econ4man

It is important begin by defining the field. Managers do not need to know anything at all about academic economics, since theirs is a far more practical task. Managers do not need to know anything about the economic strategies pursued by the organizations for which they work, the sources and types of revenue, how to evaluate particular decisions, and how to regulate expenditure. After all, they are managing universities, not biscuit companies! Anyway, that's the sort of job that accountants do.

We are now in a position to define precisely the focus of management economics specifically. It is to explain and justify the flow of money into management.

Much work has been done already on the founding myths and traditions that belong to the modern era. The ground has already been established by arguments such as the following:

(1) Management salaries should be awarded in proportion to the turnover of their companies. This is a principle that was established by the growth of spectacular one-person high growth enterprises of the 80s and 90s, but there is no reason why it should not be applied to universities as well. Happily, Government policy and Government cash is producing higher turnover every year for us anyway.

(2) There is a highly competitive market for managers and if we do not pay managers huge sums of money, they will emigrate, and

Britain

's competitive position will be threatened. There is of course no evidence that such a market exists for ill-trained amateurs, but we can assume that it must. After all, we are all managers.

There is no reason why management should not use its considerable power and influence to divert an increasing proportion of university revenue into its own pockets. There are several ways in which this can be done. The first thing to remember is that the revenue that we might usefully tap has to be shared with others. Why not increase our market share?

The recent HERA (Higher Education Role Analysis) review shows some possibilities here. The UK Government decided that it wanted to place all university jobs on a single pay scale. How delightfully democratic, and how timely a recognition that in the higher education community a cleaner should really be on the same pay scale as a professor. The nationally suggested scale runs from about £12,000 to about £40,000 pa.. Having established the principle, we can then manage some of the details in our own unmistakable way. For example, the actual location of a job on the universal scale needs to be rationally calculated. Special consultants (fellow managers in other Universities or in private companies) have to evaluate each job and award it a certain number of points. People employed in that job can accumulate points with experience, and thus enjoy a modest annual increase. Any further progress past the top of the scale depends upon management approving any changes, and, above all, employees have to demonstrate that their job has changed. What could be fairer? It is also more efficient, since it is possible to hit the top of the scale pretty early, and after that there are no increases, except those which the Government decides for all. It also makes perfect sense to introduce local pay bargaining to increase labour market flexibility (that is, drive wages down in areas where there isn't much alternative work).

In practice, enlightened management can make considerable savings. What you want do is to define each secretarial clerical or maintenance job to include as few skills as possible. Then you can justify low wages. There could be a problem here, because actual secretaries, clerks and engineers often develop an extremely skilled approach to their work, especially if they are working in a pretty poorly resourced University. Secretaries often take on voluntary counselling with students, or keep up to date with electronic offices at their own expense for example, while engineers work wonders in tweaking and improving aging equipment. However, you can smooth this out by announcing that these more skilled aspects are not technically part of the job -- you should know, because your mates have defined the job in the first place. If these skills are not part of the job, you do not need to pay people to perform them. Of course, people probably will continue to perform them, because these are the more satisfying aspects of the job, and few are cold-hearted enough to turn away students in need, or refuse to fix a lift for the disabled just because it doesn't happen to be scheduled. Congratulations! You have got people performing skilled work for free!

The most beautiful and elegant aspect of the HERA scheme has yet to be revealed. It applies to jobs. To all jobs. However, managers are not subject to it. No one is going to attempt to describe their work in a few bullet points and to relate their salaries to it, nor to peg the increases in those salaries to demonstrable changes in responsibilities, nor wait for miserly national increases. Local bargaining is almost certainly irrelevant too, given the assumptions about the international market for managers. Where the HERA jobs scheme stops -- at £44,000 -- management salaries can start. With a bit of luck, though, the clerical, secretarial and maintenance people will not notice that there are wages above the top of the HERA scale. After all, as everyone will tell them, all jobs are subject to HERA.

This is absolutely true. Managers do not have jobs. We have positions, to which we are attracted by various emoluments. We serve out of a sense of community spirit. What we do can never be vulgarly described in a job description, because we have ineffable skills, missions and visions. Deciding our salaries is a much more skilled process, run by an in-house Emoluments Committee. And who sits on that committee? Only a few are skilled enough to appreciate the issues, but luckily we can help.

The skilled manager will perceive several other opportunities to increase their share of revenues. Most universities, for example, expect that any income will be 'top sliced' in order to pay for the necessary administrative benefits that academics receive. Currently, the sector-wide average is 40 per cent of all revenue. Most managers will argue that this is a feeble sum, and that the benefits accruing to most academic activities from management are so large, that a 60 or 70 per cent take would not be unreasonable. However, troublemakers among academics would probably insist that it is important to teach as well as administer. We want to avoid confrontation, and so we will have to think of ways of dividing up that top slice in order to continue to provide first-class administration at the market rate. With any luck, we can make sure that the average 40 per cent contribution means that each course must make a 40 per cent contribution at least.

It is clear that 'administration' covers a wide range of activities, of course. Most academics, unversed in the world of management, imagine that the main activities are such matters as secretarial assistance, maintenance of computers, provision of library services, providing adequate teaching accommodation and the like. However, we would want to press our case that the most important activities are of course managerial, ideally directorial, and it is those activities that should receive the bulk of the flow of monies acquired under top slicing. It follows that we can receive more if we make those other activities leaner and more efficient. Managers simply need to explain to academics that there is a financial crisis, and that unfortunately secretaries, librarians, cleaners and maintenance men have to be sacked, and that we can't afford to replace furniture or computers at the same rate, if at all. However, the sector wide average of top slicing has to be maintained, despite these cuts in services, leaving the same amounts to be re-divided. Few academics will be able to understand quite how this means that management salaries can continue to rise in times of financial constraint and diminishing resources -- but then, they are not managers.

The final benefit of averaging out top slicing is that averages can conceal considerable variations. Some profitable courses will be able to make their contribution to top slicing and then have some revenue left over. Who should own that extra revenue? It would be quite improper for academics to make a profit, and, after all, it is probably the result of managerial skill and responsibility in the first place. Clearly, profit belongs to 'the University as a whole', and should be devoted to pursuing the policies of the University. Quite naturally, those policies usually prioritise attracting senior managers to positions, as we have seen.

According to the same argument, some courses and activities will not make much of a contribution to top slicing. Those who are unable to offer a 40 per cent contribution can simply be closed. Others can be encouraged to become more efficient, by accepting larger classes, cutting library budgets, making do with fewer staff, and so on.

Finally, although there may well be a sector wide average which insists that 40 per cent of all revenues be handed over for the purposes of administration, there is no implication that each contributing course should receive equal amounts of administration in return. Some academics happen to be very efficient and useful administrators, who have trained themselves to use computers and develop office skills, or who spent much of their spare time attempting to attract students or developing cost-effective forms of teaching. These people do not need 40 per cent's worth of administration, and so they shouldn't get it. In several cases, it might be possible to suggest that the amount of administration paid for by the 40 per cent contribution is not always needed, leaving a surplus. We know what happens to surpluses, as above.

An efficient manager can make use of all these techniques to engineer a steady increase in annual salary without the need to confront anybody. Everyone benefits. Non-managers find their jobs enriched by all the additional skills they have to acquire. Those rendered surplus to requirements are given a life-changing opportunity to develop their careers outside of the institution. Students barely suffer on an individual basis, and wouldn't know the difference anyway. Everyone feels a part of the organization, tightening their belts in order to avert financial crisis and maintain a quality service. We can loosen our belts by contrast in the sure and certain conviction that we have brought efficiency and happiness to those we serve.