Merger of WIT and IT Carlow – risks and hard questions

In an opinion piece published in the Irish Times yesterday I responded to a report from Michael Kelly on the ‘Engagement and Consultation Process on a Technological University for the South-East‘. Today I’m going to expand on my earlier piece, and explore some of the other issues involved in setting up a Technological University in the South-East. I’m indebted to a number of people, from Waterford, Carlow, and further afield,  who contacted me about this over the last few days.

Higher education

Proposals to build a university in the South-East go back for over thirty years. The logic of doing this is hard to dispute. There’s good evidence that universities contribute to economic growth, in many different ways, and the potential benefits of setting up a university in the region have been well described in many sources, including the Kelly report . Waterford IT itself is a successful IT,  with good academic outcomes, and a very respectable track record in research and development. It’s the obvious keystone for a university in the region. IT Carlow is also a successful IT, but one with a radically different profile, and a strong focus on training.

One of the difficulties in talking about TU’s is the risk of running down the IT’s. To be clear, a successful education system has to provide access to a broad range of educational opportunities for everyone. This includes a working further education system, as well as higher education. Traditionally higher education in Ireland was divided into two groups, the Regional Technical Colleges, later the IT’s, who did apprenticeships, certificates, and diplomas, and the universities, who did degrees. For many years the IT’s awarded degrees only in partnership with universities, but more recently they have been allowed to award degrees themselves.

Irish parents have a strong preference for degrees. This has led to big increases in the number of kids doing degrees in the ITs and a fall in those doing certificates and diplomas. Arguably, this has weakened the whole system. It has certainly become harder to start with a certificate, and work up the system to a higher degree. It also leads to a moderately high dropout rate from first year degree course in the IT’s, as people who might, perhaps, have been better advised to start with a certificate, find they can’t manage a degree. I suspect that a fair of these would manage a degree later on, if they wanted one, but at age 18, many people do not have the maturity to manage a degree course.

The key point is that IT’s, technological universities, and ordinary universities are all doing something important, but they are also meant to be doing something different.

Mergers, risks, and management

Mergers are dangerous. Many mergers fail, and mergers can destroy large, and apparently successful organizations. Failed mergers destroy value, because they consume management and staff time, which could have done something more useful; and because the new body can be seriously, or even fatally, weakened by the merger process. It is perfectly possible to merge two good profitable companies and end up with one bad, loss-making, company. Of course, public sector bodies don’t usually exist to make a profit, although IT’s must balance their budgets, but the services they give can be badly damaged. The evidence is that, to succeed, a merger needs a clear, agreed, goal, and that both partners need to trust and respect each other. They also need to know each other very well (i.e. to have done a proper due diligence).

Red flags

Given the risks of a merger, reading Michael Kelly’s report should bring any properly designed civil servant out in a cold sweat. The process of merging WIT and IT Carlow has not gone smoothly, to say the least. WIT, an organisation that has had its own troubles over the last few years, walked away from merger talks in October 2014. At that point only the first stage of a four stage process leading to a technological university had been completed.

Someone in WIT pointed out to me that, at least until recently, the proposal for university status is not driven primarily by WIT, but by the city and local chamber of commerce. This person also felt that, for most staff members in WIT, the whole merger process was not very salient – ‘IT Carlow featured far too rarely in discussions of the future of the Institute’. I suspect that many staff in WIT feel the same way.

Kelly’s report, based on work with senior managers, the governing authorities, and others, includes many descriptions of how WIT and IT Carlow view each other. Phrases like “there is little evidence of previous formal collaboration”, “many instances of negative commentary, formal and informal, have been unhelpful and hurtful”, “need to build mutual trust and respect as the foundation of equality of esteem”, “doubts about the real level of commitment to TUSE” all occur. This is what has been published – what has not been published ought to frighten everyone.

This is not the basis for a viable long-term relationship, nor is it the basis for a successful merger over the next few years. WIT and ITC have also recently produced two separate visions for a technological university in the South East, which should also cause concern. Kelly shows that there are many common elements in the two visions, and I think he is right, but this is not a good place to start from.

One missing piece is mutual due diligence. Merger’s require transparency, and trust. They also require a lot of work to make sure that everyone on both sides knows where they stand. This is due diligence. Neither IT has completed this yet. In addition a key part of the TU process is preparing a detailed report on the performance of the two IT’s – this has yet to be completed for either. Again, this suggests that neither IT is yet ready to move to a merger. As Kelly observes, no IT will agree to a merger without some assurance that they will be able to form a TU. At the moment, WIT is much closer to meeting the TU criteria, than IT Carlow. The merged entity will be further from meeting the TU criteria than WIT is right now.

Managing risks

The risks of proceeding with the merge are not well described in the report. There is no more than a brief mention of the need for further resources, and a little further detail on the importance of achieving a common vision. It is proposed to finish in three years or less, which I believe to be unrealistic. The Dublin technological university process, which Kelly leads, and which has full support from all the ITs involved, has taken longer than this already.

I see further major risks, which need to be dealt with. Neither IT is ready. They dislike each other, and do not trust each other. Much work is needed to bring the two organisations on board, and it may not be possible to do so. It is regrettable this has happened, but it would be worse to pretend it has not, or that it does not matter

The price of moving ahead will be high. The direct costs of the merger will be, I think, a minimum of €4 million. There is also a big opportunity cost. Neither IT will have management time to develop themselves during the merger. They may not have the time, energy and resources to manage themselves properly.

There is a real risk of the merger dragging on for several years, with acrimony, suspicion and misery, and ultimately failing. This would do serious damage to the reputation of both ITs and the wider sector.

Conclusion

There are significant risks to proceeding. As far as I can see, these have not yet been properly considered, and no mitigation is proposed. If this is to go ahead, and to have any chance of success, I see no option but to start with a mediation process. This will mean further delay, but I feel it is necessary. Both partners are badly hurt, something which comes across very clearly in their responses to the report.

An alternative is to review the merger. It’s not obvious to me that the merger is either necessary, or helpful. There may be a case for a merger, but I think it needs to be reviewed and justified first.

Unless the work is done now to repair the hurt, to restore a sense of trust, and to establish real mutual esteem, any attempted merger will be a shotgun wedding, with results better imagined than experienced.

I am a member of the Higher Education Authority, but I write here in a personal capacity, and I do not speak on behalf of the HEA.

Paying for third level – a fairer alternative to fees?

There are two widely held beliefs about paying for third level. The first is that universities cannot continue to be largely funded from general taxation, as at present. The second is that Irish universities are underfunded, and this is why they have slipped down the league tables. As a result there is a modest panic about paying for universities.

Prof. Michael Murphy, the president of UCC, in an interview with Sean Kelly (Irish Times, Nov 12th), blew on the flames, saying that “Student fees of at least €4,500-€5,000 per year are necessary to maintain the quality of higher education in Ireland” and “as graduates gained a significant income premium from their degree, it was right that those who can afford to pay fees be asked to make a more significant contribution.”

Prof. Murphy is of course right about the income premium. OECD figures for Ireland up to 2004, suggest that graduates, as compared with someone who only completes secondary school, can earn 30% to 70% more. More recent Irish data are not available, but the more recent figures for other OECD states are similar. These figures are for extra earnings across a working lifetime (20 to 64).

How do we pay for third-level education now? It’s hard to get a good picture of the finances of the whole sector, and there are big differences between institutions, especially between the ITs and the universities. The HEA pay the bulk of the costs, apparently 65% to 90%+, depending on the institution. They paid just under €1.35 billion in ordinary grants to all third level institutions in 2009. Of this €769 million went to the university sector. Student ‘registration fees’, now running at €2,000 a year, are said to pay about half the costs of ‘direct student services’, a rather vague term.

Income from research grants, campus companies, patent licensing, conferences, accommodation, catering, rental income, and other university enterprises, makes up the rest. It is not clear whether these other activities even cover their own costs, as there are weak costing and management information systems in the sector. In any event, the bulk of funding comes direct, as a per-capita grant, from HEA, i.e. from general taxation, and so, non-graduates subsidize graduates. This seems unfair, as Prof. Murphy rightly suggests.

The return of fees is touted as a solution. Our neighbours in England have just brought in fees of £9,000 a year, and got a 12 % drop in applications to third level. They do have an efficient scheme of student loans, where repayments are deducted directly from salaries, once the student earns above a modest level, and interest rates are subsidized. The US has an odd system, with very high fees, student loans, and default rates running at 10% overall, and up to 80% in the worst of the private colleges (think mortgage misselling tactics applied to degrees). Most other EU countries have either no fees, or modest fees. We have nothing.

What would bringing in fees do? This would help to fix the funding gap in the sector, although to do this they would need to be closer to €10,000 or €12,000, than the figures of €3,000 to €4,000 being discussed. This would throw much of the burden on current students, and their families. Students entering in the next few years seem likely to be hit for fees. Those whose families can afford it, will graduate with few debts. Those whose families cannot, will either not go, as the recent English experience suggests, or will take on significant debts to do so.

Assuming we develop a system more like England than the US, these students will then repay their loans over 20 to 30 years, by direct deduction from their salaries. Older graduates, like me, would pay nothing for our education. We have already benefited from third level education, which received significant public subsidies, and, in many cases, our parents paid the fees.

Wouldn’t it be better to think of a graduate tax? The effect of this would be similar to a loan repayment deducted from salary, but a lot more people would contribute, so it would spread the costs more fairly. Every graduate earning above a set level would pay, and it would be deducted directly, like PRSI, and the universal social charge. No costly new systems would be required, and the administrative costs of tracking 40,000 graduates a year, across the world, for twenty or thirty years, would be avoided. There would be a once-off cost for registering graduates, but this would not be too hard. The tax would cover all graduates, whether of Irish, or foreign, third level institutions. This would ensure that all graduates would contribute to the costs of third level education.

This might be seen to be unfair to older graduates, as students paid tuition fees up to 1996. However, most graduates under the age of sixty have benefited from significant public subsidies to third level, which have been a feature of the Irish system since the late 1960’s, so it seems fair that we should contribute now.

What rate of tax would be needed to raise €2 billion a year? A rough estimate can be made. In 2010 the top 1% of income earners paid 25% of income tax, the top 8% paid 60% of of the tax, and the top 21% 83% of the tax. In 2010 it was estimated, by the Dept. of Finance, that a 1% rise in the health levy would raise €600m. If we assume the same ratio applies, then 21% of the population paying a 3% levy would raise €1.4 billion.

This suggests that a graduate tax paid at zero for low earning graduates (e.g. under €30,000), 2% for lower earners (e.g under €50,000), and 3% for higher earners would pay for Irish third level into the foreseeable future. These are not trivial sums, but they are not especially onerous either. In the UK new graduates now pay up to 9% of their income for up to 25 years to repay their loans.

There is a major effort to bounce us into bringing back student fees, but it’s not too late to change our minds. There are better, cheaper, and fairer options, and a graduate tax is one.

Funding Irish Universities

The perennial issue of funding third level has raised its ugly head, again. For non-locals, the situation is, first we spend rather little on tertiary education overall, by OECD standards (1.2% of GDP, compared with a median of 1.5% of GDP), and most of our universities are in significant financial difficulty. Third level fees were abolished, for Irish citizens, in 1996, with the stated aim of improving access to third level for students from poorer families. Over the las few years universities have raised student registration fees, originally intended to cover student services, from around €300 to around €1500, and it is now proposed to double this fee.

The effects of the earlier abolition of fees have recently been analysed, and the author (Kevin Denny from UCD) concluded that the abolition of fees had no effect on access for poorer students because :-

  1. There was (& still is) excess demand for places: there is a shortage of places not students.
  2. The fee reduction benefitted well-off students, low income ones would have been exempt.
  3. Most importantly: the paper shows that it’s how students do in the Leaving that matters. The fact that the low income kids do worse in the Leaving is why they are less likely to progress. Changing fees didn’t change that.
  4. Kevin Denny Behavioural economics blog May 2010

In the light of this, and our rolling financial crisis, its being suggested that we double ‘registration fees’ to €3000 for everyone (FF), bring in a graduate contribution, based closely on the Australian HECS, for new graduates earning above a certain level (FG), and do nothing much (Labour). I have reservations about all of these.

The FF proposal is to further increase the already stratospheric ‘registration fees’ which pay for ‘student services’, like library books. This will hit families just above the income threshold for grants very hard, and is not likely to raise much money. It currently brings in €60 million (this is my guess, 80,000 students, half of whom pay, €1,500 each), so doubling it would get you €120 million, while the HEA, which largely funds the third level sector, spent €1.5 billion in 2007.

The Labour proposal neither addresses the real funding crisis in third level, nor does it do anything to f ix the holes in our budget deficit, so I’ll leave it at that.

The FG proposal is more interesting. Its based closely on the Australian HECS system. In brief, they propose that new graduates should pay back one third of the cost of their education in stages, through the PRSI system, once they reach certain earning thresholds. Existing graduates would make no contribution. This is intended to raise about a quarter of the costs of third level education (€500m out of €1.8 billion).

I can see some problems with this. First, it’s not enough.The amount they propose to raise will not fix the problems of the third level sector. Second it will take a long time, up to ten years, before any substantial sums of money are raised, as the graduates have to get jobs, and move up their pay scales. Third, it’s not fair, the burden of funding third level falls on current and future undergraduates, and those who had free education, from 1996 to 2010, pay nothing. Fourth, the system will be very complex to administer, as an individual will have to have an individual account, which is paid down over time. Both the UK and the Australian experience suggest that this will be very expensive, and cause a range of social problems. Both countries fare poorly in the recent report on Global Higher Education Rankings 2010 – Affordability and Accessibility in Comparative Perspective.

Is there another way? Let us adopt the basic idea that those who benefit from higher education should pay for it, and those who do not, should not. The economic return to higher education accrues both to the individual graduate and to the society as a whole, so there is a case for subsidy to higher education. However, the salary gap between graduates and non-graduates is significant, so graduates ought to pay more for higher education than non-graduates. One way to achieve this is to levy graduates. It’s not too hard to identify graduates. Many jobs are entirely graduate. Also, graduates do not become non-graduates, so it is only necessary to record the graduate status once. A flat levy, of 1% or less, on all graduates, from Irish universities, or elsewhere, whose total income is above a modest level, could pay for third level education. Such a levy could easily be collected through the tax system, and would bring in the money quickly.

Worth considering?

Using R in research education

I’m at the UserR! 2010 conference at NIST in Gaithersburg, Maryland. This is the main annual event for R users. there have been whole series of presentations on using R in education. The full program lists the Pedagogic talks (3 sessions, and 9 talks, on the first day).
What I’ve seen so far is great work on training people in data analysis, in statistics and (to some extent) in probability, The work is really good, and I have lots of new ideas. What’s been lacking, and what I need to think about more, is the other part. There are at least three other elements,

  1. asking intelligent questions, that is questions that are well enough specified to be answered, and well enough considered to actually matter.
  2. using research information, and clinical information, to support good clinical decisions
  3. data cleaning, data exploration,

Any thoughts?

Abolishing Fas?

Deputy Ruairi Quinn has called for Fas to be abolished and its budget diverted to the IT sector. While I share his frustration with the running of Fas, it is, I believe, a serious mistake to think that it can easily be replaced.

Just as the IT’s and the universities have different and complementary roles, so Fas fills a vital slot in the educational landscape. No-one else has the same combination of guidance, staged training, and
technical options. We need it, we need it to work well, accountably and efficiently, and we need it more than ever now as the economy crumbles. The only chance for many people to get the skills they need is Fas, or something very like it.

TD’s need to hold Fas, and the rest of the Education sector, accountable for delivery, and efficiency. Soundbite policies got us into the present mess, but will not suffice to get us out of it.
(Irish Times Saturday Sept 4th)

John Nelder has died

Prof. John Nelder, one of the more remarkable British statisticians, has died, at the age of 85.

I never had the good fortune to meet him, but his work had a great influence on me. McCullagh and Nelder, Generalized Linear Models, was my first technical statistics book, as an epidemiology PhD student, and I used Genstat, which he originated, throughout my PhD. His clear explanations have stayed with me, and I am proud to recycle them to my own students (with attribution!). Genstat also showed me a way past the more ‘black box’ approach of SPSS and SAS, to the interactive data analysis, exemplified by R. I’d like to thank him, and offer my condolences to his family.