Mergers are becoming increasingly popular in higher education.
Last year, three renowned institutes in Sweden announced they would fuse their
organizations into one entity entailing 70.000 students and almost
€1 billion in research funds. In the Netherlands, a similar trend can be
observed.
What makes scaling up so attractive to policymakers and
university leaders alike? A cosmetic reason might be that larger
institutes produce more research and fare better in rankings.
Beyond that, a certain scale is vital to achieving
breakthroughs.
Lessons from commercial sector
The British Higher Education Funding Council (HEFCE) had a
closer look at this issue and drew up a report with best practices for collaborations,
alliances and mergers (CAM). The authors note that "most research
in the HE sector, both in the UK and in other countries, has
focused on mergers rather than collaborations, alliances, consortia
or joint ventures."
Inspiration here can also come from the commercial sector.
"Notwithstanding the many differences with higher education, some
of the general lessons from the private sector are worth noting.
[There,] a high percentage of mergers fail outright or do not
achieve the expected benefits in terms of increased shareholder
value or efficiency gains."
Form, evidence and process
To guarantee that university CAM activities do not share a
similar fate, a number of questions have to be answered:
- What form of relationship is most appropriate in this
particular case?
- What evidence is necessary to inform decision-making?
- What process should be adopted to ensure the most e?ective
outcome?
Regarding theform of relationship, "teaching, research and
knowledge exchange" needed to be placed at the heart of any
potential CAM. "Successful CAM projects have a strong academic
purpose that is underpinned by a sound economic rationale."
The HEFCE report also warns of completing mergers simply for the
sake of scale. "Issues about the size and scale of institutions are
complex and inadequately researched in the existing literature; but
size in and of itself is rarely a good argument for merger."
Look for complementarity
All forms of CAM entail the potential benefit that they "enable
institutions to share risk with partners in achieving their
objectives". This may refer to sharing costs or capacity. Mergers,
in particular, could furthermore be accompanied by other reforms.
"Mergers can be a 'point of discontinuity' with the past, allowing
institutions to achieve a whole series of changes that would be
more difficult to achieve piecemeal during 'business as usual'.
In any case, complementarity is crucial for mergers. "Mergers
are likely to be more successful where, through a careful analysis
of objectives and activities, most of the institutions' major
operations are compatible or complementary."
"Geography and distance sometimes constrain the effectiveness of
mergers, so selective collaboration might be a more viable
alternative. Co-location is often necessary to deliver significant
synergy or efficiency. It is important to consider the impact on
students and staff of any rationalisation of multi-site
operations."
Do not underestimate costs
Regardingevidence, the report states that a complete
cost-benefit analysis is vital to success. "A rigorous options
review, prepared objectively and subject to consultation, should
precede any agreement in principle, and it is important to engage
with dissenting views. Where a proposal a?ects students, their
interests and needs will be a major priority."
HEFCE also points out that costs could easily explode.
"Merger costs are often underestimated, particularly in areas
such as harmonising pay and beneits structures, ICT systems and
administrative processes. These costs can be very substantial where
the merger is between higher and further education
institutions."
Therefore, due diligence is key - especially to minimize
renegotiation risk. "Given the tendency to underestimate costs and
risks, particular attention needs to be paid to due diligence, and
it should not be done so late in the process that its results
cannot be properly taken into account and the proposal reconsidered
or renegotiated if necessary."
Avoid ambiguity
Regarding thechoice ofprocesswhich will yield an optimal
outcome, the authors say that "leadership from the outset is vital:
all the initial questions concern mission and strategy, and leaders
can help to drive the whole process, overcome obstacles and
negotiate with stakeholders. Institutions and their potential
partners should develop a shared vision before acting, as clarity
about objectives will energise the parties and avoid wasted
e?ort"
"The senior management structure and governance arrangements in
the new institution or venture need to be agreed at an early stage,
perhaps as part of a memorandum of understanding. If these issues
are not resolved, ambiguity may undermine trust, or senior managers
and governors who have a strong commitment to existing structures
could be an obstacle to change."
"The change process is dynamic, often messy and subject to the
influence of unexpected events; institutions should therefore agree
'break points' to mitigate the risk of being swept along and
missing warning signs. An implementation plan is an essential part
of the process, and it should be kept under review and modified as
necessary."