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Transcript of address by the Minister for Education, Science and Training to the 5th Annual National Conference on University Governance: 6 October 2005: Canberra.



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TRANSCRIPT OF ADDRESS TO THE 5th ANNUAL NATIONAL CONFERENCE ON UNIVERSITY GOVERNANCE, CANBERRA

6 October 2005

DR NELSON:

Thank you very much Steve for that very generous introduction. I appreciate it very much, and Bob, for your commitment to and leadership in the area of governance in universities over a long period of time, thank you very, very much on behalf of, not just the university community in this country, but the broader society which it serves.

To all of you that are here today, chancellors, vice-chancellors, pro vice-chancellors, pro chancellors, and those of you who, in spite of governments, every single day do everything you can to see that universities in the country operate to the best of their ability, thank you very, very much.

In one sense I apologise to the people who are behind this pillar over here who can’t see me. They’re probably grateful for that. My wife would say the only unfortunate part about that is you can still hear me! I appreciate the fact that you’ve all remained here in spite of the time of the day and it’s Thursday afternoon and I’m now the speaker.

I recognise of course the Ngunnawal traditional Aboriginal people, the traditional Aboriginal custodians of the Canberra-ACT region.

If you’re wondering what sort of things I do when I’m not pestering those of you who spend your lives in higher education, I’ll give you a bit of an insight into this. It’s a bit hard not to get elected in my electorate if you are the Liberal candidate, by the way Steve, but as one of my colleagues said when I was Parliamentary Secretary and I went

to my first full Cabinet meeting and I made my first contribution, when I sat down she said, “Brendan, Bradfield is a safe seat. Your campaign to make it marginal continues unabated.” So, I’m one of those people who tend to be a bit too honest for my own good with my own constituents.

But coincidently I was at the Highfields Preparatory School, which is in my electorate, from prep to year 2, and so I go along to open a new building and the media want to take me inside to take some photographs with a couple of the kids. So I sit down and I pick up a piece of work which the children had done, and it was entitled “what makes my mum mad”. So I turned the first page and each story was accompanied by a drawing, and the first one is, “My mum gets mad if I throw a ball in her face”, and there’s a drawing of a very unhappy lady. And I turn the page: “My mum gets mad if my sister blocks the toilet”, and there was a drawing of a toilet and certain things coming from it.

So then, a couple of weeks later, I get about 30 of these letters from year 2s. The first one is, “Dear Dr Nelson, thank you for coming to our school. You didn’t have to come to open our building. We already had a key. Maths is okay, but can you make English fun?” And then underneath: “Does your mum get mad if she finds bird poo behind the couch?”

The next one was, “Dear Dr Nelson, thanks for turning up at our school”. This is a year 2 student. “You’re a real comedian, but gee your speech was long.” He said, “I had a cat called Nelson, but he died”. So, there you go.

When I was addressing the Chancellor’s Committee this morning, and reflecting in part on governance, I remembered that in 2002 we’d gone through the process of reviewing Australian higher education and it was only in the third week after my appointment to the portfolio as an outsider to your profession and your disciplines that I made the decision that the status quo was not a viable option for Australian universities and that we would need to embark on a process of reform, and in doing so would require the engagement substantially of the sector and all parts of it. And I appreciated it was going to be very difficult, but you may recall that we produced and released seven discussion papers and established a special unit within my department, and we ran a very broad and detailed consultation the length and the breadth of the country.

The penultimate meeting we held in the main committee at Parliament House - and I invited 50 people from different key parts of the sector, including the NTEU and student unions and everybody who has a stake in higher education - and I asked David Murray from the Commonwealth Bank if he’d come along a give a presentation about governance. So David painted very vivid picture of governance as he had found it at the Commonwealth Bank when he joined it before its privatisation and the governance arrangements that operate at the Commonwealth Bank today.

Following his, I’ve got to say, very powerful 25 minute presentation to the assembled group, after what seemed like a painfully long pause, the silence was broken by one of the vice-chancellors who said, “Well, Mr Murray, if universities are branches, we actually need to keep them open. How can we have governance reform that you’re advocating and still actually have campuses where students can actually come and learn something?” And behind the remark, of course, was a tension which inevitably exists between what in many ways is a special mission of higher education, which has similarities with, but is nonetheless still different from those who basically work and

spend their lives in the business community. And the chancellors, by and large, are a group of men and women who basically traverse both areas.

I also had the experience - when I went to universities during the review I’d always insist on meeting management, then I would meet the Tertiary Education Union, then I would meet the student unions, and then I’d insist on meeting normal people - but, I remember that at one of the universities the president of the student union said to me, “look, we’re a bit unhappy here”. He said, “We manage a $4 million budget here at this university in our student union, and we make a lot of effort to make sure that students know what they’re actually doing, but there’s a lot of people that are actually running this university that have got no idea how to run anything, and they’ve not ever been trained to do so.”

That of course is a sweeping generalisation that certainly should not, nor did not apply to everybody who is responsible for running a university or being on a governing council. But nonetheless it was one of the many things that I took on board in developing what would ultimately become the final shape of the reforms that went through, including the National Governance Protocols.

In my experience, the two things for which all of you in this room, in various ways, are responsible are at the heart of getting successful outcomes. The first is management, and management in my experience is about getting results, and it’s extremely important. But what is equally, if not more important is leadership, and leadership is informed by vision. It’s much more a sense of what are we trying to achieve, why do we want to achieve it, and what are the long term objectives we have for the people whom we seek to lead. And people who are in positions of leadership and management in universities, I think, have responsibilities to both of those critically important functions, and if I’m ever wondering how management’s going in Australian universities, I look no further that Nick Saunders’ face to see how he is shaping up with some of his challenges at Newcastle.

We discovered, and again as, if you like, a lay person, whilst I’d had some experience in different ways in a previous life, we discovered that the university governing councils were unwieldy in size. I would still argue that in many cases they are, but life is a series of compromises, and we found the sizes of the councils ranged up to 37 - of course at the University of Queensland.

I also discovered that the people who are on university councils brought a variety of skills to the task, but most of them saw themselves as delegates who were there to represent somebody else’s interests rather than necessarily putting first and foremost the best interests of the university for which they had responsibility as being a part of the university council.

We discovered that business expertise on university councils ranged from zero to 68%, and that commercial expertise, if it existed on a university council, more often was an accident of circumstance.

When I first presented all of the issues to my Cabinet colleagues, and I carefully walked them through things, when I got to governance, amongst the anachronisms, at least from my perspective that I felt that I had discovered, was the appointment of politicians - working politicians that is - to university councils. And I said to my colleagues, I think

it’s a ridiculous situation where we’ve got, nonetheless good men and women of whatever their political persuasion, we have working politicians on university councils who too often, in my experience, have been appointed to those councils to get them out of the hair of the relevant government from which they come.

And in fact, when I presented this, one of my Cabinet colleagues said, “well, I’m not so sure about this Brendan”. He said, “I spent four years on the council of a” xyz university. He said it was, “the best learning experience I ever had”. And I said, well thank you very much for making the point. You do not go onto the council of an organisation running a billion dollar a year budget to have a “learning experience”.

I also discovered that to varying degrees, as a consequence in part of the attitudes of a number of Sate Governments, reflected in enabling acts, that the responsibility taken by councils for the commercial activities into which the university might go actually varied, and that in many cases that the members of the council were limited in the amount of responsibility that they might personally be taking for the activities for which the university might be responsible in one form or another.

And so all of those things, and others, we thought should change, and once I started rattling the cage on governance issues it was surprising in a way, but not in another, that some people suddenly started coming to me and were getting quite exercised by the fact that we were talking about limiting the tenure of people on councils. And, as you know, on of the Protocols ended up being that no-one could serve for more than 12 years, and only then with the majority support of the council. And some of the people who came to me who had been on university councils for in excess of a decade only reinforced my view that there comes a time for a change,whatever the obvious skills and benefits that people bring to governance arrangements.

So now we’ve moved into the Protocols and I pay tribute and give great credit to the State and Territory Governments who, in some cases against their better judgement, amended their acts to enable us to implement the Protocols. And the Protocols in many ways establish a beachhead in terms of what I think is a long overdue reform as far as university governance is concerned, but I do think that we still have some considerable distance to go.

But I’d also like to thank the then chancellors of the universities because they, as uniquely placed people in our society, and respected by both sides of the political fence, and by all tiers of government, and they were particularly effective in persuading State Governments to the wisdom of amending their enabling acts to give effect to the Protocols.

In fact I was saying to the chancellors earlier this morning that I would like to see them be much more active participants, not only in seeing that we are able to develop and drive appropriate policy for higher education in Australia, but also I think increasingly in this 21stcentury, I think the role of chancellor will move from not only or so much being an ambassadorial kind of role and playing a significant role in terms of council activities, but I think the role of the chancellor should increasingly move into having a much closer relationship with the vice-chancellor, the members of the council and also perhaps taking a greater interest in the evaluation of the performance of the council, and overseeing amongst other things the financial activities of the council, which in most cases of course

is precisely what is happening at the moment. But I think that the resource that we have in the chancellors of the country is something that I think to some extent has been neglected, including by myself.

The Protocols, with which you are obviously very familiar, okay well we have got university councils to be no more than 22, but in my experience that is still unwieldy.

I , again this morning, related to the chancellors that in the first few months I was in the job I had a meeting with a number of vice-chancellors who were representing universities as employers and they put to me rather stridently some well considered views in terms of should happen within the universities in relation to industrial relations issues. Three hours later I heard one of the vice-chancellors as the second news story on ABC Radio arguing something completely different from what I had been told that morning. I was then recollecting some of the comments made to me by some of my predecessors about how vice-chancellors can at times be a challenging group of men and women to deal with.

And, as an aside, you might be interested to know in a previous life I was Federal President of the Australian Medical Association, and spent some time working at other levels of the AMA, and within a week of my appointment I spoke to a journalist from a broadsheet, and this particular journalist said to me, you realise that the vice-chancellors are a bunch of backstabbing, vituperative, self-interested, disloyal and so on it went. And I’m thinking, oh my goodness, what’s this about? Fortunately, she broke the pause by saying, “but then again you have come through the AMA”.

Again I discovered, and I respect the important role of all of the vice-chancellors, but I discovered why the situation can be created where a view may be put to me privately and then at times perhaps a slightly different view, at very least a different emphasis on it, put in the public arena because the governance arrangements which have emerged from the collegiate model of higher education create an environment where the chief executive is really - I wouldn’t say hostage to, but basically is beholden to living and working with a group of people who might frequently be hostile to necessary reforms that have got to be undertaken.

And, of course I didn’t ever do this when I was President of the AMA, but at the AMA we had a council of 28, so you would have the plastic surgeons alongside the physicians and the psychiatrists and the GPs, and they would all be fighting each other, and we had an executive of 6. But the way I had to end up trying to run it is get a cabal of 6 or 7 people from the 28, and basically get them organised as a power base to actually make the real decisions within the organisation while the others were wandering off on there own special interest exercises.

And I have discovered, at least up until recently, that it is not uncommon for vice-chancellors to be forced into a situation where they basically will have a large unwieldy council, people who are there to represent the interests of other organisations, and individuals who see themselves as delegates who are not making decisions that are in the best interest of the university as distinct from the group from which they come, and the vice-chancellor effectively being forced to find a group of like-minded individuals within the council who basically end up making decisions. And I realise that’s probably offending some of you as I say that, and it certainly shouldn’t and does not apply right

across the sector, but I have found that can be case.

So we have moved now to 22 no more, at least two people with financial expertise, at least one with commercial expertise on the council. We have also, as you know, moved to look more at trustee arrangements for people who go onto the councils, to limit the time that a person can spend on a council, and also, I think, to make the university council much more responsible for the commercial arrangements into which it enters.

One of the frustrations that I have - I know I am upsetting you with some of the things I’m trying to do in the sector at the moment, but one of the frustrations that I have is that in the broader sense of governance, a federal government - whether you have a Coalition or a Labor government - the Federal Government drives policy basically for the sector, we provide 98% of the public funding that goes into the sector, and yet with the exceptions of AMC and ANU, the responsibility for auditing, financial management and governance is held at another tier of government.

And one of the State Governments - as you know I am seeking to stimulate a debate about whether or not there should be a transfer of responsibilities across to the Commonwealth Government for those things. I don’t mean the real estate or any of that sort of thing, that’s not what it’s about, but rather the responsibility for those things to be with the same tier of government, and to the varying degrees there’s resistance to it. But one State Minister actually said to me, the NSW Government - Andrew Refshauge was the Minister - he said, “We’ve already decided. How soon can you take them?”

And you have got to ask yourself - now governments come and go at the state and the federal level, of differ political persuasions - but you have got to ask yourself in this increasingly competitive world and this increasing important sector, which is going to drive our economic and social development as a nation, is it really appropriate for the decisions about commercial activities, appointments to councils, auditing, financial management and so on and so forth to be in the hands on a government that really would prefer not to looking after those things?

I think, as far as those decisions that are made in terms of collaboration, both domestically and internationally, about commercial decisions, about financial arrangements, all of those sorts of things, I think will ultimately, whether it’s in my time or anyone else’s, will ultimately drive what I think should be a logical conclusion - that there needs to be a rationalisation in terms of these enabling acts.

It could actually come in one of a number of ways. I mean you could test the corporations powers of the Commonwealth in some areas to see if we can shift it. One radical suggestion might be to look at trust arrangements for higher education. You could have common amendments, for example, to State enabling acts which might give effect to it, and then of course you can have a transfer of powers. But assuming the New South Wales Government stands by the decision that it has made, we would be in a position to expect that in the not too distant future at least we will have some capacity to give affect to what I am saying to you with the New South Wales universities plus ANU and AMC.

One of the other things, before I finish so you can ask me things that you would really like to know about - one of the other things which I was explaining to John Mullarvey and the AVCC earlier this morning and also to the chancellors: we’ve got about $145

million or there abouts available for collaboration and structural reform in higher education and workplace performance productivity. And because, by virtue of the election outcomes last year, we are now able to implement what we consider to be necessary albeit unpopular and difficult reform in industrial relations in the sector, and I’d been thinking about how we might best invest that money - I mean it’s your money, it’s taxpayers’ money - and my department had recommended to me a number of very worthy small projects in terms of structural reform and collaboration, about 40 or so. And I approved five, and I have rolled the money over for next year because I want to be in a position where any of us can look back a decade from now and say, did we invest that money wisely, and what sort of a reform did we get out of it?

What I have proposed publicly, which I would ask you to reflect upon, is that there is always, and legitimately, an argument that more money be invested in higher education. However, it can be difficult to persuade people in what we call central agencies, that’s Prime Minister and Cabinet, Department of Finance, and Treasury, not to mention my own colleagues, about investing more money in what is a very large and important sector.

And one of the frequent criticisms that emerges is that the universities may not be as efficient as they could possibly be. And I am aware that in many cases it’s very difficult for management to make decisions without having multiple committees, multiple meetings, all sorts of things which reflect the collegiate nature of the sector. And so what I am proposing is that we establish a panel of accounting and financial management agencies, in cooperation and consultation with the sector, that can be engaged, at our expense, by individual universities to actually examine business management practices internally. And Gerald Sutton and Di Yerbury advised me this morning that to varying degrees individual institutions have done and continue to do just that very thing.

But - procurement and investment decisions, commercial arrangements, administrative structures, communication systems, internal resource allocation models and how those decisions are made,- there may be some merit in inviting as I say at our expense, into institutions an external eye to actually have a look at how things are being run and how they might be reasonably improved, and then we the Government providing some financial assistance to the institutions to actually implement the recommendations.

I have - look you get letters from all kinds of people, and you know within your own institutions there is always somebody complaining about something - but I do get a lot of mail and I do have people that I, whilst they may not agree with me or the Government, people nonetheless whose views I respect who too often say to me, “this university is inefficient and there’s layers and layers of management, and they are doing all these ridiculous things. You ought to see how they waste money.” And I don’t accept those things at face value, but you get enough of it to sort of think - and I know you can tell me lots of things they say about the Government, which I’m sure is probably a fair criticism - but nonetheless enough of it to think, well, how am I to know? How are my officials, who turn up from the department and spend a few hours and a few days at any one institution, how are they really to know?

So what I am thinking about is some voluntary process, which is funding by us, which brings an external agency with expert eyes into the institution to make recommendations

to us.

I do fully accept the fact that a university is not a car manufacturing factory, and that it has a different mission and so on, but in terms of basic business and management practices there may be some merit in that, and I’d invite you to perhaps think about it.

The other thing which I am privileged to do is to formally launch the Governance of Professional Development Programme. One of the protocols, as you know, relates to induction and professional development, and we have about 800 people that are currently serving in university councils across the country, and coming back to what the student leader said to me not all of them - they bring skills and expertise and life experience to the task of being on a university council - but not all of them are necessarily trained in the skills they need.

So, I congratulate you and thank you for putting together, again with a bit of financial assistance from us, this professional development programme to look at what are the essentials in terms of governance, and what are the continuing issues in governance, what are the contemporary issues in governance, supporting the web-based program for sharing experiences and best practices in governance in higher education.

In that sense, the reason I came here today is not because I enjoy pestering you or boring you to death when you really want to go home, but rather, as in all things, I become increasingly convinced that if we can get the governance issues right in the higher education sector then many of the others will flow from it. And the more efficient we can be in the governance and administration of the sector, the more resources to the teaching and researching of it.

And also, I hope will be me, but as we approach 2007, when we move from the 7.5% increase in the Commonwealth Grants Scheme funding in the third year of those increases, and the sector will become more focussed on its long term funding profile, I think that it will be the argument for the Minister, in arguing successfully to the Government for perhaps even increased resourcing to the sector, that it will be greatly enhanced if we put a lot of effort and significant common sense reform with best business practices into governance and administrative arrangements within the sector in the mean time. You may not accept that but it will be a lot easier to deliver the financial outcomes you want if you can all work together to make sure we have the very best model of administration within each institution.

Thank you very much.