurance the university is likely to get a much better rate if the travel profile is accurately defined based on its profile from previous years."
"…if the travel partner is simply viewed as the single and only place to process transactions then the scope for savings is limited."
Times are changing for Britain's universities. Financial pressures in particular, plus the ever-widening implications of the new fees arrangements, have pushed the insurance of risk towards the top of the agenda. And with this has come the need to focus on the cost of insurance and its effectiveness. Because there is a relatively small number of insurance carriers in the university insurance sector, it is fair to say there is no great motivation for those insurers to go out of their way to be particularly competitive.
It is a matter of debate within the market whether insurers are sufficiently competitive, albeit with both sides recognising that cost is an issue. Addressing the issue of cost is a problem in any market but for universities it is particularly difficult as the risks are so diverse and the financial pressures have intensified so quickly. There is also a considerable gap between the perceptions of insurers and universities, with those in the middle, namely brokers and other advisers, themselves having mixed opinions.
Where there is some bridging of this gap is with insurance arrangements in which universities feel they have greater control over the construction of insurance solutions and the pricing of them. This is particularly the case when universities are members of a mutual (the largest being UMAL), where they are members of purchasing consortia, or they even own their own insurance company (i.e. Oxford University which owns Oxford Mutual – OML). All this is replicated to some extent within the further education sector, with some FE colleges being members of UMAL and others members of the Crescent Purchasing Consortium, which is purely for the FE sector.
Risk of litigious students
Peter Bristow of broker Gallagher Heath sees the problem as follows: "Universities have huge financial pressures. Their funding has been cut by the government. Because they are consequently having to charge fees at such a high level, student expectations of them delivering a good education have dramatically risen, and students could become more litigious. Also, in response to these financial pressures universities will enter into more and more commercial contracts and become involved in more and more overseas partnerships – research and lecturing, etc. There is thus the likelihood that risk will become more complicated and claims increase."
Because of all this Bristow doesn't see insurance costs coming down, rather the contrary. He says: "It is not helped that insurance capacity itself is becoming more expensive. Insurance cover will become more expensive at whatever level claims come in." But he doesn't think insurers are being unreasonable. "Although there are relatively few numbers of insurers in this market, there is a competitive market for quoting on higher education risk. From what I have seen, the premiums being quoted are not unreasonable in the context of loss experiences and some quite volatile exposures. I am not sure that insurers are over-charging for risk."
Procurement rules and procedures
There are those who argue that the OJEU (Official Journal of the European Union) rules and procedures for procurement which all universities purchasing insurance have to adhere to (apart from one important specific instance) put all insurers tendering for their business on a level playing field and thus contribute to competitiveness.
Colin Bradbury, UK underwriting director at insurer RSA, believes that OJEU has a beneficial impact in terms of competitiveness. He says: "Insuring universities remains highly competitive across all classes. The OJEU tender process is extensive, requiring significant preparation and consideration. Whilst that deters some potential carriers, it does not seem to have deterred new competition from coming into the market more generally."
Mind you, Bradbury is not a total fan of OJEU, as he explains: "During the tender process, any questions asked (and associated responses) are shared with all interested parties. That represents challenges as well as opportunities. In many cases, it helps to avoid misunderstandings, but in others it can make it harder for an insurer to provide a point of differentiation from the competition.
"Yes, the tender process sets out a clear scoring mechanism with weightings allocated for each element. However, the challenge within that document is to highlight issues that exist beyond price such as coverage, risk management, servicing, claims and underwriting. Whilst a blanket approach may work for some universities, what is clear is that some covers would be best placed in specialist markets. One carrier may not always be the most effective or efficient solution."
Serving members who own it
This really brings us to UMAL. This is the leading mutual in the university sector. Its central message is that is exists exclusively to serve its members who own it. Members sign up for a fixed period and pay subscriptions – these create a pool of money which funds insurance cover for the members. Money left over after paying claims and running costs is returned to the members. It all appears to produce an unbeatable package. So why aren't all universities members?
UMAL has 70 members, both higher and further education institutions. Its associate special risks organisation which provides terrorism cover (UMSR) has 109 members, again both universities and FE colleges. Against this in the UK there are some 115 institutions with "university" in the title, and there are over 300 institutions in the UCAS scheme, including universities and colleges of higher and further education. So UMAL's university or combined higher and further education membership could be regarded as significant or instead not sufficiently large as to do full justice to the strength of the mutual message.
Offering a gold standard
There is a lot of respect, and indeed sympathy, for UMAL in the market. It is regarded by many as offering a gold standard. One problem, though, is the fact that when it pitches for business in OJEU-governed tenders it tends to do so across a block of insurances rather than tendering for just one or two covers. So while it may be very competitive on a number of covers, it isn't on others – which can sometimes rule it out overall.
Also, UMAL faces competition from university purchasing consortia which can undercut it. For instance, London Universities Purchasing Consortium states that it can typically save its approximately 40 members 30% on premiums across all types of insurance in comparison with other arrangement. Also, some universities may be concerned about the amount of notice they would have to give if, having joined UMAL, they decided to leave. If they don't give the required notice they forfeit their share of surpluses earned in the relevant period.
Avoiding OJEU requirements
However, UMAL does have one major advantage for those university insurance officers who dislike what many view as the restrictive and burdensome OJEU requirements. A Supreme Court decision last year, applying to all mutuals, has meant that members of UMAL do not have to go through the OJEU procedures every time they wish to renew their insurances with UMAL. It gives them greater freedom and less hassle when it comes to exercising their insurance professionalism.
Much of the debate about insurer competitiveness centres on the issue of whether insurers are sufficiently minded to give universities what they really want. Gallagher Heath's Peter Bristow comments: "Some insurers can be very flexible, e.g. UMAL and Zurich Municipal – they tend to be the most flexible insurers in the sector. But in general the difficulty for underwriters is that exposures in the higher education sector can be so wide ranging that nervousness sets in. They want to know where their parameters are.
"Universities are involved in so many different activities now – they don't want to have coverage restricted and have to notify insurers about each new venture. Insurers, on the other hand, want a very defined risk with a limited geographical risk – they want defined wording and a definite exposure. The two sides have very different considerations."
Exposures are subject to constant change
RSA's Colin Bradbury expresses the majority view of insurers: "The exposure of each university is different and is subject to constant change. As universities adapt to a new economic and educational climate, looking at innovative ways to secure commercial investment, one can expect levels of exposure to continue to fluctuate. For instance, specific university exposures we've recently come across and that require tailored cover include medical research and trials. In addition, the valuations on older buildings, greater use of technology (and increased associated values) and the growing prevalence of business interruption exposure are all key considerations for insurers."
Universities are not very sympathetic towards this and nor are all their advisers. Bristol University's Ginny Hope, who is also chair of the insurance side of Southern Universities Purchasing Consortium, counters: "A lot of insurance companies don't understand universities. With one honourable exception no one really has a policy which fits universities – you can tweak them but it is generally difficult to get the precise cover you want."
Ironically, although a supporter of mutuals, Bristol University isn't a member of UMAL. Explains Hope: "Mutuality has to be a really good way forward and it is a matter of finding a point in the insurance cycle which makes it financially viable." This wasn't possible for her because Bristol had a number of risks which UMAL couldn't cover at an acceptable price, including a medical school, aerospace engineering department and veterinary school. Maybe next time around it will be different.
Universities interested in different providers
Hope believes that the way forward to meeting the needs of universities is having more insurers in the market: She says: "We need somehow to get over that universities are really interested in having their insurance with different providers and if you understand the rules you could bid for a whole tranche of business which you are currently excluded from."
But the other view is that this increased element of competition has to come from within existing participants too, and both before and during the insurance relationship. Explains Cherry Chan of actuarial firm Barnett Waddingham: "Insurance programmes are being dictated by insurers. Yes there are not enough in this market, but we probably need to get existing players to work harder for their money. They should be putting forward more innovative provision for the higher education sector because they certainly are able to make money out of it year on year."
While the OJEU procurement process is meant to bring about transparency and clarification of issues, it is often only after contracts are awarded to one or more insurance carriers and the policy term begins that the reality of what has been promised becomes apparent. The new financial environment piles on further pressure for this to be assessed in a disciplined and comprehensive way.
Whether value for money
Explains Chan: "The university sector needs to get more independent advice to see whether insurance providers have been offering value for money. They should look at the insurance programme in totality to see the level of deductibles appearing (i.e. what the university will have to pay before the insurance kicks in) and compare this with the premiums being charged, based on analysis with the broker and actuary."
Obviously, there's more to having a satisfactory relationship with an insurer than an acceptable level of premium. A university insurance officer doesn't want unnecessary hassle with settling claims. So Rhydian Thomas of Henderson Insurance Brokers believes in Service Level Agreements every time. "You need to know what you can expect with the contract of insurance, and this should include agreed responsibilities on the part of the insurer and key performance indicators."
Response times are important
Response times from the insurer are important and there has to be a preparedness to be flexible and really helpful. Says Thomas: "You can have a KPI of three days but you may have a situation where you need an immediate response and you should get it, for instance in providing cover for an imminent and problematic overseas trip. Mind you, it's also the job of the broker to screen requests and confirm the cover position wherever possible."
Another way of assessing or benchmarking an insurer's performance during a policy term is to discuss matters with fellow insurance officers in other universities. Thus, for instance, London Universities Purchasing Consortium (LUPC) puts great stress on providing a range of discussion channels where members can exchange experiences and ideas – the purpose being to get enough feedback to have a group response on critical insurance issues including performance.
Of course, the most important aspect of meeting the challenge of insuring universities in the face of financial adversity is for them to focus on insurance priorities, so they cut out wastage. Says Rachel Phillips of broker Marsh: "Universities should optimise value for money in ultimately what they are buying, so they have to get their strategy right from the start. They should separate out what is nice to have from what is critical or they need to have.
"Let's understand all the drivers of premiums, otherwise there might be unnecessary costs which in these times could be spent on education provision. It's all about informed decision making before you even go to the insurance market."
Cutting out the fat
Thus universities ought to be cutting out the fat. Explains Phillips: "Some insurance packages have add-ons which might not be relevant to or required by the university." This is particularly the case with one of the biggest items of university insurance, property/business interruption. Here it is really important to get the sums insured right.
Says Phillips: "Some insurers may not have sufficient capacity to write the full 100% of the property and business interruption sums insured and will therefore not offer terms. To maximise insurer engagement, universities should have a clear idea of the estimated maximum and probable maximum loss limits, often lower than the full values, before they approach insurers. A broker can conduct an EML survey so you can make a decision against full value. This way, universities can achieve a good sum insured but lower the impact on the balance sheet."
She advocates proper modelling for deductibles so universities can make credible judgments about levels of self insurance.
Not increasing self insurance
However, Paul Tombs of Zurich Municipal warns against universities taking on more of the insurance burden themselves to make premium savings. He says: "They need to avoid a knee-jerk reaction or a potentially short termist approach of considerably increasing self insurance when looking at renewing their insurance programmes. Any increase in elements of self insurance could impact further along the line if there is a run on medium sized losses. The starting point should always be for the institution to assess its risk appetite."
Universities can require the option of Long Term Agreements for their insurance. Providing their claims don't go above a certain level, premiums will be fixed – so they don't have to renew every year with the worry of increased rates. Some universities will go for agreements as long as five years. LUPC is a case in point – it benefits from attractive discounts because of the number of institutions it is bringing to the table.
Whether or not Long Term Agreements
Marsh's Phillips will contemplate LTAs as a way forward. "There's nothing wrong with them if the client is comfortable with the cover and price – and is trying to get pricing predictability. We will have a very good feeling if the pricing is best in class and we are being given a further discount – then why not have it!"
Gallagher Heath's Bristow doesn't agree: "I would much prefer to go a fixed rate contract as LTAs are weighted too much in the insurers' favour. However, in the current market insurers are reluctant to give these and an alternative is to try and ensure that insurers commit to premiums which are geared directly to loss experiences over a rolling five year period. I am interested in price stability – LTA breaches and unexpected rate increases make it difficult for universities to budget for insurance costs."
What is apparent is that despite the relatively small number of insurance carriers in the university insurance market and the restrictions of the OJEU-governed procurement process, there is no shortage of opinion as to how the market should operate. There can be no doubt too about the quality of the debate, bearing in mind that the one thing universities are not short of is brain power.
"There is a considerable gap between the perceptions of insurers and universities…"
"Much of the debate about insurer competitiveness centres on the issue of whether insurers are sufficiently minded to give universities what they really want."
"…the other view is that this increased element of competition has to come from within existing participants too…"
"Response times from the insurer are important and there has to be a preparedness to be flexible and really helpful."
"Universities can require the option of Long Term Agreements for their insurance."
The vast majority of universities will cover the basics, taking out buildings cover for halls of residence, as they would with any building under their remit. If the halls of residence are owned by a private contractor, it would be prudent for the University to ascertain where the responsibility for buildings insurance falls.
But "block halls" contents insurance goes a step further, offering peace of mind for students and parents as well as university and private sector accommodation providers. Comprehensive block halls insurance will automatically include basic cover against fire, flood and theft of residents' belongings within their accommodation (but not outside), so that all residents benefit.
These policies, which can offer cover for properties off-campus as well as halls of residence, are significantly cheaper when compared to students buying their own contents insurance individually. They make it an affordable option for cash-strapped students, and one which can be included in the price of halls.
More often than not it will be parents, rather than the student, who thanks you for the hours saved scouring the market for a suitable policy.
But we're seeing that students' lifestyles are changing. They are increasingly tech-savvy and often carry expensive items such as Kindles and iPods outside their halls, meaning they wouldn't normally be covered by block halls insurance. Let's not forget that often students' entire music collection and all their textbooks can be stored on these devices.
So if needed, students should have the option to protect themselves by purchasing add-ons to their existing policy, for example for belongings outside their room and for accidental loss. In a time of crisis, students will find added benefits such as 24-hour replacement for laptops invaluable.
In the instance that damage to university or landlords' property is caused by a tenant, tenants liability cover can be included to protect where a student can be held liable for damage through attributable negligent behaviour to any items within the property that the tenant is legally responsible for.
As students are so often on the go, studying at different times of day and unwilling to spend a long time on the phone sorting policy details, web based support would be a key benefit, allowing them to download their policy certificates, extend their cover and find out how to make a claim.
A dedicated claims team who will liaise directly with tenants to ensure an efficient service and minimise the involvement of university resources is also a must have. Even better would be a personal account manager for your property, who can ensure the arrangement runs smoothly from day to day and knows your needs inside-out.
Some providers will even offer to educate students about their cover, attending arrival weekend events, but also supporting the university with crime prevention initiatives. Universities have a responsibility to protect their own assets, but will benefit from helping students to protect their own with insurance tailored for their lifestyles.
A number of external factors will dominate the way that university and higher education establishments invest their endowment. Assuming that statutory funding and student fees essentially pay for the annual costs of education provision, the endowment assets can be used for long term finance. Funding scholarships, bursaries and capital developments will be the focus of most endowment spending.
Current cuts to the UK education budgets will have an inevitable effect on higher education. The number of undergraduate places at English universities will be cut by 10,000 in 2012-13, with the slots allocated instead to 155 further education colleges. The change is part of the coalition government's market based reforms of higher education. Student numbers have been capped by the government to control costs. For the coming year, the Department of Education has stripped universities of 20,000 places, although institutions which charge average fees below £7,500 can enter a competition to win them back.
Much depends on whether a university is based on undergraduate education or research. Oxford University estimates each undergraduate costs £16,000 to teach. Even after the rise in tuition fees, the university estimates, undergraduate tuition will leave it with an £80m shortfall. As a research university, Oxford must also find the means to support postgraduate students, who receive little public help.
While this is not good news for potential students and presents planning nightmares for the higher education institutions, finance committees should not lose sight of their longer term priorities and how the endowment will assist.
As with independent schools, competition between higher education establishments increases financial pressure. Lecturers' salaries have been rising with the demand to attract and retain the best talent, especially with the attraction for the brightest academics being tempted to teach in the US, Europe and Asia. On top of this comes an increased National Insurance and pension cost. Undeniably, cost of building projects and the need for better teaching facilities has increased the pressure on endowments.
The last few years has brought home some simple truths about investment. Diversification of assets, particularly into illiquid assets had a dramatic effect in 2008. This was particularly evident for the US educational endowments and the concept was replicated by certain UK academic endowments. Many had invested in illiquid investments, such as hedge funds and private equity, in the hope that ongoing capital gains could pay for capital projects and certain operational running costs.
Yale, Harvard and Stamford endowments fell by between 25% and 27% in 2008, while Oxford, for example, fared better with a decline of 14%. This resulted a liquidity trap as the illiquid assets paid no income and could not be sold to pay ongoing operating costs. As a consequence, any liquid assets were sold at the bottom of the market. Having sufficient liquidity to meet immediate capital commitments is essential.
Universities need to maintain the real value of the endowment over the long term, so it is logical that the investment objective should be to keep pace with costs of the institution and real economy. An inflation based benchmark or target makes sense as this allows for a more flexible asset allocation, which should allow more freedom to preserve (and preferably grow) the real value of the endowment. If the investment committee is clear about the medium term cash flow of the institution and levels of sustainable income, it should be in a sustainable position for the long term.
A final comment on fundraising is necessary, in the case of university and other higher education institutions. Unlike other academic endowments, many UK colleges and universities have been successful in copying practices from the US in developing funds from alumni and other major donors.
Cambridge's endowment now stands at £4.5bn after it completed a £1.2bn drive to mark its 800th anniversary. The University of Oxford has closed the wealth gap after raising £1.3bn in a fundraising drive, which started in May 2004, bringing the institution's endowment assets to £3.8bn. Oxford persuaded a third of its 175,000 contactable alumni to donate to the university and 16% of the university's database of former students gave funds.
Whilst it is possibly unfair to compare with the success of Oxbridge, it should be noted that the remaining UK universities had investments of £2bn, according to data for 2009-10 and are very active in fundraising for the future, with the average for Russell Group universities alumni donating of 3.8%.
There will be some consolidation of higher education over the coming years after a period of expansion. Universities will need to maintain their long term investment plans and be active in raising funds from other sources than the government to support spending. Ensuring sustainable income in the short term and flexible asset allocation in the longer term, should allow more freedom to preserve and grow the real value of the endowment for the benefit of future scholars.
"If the investment committee is clear about the medium term cash flow of the institution and levels of sustainable income, it should be in a sustainable position for the long term."
In October 2010 the UK Government introduced fundamental changes to the way universities in England were to be financed. As part of this strategy the government raised the upper limit on the level of tuition fees to £9,000 per annum.
Higher education is a devolved matter, so it was up to the Welsh Government to decide whether a similar change would be introduced in Wales. The finances available to the Welsh Government would not allow it to reject all the Westminster reforms but at least it could protect the people of Wales from the biggest change as students who live in Wales would not have to pay any more than the current fee level of just over £3,000. The difference would be paid by the Welsh Government to the universities.
When it came to setting the fees, the majority of universities chose a flat £9,000 rate. Glyndŵr University took what it considered to be a more socially and politically responsible decision to charge an average rate just below £6,500, although the actual rate charged depended on the type of programme being followed. This reflected the significant difference in the cost of delivering diverse subject areas.
Behind the changes was a desire to increase the power of the student. In England this was a natural consequence of the student rather than the government now being responsible for paying the fees. In Wales the government had strengthened the role of the student by making the student experience one of the key performance indicators on which all universities would be judged.
The result, particularly in Wales, is the need for universities to improve the student experience but on a considerably reduced level of income. In response, Glyndŵr University has adopted a comprehensive set of measures including the restructuring of the university to focus resources on the most needed areas; greater cooperation within and outside the sector both through purchasing consortia and academic collaboration; and a shift in emphasis away from public money to privately generated income.
The need for universities has never been greater. The old certainties on which the economy relied have gone. Traditional, heavy industries which formed the backbone of the economy in North East Wales have all disappeared, replaced by new, knowledge-based industries such as Airbus, Sharp and Toyota, together with hundreds of small businesses which are crucial to economic development. To stay ahead – even to survive – these businesses need a new, highly skilled and innovative workforce. This is the role of today's universities.
It is true that compared with many countries, our universities are significantly underfunded, but complaining will not change the situation. Ten years ago, at this university we were 64% government-funded and today we are down to below 40%. We continue here to reduce our reliance on public money through diversifying our income sources through for example, the acquisition of a private London college and the offering of training and consultancy services to industry and private sector.
The financial stability and with that, the future of our universities lies in our own hands. Tight, targeted financial control, continued diversification of funding sources and spreading financial commitments as widely as possible, all have important roles to play in securing that future for generations to come.
Insuring British universities is a complicated and very demanding process, much more so than for most other charities. It puts considerable pressure on university insurance managers who need as much help as possible from the insurance sector. That help is generally forthcoming but its quality varies, really depending on how proactive insurers and brokers are prepared to be – above and beyond the call of a duty prescribed by an EU-inspired procurement mindset.
The insurance of Britain's universities is such a major operation partly because they are so big (often spread out on different sites). The risks they have are very diversified (with people working in a wide range of occupations and also with a wide range of activities being carried out on sites). The people and organisations they deliver services to are not only varied but large in number.
Indeed, with virtually everything connected to Britain's universities the numbers are big – whether in relation to income, people employed, individuals in receipt of services, or contracts of supply to outside organisations.
Sheffield University, for instance, has an annual income of £408.6m, over 5,500 staff, operates specific services for industry and commerce – with its research partners and clients including Boeing, Rolls Royce, Unilever, Boots, Astra Zenecca, GSK, ICI and Slazenger – and works with UK and overseas government agencies and charitable organisations.
Its academic partners are leading universities around the world – including the World Wide Universities Network in the USA, Europe and China. And last but not least there are the 25,000 students which it has on site.
Sheffield is only the 26th largest university in the UK. As a comparison, the disability charity Scope has an annual income of £104m, 3,500 staff and 8,000 volunteers. Other leading charities have incomes as follows: Barnardo's (£245m), NSPCC (£149m), RSPB (£123m).
The risks involved in operating Sheffield University are so numerous that at first glance they would appear horrendous. There are the risks to all its buildings and the potential liabilities to the people using them – whether the use is for learning; laboratory work; other research work where there are perils; storage of hazardous substances; garaging of vehicles; housing for students; consumption of food and drink whether by staff; students or visitors; other staff facilities; indoor sports and leisure facilities, etc, etc.
Equipment is at risk
Damage to or theft of university equipment, particularly of laptops, is a big risk. The need to cover the contents in student accommodation requires particular focus. Sheffield provides self catering and catered accommodation for as many as 3,500 students in the apartment blocks of just one, albeit the largest, of its three student villages or accommodation clusters.
The people working on site constitute a major risk and, once again, a very varied one. Some 4,340 of Sheffield University's employees are non-academic, which means they could be undertaking cleaning, maintenance, catering, workshop, scientific or technological assistance, driving, etc, etc. The liability to these employees is considerable while the risks range from the simple to the complex.
The university's liabilities to third parties – public liability, contractual liability, etc – are substantial. Working with industry, commerce, government agencies and charities leaves the university open to all sorts of risks. Its schools of medicine, dentistry and nursing are in a class of risks of their own. Travel overseas by staff on university business, whether to attend conferences, meet academic partners or to service arrangements with overseas agencies brings a number of risks.
However, these kinds of risk which Sheffield and other universities face are being overshadowed by the clouds of recession and government cutbacks in funding – plus there are other factors, all coming together to force universities to focus on risk in a different light.
Wendy Piatt, director general of the Russell Group of elite universities, writes in a foreword to a report on further and higher education risks put out by insurer Zurich Municipal: "We are facing severe cost pressure across all key activities. The reasons for this include the changing nature of research itself which is becoming more interdisciplinary, international and technology-driven. There are also increasing costs associated with maintaining the facilities, staff and support services which are essential components of providing an outstanding student experience."
Providing the required student experience
Indeed it is the risk of not being able to provide the required student experience which worries Paul Tombs of Zurich Municipal as the government has linked the raising of student fees with students being entitled to have satisfactory educational provision. Also universities are now beginning to have to compete for students as high fees have started to deter would-be applicants for places.
If universities can't cope with the cost pressures then something will have to give – namely reputation, with the worst scenario being students actually suing a university for not coming up to expectations. That sort of situation will be really bad for reputation at a time of intensifying competition. Loss of revenue could become a major risk, not just in relation to fewer students applying but in relation to concerns by commercial customers and partners and other bodies. Loss of reputation leads to loss of revenue.
Tombs is also worried about universities cutting back on the maintenance of buildings, particularly at a time when they may be increasing their utilisation to save or make money. Risks will increase in proportion to the extra numbers using a building and the widening range of uses it might be put to – whether for university or outside commercial purposes.
The way to address these risks is by risk management and insurance – risk management in particular when there is no insurance back-up available. You can insure against some causes of reputational risk – e.g. an explosion or fire, a building collapsing, food poisoning, employee fraud, but not all of them – e.g. poor performance, commercial contracts not being renewed, key staff leaving and problems of replacing them.
So risk management needs to be given intensified priority by universities. Says Tombs: "You have to know where the key dependencies of the university are and have certain risk management policies in place, for example key building resilience. With the potential for increased student litigation it is even more important that universities provide what they promise, have a clear systematic process for dealing with complaints around the quality of courses, and ensure all record keeping is detailed and up to date."
Universities look to insurers to provide both insurance and risk management which covers their needs and, on the face of it, there is a mandatory procurement process governed by EU regulations under which universities are meant to set out their requirements and insurers tender to meet these. In many ways what is designed to be a methodical and transparent procedure ends up being potentially hideously complicated and restrictive. It also leads to a mixture of not very positive characteristics: box-ticking, timidity, tunnel vision, complacency and lack of creativity.
Procurement governed by OJEU
The procurement arrangements for the purchase of insurance by universities are governed by the OJEU (Official Journal of the European Union) rules and offer a university four types of competitive procedures: open, restricted, competitive dialogue and competitive negotiated – and some of these may only be used in certain circumstances.
Not exactly a system to encourage the full use of skills, experience and common sense by either the supplier or purchaser of insurance. Nevertheless, by not being overwhelmed by the demerits of the system and not losing one's perspective, it is ultimately possible to achieve a better result than average.
Observes Ginny Hope of Bristol University, who is also chair of the insurance side of the Southern Universities Purchasing Consortium: "Yes, we are bound by OJEU – and it's very good if you are outsourcing your catering but not if you are buying insurance. So what you need to do is have a very good relationship with your procurement people who will then in general leave you to keep sight of what is best value and the right cover and obtain something which works in the end for you. It is so easy to be frightened of EU rules that you get driven by the whole OJEU process rather than your objectives."
Adherence to OJEU can lead to playing it safe with a resulting blurring of focus all round. Says Cherry Chan of actuarial firm Barnett Waddingham: "Universities should certainly ask questions of their insurers but it is the quality of the responses which count, and this depends on your specifications. In terms of what you specify you need to be very clear in your mind what you want – specifications can be very vague and respondents can say how on earth do we answer this."
So focusing on one's objectives is key and so is making the OJEU rules sweat if necessary to achieve them. Universities and their brokers (if they use them) have their own preferences about which part of the OJEU rules to operate under. Rachel Phillips of broker Marsh likes to utilise a negotiated procedure, despite the strict limitations by OJEU on its use.
She says: "If there is a valid reason for going the negotiated route I would recommend it. Given the insurance terms and conditions being offered there may be a need for further discussion to make sure you really are getting a policy fit for purpose and at the right cost. If you don't use the negotiated route what happens in reality is that the quotation is 'subject to standard rates and conditions' which may not be what you want or best for you in the event of a claim."
Universities should assert themselves
Universities want to know where they are – of course they do. So they should assert themselves. Comments Phillips: "Contract certainty is very important. Before I place a risk I want to see the detailed wording – I don't want it coming in, say, 60 days after we have signed up. I also want to see flexibility about mid term changes in the risk profile. We may be insuring things on day one, but we may need to extend cover on day 90."
That part of the insurance sector servicing the insurance and risk management needs of universities is relatively small and somewhat polarised in terms of its structure, including the way insurers are prepared to work with brokers. At the one end are the mutuals, dominated by UMAL. At the other end is Zurich Municipal (part of a big shareholder owned group). Zurich deals direct with universities but has no inhibitions about including brokers in discussions.
UMAL says that while dealing with brokers it won't pay them commission – and it is perceived by many as not really being prepared to work fully with them. This is strongly challenged by UMAL, but some brokers are adamant. Says one, who wishes to remain anonymous: "My job as a broker is to advise the client properly and so I need to be there when there are discussions. Zurich don't mind me being in the room with the client when these take place, but not UMAL – they don't want me in there."
Peter Bristow of broker Gallagher Heath explains all this in his own way: "There are tensions between UMAL and the broking community. We have a working relationship with UMAL, particularly when quoting for further education college business, through the Crescent Purchasing Consortium, and treat Zurich Municipal in the same way as any broker market. We also work with UMAL as a risk carrier. But we know and understand that both UMAL and ZM have a direct dealing service model. Our role is to recommend the best option for the client, and wherever this involves UMAL and ZM we have to make this work for the client."
In the middle of the spectrum are a slew of insurers most of which don't exactly set one's pulses racing. There is a perception of some of them being really passive – not particularly helpful, and lacking creativity and energy. These don't like opening up their thought processes for discussion. It is considered that all this is down to a slavish following of OJEU rules and a willingness to let the spirit of OJEU do their thinking for them.
An upsurge of medium sized brokers
Also servicing universities are insurance brokers. For quite a while now insurance advice has been dominated by the really big brokers, but more recently there has been an upsurge of medium sized brokers advising universities.
These medium sized brokers have won business by demonstrating of necessity how really hard they work for their clients and have come up with some imaginative solutions one way or the other via the OJEU process. They have been helped in their quest for business by rumours of unhealthy relationships between certain brokers and insurers. However, these rumours should be set against the heavy compliance burden all brokers are subject to and the pressure on them to maintain best practice.
Comments Rhydian Thomas of Henderson Insurance Brokers: "The role of a broker involves the need to generate wide insurer interest and hence eventual competition for any OJEU insurance tender exercise." That's not always the easiest thing to do as sometimes insurers won't respond to tenders. "Our job is to be dynamic and proactive, to engender genuine competition to help secure the optimal tender result within the OJEU rules and framework," he says.
Brokers of all sizes do have their fans. The London Universities Purchasing Consortium, which has over 40 members and is committed to spending some £50m in insurance premiums over the next five years starting in 2012, uses one of the big brokers. Mike Kilner, who leads the contractual arrangements for insurance on behalf of LUPC members, says: "We expect a broker to know what the market is at the time – where to place and what is possible. They can be very intuitive and get the best deal out of an underwriter."
Ironically, Sheffield University set up its own broker subsidiary, Risk2Value, not only to manage its own insurance and risk management programme but also to offer services to other universities and the wider education community.
"Loss of revenue could become a major risk, not just in relation to fewer students applying but in relation to concerns by commercial customers and partners and other bodies…"
"In many ways what is designed to be a methodical and transparent procedure ends up being potentially hideously complicated and restrictive.…"
"That part of the insurance sector servicing the insurance and risk management needs of universities is relatively small and somewhat polarised.…"