The Triple E: Efficiency, Effectiveness and “Economisation”: Moving beyond carrot and stick

When universities come under financial fire ideas flourish on how to be more efficient and effective. Edeltraud Hanappi-Egger Rector of Vienna University of Economics and Business discusses the Austrian case of what might work and what might not.

Universities especially public universities have been under pressure for many years to demonstrate efficiency and effectiveness in spending taxpayers’ money. This has become even more intense in times of budget cuts as ministries often expect universities to provide the same services in the same quality (if not higher) for less money. These expectations are bound to cause tension since universities are by definition expert organisations and as such do not follow the same economic rules as for-profit organisations: Faculty members need freedom to be creative and time for research and are in most cases intrinsically motivated. Students should not just optimise their academic programs but also see their time at university as an opportunity for personal development cultural and social experiences and networking. For these reasons university management depends more on communication and motivation than on orders and instructions.

However as several international examples show if universities come under financial fire ideas are generated on how to become more efficient and effective in terms of increasing productivity or more precisely increasing output with the same input or the same output with less input.

The Austrian case can be taken as an example of what might and might not work.

Austrian public universities have gained greater financial autonomy since 2004. The greatest part of Austrian university funding is a lump sum negotiated every three years with the Ministry of Education Science and Research. The underlying agreement specifies both performance and the budget. Several years ago the Ministry of Finance ordered that universities also must present efficiency measures. Each university was assigned a certain percentage of its budget that had to be saved. Despite the fact that Austrian universities have always had to be efficient due to the lack of adequate funding the new efficiency program only worked because the universities were promised that they could keep the saved money. Examples of efficiency measures include acquiring third-party funding for research resource sharing joint procurement centralising devices (for example printers) and the like. Some of these measures are sustainable some of them have been discarded - economisation clearly has it limits at universities.

However from a practical standpoint some lessons learned can be identified:

• Universities must be accepted as unique social systems in which strong economic logics could cause long-term damage such as a loss of people’s intrinsic motivation.
• It is important that universities can decide autonomously which efficiency measures make sense for them. This guarantees the necessary sensitivity and the availability of knowledge of the university’s specific situation.
• Leadership communication explanation and transparency are strong drivers for efficiency and effectiveness.
• Successful efficiency measures should be rewarded rather than “punished.” This means that universities successfully saving money by being more efficient must be allowed to spend it autonomously and should be rewarded for example by matching grants.

Universities have always been efficient institutions because this is part of good budgeting. Nevertheless budget cuts are definitely the main drivers for increasing efficiency and effectiveness.

 

Edeltraud Hanappi-Egger discussed this topic at the 4th EUA Funding Forum held on 19 October 2018 at Ramon Llull University in Barcelona Spain.