Economic management is increasingly important when working as a president of a higher education institution
A president oversees a higher education institution which is simultaneously an organisation and a vast community, involving personnel and students as well as alumni, cooperative partners and so on. In Finland, the president is also the managing director of a university of applied sciences as a limited liability company in accordance with the Universities of Applied Sciences Act (Chapter 4, Section 15). When a higher education institution is led by the same person in a dual role, an interesting dimension is added to the equation. It is true that the presidents of different educational institutions have for long been responsible for both the actual operations of their institution as well as their economy. In Finland, however, this is now based on the rule of law.
In the management of a higher education institution, when do you take on the role of president or managing director? In fact, this is all very clear: you work in the role of managing director when dealing with matters related to the educational institution as a company. In recent years, this role has been emphasised slightly more than before. This is not so much the effect of amendments made to the Universities of Applied Sciences Act, but results rather from cuts to education, which have dramatically reduced the budget of higher education institutions. Economic management has become increasingly important when working as a president, which highlights the role of managing director even more. When the state's budget was tightening, a new financing model based solely on results was simultaneously introduced at the universities of applied sciences. In this model, the universities of applied sciences compete with each other in a similar way as universities, and this competition is evaluated in performance indicators. It is true that higher education institutions have always competed against each other both in terms of students as well as funding for research and development. In recent years, however, competition has increased significantly also in terms of basic funding for higher education institutions. This has inevitably led to a situation in which the presidents are obliged to examine and develop the competitiveness of their higher education institution more as an organisation, as performance management has become increasingly important. Although the president is a person who also works as a managing director of a university of applied sciences as a company, the latter role has gained greater significance.
It is true that the economic management of a higher education institution has always been important. However, cuts to the state budget and the introduction of a performance-based financing model have destabilised the financing of higher education institutions considerably. As a result, higher education institutions have been forced to adapt their operations to meet the changes in funding. In some higher education institutions, this has resulted in a need for considerable reductions in the number of personnel. As fluctuations in funding became more common and the overall amount was in serious decline, a proactive approach to economic management became increasingly important. When the allocation of total funding is based on higher education institutions’ success as reflected in the performance indicators of the financing model, the educational institutions have become increasingly aware of their results. Even if a higher education institution succeeds in improving its performance, the amount of funding may decrease if other higher education institutions improve their performance even more. Consequently, higher education institutions are now aware of the importance of a healthy economy. They identify the achieved results and the operational effectiveness of their own educational institution in comparison to the others better than ever before. And so, the financial austerity measures have weakened the operating conditions of higher education institutions while simultaneously forcing them to become more effective, which is reflected in greater performance.
The demands to develop the economic management of higher education institutions have strengthened both the planning and monitoring of operations and finances. Monitoring now takes place more frequently, which has posed challenges to data production and reporting: they need to maximise their contribution to the running of a higher education institution in which economic management is in an increasingly important role. In order to secure the operating conditions of higher education institutions, it is of utmost importance to link the operational targets and results to the planning and monitoring of operations and finances.
It should be recognised that the role of economic management has grown in importance during the past decade when running a higher education institution as a president. This will probably be the case also in the 2020s, at least for as long as the current financing model applies. This model is based purely on the results of higher education institutions, thereby underscoring the importance of continuous improvement of performance.
PhD, President, CEO Jouni Koski
Laurea University of Applied Sciences