Universities are under utilised and under performing

Universities are vital social institutions. They prepare the next generation of leaders, and their research deepens our understanding of the world and ourselves.

Despite these lofty aims, it is important to keep in mind that universities are also businesses. They purchase equipment, consume supplies and employ labour to create products and services, which they sell at a price.

Costs constrain the volume and quality of their output and revenues influence which services and products they provide. If their income fails to exceed their expenditures, then universities eventually go bankrupt just like any other business.

Modern universities are finding it increasingly difficult to make financial ends meet. There are three main reasons: outdated teaching methods; inefficient use of capital and administrative bloat. Let’s look at each one in turn.

Although their buildings look modern, higher education is still a 19th-century industry in which academics handcraft courses and deliver them to students. Even straightforward subjects, such as first-year statistics, are bespoke creations.

The result is that Australia’s 39 universities offer 39 different statistics courses. Standardisation and online delivery would reduce costs considerably and, by sharing best practice across institutions, increase quality at the same time.

Despite the online revolution, lectures remain ubiquitous. Every university has a multitude of lecture theatres, and considerable administrative effort goes into deciding who gets to use each one, and when.

Except for Friday afternoons (students and academics zealously cling to a Thank God It’s Thursday culture), teaching spaces are heavily booked.

Over the years, universities have improved the acoustics of lecture theatres, installed digital projectors and added airconditioning, but their labour productivity has stagnated. Since it still takes the same amount of time to deliver a one-hour lecture today as in the 19th-century, something else has to change.

Academics frequently ask for more teaching spaces, but the present ones are underused. The average Australian university conducts classes for around six months each year.

The rest of the time, classrooms stand largely idle. Teaching across the entire year would permit students to finish their courses in a shorter time while a more intense use of capital would make a big difference to institutional bottom lines.

Finally, over the past decade, universities have employed large cadres of administrators who now outnumber academic staff at almost all institutions.

It is not clear why this has happened, but reversing this ratio would allow universities to redirect their resources to their crucial work – teaching and research.

Steven Schwartz is a senior fellow at the Centre for Independent Studies and the former vice-chancellor of three universities.