Accountancy called to book in quest for value

March 21, 1997

The traditional academic values of British universities are widely seen to be under threat from commercialism and misplaced business management methods.

At least, this is what is often claimed. Yet a survey of how universities allocate their resources, conducted last year, shows that this claim is mistaken. Certainly, we found management styles which demotivate academic staff. But staff may be relatively content to work in an apparently quite commercial environment, that is, in the small number of universities in which departments have access to good-quality financial information.

Our brief when surveying United Kingdom universities was to seek to establish whether accountancy, a popular and relatively inexpensive university subject, was being used to cross-subsidise other, less popular and more expensive subjects. We sent a lengthy, detailed questionnaire to 88 universities (including London University schools and colleges of the University of Wales). We received 52 usable replies.

We discovered very considerable differences in the knowledge of resource allocation and in the extent of devolved financial management. These results proved more important than what we learned about cross-subsidisation.

Although respondents in universities with less transparent systems were less able to provide estimates or evidence of cross-subsidy, they were still very likely to believe that their unit's resourcing was not fairly related to the income it generates. The lack of transparency suggests that there is ample scope for hidden cross-subsidy in about a third of universities and some scope in another third.

Variations in financial transparency appear to be related to strong differences between the new universities (the former polytechnics and colleges) and older, more traditional universities. The table on the right shows that half the responses from each type of university appear in one financial transparency category: technological universities (the former CATS) in high; "traditional" in medium; "new" in low.

In the low financial transparency category there is a clear contrast between the two "traditional" universities - which, for different reasons, are exceptional - and the new universities. Nine of the 12 respondents in new universities neither receive a statement comparable to our sample, nor do they know of one at a higher organisational level. Two of these respondents commented that budgets are treated as confidential. Another two commented upon the character of financial information: one claimed that "budget and actuals are not integrated in any meaningful way", the other that the faculty level statement shows only "budgets/ variance, not income!" Of these nine new universities, only one reports computer-based planning. More generally, 12 universities reported no computer-based planning. Ten of these are new universities, ie 40 per cent of our new university respondents.

Universities in the low financial transparency category do not use financial information to manage academic units - except perhaps at quite senior levels.

New universities have a line management structure. The head of department or school holds a post, rather than an office; its duties are to take operational and some defined policy decisions and to direct or manage subordinate staff. Despite differences in style, the underlying model is closer to command and control than to the committee management of traditional collegiality. It is possible to use access to "the figures" to enhance managerial authority, and, by retaining a greater degree of executive discretion over resources, to reward compliance. Such a regime does not encourage transparency or formula-based allocation.

Traditional universities typically do not have this line management structure. Deans and heads of department are generally professors serving a term of office. Because they need to be able to live, as equals, with the consequences of their time in office, they have a greater need to secure agreement and to exercise their role in a political vein. Thus, there is an advantage in translating downwards the constraints in which an office needs to be exercised, from vice chancellor to dean, from dean to head of department. Because these constraints are ultimately financial, financial information and financial management become a means to academic management.

This hypothesis would explain the qualitative change from medium to low financial transparency. In the medium (as well as the high) category, financial information is being used as a means to management and so academic units are financially informed budget centres. In the low category, financial information is given little or no currency because academic units are managed more directly.

An important question is whether differences in the use of financial information and in management style have different effects on academic staff morale. We found that perceived fairness is associated with working in a high financial transparency university and having some discretion over any surpluses; low financial transparency universities are perceived as unfair, with the implication of hidden cross-subsidy.

Such differences in perceived fairness should be enough to cause a rethink of the rhetoric of commercialism. It is the universities with high-quality information systems, transparent resource allocation and devolved budgets which are perceived as "fair".

David Angluin and Robert Scapens are, respectively, research associate and director, Centre for Interdisciplinary Research in Accounting and Finance, University of Manchester. Their report is on the world wide web at ://

University type

Financial transparency / Total / "New" / Technological / "Traditional"

High / 17 / 6 / 4 / 7

Medium / 18 / 7 / 1 / 10

Low / 17 / 12 / 3 / 2

Total / 52 / 25 /8 / 19

New universities are former polytechnics and Scottish Central Institutions; technological universities are the former Colleges of Advanced Technology; and "traditional" universities are other Scottish universities, civics, university colleges and the new universities of the 1960s.

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