The rational approach to budget cuts: One university's experience

Conclusions

What can we conclude from the experiences of UM in managing cutbacks?

The rational approach has limited value in universities

UM's approach to cutbacks met most of the criteria associated with rational decision making. There was a limit, however, to how useful this approach could be - in 1984/5 UM returned to across-the-board cuts, because of the constraints faced by the university.

We could not analyze and reanalyze the situation... We felt we couldn't go through the whole process again but we still had to cut (administrator).

The constraints faced by most universities reduce the degree of strategic choice and limit the value of rational analysis. The only way to save significant sums of money, since usually at least 80 percent of the budget is tied up in payroll, is to reduce posts. Tenure protects the majority of professorial staff and Quebec legislation effectively guarantees job security for the nonacademics, so attrition has to be the main mechanism. UM has not expressed any intention of breaking tenure and, in Canada, only the University of British Columbia has challenged it in a handful of cases. Increasing revenues is difficult - additional research income only adds to overhead costs as many Canadian research councils do not pay them. A lack of a tradition of giving to universities makes fund raising hard in Canada, particularly in the francophone culture. Tuition fees, the lowest in Canada, are fixed by the government and have not increased for many years. Student numbers were increased in an attempt to raise the government's operating grant but UM has been unable to profit from extra funding for management and engineering students because ??? and EP have separate budgets.

The business approach will not guarantee excellence

The business approach may improve cost efficiency but it will not, of itself, guarantee excellence and may in fact work against it. Excellence in universities is the product of excellence in people. It requires innovative and often risky recruitment decisions, and the provision of enough flexibility to allow individuals to be creative and innovative (Pearson, 1986). Increasing controls, quantifying output, pursuing predominantly economic goals may remove that flexibility and make attracting, keeping and motivating excellent people more difficult. Successful university management involves developing an organizational saga (Clark, 1972) - a collective understanding of the institution's achievements which provides purpose and motivation, and finding the right approach for the particular institutional culture (Hardy, 1987). It requires leadership, communication, and political skills and not just economic analysis and strategy (Chaffee, 1984).

Success depends on political skills UM relied on a rational approach to cutbacks but other models were present. It occurred within a bureaucratic context and may have been used politically to influence and legitimize decisions - and/or for collegial reasons - to build consensus.

We wish to argue that analysis figures prominently in both collegial and political processes, as well as garbage can ones, stimulated by the existence of ambiguous goals and multiple actors... analysis serves more as a means of exerting influence in interactions rather than of resolving issues on its own. It may be used to aid personal understanding for individuals or groups, but it also serves as a means of communication and attention focussing, as a means of legitimizing decisions, as a means of consensus-building, and perhaps most importantly as a means of persuasion. In this way, analysis helps to ensure that what does get decided in fact has some justification in principle (Hardy et al., 1983; 421–423).

Administrators at UM failed to create consensus because of inadequate political skills; ironically it was because they failed to do so that their actions were labelled as political. The term “political” has negative connotations but it is important to realize that the same behaviour can be used for both the common good and self interest - political skills can be used to build consensus and enhance collegiality (Hardy et al., 1983).

I think the imagery of politics is very helpful in understanding the operation of this place. Of course this doesn't necessarily imply “dirty” politics. I simply mean that you've got to understand the political forces - both inside and outside - that are trying to control this place. There are pressures impinging on the officials of the university from all directions, and in a real sense the management of this university is a balancing process. It's a task of balancing the demands of various groups against each other and against the university's resources... the men in critical positions are not bureaucrats, they are politicians struggling to make dreams come true and fighting to balance interests off against each other (dean, quoted in Baldridge, 1971: 20–21).

Defining and funding priorities and identifying and phasing out weak areas, without alienating the professoriate and endangering morale, relies on more than just rational analysis, it requires leadership, intuition and political will.

The business perspective ignores essential political skills

The problem with the current emphasis on the rational approach is that it ignores political reality and devalues political skills. The analytic skills, concepts and frames of reference associated with the business perspective are of little use for managing the social and political processes occurring within the system (Lyles & Lenz, 1982). Universities may benefit from thinking more carefully about their environment, developing ideas as to their future direction, and acquiring more information about their activities but all the planning and analysis in the world will not necessarily make anything happen. Universities are complex organizations in which the top-down approach associated with business is often untenable. Decisions cannot be imposed, they have to be nurtured from the bottom-up (Mintzberg & Jorgenson, 1986), which involves not just machiavellian machinations but the ability to communicate, motivate, build consensus, and create loyalty and commitment.

The issues raised by the experiences of UM should be considered suggestive - a single case study obviously has its limitations. It does, however, signal a need for further empirical study of the supposed benefits of the business model for universities. There has sometimes been a willingness to both impose and accept the industrial rationale in the university community which is not necessarily justified. Research is needed to answer the questions raised in this paper. How feasible is the rational approach in universities in the light of the constraints they face? Why do universities use this approach - to be more businesslike, or for political reasons? What are the results of this approach and are they beneficial? How important are factors such as leadership, intuition, judgement, and political will, and are they being neglected as a result of business models? Is “good management” in a university the same as in business? Until we can answer these questions more authoritatively, our trust in business solutions may be misplaced.