Effective governance: in conversation with chairs

Although the link may not always be direct, good governance is critical to an effective higher education system that works in the interests of students. A well-governed sector underpins high quality courses and positive student experiences, and good management and governance practices are essential to institutions becoming more financially resilient. Ultimately, effectively governed institutions enable students to reap the benefits of higher education while giving taxpayers confidence that public funding is used appropriately. 

The higher education sector is facing significant challenges, not least in relation to financial sustainability and a changing student recruitment picture for both UK and international students. There is a greater need than ever for innovation, transformation and realistic and stress-tested strategic thinking in institutions at executive and board level. In this context we know how important confident and robust decision making is to the success of individual institutions and the sector as a whole.

While there is no doubt that some providers have very effective governing bodies and robust governance arrangements there are pockets where these are less effective. We have identified issues which pose significant risks to taxpayers, and students through our regulatory casework and the National Audit Office (NAO) investigation into student finance for study at franchised higher education providers emphasised the increased risks to students and public funds that have arisen where management and governance are weak.

Many of the issues we see appear to be connected with governance issues and there are some aspects of governance in higher education in particular – like the size and structure of boards – that might create risks that many if not all institutions should consider. We’ve been speaking with colleagues across the sector to better understand their experience of and perspective on these issues.

What we heard

Our roundtables in Sheffield, Birmingham and London brought together more than a hundred chairs of governing bodies from across the whole range of institutions to discuss effective governance in higher education. Our discussions were wide-ranging, covering how chairs and their governing bodies manage risk, change and continuous improvement and ensure the governing structure works for their institution.

We saw some common emerging themes, with participants reflecting on the financial challenges in the sector, and in some cases describing how those challenges have spurred improvements, for example, where they have driven an important focus on financial risk management or led to opportunities to innovate or collaborate with new partners.

We heard a variety of views, for instance on the 'best' size and structure for a governing body with some chairs content that the status quo was no barrier to effective governance, while others spoke about steps they have taken to reduce the size of their governing body over the past few years. There was similar diversity of views in discussing the benefits, or otherwise, of remunerating chairs and other members of the governing body for their work.

We also invited reflections from chairs about whether the OfS's regulation was a barrier to governing bodies’ flexibility to innovate, adapt or change their structures or approach. This was particularly important for chairs of further educational colleges, which are also subject to Department for Education (previously Education and Skills Funding Agency) regulation, and where higher education students can be a small fraction of their overall educational delivery.

I was pleased colleagues felt free to share their views openly. These conversations emphasised the diversity of higher education providers across the sector and the needs of different organisations – in terms of challenges, risk appetite and governance structures. The roundtables have been really helpful in exploring and expanding our understanding of the potential issues. In the context of this diversity, all agreed on the importance of effective governance and that there are opportunities for the sector to continue to improve.

Next steps for OfS regulation for effective governance

We encourage chairs of all institutions to keep questioning and sense-checking their governance arrangements – examining what is and isn't working and thinking about how to improve.

Our recent events are just the beginning of a wider conversation with stakeholders across the sector about the importance of effective governance. In the next few months we will extend this conversation, including with vice-chancellors and principals, registrars and secretaries; external and internal auditors; and sector bodies – we know work is already underway in the sector to review governance codes and best practice to ensure institutions have resilient and robust governance arrangements in place.

We are now starting to think about how we should set clear regulatory expectations for effective governance and intend to follow this year's engagement programme with a call for evidence before consulting on any changes to our ongoing conditions of registration in this area.

And, of course, chairs should approach us if they want to discuss anything, or if they can see challenges in their own institution. The earlier we know a provider is facing challenges, the more we can do to ensure we understand the issues and support you as you tackle them. The biggest myth we were pleased to dispel at our recent events was that an early approach to the OfS to discuss challenges, risk or strategic changes would be viewed negatively – in fact, we consider timely engagement with us on these material issues to be a positive example of the open two-way dialogue we're seeking with the sector.