Why universities can’t afford to coast anymore

The university sector in Australia is confronting some difficult truths. Having long relied on deregulated markets, soaring international enrolments and the perception of prestige, some institutions are now stumbling as external conditions shift to reveal strategic blind spots and a worrying lack of agility.

The Australian Catholic University is just one example – recently highlighted in the Australian Financial Review (AFR) for its ongoing turmoil. Alleged internal conflict and serious governance challenges, a lack of strategic oversight, and a questionable business model that prioritised margin over mission have now spilled into the public domain.

According to the AFR, ACU followed the favoured path of chasing international student dollars and restructuring course offerings towards more profitable subject areas like accounting. This came at the expense of other important, but perhaps less profitable, subjects such as anatomy and pathology.

Sadly, ACU is not an isolated case. The University of Wollongong is reportedly making over 270 job cuts. Australian National University is cutting jobs citing a $200m deficit.

The University of Technology Sydney has also announced a $100m cost-cutting drive with 400 job losses. Even though on paper they’re doing well, they’re cutting deep. This begs the question: is the decision about genuine long-term strategy or a short-term push to reduce spending and boost surplus?

Riding a boom is not the same as building a sustainable model

There is a broader lesson here that extends beyond education. Many industries have endured it – from real estate to construction to technology.

Universities have traditionally enjoyed an inherent prestige and faced relatively little competition. During the international student boom, nearly anyone in the sector could claim success. But were they building enduring models, or just riding the wave?

As competition grows and the market cools, it’s clear that only those with strong governance and a genuine value proposition are going to thrive.

Even institutions with a premium price tag aren’t immune. People will eventually realise that high cost doesn’t always equal high quality. In some cases, as we’ve seen with certain top-tier schools, hefty fees can simply be a mask for deeper issues.

It only takes one parent or student to champion an alternative for the momentum to shift, and suddenly even the most established institutions can find themselves on the back foot.

University leaders must be paying close attention. Students today have more options than ever before. Be it a competing university in the same state now offering your once-exclusive course, or a new entrant with sharper strategies and closer ties to student wants and needs, the time for humility and discernment is now.  

Keep connected, or risk becoming irrelevant

Success in any sector is never just about riding tailwinds. History is full of examples where a shift in the market combined with complacency of leadership have led previously prominent organisations to unravel.

Vice Chancellors, some of whom earn salaries north of a million dollars, must be:

• Deeply involved in the day-to-day direction of their institutions.
• Tuned into the shifting dynamics of the sector.
• Proactive in adapting strategy to meet changing conditions.

Ask the hard questions, benchmark honestly, and face the reality of a sector that’s no longer forgiving of slow movers or outdated assumptions.

Partnering with an experienced advisor can help to shed light on systemic issues and emerging challenges, while positioning your organisation to seize valuable new opportunities.

At RSM, we work together with Vice Chancellors and their executive teams to dig deep into the problems their institutions are facing. Be they strategic, cultural, financial or governance-related, we offer a fresh perspective on how best to move forward so you can confidently weather the changing tertiary climate and build resilience for the future. 

If your university would benefit from a confidential discussion with our specialist team, please contact Andrew Bowcher on (02) 6937 7001.