Mergers are not new in the French competitive landscape. Tours and Poitiers Business Schools merged a few years, CERAM (Nice) and ESC Lille (Lille) merged 2 years ago to create SKEMA, there is project of a “France Business School” which would see more than 6 business schools merging, Rouen and Reims business schools have also announced a merger,…

The main reason behind these mergers is the intensity of the local competition. Despite being international and being recognized as such, French business schools still rely mostly on the local French market. And this market is strongly influenced by local rankings, which have many size-related criteria. So being bigger automatically brings more points in the rankings. It is similar to the movement of mergers of French universities and research centers to answer the criteria of the ARWU “Shanghai” ranking.

Then, as for many mergers in other industries, the risk of failure is high for several reasons. Business schools are culturally different, building on their 100+ years’ history for most of them, and are generally strongly anchored in their respective territories, including the strong influence of the local Chambers of Commerce. Then, the question of the financial synergies is yet to be answered, not to mention the cost of the mergers and the potential issues on the brand (keeping the 2 names, creating a new one,…?). Economies of scale are not obvious, particularly for campuses located several hundred kilometers away. So, will the value of the new entity be higher than the value of the 2 former ones is questionable, as it is again for many mergers in other industries. The impact on the financial results could be negligible. In some ways, one of the positive characteristics of French business school is that they are totally independent from universities and as such, able to be very reactive. And becoming bigger is not generally synonymous with reactivity or proactivity. The main positive aspect is in terms of international visibility. It could push more foreign students to opt for a degree from a French business school (the offer of programs 100% in English is common in France). It would also help French business schools in the opening of branch campuses abroad, a strategy, which despite regular announcements, is only timidly pursued, particularly compared to the initiatives of UK, US and Australian business schools. Hopefully, the local reasons behind these mergers will generate positive international spillovers.

If we don’t have examples of private equity firms investing in significant operations in higher education in Europe, we have examples of private providers (mostly from the US) who bought over or took a share in private providers in Europe.

For example, C.E.C bought one business school in France and one in Monaco, Laureate has one engineering school in France, several business schools in the rest of Europe and runs the online operations for the University of Liverpool from its Amsterdam office.

Even if we will never get a clear answer from these private providers, we can genuinely guess that they are expecting at least 15% in operating incomes. Some of the financials available for C.E.C. for example show that this is more or less what they get on their European operations.

Then, the issue is that most of the universities, business schools or engineering schools in Europe are either public, or if private, not-for-profit. Purely for-profit providers of a reasonable (= interesting for the investors) size are very rare. They were mostly built 20 to 30 years ago by entrepreneurs who managed to make a decent living out of them. And most of these private ones, up to our knowledge, have already been bought by one of the large US players mentioned above. So, it means that the potential number of targets is very small.

Then, when we look at the not-for-profit private providers, they mostly follow a business model similar to the ones of public universities: the spending is adjusted to the expected amount of revenues. It means that they are very far from the expected 15% and are more between 0 and 6-7%. So they are not interesting enough for investors. We could of course argue that investors could try to cut costs, rationalise the activities,…to reach the 15%. But as these potential targets are facing a very fierce competition to attract the best students (keep their rankings, reputation and accreditation), they generally tend to use all the resources available to retain top faculty, fund research, spend on marketing,… So any significant gain could have important consequences on the revenues on the long term (Killing the goose that lays the golden egg).

It is not surprising in fact that, so far, the large US private providers have mostly invested in second or third-tier institutions with little or no international reputation. These institutions are not attracting the best students, but the ones who anyway want a degree, so are not sensitive to the same criteria as the better students. Thus, these schools or universities can invest less on research, on facilities, use more part-time faculty,…which allow them to maintain a better financial profile.

Of course, we may see in the future a European private institution bought over and successfully revamped (= becoming highly ranked and very profitable), but the current market conditions are not advocating for that in my opinion.

If this process is followed correctly, universities will be closer to the expectations of the students and of the society in general and a common perception of value could even emerge, making public policies more efficient.

Two examples:

Study medicine in Cluj, Romania

Since 2007, the year of Romania’s accession to the European Union, the medical studies in this country are sanctioned by a European degree. As a result, many young French people are trying to get one of the existing spaces in the French-speaking track in medicine at the University of Cluj.

Main advantage: the recruitment process.  It is a major difference with the French competitive exam, which retains an average of 16% of candidates (as shown in rankings of medical schools for success after the first year). At Cluj, in 2009, on 329 French candidates, 143 were admitted, 43%. In 2010, the University of Cluj had 268 French students, including 159 medical, 82 dental and 27 in pharmacy.

Study physiotherapy in Liege

It is n physical therapy that the French are the most represented at the Medical University of Liege, Belgium. In 2010, they were 145 or 40% of this sector. “We counted up to 60% of French students before a decree limited to 30% the number of non-Belgian residents,” said Didier Maquet, lecturer.

Since 2006, the French may enroll in only one school or university (there are 8 French courses). They are then subjected to a draw before a bailiff, to maintain the 30% quota of non-residents. And at a cost 10 times less than in France (about € 800).

Improve the governance of universities and student orientation

No revision of the current law on universities, but an improvement in governance: that’s what Terra Nova is suggesting, through the creation of an academic senate at each university to allow “a clear separation of powers.”
In addition to organizing a major debate on the direction to set priorities and the necessary budget, the report sets the “ambitious but realistic” goal of 50% of an age group with a bachelor degree in 2022.
Customize the undergraduate degree courses

” Level Interview” during the registration and the formation of level groups in the first and second year of the bachelor (L1 and L2), enhanced supervision and mentoring, development of fully multidisciplinary courses: these measures must allow for a customization of the curriculum and promote gateways to improve the orientation process, in partnership with other stakeholders (employment centers, local authorities, Chambers of Commerce …).
Introduce the selection in the first year of Master (M1) and promote gateways from the university to the “Grandes Ecoles” (Engineering and Business Schools)

The rapporteurs do not go around the bush, they advocate for the “introduction of a selection process at the first year of the Master( M1)”, while it takes place today at the entrance to the second year of the Master (M2).
Another proposal that should stimulate debate, “decrease of 33% in 5 years of the number of seats in preparatory classes (the current entry point to the “Grandes Ecoles”) ” in parallel “to a reduction by 50% in 5 years of the intakes in the “Grandes Ecoles”.In order to “increase the number of students entering the “Grandes Ecoles” from the university and not through the current preparation path,” and that, as from September 2012. The preparatory classes could also be administratively attached to universities.

Cocnerning the private graduate schools and universities, Terra Nova offers to “launch an audit of the quality of private higher education.”
Greater recognition of young researchers

Recognize the thesis professionally and financially, increase the number of doctoral students positions and the come-back of post-doctoral students and researchers from abroad, facilitate the recruitment of doctors in public services: these are the proposals for young researchers .
In addition, the think tank suggests a “significant” raise of the salaries for academics and researchers (from public universities).
It is also necessary to rebalance the funding of research, between “a minimum of 50% of contractual funding and up to 50% of funding by project finance.”
Promote social diversity in higher education

For a real diversity of higher education, Terra Nova intends to generalize some of the initiatives already implemented by some institutions such as the reduction of the coefficients of socially discriminatory courses and units or building bridges to enter the Grandes Ecoles after a university degree.

Increase fees and pay a study allowance

Taking a long-standing demand of student organizations, Terra Nova proposes to pay to all students a graduate allowance of € 500 per month, which can be supplemented by zero-interest loans guaranteed by the State of an amount of € 150/month at the Bachelor level, and € 300/month at the  Master level.
More controversial, the increase in fees is also included in the report which calls, a threefold increase in 5 years for the bachelor degrees and a fourfold increase for master’s and doctorate. All students with a scholarship would remain exempted from paying these fees which would reach in 2017 € 500/year for a bachelor, € 1 000/year for a Master and € 1 500/year for a PhD.
Another priority figures: student housing, with 50 000 renovations and 40 000 buildings.

Disclaimer:

This post is an edited and translated version of an article written by Sophie Blitman and published in French by Educpros on August, 24^th.

The original article in French is available at: http://www.educpros.fr/detail-article/h/22a34c4c7a/a/enseignement-superieur-et-recherche-les-propositions-de-terra-nova.html

 This translation was done for the non-French speaking readers interested in higher education in France. The ideas presented remain with their original authors.

This is the opportunity to remind us a simple fact: general rankings (Times Higher Education ranking and ARWU being the best examples) are only useful to the ones they are designed for and that it can be misleading to use them for other purposes. And among all, students should not use them.

. General rankings are by essence very broad. Outside maybe of the 20 best universities worldwide or the 5 best in a region, being in the ranking does not mean that the university has a scientific recognition in your area of study. Numbers are obviously aggregated for the entire university and very high ratings in one discipline can compensate for lower ones in other disciplines. As such, as your area of study will certainly be narrow, particularly if you are a Master or PhD student, you cannot use them. Having one Nobel Prize winner in Physics does not mean that the MBA will be good. To counter this issue, general rankings have introduced “discipline-based” rankings. But then it’s sort of putting a plaster on a wooden leg. For example, the THE ranking, in its 2010 edition has a category called Social Sciences defined as such: “This broad subject category covers student favourites such as business and economics, as well geography, education, criminology and international relations”. It is honest to them to recognise that this subject category, supposed to be narrow, is broad. How being good in geography is of any interest if you want to study business? As a consequence, they do obvious mistakes. Just one example, MIT is not ranked in the social sciences category in the THE ranking (2010), even if it is highly recognised in economics, in innovation, in technology management, both for Master and PhD studies. I am not sure that the several world star faculty members teaching are appreciating that. Or more surely, they genuinely don’t care as they don’t need the THE ranking to attract the best students or funding from companies.

. General rankings are not customer-oriented. They do not ask the right people. If we take the example of the THE ranking, since when do academics from another institution have any idea on the quality of the student experience in another institution? What do they know about internships, study abroad programs, placements, alumni network, etc…? Some of them don’t even have this information for their own institutions! They MAY know about the research quality, as they read articles and meet other academics in conferences, may have participated in joint-research projects, may even have taught there (but that would then be a very small percentage of them). So, the information on a specific academic discipline could be useful for a PhD candidate. But if there is a champion/serial published in an academic area, will this person teach to undergraduate students? Or you will not even see his/her face in your 3 years on campus? On the contrary, you will see specialised rankings (such as some of the MBA rankings) surveying alumni, HR managers, enquiring about the salaries after one year or 5 years,…All the useful information not captured by a survey on academics.

. General rankings do not take in consideration the localisation factor. If the academic world is certainly global (although academics still tend to stay in their own countries), many students do not want to embrace an international career. If you plan to work in your country, then the local integration of your university is important. If I am a German student and I want to work in Germany, well, this is interesting to get a very good training, but this is also interesting that this training is recognised locally and that I can benefit from the alumni network, which is also mostly local, outside of a very few truly international institutions such as INSEAD (oups, not ranked in the THE ranking!). So, if it is great that Harvard is the best university in the world, it does not really apply to me. Nor even that Cambridge is the best in Europe. I need a very good local training.

. General rankings focus only on universities. As such, they miss all the “schools”, which in several disciplines and countries are where things are happening. In Economics, where is the Toulouse School of Economics, even though it is considered as one of the most advanced research center worldwide in economics and econometrics and where the late founder was regularly cited as a potential recipient of a Nobel Prize in Economy? In Engineering, where are the IITs (Indian Institute of Technology)? Companies worldwide are praising the Indian engineers and this is one of the main reasons why global IT companies all have subsidiaries there.  In management, where are the French business schools, even though 5 of them are in the top 10 Master in Management ranking done by the Financial Times? And where are the Indian IIMs (Indian Institute of Management), again recognised worldwide for the excellence of their education and where students are fighting to enter?

Rankings such as the THE or ARWU were designed by academics for academics and because they are macro pictures of a situation, they resonate also to public bodies and governments, who like to think in general terms. And very interestingly, even if they pretend to be global, they adopted in their construction a very “Anglo-Saxon” view of the academic world, where full-fledged universities are the main way to get a degree and where the aims of getting a degree are sometimes far from the reality that students are confronted to (see the debate on higher education for life or for work). So, if such rankings are certainly pleasing in a self-centred academic world à la David Lodge, they should not be used for more than what they are.

A recent article in The Guardian (http://www.guardian.co.uk/education/2011/jul/25/white-paper-universities-training-jobs#start-of-comments), following some points of the White Paper, has sparked a debate on the role of HEIs. Should they train students for life or give them skills for work?

Coming from the Business Schools world, this is one of the strangest questions I have ever seen in my industry. There are many academic areas where providing skills for work is obvious: business, engineering, architecture, communication, art, etc… In these faculties, we train students to get the job they want when they graduate, which means to be immediately operational, and we also provide them with skills that they may not use now but that could be useful in the future: only a few of them for example will be involved in the definition of the strategy of their first employer but they may be in the future and nevertheless, it is important for them to decipher the strategic decisions taken by the top management; same for leadership skills. Their future employers expect that these young graduates will be immediately skilled for their jobs, outside of the usual warm-up period to understand the specific processes, tools and culture of the company. That’s why also students and companies are now favouring long periods of internship and “sandwich-years” to make them even more employable when they graduate. In another discipline, would you imagine a doctor not to be immediately operational? Of course, old doctors will be more experienced but young ones may be more aware of the latest discoveries and techniques. And in many countries, this is in fact because they are not ready for work that PhD students have more difficulties to find a job than Masters students, although their knowledge is deeper.

In Business Schools, we design our pedagogy around 3 categories of skills: Knowing, Doing and Being. Working on this triptych ensures that students will get the appropriate knowledge (expected by companies), will know how to apply it directly in a professional context and finally will behave as it is expected from a young professional or manager. This is how the aims of a unit or course are designed and the content must be built to ensure that the 3 components will be present, even in “technical” subject such as finance or accounting.

I understand that some academics are afraid that some disciplines or courses may be in jeopardy if this “reality principle” becomes the norm. And so what? At a time where students will have to pay a lot to study, where they may not even be sure to enter the university of their choice, isn’t it the minimal duty of academic institutions to provide a clear professional future to their graduates? If it means that there will be fewer students in medieval history or in palaeontology for example, the less chosen disciplines may finally reassess what they are teaching and why they are teaching it to make themselves attractive again to the students. And from the pure economical point of view, redirecting the budget of a university from the disciplines which are less leading to employment to the ones more in tune with the demands of the corporations can only be good for the economy of a country.

The main similarity that I see with a financial bubble is that the same experts who were ecstatic about the internationalisation of universities 10 years ago are now promising a near doomsday.

What do we know about branch campuses? The latest study dates back from 2009, where there were 162 reported branch campuses worldwide, from 35 in 1999. On these 162, 40 were located in the UAE, 15 in China, 12 in Singapore, 9 in Qatar, 6 in Canada, 5 in Malaysia… 40 branch campuses were created by universities from the US, 14 from Australia, 13 from UK, 11 from France and 11 from India…

Since then, we can add at least HEC (France) in Qatar, INSEAD (France) in Abu Dhabi, Manipal (India) and Raffles (Singapore) in Malaysia and there are still new announcements regularly: for example, Limkokwing (Malaysia) opening in Uganda, NYU and Duke in China, Yale in Singapore…

Obviously, it shows a clear positive trend but does it mean that we are facing a bubble?

A bubble is characterised by a high difference between the price paid for a good or service and its intrinsic value, this price being favoured by an easy access to liquidities (for example when interest rates are low) and by different irrational behaviours by all the stakeholders involved, including the regulators not regulating anymore.

Translated in our industry, it means that universities would have been attracted by a “bigger bang for the buck” and would have invested heavily without anchoring these investments to tangible data, particularly a clear foreseeable return on investment.

First, it would be a bubble if there was no clear indication on the potential market (no buyers for the products of the new ventures). This is obviously not true. It is expected that by 2030, 158 million NEW students will enter the market. So, unless you consider that the thirst for higher education of young adults is a bubble, I see a clear existing and potential markets.

Second, there is no easy access to liquidities on overall. On the contrary, outside of few cases in the Gulf region, financing is a real issue for universities and business schools worldwide, public or private. So, any decision to spend money must be (at least should be) carefully taken, is scrutinised by the different stakeholders (senate of universities, boards, student unions…) and there is no room for uncontrolled spending as it was the case for example during the Internet bubble. The current debate in Texas on the performance of academics is a good example. So, the second condition for a bubble is not met.

Then, it is important to distinguish between the different regions where you find branch campuses: putting in the same basket the Gulf region, India, China and South-East Asia does not make sense.

In India alone, the goal is to raise the number of students from 13 million in 2009 (10 million in 2004) to 30 million in 2025. The country would need 1500 universities compared to 467 currently.

If we look at the past 20 years, there are now around 50 million students enrolling each year in the countries of East and South-East Asia, compared to 14 million in 1991. It is tempting of course to focus on the few failures, for example, the 20 million Australian dollars burnt by the University of New South Wales in 2007 in an attempt to open a full-fledged campus in Singapore. On the other side, there are remarkable successes. The University of Nottingham’s Ningbo campus (China) is cited as a success by the UK HE International and Europe Unit (http://www.timeshighereducation.co.uk/story.asp?sectioncode=26&storycode=416863&c=1)

Curtin University (Australia) has 3000 students on its Malaysian campus and moreover from 40 different countries, showing that its attractiveness is far beyond the local market. RMIT (Australia) has now more than 5000 students in Vietnam and is expanding its 2 campuses. Of course, it was after a failed attempt to run a campus in Penang (Malaysia). But some business failures here and there do not mean that there is a bubble. It is the natural course of business, as for any other industry.

With no doubts, there is an issue in other parts of the world and particularly in the Gulf region as it has been discussed a lot already (see: http://www.universityworldnews.com/article.php?story=20110715164537795 ). But for the other regions where we see a rise in branch campuses, it is sustained by the constant growth in the demand.

That’s why discussing always the case of branch campuses is not the right debate.

If there are issues in the internationalisation of higher education, taking a larger scope is a way to find them.

First and foremost, discussions should integrate all the international initiatives of universities and integrate joint-, dual-degree and twinning programs. It is generally not done as it is more difficult to track numbers (and academics like to discuss with data!). In China for example, while there are only 15 branch campuses, there are 580 dual or joint-degree programs. And evidence shows that there are also numerous twinning programs in the Gulf again (Dubai and Oman for example), in Singapore and in Malaysia. So, if there is an oversupply of programs, the problems lies certainly more in the proliferation of these agreements. And these agreements are generally the ones posing difficult questions on the quality control and on the financial aspects.

Then, if the question of oversupply must certainly be asked in emerging economies by integrating all the international programmes, there are very clear signs of oversupply in other countries which are barely discussed. These are the countries where, because of the demographics, there are already or there will be very soon too many tertiary institutions: Japan, South Korea are in this situation. Germany could be soon. And we should not forget that if Australian institutions started to recruit heavily abroad 10-15 years ago, it was mostly because it was the only way to survive to the negative demographic trends at home. If the supply of foreign students was to stop, several of them would be in trouble. And in UK, 15% of the student population is made of foreign students, and 68% of these foreign students are coming from outside the EU. Why if they stop studying in UK because it is cheaper and of equal quality in their home countries? How does it fit in the White Paper?

These questions are to me much more important than the debate on the branch campuses and should be discussed more regularly by the experts on international higher education.

The general public (taxpayers) and local authorities want to understand better what they get for the money.

In an era of tight governmental budgets, it seems to be a genuine request. And in a time where more and more employees are subject to very detailed KPIs, why it could not be the same for US academics?

I will share with you roughly the system which is used in several Bschools in France (and certainly elsewhere in different forms) and which made everybody happy. Metrics and rubrics can be different from one school to another.

We consider that a year consists of…365 days. We would then remove 104 days for the week-ends, the 11 public holidays, and the 35 days of paid leave. We are left with 205 days, each day consisting of 7.5 hours. It makes a total of 1537.5 hours of work in a year.

At the start of every academic year, a tentative workload is agreed between the academic and the head of department using all kinds of metrics covering the spectrum of activities:

. one hour of lecture (larger groups) would be counted as 2.5 hours as you need lots of preparation.

. one hour of workshop (smaller groups) is valued at 1.5 hours as you need less preparation.

. An academic teaches a new course prepared from scratch, 5 days are given.

. the supervision of a MBA student dissertation is valued at 2 days.

. etc…

Some specific cases:

. Regular meetings (the monthly department meetings, the yearly strategic day…) were also counted roughly.

. Research was counted depending on the target: 1 day was given for a presentation in a conference, 15 days for a publication in A journal (10 days would be taken on the first year and the remaining upon publication for example),…

. Any academic responsibility (Head of Department, Head of Program,…) would be also obviously mentioned.

. Your Dean wants you to work on a special project (or you suggest one): it is then decided together how many days would be reported for this project on your workload.

. A new project comes after the definition of the workload: very easy also, a revised version is done in the middle of the academic year.

Etc…

At the end of the year, the academic would meet with the Dean and discuss the achievements.

If more than scheduled was done (if the final workload is above 205 days), the academic has the choice to either be paid as extra time or to deduct these extra days to the next year workload. If less was achieved, the days would be added to the next academic year.

Once everybody agrees on the metrics and KPIs for each item, it is a very easy system to manage.

This system presents many advantages:

. It is very clear, shared and agreed by all the stakeholders

. It avoids the usual jealous comments from peers (e.g. “because X has been in our school for 15 years, he is paid doing not much”), from the administrative staff (“these academics are never in their offices, they never work).

. It is an actionable tool for Deans. More publications in journals and less presentations in conference are needed? Full-time academics should focus more on doctoral students and less on undergrads? Change the respective number of days attributed. Of course, the criteria and days cannot be changed too often as academics would feel confused but it is a rather fast technique to modify incentives and goals.

. It works also very well to modify the behaviour of “Look like busy” people. Academics won’t show up uninvited in a meeting, on a project… and cannot drag on forever on their own projects.

. It is also a great way to manage different profiles. Professionally qualified professors will teach more while academically qualified ones will do more research, again in a totally transparent way.

Obviously, for this tool to work, a clear consensus is needed, which is not an issue if the academics have a strong sense of belonging to their institution.