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Presentation at the EURASHE Seminar
‘Innovative Professional Higher Education –
New Trends for the Future’
Hans Vossensteyn
Warsaw, 14 October 2015
Performance funding and agreements across the globe:
Myths and realities
Performance Funding and
Agreements - EURASHE 2015
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HANS VOSSENSTEYN
Director of CHEPS, Center for Higher Education Policy Studies,
University of Twente, the Netherlands
Professor / programme leader at MBA Higher Education and Science
Management, University of Applied Sciences Osnabrück, Germany
Partner in the Erasmus Mundus programme:
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OUTLINE
Public Value Management
Diversity, differentiation and profiling in higher education:
Stimulate through performance agreements
Funding and performance orientation
Performance agreements: an international comparison
General observations
Intended and unintended outcomes
Contested but useful ?!
Extensive research report: http://doc.utwente.nl/93619/
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FROM NPM to PUBLIC VALUE
New Public Management: from bureaucracy to a market approach
Results and efficiency:
Professionalisation
Measure results and outputs
Disaggregate units
Competition & business-like management in the public sector
Greater discipline in resource usage
Public Value paradigm
New pragmatism:
How can higher education best serve society?
How can government steer HEIs to do this?
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THE STRATEGIC TRIANGLE OF PUBLIC VALUE
Collective preferences instead of aggregating individual interests
Incentives
Regulations
Policies
Stakeholders
Resources
Staff
Finance
Expertise
AUTONOMY
Strategic goals of
Government
HEIs
Stakeholders
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PUBLIC VALUE:
TO CREATE DIVERSITY & PROFILING in HE
Diversity & differentiation in order to serve a greater variety in
needs of students, the labour market and society
Profiling: Institutions / programs to show how they are different
Priorities and strategies
Target groups, types of degrees
Employability of graduates
Modes of delivery (traditional, online, internationalisation, PBO, …)
Research priorities
…
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BUT …
WHO STIMULATES DIVERSITY & PROFILING AND HOW?
Transparency tools - Rankings? e.g. U-MAP / U-Multirank
Who in charge? Ministry or HEIs? Relate to funding?
Changes in Funding Systems (modernisation)
Performance-based funding &
Performance agreements
8
OUTLINE
Institutions
Taxpayers
Framework to analyse HE financing
Student Financial Aid System
- Loan schemes- Grant schemes
Allocation of Public Subsidies to Institutions
- Block grants / funding formula- Targeted funds- Line-item budget
State
Private sector
Students and families
Funding Tertiary Education
Governing Tertiary Education
Decisions
-Tuition fees-Institutional financial aid-Investment funds
Institutional efficiency
- Time-to-degree- Completion rates- Student-staff ratios- Programme duplication / underenrolment
Context- Expansion of/demand for TE- Limits to public budget- Competing priorities for public budget- “Technology” / Unit costs in TE
Goals of tertiary education- Access to and equity in TE- Quality of provision- Relevance of programmes- Internal efficiency of system
Constraints- Difficulties in determining ‘need’- Ability to collect loan repayments- Private capital markets- Income distribution of population
QualityAssurance
R&D andinnovation
“Third mission”activities
LabourMarket foracademics
Tertiary Education Outcomes- Size- Efficiency
- Equity- System responsiveness
- Quality- Innovation
14-10-2015
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EUROPEAN AMBITIONS AND DEVELOPMENTS
IN HE FINANCING
Europe’s Modernisation Agenda for HE (2006 & 2011): Funding
1. Ensure financial autonomy
2. Encourage partnerships with business
3. Spend 2% of GDP on higher education to reduce the funding gap
4. Revise student fees and student support schemes
5. Base funding more on outputs than on inputs
6. Examine the balance of core, competitive and outcome-based
funding
7. Ensure portability of student support
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INTERNATIONAL DEVELOPMENTS
Many countries struggle to find a right funding mechanism to
enhance quality, diversity, profiling and performance
Public funding models in constant change – introducing or rethinking
performance incentives in allocating public funds.
Performance-based funding (PBF) and Performance Contracts (PC) new for
some countries, but for many years already in place in others (e.g. United
States, Finland, Germany-NRW)
Difficult to balance between national and institutional priorities and objectives
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PUBLIC BUDGET ALLOCATION
Performance-based allocation refers to the part of funding that is based on
qualitative or quantitative output indicators
Input-based
(incl. fixed costs)
• Historical
• Formulae
Output-based
Ex post:
achieved performance
• Formulae
Ex ante:
future performance
• Innovation funds
• Agreements
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DUTCH MINISTRY COMMISSIONED RESEARCH
http://doc.utwente.nl/93619/
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INTERNATIONAL COMPARATIVE STUDY:
PBF / PA IN 14 HE SYSTEMS
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INTERNATIONAL COMPARATIVE STUDY:
PBF / PA IN 14 HE SYSTEMS
Australia: Mission-based compacts (2011)
Austria: Ziel- und Leistungsvereinbarungen (2002)
Denmark: University Development Contracts (2007)
Finland: Performance Contracts (1994)
Germany: Ziel‐ und Leistungsvereinbarungen (NRW, Thüringen, late 1990s)
Hong Kong: Performance and Role‐related Funding Scheme (2005)
Ireland: Structural system change (2012); Institutional Profiles
Netherlands: Performance Contracts (2012)
UK: Scotland: Outcome Agreements (2012);
England: Research Evaluation Framework (2014) (replacing the RAE)
United States: Louisiana, South Carolina, Tennessee: PBF (late 1970s)
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PERFOMANCE AGREEMENTS ARE …
Two partners negotiating in a structured process (ministry & HEI)
Both sides contribute to the defined (public) objectives
Financial rewards/punishment related to performance (large/small/zero)
Complementing – replacing formula-based funding
Pre-defined future objectives oriented (based on strategies)
A written and signed agreement/contract: transparent and binding
…
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OBSERVATIONS: GREAT VARIETY IN AIMS
to improve performance in core activities – higher quality (weeding out
underperformers; increase efficiency)
to enhance accountability and transparency (informing stakeholders; support
dialogue and trust)
to encourage HEIs to strategically position themselves: diversify
to align national and institutional policies and activities (institutions
contributing to the national agenda)
Aims are likely to have an impact on the design and implementation
Multiple aims will complicate the design, implementation and evaluation
(effectiveness)
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OBSERVATIONS: GREAT VARIETY IN FEATURES
Time span: PBF and PA vary from two-year to six-year contracts
Experience: from the early 1980s (USA) and 1990s (Finland, Germany) to the present
(Ireland, Scotland, the Netherlands)
Content and Comprehensiveness: kind and number of topics addressed
Rewarding under- and over-performance
Level of detail: (mainly broad) intentions or specifying activities / performance in detail
Size and balance % of funding; input-based and output-based funding
Selection, number and weights of performance indicators used
Orientation: apply to the whole sector or differ from one institution to the other
Institutional contribution: fixed set of targets and indicators for all or institutions
picking targets and indicators (e.g. from a given set: ‘menu-approach’)
Stakeholder involvement: developing templates and guidelines, priority setting,
drafting contracts, data processing, reporting, evaluation of outcomes vary
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OBSERVATION: GREAT DIVERSITY IN INDICATORS
Core indicators
# graduates / degrees (A, FI, NL ,NRW ,Th ,Ten, …)
# credits passed (A, DK, FI, Ten, Lui, SC, …)
Underrepresented students (AU, IRL, Th, Ten, ..)
Duration of studies (A, DK, NL, Ten, …)
# PhDs (AU, DK, FI, NL, Th, …)
Research productivity (AU, DK, FI, UK, …)
Research Council contracts (AU, FI, HK, IRL, Scotl, Ten, …)
External income / knowledge transfer (A, AU, DK, FI, NRW, Th, HK, Scotl, …)
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OBSERVATION: GREAT DIVERSITY IN INDICATORS
Less frequently used indicators
Knowledge transfer (A, AU, Scotl., …)
Internationalization (FI, Ten, …)
Student satisfaction (FI, Ten., NL, …)
Graduate employment (FI, )
Research quality (HK, Engl., Scotl, … )
…
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MAIN DIFFERENCES BETWEEN RESEARCH
UNIVERSITIES AND UAS
PA’s are often associated with stimulating (a) individual institutional
profiles, and (b) excellence.
Institutional profiles: UAS stand in various positions
Some are specialised in a certain area (e.g. business, fine arts, engineering).
They are in a good position to develop their strengths better or more explicitly
by PA’s;
Some UAS are large, comprehensive (in terms of disciplines covered) and have
mainly a regional role, i.e. to educate youth (+ LLL!) in the region where they
are located. For them it may be difficult to develop a specific profile that stands
out in PA’s.
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MAIN DIFFERENCES BETWEEN RESEARCH
UNIVERSITIES AND UAS
Excellence: in many countries understood as ‘research excellence’ =
citations and publications in international top scientific journals =
Mode 1 research
UAS in many countries think they have to emulate this, and this race
they lose. Because they do not have the facilities, the critical mass of
excellent researchers, and the teaching staff do not have time to
engage seriously in research
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MAIN DIFFERENCES BETWEEN RESEARCH
UNIVERSITIES AND UAS
So… for UAS define research as application-oriented research, and
builds on the developing practice of Mode 2 research in UAS’s
Close connections between your UAS professors) and their business
world clients and principals
Develop ‘centres of expertise’ in the UAS sector in applied sectors
such as ‘automotive’, ‘health’, ‘creative industry’,…
Excellence in teaching: e.g. student satisfaction
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OBSERVATIONS: PITFALLS
Tendency to focus on quantitative indicators (only)
List of national objectives overly long and prescriptive (contradictions)
HEI tempted to list too many initiatives
No priorities set by HEI => mission overload
Policy-makers stress activities & inputs, focus should be outputs
Changes in environment (after signing PA) will affect PA
(ruling coalition, economic climate, …)
HEI has to prioritise => strategic profile
Reflect on objectives (in-period) and discuss with experts
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EXPERIENCES … Myths and Realities
Challenges …
Balance PA with other funding components
Too many dimensions & indicators may make all institutions look “good”
Generic indicators make all institutions develop in same direction
PA can compensate simplicity and ex-post character of formula funding
PA to give state-HE dialogue a formal structure
PA reinforces role differentiation of HEIs
Primarily accountability instrument, legitimize funding, restore public trust in HE
Creates extra accountability (burden)
Non-realisation of contract goals: who to blame? what to do?
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RECOMMENDATIONS
Performance agreements …
Require complex design questions, due to often qualitative character of
objectives
Require time for dialogue (preferably mediated by independent commission)
Experiment with PA (‘Learning by doing’): don’t rush to conclusions
Require a transparent way to measure and quantify clear objectives through
performance indicators and clear expectations
Require process of checks and balances accepting substantial transaction costs
and controlling mechanisms
Monitoring is required: “In God we trust. All others must bring data!”
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THANK YOU FOR YOUR ATTENTION !
QUESTIONS ?
Contact information:
Prof. dr. Hans (J.J.) Vossensteyn, University of Twente
Center for Higher Education Policy Studies (CHEPS)
PO Box 217, 7500 AE ENSCHEDE, The Netherlands
tel: +31 - (0)53 489 3809
inet: www.utwente.nl/cheps
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