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Governance, Leadership and Management in Universities

Keynote address by Professor the Hon Gareth Evans AO QC, Chancellor, The Australian National University, to 6th Annual University Governance and Regulations Forum, Melbourne, 10 August 2011


Power Distribution:Formal and Real

Back in 1876, describing the English constitutional system, Walter Bagehot drew a famous distinction between the "dignified" and "efficient" aspects of government – essentially the monarchy and the cabinet respectively – which has remained both an influential and generally accurate way of describing how Westminster parliamentary systems operate.

It is not unknown in Australian universities – and I’ll leave it you to guess as to whether I am speaking from personal experience in this respect – for some Vice-Chancellors to have embraced this kind of distinction with barely concealed enthusiasm, taking the view that the job of Chancellors and University Councils is to do dignity (dressing up for ceremonies, being the formal embodiment of the institution, and exercising on advice various formal powers), while leaving efficiency (actually running the place) entirely to them.

Having been a CEO myself (for ten years after I left politics, and before returning to Australia two years ago) – albeit of a major international NGO, not a business or public authority – I can certainly empathise with this view of the world. As President of the International Crisis Group I would love to have had an absolutely free hand to make every strategic decision I thought necessary, leaving it to my very distinguished successive chairmen and the six-monthly board meetings to look after the dignity side of things.

The natural instinct of chief executives, in a university context as everywhere else, is to think to oneself: how can an infrequently meeting governing board of part-timers, however extensive might be their expertise and experience in particular areas, know as much about anything to do with this organisation, and what’s good for it, as I know about everything?

And with universities now being the hugely complex billion dollar-plus operations they are, it’s natural for even the most sensitive modern vice-chancellor to feel deep down inside, whatever he or she reveals more publicly, that the fusty old university senate and council structures, modelled on those first put in place in Australia more than a century and a half ago, are not really where the action is, and a formality to be endured rather than a really vital component in policymaking and delivery.

But of course complete freedom of managerial action, with only purely formal oversight by the formal governing body, is not the way the world works these days for most vice-chancellors or any other chief executives, and nor should it be. It is required, by the formal instruments under which we all operate as a matter of law, and the management principles under which we should operate as a matter of good practice, that power and responsibility be shared. The trick is to know where and how to draw the relevant lines, to sure not only that relationships between governance bodies and managements don’t end in tears, but that the most productive possible synergy is achieved between them.

The lines are not actually crystal clear when one looks at the formal statutory provisions. If one takes literally their language, it actually looks like all the power is in fact with the governing body – just as under the Australian and UK constitutional systems it looks like that all the power is with the Queen or her representative.

For example [Slide 2], the Sydney University Act says that the Senate “has the control and management of the affairs and concerns of the University” (s.16 (b)); the University of Melbourne Act that the Council “has the general direction and superintendence of the University” (s. 8 (2)(b)); while my own Australian National University Act says even more robustly that “the Council has the entire control and management of the University” (s.9(1)) – although somehow I don’t recall Ian Chubb specifically bringing that to my attention during my initial briefing as Chancellor!

Of course it was always intended that most of these powers be exercised by delegation, with the governing body playing a strategic oversight rather than hands-on managerial role. A much better guide as to what the real division of roles should be in practice lies, for example [Slide 3], in the list in the ANU Act of functions that cannot be delegated (s.17 (3)) or [Slide 4] the list in the University of Melbourne Act of ‘primary responsibilities’(s.8 (3)). And it is essentially these functions that have now been set out [Slide 5] in the Voluntary Code of Best Practice for the Governance of Australian Universities, replacing the former National Governance Protocols, which has now been endorsed by the University Chancellors’ Council and Universities Australia.

The Three Basic Roles of University Governing Bodies

The Code’s list, in Principle 2, of what should be regarded as the primary responsibilities of every university council consists of nine items, which I think for present purposes – to enable us to more readily get our heads around what is involved, and how this should work in real world practice – can be distilled, without undue simplification, into three basic roles: strategic oversight, ensuring effective overall management, and ensuring responsible financial management. [Slide 6]

Strategic Oversight encompasses:

  • approving the mission and strategic direction of the university;
  • ensuring that visions and goals are turned into effective management systems; and
  • monitoring implementation of the strategic plan.

Ensuring Effective Overall Management encompasses:

  • appointing the VC and monitoring his or her performance;
  • overseeing and reviewing overall management performance; and
  • monitoring the academic activities and performance of the university.

Ensuring Responsible Financial and Risk Management encompasses:

  • approving the annual budget;
  • approving and monitoring systems of control and accountability;
  • overseeing and monitoring the assessment and management of risk; and
  • ensuring compliance with legal and government policy requirements

There is no time to discuss in any detail any of these functions – and I’m really conscious of my presumption in discussing any of these things at all given that I’ve only been back in the university system as ANU Chancellor for 18 months – but it has been a pretty jam-packed period, and I thought it might be interesting, and perhaps even useful, to give you a few quick examples of how the ANU is now trying to do things (after some experience over the years of doing things in rather varying ways), and how this seems to be working out.

Strategic Oversight. ANU is about to publish its 2020 Strategic Plan, which although primarily the work of our new Vice-Chancellor, Ian Young, and reflecting a much greater enthusiasm for precise benchmark metrics than has been common in the past, was the product of a very protracted and intense consultative process with the Council (as well as the wider University) – including a full weekend council retreat for this purpose. Council’s approval was anything but desultory and formal: it very much reflects specific input, both on detailed language and also the way in particular themes have been emphasized (e.g. ANU’s comparative advantage, as our national university, in contributions to public policy formulation and development).

Management Oversight. The most important single thing for any governing body to get right is the appointment of its chief executive, and replacing the hugely successful Ian Chubb after his ten year reign was a formidably difficult task for the Council. We went about it by very proactively searching for outstanding candidates, relying on a rather narrower and more sharply focused set of selection criteria than usual, and setting a high bar for candidates in terms of looking for evidence of hard thinking about ANU’s future rather than their own past (an emphasis which surprised some of them at interview).

But even harder for councils, in a sense, is working out how to actually exercise what must be our function of overseeing and reviewing overall management performance. That will be made easier – in the context of the benchmarks identified in a strategic plan - with specific metric targets, but councils also need to have a feel about their institutions are actually working, what the current issues and problems are, and how the general morale of the institution is faring. At ANU we have recently reinstated a practice, exercised only desultorily in the past, of regular site visits after Council meetings, where for two or three hours over lunch and subsequently a detailed briefing and discussion occurs about what is going on in that area – for example, at our last meeting, we gathered up the key players working on government training and public policy outreach.

Monitoring academic activities and performance is of course a particularly sensitive area for councils to tread in, with no justification at all – and even less than elsewhere – for any kind of attempted micromanagement. But the usual requirement of a direct reporting line from Academic Board to governing body (not always part of the ANU structure) is an important way of ensuring that the council is kept well informed about current issues, and able at least to ask probing questions if troubling matters arise.

Financial and Risk Management. To a significant extent councils here are always going to have to delegate the really intense scrutiny role to finance and audit committees, and ensure they have members with real expertise participating and reporting back. But an endemic problem for most councils – and this was certainly the case at ANU – is making sense, particularly for non-specialists but not only them, of the mass of detailed information thrown at us in numerical, tabular form. We have sought to overcome this problem by having basic financial performance material (and staff and student indicators) presented to us now each meeting in the form of 20 or so easily readable charts – and the benefits in terms of quality and focus of discussion have already become apparent.

One whole area of potential activity for chancellor and governing body which I have not described as part of the governing body’s basic roles, is the external face the university presents – to governments and (increasingly) other potential sources of financial support, including alumni; to overseas partners and potential partners; and to the increasing army of regulators, where basic policy matters are in question. My own view is that there is very definitely a useful role for chancellors and council members to play here, but that it should be worked out case-by-case, situation-by-situation with the vice-chancellor, who is and should remain the primary public face of the institution.

What Makes for Effective Governing Bodies

If any university’s governing body is to play effectively any of the basic roles I have been describing, it needs to have its own house in order, in terms of both structure and process. This means paying close attention to a number of specific issues which I haven’t time to discuss now in detail, but which are worth listing. [Slide 7]

Membership Basics:

  • manageable size (ANU’s 15 we think about right; but the national average is closer to 22 , as reflected in Code of Best Practice Principle 7);
  • right combination of qualifications and experience (including financial and commercial expertise, and a majority of external members, as required by the Code Principle 7); and
  • right combination of continuity and renewal (the Code Principle 8 proposes a standard maximum of 12 years, which ANU has tended to exceed, but we are now working to pull back to that or less)

Induction – and Continuing Education:

  • in formal obligations under relevant Corporations legislation (as required by the Code Principle 5: most new members are a little startled to find out how stringent director’s responsibilities are, and it is important that they be briefed in detail from the outset);
  • in understanding limitations of “representative” role (namely that council members are not there to advance any particular sectional interest but rather the university interest, even if they are elected staff or student representatives – of which there are five on the ANU Council –though there should be no inhibition on these keeping councils informed of the views of their various “constituencies” on key current issues;
  • in understanding the basic roles of the governing body (i.e. the three basic functions discussed here: ANU found useful to conduct a workshop – for both new and old members – in which, inter alia, a session was devoted to discussing [Slide 8] a dozen “vignettes” or case studies of issues that could arise in practice, borrowed from the National Conference on University Governance at RMIT, October 2010); and
  • systematic exposure to main areas of university operation (which we are doing at ANU with systematic campus visits after every Council meeting: this is an opportunity for Council members not just to gaze with varying degrees of comprehension at pipes and lab equipment, but to quiz staff members in some detail about what they are doing, how they are organized, and how they see the discipline’s future within the university).

Meeting Conduct:

  • well prepared papers (with particular attention being paid to making more accessible financial reporting, and information about progress against targets and benchmarks);
  • no longer – or shorter – than necessary (ANU’s meetings last around 3 hours on average, which seems about right: increasingly substantial time is being devoted to systematically discussing particular strategic issues);
  • real debate: the chancellor’s responsibility is not to engage in meandering soliloquies, or allow others to do so, and to encourage active participation by all council members.

Regular Self-Evaluation:

  • required by the Code of Best Practice Principle 7, this doesn’t need to be too formal (at ANU last year this took the form of a series of sybaritic lunches by Chancellor with individual members – involving fairly frank exchanges, followed by a three-page report back to Council not identifying any individuals, but summarizing views on key themes and issues, and recording satisfaction or dissatisfaction with particular structures or processes; this seemed to work well enough, and is an exercise we will aim to repeat every year or so).

Working Together

Each of the three basic roles I have identified [Slide 6] involve functions which in any self-respecting and properly run university should be taken very seriously and fully exercised by the governing body - not treated as matters for tick-and-flick endorsement after a desultory question or two, with the Vice-Chancellor’s advice regarded as more or less sacrosanct unless the house is obviously falling down. Any university which operates in this way runs the risk of becoming a suitable case for application of the old allegedly Chinese saying that “The Fish Rots from the Head” [Slide 1].

  • This is the title of Bob Garratt’s rightly esteemed book on institutional governance, now in its umpteenth edition, and useful reading for university council members even though its primary focus is on corporate board directors. Although the origin of the phrase seems more likely to have been Turkish than Chinese – and it’s wrong anyway, because any self-respecting fish rots from the guts first – it does capture a sentiment worth remembering.

At the same time, when properly exercised, these functions absolutely need not cramp the style, or limit the freedom of action in any significant way, of creative and effective chief executives – and I say that as a CEO myself working with quite tough-minded chairs and boards. If, in a university context, the Vice-Chancellor accepts and respects the governing body’s basic roles; gives it all the information it needs to exercise those roles in a timely and accessible fashion (and I emphasise “accessible”: the snow job, particularly when it comes to complex budgetary and financial matters, is not an unknown phenomenon in council papers); and responds cogently and honestly to questioning on sensitive or difficult matters, there is little prospect of the relationship being anything but comfortable.

The governing body of course has a reciprocal responsibility to stay strictly within the bounds of its basic functions, understanding and accepting the difference between oversight and management; to treat its executive head with courtesy and genuine respect; and to always give such advice as the vice-chancellor offers on matters within the council’s own prerogative, in particular the university’s strategic direction and its budgetary priorities, great – if not necessarily decisive – weight.

The bottom line in all of this seems to me that in governance/management relations nothing is more important than the exercise of plain common sense on both sides. It is partly a matter of good clearly defined boundary lines making for good neighbours. But it’s also a symbiotic, synergistic relationship in which there are immense gains to be made from working constructively together, and recognizing that each needs the other. The best universities, like the best football clubs, are those where all this is instinctively understood, where respective leadership roles are acknowledged but there is a great deal of communication and consultation on issues which straddle the border line, and achieving genuine consensus on key issues rather than protecting decision-making turf is seen as the normal order of things.