Reckless downsizing: the “logics” of management’s cuts
Unpacking the “business model” behind the plans to restructure the University of Edinburgh
Over the past months, our group has shown how the cuts demanded by the University of Edinburgh’s management are unnecessary, and that they are most likely to bring about the crisis that they pretend to address. But, then, the question we all ask ourselves is: why are these cuts being imposed, what is the rationale?
In this post we have sought to respond to this question, and in doing so, we explore the ideological world of university managers and their visions of what universities are for. We have done so by consulting communications to staff and students, Court minutes, and the wider literature on what has come to be known as “academic capitalism”.
What we found holds two key propositions:
(1) The University Management’s “business model” is best understood as driven by “capital projects”, with themselves as “asset managers”. It is not just that the University wants to shine through fancy “prestige projects” – it is actually that capital projects (infrastructure, buildings, and equipment, including digital infrastructure and equipment) per se, not the teaching or research that they are supposed to support, drive the University’s strategy – with each project having to generate high return on investment.
(2) This high return on investment used to be pursued through a reckless growth strategy – but the current plan is rather to pursue an equally reckless and even more painful downsizing strategy to achieve it (though both strategies could go hand in hand, of course). Where does this change of vision regarding the generation of high value come from? We argue that downsizing is a strategic decision of the University’s Management – not a reaction to an alleged crisis. This decision is surfing on the wave of “shock and awe” in UK higher education and fostered and amplified by management consultancies, both through direct consultancy services and more generally through ideological proximity between consultants and the management teams in UK universities.
The University of Edinburgh as asset manager
We documented in past posts the increasing prevalence of the ‘Earnings Before Interest, Taxes, Depreciation, and Amortization’ (EBITDA) metric as key performance indicator in higher education, against which UoE are measuring their ‘performance’ (see here). We also mentioned the fact that the EBITDA target had been raised recently (June 2024) by University management. This metric, and the fact that it has been raised, are both quite revealing of what the University’s ‘business model’ is and is becoming.
A paper by the British Universities Finance Directors Group (BUFDG), from 2017, states that, among other things, EBITDA “provides an indicator of financial capability to service debt and/or fund capital expenditure from internally generated cash”.
This indicator, and its increasing prevalence in HE, thus encapsulates and embodies managers’ view of the University more and more through the lens of capital projects, and of themselves as asset managers.
In this sense, the following extracts from two recent Court papers are revealing:
4/12/2023 Court minutes (p.8):
“Edinburgh Futures Institute. Paper L. Court was provided with a detailed overview of the creation of the Edinburgh Futures Institute (EFI) in the former Edinburgh Royal Infirmary building. The complexity of this conversion project was outlined and the impact on costs of unforeseen issues with the fabric of the building was noted. Delays caused by the Covid-19 pandemic and the recent inflationary economic environment had also contributed to rising costs. The importance of completing the project was noted. Significant returns to the University were expected even with increased levels of investment, given the high-value activity that EFI would facilitate. Moreover, the renovated building would be recognised as an important asset to the city and a significant achievement in terms of heritage preservation.”
07/10/2024 Court minutes (p.9):
“New Darwin – Estates Project. Paper I. Iain Gordon, Head of the College of Science & Engineering, and Damien Toner, Director of Estates, outlined the proposed project, which would deliver the final phase of the ‘Building a New Biology’ project, creating a new hub for the School of Biological Sciences. It was noted that this would enable the University to further enhance a leading centre of research and teaching, whose specialist areas included priority areas identified by government, experienced high student demand and had great potential for increased engagement with industry... In discussion, it was noted that the financial benefits of the project included an expansion in fee-paying student numbers, while the University was not pursuing a growth strategy overall. This increase would in part be balanced by expected changes in other student populations and other financial benefits would flow from a re-balancing of sources of research funding and increased commercialisation activity”.
The reasoning is clear: development of the University takes place through large capital projects, which then have to generate activity that is going to bring high returns on investment to the University and its partners. International fee-paying students are key for such ‘high value’. This is confirmed by taking a look at the Terms of Reference of the University’s Capital Projects Group (all British Universities have such teams nowadays).
It can be argued that the EBITDA indicator is actually a proxy for the high value for capital projects target, as what EBITDA is there to cover chiefly is interest on debt, amortisation and depreciation (taxes are negligible for UoE). The setting last year of the EBITDA target at 7-9%, and recent increase to 9-10%, of total income, shows the magnitude of expectations. As our group has shown, the cuts are not due to a projected operational deficit (based on projections that the University Management has not shared with the unions or staff, despite repeated requests). It seems rather that the 10% cut is driven by the EBITDA metric.[1]
The Principal argued, in his email to staff on the 25th of February 2025, that the University has to secure the sustainability of its finances to be able to continue to “invest in its staff, students, and infrastructure”. It would be fairer to say that the University wants to continue to invest in infrastructure, with staff allowing these infrastructures to “sweat”, the rather graphic Business jargon term for saying that staff undertake the “day-to-day tasks necessary to ensure that the companies’ assets continue to throw off cash”[2], and with staff and students providing enough revenue, through stable/increased income, decreased costs, or both. But decreasing costs appears much more achievable, from a mere accounting/finance point of view, than gaining more income.
Downsizing is the new game in town
This brings in the second key aspect of the rationale: that for generating high value, the University is now focusing on reducing costs rather than raising income. The discussion of the New Darwin project above shows that the University is apparently “not pursuing a growth strategy” any longer. This is interesting vocabulary: it is not really that the University is facing challenges, but rather that it has changed strategy. If its strategy is not to “grow” anymore, but still to provide “high value” returns on its investments, then this means restructuring and, as the consultancy speak has it, “do more with less”. This is very clear in the title of the page in the University finance Sharepoint website: “Changing our size, shape and ways of working”.[3]
Why has the University changed its strategy? We could take it at face value that income from foreign students slowing down. And, of course, such a decrease is likely – the levels of growth pursued by the University in the past were reckless, and everyone was anticipating that this would go awry at some point. This point does not seem to have come quite yet however, or only very marginally so (as shown by this BBC News piece, there are drops in international students everywhere in Scotland except at Edinburgh). Clearly the University is seizing the opportunity of that inkling of change, and of the current conjuncture of generalised “shock and awe”, to argue that it has to be ‘bold’ (Peter Mathieson’s word), which means reckless and playing with fire. This rhetoric unfortunately is becoming familiar in other contexts too.
For HE institutions, it has been fostered and amplified by management consultancies, who have acquired a tight grip on the HE sector (including through presence on Universities’ governing boards). Cris Shore has analysed reports on/for HE from these consultancies since the pandemic, all framed as “crisis reports”, which “evoke a dystopian future of uncertainty, risk and disruption claiming this necessitates a ‘fundamental rethink’ of the entire system of public higher education”.[4] Shore likens their tactics to that of the “shock doctrine” described by Naomi Klein – he has a point. These consultancies were involved not so long ago in the shock restructure of Eastern European economies, administering drastic cuts and a brutal shift to a market economy. One of the reports Shore analysed, by KPMG (The future of higher education in a disruptive world, 2020), encourages university management teams to “reimagin[e] their operating models, offer shorter degree courses, integrat[e] experiential learning with vocational training, offer upskilling, reskilling and retraining courses, embrac[e] digital transformation, invest in overseas programmes, and ‘compet[e] at scale’ in ways that yield greater productivity”.[5]
Another of the reports analysed by Shore “exhorts universities to develop ‘strategic vision’ and strong leadership, become more agile, avoid cultural inertia, seize opportunities, and ‘consider divestment’ as well as expansion. Divestment here means unbundling and outsourcing the university’s functions”.[6] All of this jargon very closely echoes Peter Mathieson’s email to staff on 25 February, as well as, incidentally, that of NousCubane (a consultancy with a longstanding contract with the University). The consultancy is currently carrying out its UniForum benchmark exercise, which promises to provide the University with “insight into how the professional services that support our teaching and research activities are resourced”. Apparently, Peter Mathieson has already got that “insight” since he is able to say that “comparisons with other similar universities consistently show that we have some of the most devolved [professional] services in the sector… duplicative services across the University, often with inconsistent practices which create inefficiencies, increase staff workload and impact our student experience”.
NousCubane’s approach to rationalisation and centralisation at Edinburgh, and the cost of its services, merit further inquiry. It is troubling to read on their website that, among the “bold moves” they advocate for Universities “to overcome their financial challenges”, they push for addressing what they call “the root causes of unnecessary complexity”: “In the case of academic programme administration, for example, an unhelpful and ultimately unwarranted growth of teaching portfolios not only fails to serve students – Nous’s Balancing Mission and Markets report found that students want far less choice than is normally assumed – but also significantly adds to costs in terms of course materials and administration”. This sounds familiar – think of the ongoing Portfolio Review, which seeks to weed out small or part-time courses based on very blunt metrics, and was presented by Colm Harmon to the Court as a contribution to “an improved student experience by creating greater clarity around course and programme offerings and enabling staff time and effort to be better focused”.[7]
As Shore puts it, “the solutions they propose typically prioritize efficiency and cost-effectiveness and ignore educational quality and equity”.[8] But these are not “solutions”, or rather they are solutions to problems framed as such in view of implementing precisely these solutions.
The “solution” used to be growth – reckless growth. Now it seems it is downsizing – reckless downsizing. In both cases, this is for the business model’s sake, and for the increasing number of business partners — not for students (how disingenuous to claim the greater “clarity” for them), and not for staff (how disingenuous to invoke workloads when justifying the new “no growth for growth’s sake” mantra’!).
Joint Unions Finance Working Group
References
Brett Christophers (2021). Class, assets and work in rentier capitalism. Historical materialism, 29(2), 3-28.
Cris Shore (2024): Management consultants and university futures: Academic capitalism and the capture of UK public higher education, Public Money & Management, DOI: 10.1080/09540962.2024.2364284
Endnotes:
[1] Indeed the FAQs on the Finance sharepoint accessible to staff states: “Our aim is to generate a reasonable EBITDA each year so that we can continue to invest in the areas that help to make Edinburgh a remarkable University. If we cannot make our EBITDA targets each year, we won’t be able to continue to invest in the things we care about.”
[2] Christophers 2021, p.20
[3] Indeed the decrease in cash reserves was partly anticipated and part of the University’s strategy. In recent Court minutes, the Court acknowledges “a fall in the University’s cash reserves in recent years [that] was in line with Court approved financial strategy, representing the drawing down of cash built up, including through borrowing, for the purposes of fulfilling the Capital Plan”. (Minutes of Court meeting 4 December 2023. P. 6 - Director of Finance’s Report). In the 2024 Annual Report and Accounts, p.44 it is stated that “Cash and cash equivalents at the end of the year are £216 million lower than previous year, although much of this reduction was planned with a large amount placed into investments”.
[4] Shore 2024, p.8.
[5] Quoted in Shore 2024, p.5.
[6] Quoted in Shore 2024, p.5.
[7] Minutes of the Court Meeting on 07/10/2024, p. 7
[8] Shore 2024, p.5.
