The Institute of Education's culture of "academic individualism" must end, according to management consultants behind a strategic review of the institution.
A report by PA Consulting, which was presented to the IoE's council in late December, prescribes a £2.2 million cost-cutting regime.
It also recommends that the IoE expand its activities in professional education, children's services, international business and e-learning in order to boost income by about £2 million.
The report says that "behaviour change" at all levels of the IoE is required.
"While the IoE has grown rapidly over the past ten years, it has done so in a way that has strongly prioritised academic individualism," it says.
To date, work in the four areas of proposed expansion has been "frequently based on the contacts and interests of individual members of staff", the consultants say.
They add that some of the recommendations, such as a stronger focus on financial management, more collegial ways of working and "delivering non-academic impact", will "almost certainly be perceived by some in the IoE as impinging on their academic freedom".
The consultants also identify the institution's strongest research department, the Educational Foundations and Policy Studies Department, as the only one that makes a loss even before overheads. It lost £1.3 million on £2.2 million revenue in 2008-09, despite scoring highly in the 2008 research assessment exercise.
The IoE must ensure that members of the department are engaged in "sufficient income-generating activity" and should consider compulsory redundancy for "highly under-utilised" staff, the report adds.
An IoE spokeswoman said the report "highlights the need to provide better co-ordination and support to academic staff to help them turn innovative ideas into practice".
"Our council has asked us to move forward with the opportunities set out," she added.
The council turned to PA Consulting after the Higher Education Funding Council for England cut the IoE's "exceptional funding" from 2010-11 onwards.
Exceptional funding is allocated for "activities that produce additional public value over and above that produced by other institutions not in receipt of the funding".
In 2008-09, the IoE was receiving £2.9 million in exceptional funding out of a total teaching grant of £5.3 million.
A Hefce review concluded this should be cut by about 75 per cent.