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University Governance as a Strategic Driving Force

Constantin Bratianu
Bucharest University of Economic Studies, Romania
Florina Pinzaru
National University of Political Sciences and Public Administration, Bucharest, Romania
constantin.bratianu@gmail.com
florina.pinzaru@facultateademanagement.ro

This paper should be referenced as following:


Bratianu, C., & Pinzaru, F. (2015). University governance as a strategic driving force. Proceedings of 11th European
Conference on Management Leadership and Governance, Military Academy, Lisbon, Portugal, 12-13 November
2015, pp.28-35.

Abstract: The purpose of this paper is to analyze different models of university governance, considering
universities from Europe, USA, Australia, and Japan, and to find out what are the key success factors for
university governance to become a strategic driving force. University governance can be defined as the
constitutional forms and processes through which universities govern their affairs. From a process point of
view, university governance can be seen as extending right through the institution from a governing body,
down through senates and academic boards to faculty boards and departmental meetings. The
governance has an important role not just in ensuring accountability for funds received from the
government, but in opening the university toward the wider needs of society. The university governance
model in US is similar in many aspects to the corporate governance, which creates a very good strategic
driving force. In UK, the famous Oxbridge model for the university governance is based essentially on
academic self-governance because it was derived from the medieval concept of a guild of masters
recognized by Pope as an academic corporation of higher learning. In Japan, and Australia universities
have been incorporated with a significant impact on their governance. In Central and Eastern European
countries, universities have a lower level of autonomies since they are coming from a centralized
education system. In some of these countries, university governance has primarily a responsive function
and is far from being a strategic driving force. For these universities, a new perspective on university
governance is a timing issue to be debated and adopted.

Keywords: collegial governance, corporate governance, governing body, strategic thinking, university
governance

1.Introduction

University governance is a powerful concept that reflects the way a university is governed in a given
political, social, and economic context (Antonelli, 2007; Baird, 2006; Christopher, 2012; De Boer et al.,
2010; Donina et al., 2015; Hanada, 2013; Kooiman & Jentoft, 2009; Meister-Scheytt, 2007; Rowlands,
2013; Tilley, 1998). According to Shattock (2006, p. 1), “university governance is defined as the
constitutional forms and processes through which universities govern their affairs.” Governance and the
process of governing the university interact with the internal and external stakeholders striving for a
dynamic equilibrium. In a larger perspective, “Governance encompasses the structures, relationships and
processes through which, at both, national and institutional levels, policies for testing education are
developed, implemented and reviewed. Governance comprises a complex web including the legislative
framework, the characteristics of the institutions and how they relate to the whole system, how money is
allocated to institutions and how they are accountable for the way it is spent, as well as less formal
structures and relationships which steer and influence behavior” (OECD, 2008, p. 68).
Governing means decision power and authority. Carnegie & Tuck (2010, pp. 431-432) consider that
“governance is the manner in which power and authority is exercised in organizations in the allocation
and management of resources.” While management is focused on efficient and effective use of
resources, governance is focused on the dynamics of internal and external stakeholders. Over the last 20
years, universities have been under a continuous pressure of changing their core values, fundamental
missions and way of operations due to massification of higher education, reduction in governmental funds
and globalization. All of these phenomena led to the need of a higher level of competitiveness and a
strategic vision. In many countries, there was a shift from the traditional academic governance to
corporate governance models, but adapted to not-for-profit organizations (Carnegie & Tuck, 2010; Chan
& Lo, 2007; Christopher, 2012; Hanada, 2013; Min & Bowman, 2015; Mok, 2001; Mora, 2010; Trackman,
2008). Implementing these new corporate models constitute a real challenge for many countries,
especially from Europe, due to the inertia of the centralized national education systems. As remarked by
Donina et al. (2015, p.18), “in contrast to private companies, most European universities are still not free
to choose their own governance and management structures, because higher education laws define
details of governance bodies, decision-making processes and other relevant procedures for public
universities.”

Changes in the university governance should be made beyond the need of continuous adaptation to a
changing world. They should transform universities in leaders of their times (Duderstadt, 2000; Slaughter
& Leslie, 1997; Shattock, 2006). In the adaptation process, universities focus on their traditional mission
of teaching, learning and research. Today, society asks much more from universities in terms of their
contribution. Thus, universities should switch from creating adaptation knowledge to produce generative
knowledge, and to become learning organizations (Bratianu, 2011; Bratianu, 2014; Senge, 1999). That
means for governance to become a strategic driving force of the university and a powerful integrator able
to transform efficiently the potential intellectual capital into operational intellectual capital (Bratianu, 2014;
Bratianu, 2015).

The purpose of this paper is to make a strategic analysis of different university governance models and to
identify the key successful factors for the governance to manifest as a strategic driving force of the
university. This is an important topic for the academic debate since the whole work done by the academic
staff and the motivation of students for learning is strongly influenced by the university governance, which
underpins the academic leadership. In a rapidly changing world and turbulent business environment
universities need to develop strong governance models similar to business corporate governance models.
After this short introduction in the meaning of university governance, we will analyze the correlation
between governance and strategic thinking and the necessary conditions for it to become a strategic
vector. Then, we will analyze the most significant models of university governance from the continental
Europe, UK, USA, Australia, and Japan, and identify their strategic dimension.

2. Methodology

The purpose of this paper is to find answers to the following research questions: a) what is the correlation
between the university governance and strategic thinking? b) what are the most significant models for
university governance developed so far? and c) how stimulate these models strategic thinking? Being
primarily a conceptual work based on our own experience in academic governance and strategic
management, the present research integrates three interactive components:1) an extensive literature
search; 2) identification of the most significant university governance models implemented so far in
countries with world-class universities, and 3) a critical analysis of these models with respect to the
strategic thinking. Also, we looked up to the 2015 Academic Ranking of World Universities (ARWU),
which has been released recently by the Center for World-Class Universities at Shanghai Jiao Tong
University (www.shanghairanking.com).

3. University governance and strategic thinking


Governing a university in a fast changing and unpredictably environment is totally different than governing
it in an inertial environment. “Top management and its corporate planners cannot sensibly base day-to-
day work on blind optimism and apply strategic thinking only when confronted by unexpected obstacles.
They must develop the habit of thinking strategically, and they must do it as a matter of course” (Ohmae,
1982, p. 78). It has been almost demonstrated by all successful companies that traditional managerial
thinking focused on efficiency and effectiveness in a short-term perspective is not enough anymore.
Companies must develop a second decision making system oriented toward the future by using an
entropic thinking and new dynamic capabilities (Bratianu, 2015; Nonaka & Zhu, 2012; Teece, 2009;
Spender, 2014).

Using the brain metaphor which reveals two thinking systems (Kahneman, 2011), an organization should
develop two thinking systems as well: an operational thinking system devoted to short-term decision
making and solving routine and well-structured problems, and a strategic thinking system devoted to
long-term decision making and solving emergent and incompletely structured problems. While the short-
term decision making is embedded into the management process, the long-term decision making is
associated to the governance. Thus, the governance should be the strategic driving force of any
organization by elaborating and implementing strategies. A strategy should be viewed as “a dynamic
force that constantly seeks opportunities, identifies initiatives that will capitalize on them, and completes
those initiatives swiftly and efficiently” (Kotter, 2012, p. 47). The operational and the strategic thinking
systems should interact continuously and adjust their range of problems according to the specific of the
university and its mission. For instance, there is a clear difference between state and private universities,
especially in US. The governing boards of private universities and their trustees act in the interests of the
institution they serve. The governing boards of state universities have generically a political nature and
their members are selected or elected in accordance with the government interests. “The contrast
between the ‘trustee’ philosophy of the governing boards of private universities and the ‘watchdog’ stance
assumed by public governing boards is one of the most significant difference and greatest challenge
faced by public higher education today” (Duderstadt, 2000, p. 46).

The Hoare Review (1995) of Higher Education in Australia focused on the university governance, and
showed some deficiencies related to the policy-making, strategic thinking, and performance appraisal.
Based on recommendations of the Hoare Review, Tilley (1998, p. 9) suggests the following typology of
policy-making:
 Corporate policies. Concerned with the mission and external accountability of the university and
oversight of the development and adoption of strategic policy.
 Strategic policies. Concerned with institutional strategy, including strategic academic policy in
teaching and research and human, financial and physical resource management strategies,
together with oversight of the development and adoption of operational policy.
 Academic policies. Concerned with academic standards, performance and academic freedom.
 Organizational policies. Concerned with the implementation and support of strategic policies,
and including operational policies on human and financial resource management and student
administration.
It is important to emphasize that the above distinctions between corporate, strategic, academic and
organizational policies are neither self-contained nor separate. They are integrated into a comprehensive
vision and governance policy-making.

4. A strategic analysis of university governance models

4.1. University governance in UK

We start the analysis with the Oxbridge model since it contains the main characteristics of the medieval
model developed at the University of Paris. According to Shattock (2006, p. 5), “The Oxbridge model
represents the clearest expression of the primacy of academic self-governance essentially because it was
derived from the medieval concept of a guild of masters recognized by Pope as an academic corporation
of higher learning.” Beyond the academic structures and activities, both universities have properties and
business activities like any corporate entities. By the end of the last century, Oxford University made
some efforts to simplify its governing structure and defined the Hebdomadal Council as the governing
body of the university. Also, it agreed to nominate some lay people as members in that governing body.
Cambridge University retained its Regent House as the governing body, which means actually the whole
academic community, without any external lay members. From strategic point of view, the Oxbridge
governance model is primarily an academic governance model whose success can be explained as a
result of its huge spiritual intellectual capital coming from a tradition of excellence. Also, the governing
bodies of both universities take advantage of a full university autonomy which is the key determinant of
the strategic driving force.

All the other universities in UK had several stages in their governing philosophies and governing body
structure. The last significant stage started after the Further and Higher Education Act (1992), when the
Higher Education Model has been implemented. However, the model did not impose a unique structure
and composition, or a unique name. The various names (boards of governors, councils, courts) indicate
the variety in the type of higher education institutions across the country. Also, the governance
procedures and practices vary from one institution to another one (De Boer et al., 2010; Shattock, 2006).
Despite the diversity of governance structures and practices there are some general attributes and a
basic responsibility of them for the conduct of all the affairs of the university. De Boer at al. (2010, pp.
324-325) synthetize the main responsibilities of the university governance as follows:
 Approving the mission and strategic vision of the university, long-term business plans, key
performance indicators and annual budgets, and ensuring that they are in the best interests of
stakeholders.
 Appointing the head of the university as its chief executive and putting in place suitable
arrangements for monitoring his or her performance.
 Monitoring institutional performance against plans and approval performance indicators, which
should be, where possible and appropriate, benchmarked against other institutions.
It is important to mention the fact that the majority of council members are lay members, which means a
good representation of the external stakeholders. Beyond representativeness these members should
bring in a good corporate culture and expertise in business. As De Boer et al. (2010, p. 327) remark, “The
UK context requires first and foremost expertise, and dealing with representativeness is left to the
individual councils.” In the same time, the position of the vice-chancellor as chief executive officer has
been strengthened. Thus, the university governance integrates successfully the operational thinking of
the vice-chancellor with the strategic thinking of the governing body. The great autonomy of the UK
universities and the corporate model of the university governance are the most important determinants in
developing strategic thinking and decision making, which contribute essentially to the global success of
these universities.

4.2. University governance in Austria

Many scholars and officials from all European Ministries of Education consider that the new Austrian
Universities Act (UG02) approved in 2002 and implemented until 2003 is one of the most courageous,
advanced and modern law on the organization of higher education in Europe (Meister-Scheytt, 2007).
The most important ideas promoted by this legislation are the following: a full autonomy of university,
supported by a budget allocation for three years given by the ministry on the basis of performance
contracts, changing the status of the academic staff from civil servants into employees hired based on
their expertise and performance, and a new university governance. The structure of the new university
governance is composed of the rectorate, academic senate and a supervisory board. This structure
should increase the efficiency and effectiveness of the decision making in universities.

The new board of governors had to be established by each university at the beginning of the reform.
“Given its far-reaching decision and supervisory competences, the board’s activities and its relationship to
rectorate and senate proves to be fundamental for the strategic development of university” (Meister-
Scheytt, 2007, p. 248). The new boards may have five, seven or nine members in concordance with the
size and complexity of each university. Two, three or four members are elected by the senate of the
university; two, three or four members are nominated by the Ministry of Education, and the last member is
co-opted unanimously. Although the governing board has got a hybrid (elected from within and nominated
from without), and nominations made by the ministry may have a political attribute, the new university
governance is totally different than the humboldtian model. The full autonomy of the university increases
the responsibility of the board in decision making and requires a professional managerial thinking. The
board has the power of nominating the rector of the university from a short list proposed by the senate,
and of controlling all the managerial work performed in the university. The new board of governors “has to
decide on all important strategic aspects in the university, like the proposal of the rectorate for the
university’s strategy, the organization plan and the performance contract with the ministry. Finally it has to
agree to the founding of or taking shares in companies and foundations” (Meister-Scheytt, 2007, p. 249).
This dual operational-strategic system of decision making created many conflicts between the board
members and the rectorate since the law is not very clear in assigning responsibilities and decision
powers among the governing actors (De Boer et al., 2010). Also, we have to emphasize the fact that
strategic thinking is not opposing the operational thinking. They create a continuum of the decision
making process and each actor is supposed to know his position on this spectrum. But that implies a
supporting corporate culture which cannot be created by law. It needs time and understanding of the
power spectrum and decision making processes in the specific domain of academic affairs. The main
determinants of the strategic thinking for the new board of governors are the full autonomy for universities
and the budget for three years which allow long-term decisions.

4.3. University governance in Italy

The new Law 240/2010 relaxed the ministry power over the universities by allowing them to draft their
own statutes, and to specify the duties and powers of central governing bodies. The university
governance is composed of the Academic Senate and the Administrative Board. The rector is a member
of the Administrative Board, and he or she is elected from among the full professors and is then formally
appointed by the minister for a non-renewable sis-year term. The Academic Senate is composed of
maximum 35 members who are elected according to a democratic model to represent the academic
community. The Administrative Board contains the rector, students and non-academic members (Planas
et al., 2011). The composition of the board reflects no longer the democratic model. “Board members
should be experts, selected for their skills to add value to top decision making. Consequently, the board
role becomes that of improving the performance of the institution and supporting management” (Donina et
al., 2015, p.23). The rector may chair both governing bodies setting the agenda of these meetings.

From strategic point of view, the six-year mandate of the rector reflects a long-term vision and creates the
opportunity of achieving strategic objectives. However, the hybrid structure of the governing bodies does
not have the power to elaborate and implement strategies that involve major changes in the university, or
to increase significantly the performance of the university like in a company. The opening of the
Administrative Board to the external experts represents a step forward but it is not enough for a strategic
behavior since democracy never promotes experts and their expertise.

4.4. University governance in US

According to Duderstadt (2000, p. 239), “American universities have long embraced the concept of
shared governance involving public oversight and trusteeship, collegial faculty governance, and
experienced but generally short-term administrative leadership.” Duderstadt considers that any intrusion
of the state and federal government into the university governance in the name of performance and public
accountability may have adverse effects by questioning the academic values and micromanage many
institutions into mediocrity. A good governance is supported by three main traditions: academic freedom,
tenure, and institutional autonomy. For the American universities, “Institutional autonomy is intended to
insulate all decisions bearing upon the university’s academic mission from political interference”
(Duderstdt, 2000, p. 242). Unlike universities in many European countries, the federal government plays
an important role in shaping the directions of higher education in an indirect way. That means that the
governmental forces act upon the beneficiaries of higher education and not directly upon the universities.
That type of interactions gives universities full autonomy in making long-term decisions and achieving
their strategic objectives in concordance to their vision and mission.
In America there is a long tradition of inviting lay experts to become members of the university board. The
lay board selects the president of the university that is similar to the CEO from a company, and decides in
the fundamental issues of the university. “Because of the very limited expertise, the board is expected to
delegate the responsibility for policy development, academic programs, and administration to
professionals with the necessary training and experience. For example, essentially all governing boards
share their authority over academic matters with the faculty, generally acceding to the academy the
control of academic programs” (Duderstadt, 2000, p. 244). To be more clearly, the university governance
consists of a system of committees specialized on different types of problems which are coordinated and
controlled by a lay governing body. The governing board members are not involved personally with the
operational management issues. They are concentrated on the strategic issues of the university and on
the way their strategies can be implemented in the university. The American models of the university
governance achieve almost entirely their strategic potential.

4.5. University governance in Australia

In her analysis of the effectiveness of academic boards in university governance, Rowlands (2013, p.
340) states that “The 37 publicly funded Australian universities maintain a governance structure within
which the university council or governing body is responsible for the overall governance of the university
and oversight of its management, while the vice-chancellor (also known as the principal or president)
serves as its chief executive officer. Within this framework, the academic affairs of the university generally
fall under the purview of the academic board.” The chair of the governing body, called the chancellor, is a
non-executive position. The CEO (vice-chancellor or president) is a member of the governing body. Also,
the governing body has other executives of the university. Both the total number of the members of the
governing body and the number of executives vary from one university to another. According to Baird
(2006, p. 301), “The Australian Federal Government first signaled its concern to strengthen the operation
of university governing bodies in the late 1980s, opting for an openly corporatist model of university
governance aiming at delivering greater accountability to government. Since then, federal and state
government normative expectations of good university governance have been progressively refined
through review and legislative change.”

Although there are differences between academic boards established in different universities, the majority
of them are accountable for academic policies and strategies, academic standards and quality assurance,
and study programs approval. In Australia, universities are located in different states. While the
Commonwealth Government decides on education policy, state governments elaborate the education
legislation, and university governing bodies derive their authority from and act as trustees for the state.
Moreover, “Universities have an indirect obligation to local communities in each state through local
authorities and councils” (Christopher, 2012, p. 342). Adopting a corporate governance model implies that
university governance left behind the collegiate model and strives toward a performance model with a
clear strategic dimension, which must be in concordance with the vision of the federal and state
legislation. It is remarkable the trend for professionalization of the governing bodies and for improvement
of the normative framework of university governance. Also, it is encouraging the fact that members of the
governing bodies have training programs to develop their strategic thinking and skills necessary to deal
with complex problems, unpredictable events in the future and risk management. Equally important is the
effort made to create a new culture for good governance and university performance (Baird, 2006;
Rowlands, 2013).

4.6. University governance in Japan

In Japan there was a dramatic change in the university governance in the last decade. The Ministry of
Education, Culture, Sports, Science and Technology (MEXT) introduced the National University
Corporation Act (NUCA) in 2004. The Act changed completely the legal status of the national universities,
from being government-owned public institutions to a independent public administrative agencies. “The
aim of NUCA was to develop a strategic management system for national universities through
incorporation, thus changing the traditional style of governance” (Hanada, 2013, p. 538). The NUCA
introduced three fundamental changes with the aim to reform national universities as independent
agencies: a) transition to full autonomy of the university; b) implementation of corporate management;
and c) public accountability and third-party evaluation.

The new corporate model introduced the Board of Directors as the supreme governing body, eliminating
this way the Faculty Council centrism and strengthening the top-down management. The Board of
Directors consists of the president and trustees appointed by him or her. The Board works together with
some advisory bodies called generically Administrative Councils, with 50% of the members being
external. Membership in these consultative bodies is by presidential appointment. “In this manner, the
presidents of incorporated national universities have been granted significant authority with regard to
university administration, and organizational management structures have become top-down. Thus, the
reform leans toward a predominantly corporate model of university management” (Hanada, 2013, p. 542).
From a strategic perspective, the corporatization of national universities changed dramatically their status
from pure reactive entities in a very centralized system, into autonomous pro-active entities in a
competitive business environment. Now, they can develop their own vision and strategies to come back in
the global competition of the best universities in the world.

5. Discussions

University governance is the new issue of the strategic trajectory of any university in the world. However,
university governance requires academic freedom, full university autonomy, and new instruments for
public accountability and quality assurance. Thus, we cannot talk about a real university governance in
the countries where there are very centralized education systems coordinated by the government through
the Ministry of Education, and where universities are reactive and executive entities. Real university
governance can be implemented only with the corporate model, or with the collegium model if there is an
authentic university autonomy like in the case of Oxford and Cambridge universities. Although there is no
linear correlation between the university governance and its ranking in different metrics, we have to
emphasize the fact that world-class universities have a powerful governance model. Looking up in the
Academic Ranking of the World Universities for 2015 released recently we find that in the top 100
universities 51 are from USA, 9 from UK, 4 from Canada, 4 from Australia, and 4 from Japan. That means
72 universities from countries where there is a corporate governance model.

In this paper, we analyzed several university governance models developed in Europe, US, Australia and
Japan and we identified the most important characteristics of their governing bodies. In UK, there is a big
difference between the traditional Oxbridge model and the new governance model introduced recently for
all the other universities. However, the full autonomy of the UK universities is a key success factor in
developing strategic thinking. In Austria, the new legislation published in 2002 introduced the concept of
university governance. Based on a full autonomy and a three-year budget, universities can develop
strategic capabilities and become more competitive. In exchange for this autonomy, the legislation
introduced in 2006 the compulsory evaluation and reporting of the university intellectual capital, in order
to increase the accountability of the university and to have a stronger control on the decision making of
the academic leaders. Similar trends are in Italy, but here the tradition of collegial governance is mixed
somehow with the power of the corporate governance. The autonomy of the universities has been
increased, but not of the level of Austrian universities. Thus, strategic thinking cannot be developed fully
at the university level since major decisions are made at the ministry level.

A dramatic change has been made in the Japanese university system by corporatization of the national
universities in 2004. This change transformed their governance into a powerful strategic driving force. The
collegial type of academic management integrated in a highly centralized governmental decision system
has been replaced by a corporate model based on full university autonomy and strong board of directors.
The new academic management is based on a corporate model with a full decision power granted to the
president of the university, who nominate the deans and heads of departments. This corporate
governance is integrated into the university vision and its strategic thinking.

6. Conclusions
Universities like churches are long lasting social institutions. Due to complex phenomena like
massification, globalization, internet explosive development and the Bologna process in Europe
universities must adapt to the new needs of society and enlarge their traditional mission. The main role in
this adaptation process is played by the university governance, which can be defined as the constitutional
forms and processes through which universities govern their affairs. University governance is the
structural and functional framework that underpins the decision making of the academic leaders. The
purpose of this paper is to analyze different models of university governance, considering universities
from Europe, USA, Australia, and Japan, and to find out what are the key success factors for university
governance to become a strategic driving force.

In concordance with the purpose of this paper we formulated the following research questions: a) what is
the correlation between the university governance and strategic thinking? b) what are the most significant
models for university governance developed so far? and c) how stimulate these models strategic
thinking? Strategic thinking is a dynamic capability of the university that depends directly on its degree of
autonomy. If the university autonomy is low and major decisions are made at the Ministry of Education
level, then the university governance is reactive and reduces to classical administration. Strategic thinking
can be developed and use only if there is full autonomy granted by legislation to the university. Our
analysis shows that university governance models developed in USA and UK are similar to corporate
governance models since universities have been granted full autonomy. That means that these
universities have developed successful strategic thinking capabilities. A dramatic change in university
governance took place in Japan in 2004, when the national universities have been granted full autonomy
and hat to implement new corporate governance models. Similar changes happen in Australia, but not to
such a radical level. In Europe, Oxford University and Cambridge University benefit by a long and
powerful tradition in successful governance models. In the continental Europe, the new legislation
introduced in Austria in 2002 granted full autonomy to universities, and new forms of governing bodies
have been designed to approach the corporate model. Trends toward more autonomy and university
governance models able to develop strategic thinking manifested in Italy, but at a lower dramatic level
than in Austria. The final conclusion of our work is that universities need to enhance their competitiveness
in order to fulfill their enduring mission. That means for the governments to grant full autonomy to
universities, and to start implementing new corporate governance models.

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