Strengthening the strategic capacity of public universities: The role of internal governance models

Introduction

Echoing the general reform wave in public sector governance (Christensen et al., 2002; Djelic and Sahlin-Andersson, 2006; Pollitt, 2013), the relationship between the state and higher education institutions in Europe has changed significantly during recent decades (Capano, 2011; Maassen and Stensaker, 2011; Paradeise et al., 2009). Key trends include shifts in the legal status of higher education institutions, resulting in more formal institutional autonomy being granted to institutions (Christensen, 2011; King, 2015), not least concerning their financial room to maneuver, the ways in which they choose to organize internally, and in their decision-making structures (for an empirical overview, see European Commission 2010). The idea of formal institutional autonomy in higher education research has moved from mainly denoting community self-governance and an emphasis on academic freedom to denoting organizational autonomy of the university as a more unitary and strategic actor (Krücken and Meier, 2006). Analyses of this trend have noted that despite the convergence in formal governance arrangements around the world (Ramirez, 2006), there are indications that formal institutional autonomy may actually imply less actual institutional freedom (Christensen, 2011), and that governance changes taking place in higher education institutions are affected by a complex set of factors including path-dependent trajectories and external constraints (Enders et al., 2013; Frølich and Caspersen, 2015; Paradeise et al., 2009).

Political interest in increased institutional autonomy is often legitimized by the argument that increased autonomy will stimulate intra-organizational engagement, creativity, and adaptability to local characteristics, which again will boost organizational efficiency and effectiveness (Aghion et al., 2010; Verhoest et al., 2004). From this perspective, increased strategic capacity is about utilizing internal resources and organizational characteristics through thoughtful internal governance processes and designs. In this way, the concept addresses more processual aspects rather than the substance of a given strategy (Stensaker et al., 2014). However, while strong correlations can be found between institutional autonomy, competition, and institutional efficiency and performance (Aghion et al., 2010; Enders et al., 2013), there is very little understanding about how strategic capacity can be developed through careful governance designs. In this article, we shed more light on the relationship between institutional governance and strategic capacity. Acknowledging the complexity of higher education institutions as organizations (Clark, 1983; Frølich et al., 2013; Weick, 1976), we draw upon both instrumental and cultural perspectives in organizational theory to develop expectations as to how the relationship between university governance and strategic capacity may be conceptualized. We then investigate these relationships empirically based on a sample of higher education institutions. Two research questions guide our study:

How and to what degree is the internal governance model of universities, reflecting internal and external development factors, connected to the strategic capacity of these institutions?

The empirical context for the study is the Norwegian higher education system and the changes in institutional autonomy and in internal governance models of universities and colleges in the system throughout the latter decade. By studying eight Norwegian universities and colleges with different internal governance models, the significance of a range of organizational factors which are often seen as important in public sector reform are explored (Egeberg et al., 2016), including external representation and influence within the executive boards and the selection and appointment of the rector/president of universities and colleges (Capano, 2011; Christensen, 2011; de Boer et al., 2007; Paradeise et al., 2009).

Key reform trends in “modernized” public sector management in higher education

Reforms in higher education resemble reform efforts in other public sectors aiming at improving public sector efficiency, effectiveness, and quality (Christensen, 2012; Christensen et al., 2002; Pollitt, 2009). As such, a general ambition behind a number of higher education reforms in Europe has been to “modernize” higher education institutions (Maassen and Olsen, 2007; Maassen and Stensaker, 2011). The inspiration for these reforms has often been related to the spread of global ideas of effective organization aiming at transforming public agencies into bounded, rationalized actors (Djelic and Sahlin-Andersson, 2006; Ramirez, 2006; Sahlin, 2012).

Three developments can be said to have been central in the reform initiatives taken. First, a number of governmental tools have been transformed, introducing policy instruments that aim to link performance closer to political priorities and ambitions (Hood, 2007). Changes include the establishment of more targeted, outcome-based funding systems where specific performance indicators are used to steer the organizational attention and activities (Beatty and Zajak, 1994; Frølich, 2011), but may also imply the establishment of intermediate bodies to strengthen the external oversight and insight into qualitative and quantitative aspect of organizational performance (Egeberg, 2003). While more formal autonomy has often been granted to public sector organizations, the state has usually accompanied such autonomy with stronger accountability measurements with respect to organizational performance (Capano, 2011; Christensen, 2011).

Second, external representation has increased in the central decision-making bodies, not least in the executive boards of public sector organizations (Tollefson et al., 2010). As part of this increased external influence over public sector organizations, reforms have often been modeled after corporate governance arrangements in the private sector (Christensen et al., 2002), where an externally appointed chairman is intended to represent the “shareholders/owners” and where the control function of the board is emphasized, ensuring that the owners get a return on their investment (Aguilera et al., 2008). This controlling function is intended to constrain managerial opportunism, although there is inconsistent empirical evidence that board composition, size, or structure consistently affect organizational performance (Dalton et al., 1998).

Third, reforms have also put much weight on the need to improve the quality of the leadership of public sector organizations (Rutherford and Meier, 2015; Stensaker and Vabø, 2013). As public sector organizations have adopted characteristics of generic organizations, there is an increasing tendency to assume that strategic management of public sector organizations is both possible and desirable (Ferlie and Ongara, 2015). As a consequence, new models for appointing the academic leadership of higher education institutions have been introduced in a number of countries, where former internal election models have been replaced with models where the institutional leadership is appointed by the board (de Boer et al., 2007). Accompanying changes also include the establishment of incentive structures for institutional leaders (Rutherford and Meier, 2015), and the introduction of strategic management tools as a way to guide leadership practice (Teelken, 2015).

Although one could claim that these reform efforts have been ideologically driven (Pollitt, 2013), the reform initiatives taken are often characterized by an attempt to pack various governmental tools together (Howlett and Rayner, 2013) and to create quite comprehensive policy mixes adapted to specific policy contexts (Howlett, 2014). Hence, although similarities between reform efforts in various countries are indeed visible, it is also possible to identify national variations (Capano, 2011; Ramirez and Christensen, 2013) due to institutionalized characteristics of higher education institutions (Clark, 1983), the historical nature of regulation of the higher education sector (Friedman, 2006), and established domestic traditions of bargaining and negotiation (Klein and Marmor, 2006).

Theoretical perspectives and expectations

Instrumental and a cultural perspectives are very relevant as theoretical points-of-departure for the current study, as such perspectives offers a range of explanations concerning the relationship between governance reforms and the strategic capacity of universities and colleges (Christensen, 2012; Christensen et al., 2002; Egeberg, 2003; Egeberg et al., 2016).

An instrumental perspective emphasizes the structural design of the governance models and arrangements within universities; it also assumes that organizational behavior will be impacted on by changes in decision-making structures and changes in management and leadership (Egeberg et al., 2016). However, specific governance models within a given organization could still be affected by outside factors, such as the degree of autonomy given to the organization as part of autonomy reforms (Christensen, 2011; de Boer et al., 2007). Hence, the instrumental perspective comes in two versions. The first version stresses the role of the government and the degree of formal autonomy given to universities and colleges. This version acknowledges that the state may still play an influential role in the governance of the individual organization, as institutional autonomy is only one of a range of policy options and instruments at the disposal of the principal when steering higher education (Frølich, 2011; Hood, 2007). The second version gives more weight to internal governance arrangements and emphasizes actual autonomy in terms of how strategic capacity at the institutional level could be designed and organized (Christensen, 2011). This actual autonomy could, however, be curbed by instrumental side-effects of the formal autonomy given to institutions; autonomy often implies a delegation of tasks and responsibilities and an accompanying build-up of an administrative staff which may standardize and professionalize governance processes and subsequently limit institutional discretion (Bleiklie et al., 2015).

The cultural perspective embraces the general perception that cultural material, practices, and identities are found both inside and outside organizations, and that these elements constitute significant influence on public reform initiatives (Christensen, 2012). Thus, the cultural perspective also comes in two versions. The first version stresses intra-organizational characteristics and features developed over time and how these features influence values, norms, and behavior in universities and colleges, thereby enabling them to develop unique identities (Clark, 1983; March, 1994). The second version pays more attention to cultural aspects found in the environment and how global reform ideas and templates are difficult to resist and that they, as a consequence, are translated into individual organizations in a more standardized way (Djelic and Sahlin-Andersson, 2006; Ramirez and Christensen, 2013).

These theoretical perspectives and their versions can be systematized in the following way in relation to their impact on the strategic capacity of higher education institutions (see Table 1).

OPEN IN VIEWER

Table 1.

Key instrumental and cultural explanations for the development of strategic capacity.

	Convergence	Divergence
Instrumental perspective	Institutional autonomy is limited due to the existence and influence of other governmental instruments (funding, evaluation, etc.), resulting in convergence in how strategic capacity is developed at institutional level	Institutional autonomy provide institutions with considerable discretion concerning governance structures locally resulting in divergence as to how institutions develop their strategic capacity
Cultural perspective	Dominant external reform ideas and templates limits the perceived institutional autonomy resulting in convergence as to how strategic capacity is developed at institutional level	Institutional values, norms, and practices developed over time shape the institutional autonomy resulting in divergence as to how strategic capacity is developed as institutional level

Study design and empirical data

Results

Discussion

This comparison between institutions with different institutional governance models identifies a number of interesting issues regarding the relationship between the state and the institutions, and more specifically the importance of the institutional governance structure for the handling of strategic issues. We have analyzed in detail the relationship between the Ministry and the individual institutions in: framing the strategic process, the strategic agenda set by the institution, how strategic decisions are taken and the way strategic processes are organized and followed up internally. In this section, we return to our two theoretical perspectives in order to interpret the results.

The instrumental perspective was outlined in two different versions; one version underlining the significance and importance of public authorities despite increased institutional autonomy, and one version underlining the discretion formal autonomy may provide the individual institutions. Given the fact that few differences can be observed as to how institutions act in various stages in their strategic process, these data suggest considerable convergence in institutional adaptations to strategic processes, and that “governments are continuing to do their job” (Capano, 2011) in governing the higher education sector. Thus, the re-shuffling of policy instruments at national level experienced in higher education in general (Enders et al., 2013; Paradeise et al., 2009), seems to have little impact on the importance of the Ministry as a key player in the governance of the higher education sector in Norway. In general, all institutions studied displayed rather similar strategic agendas, where societal goals and academic ambitions were quite well balanced. As all institutions report that strategic matters have become more important over the last decade, this does suggest that system governance has changed and that governmental ambitions to exert coherent transformations in policy instruments may be underway (Howlett, 2014; Howlett and Raynor, 2013). A sign of such change in system governance is that the annual/biannual strategic dialogs between the Ministry and each university and college, show the Ministry to have become less detail-oriented and more concerned with long-term matters and long-term development. The dialog with the Ministry has, according to our informants, become more balanced and less directed at controlling the institution.

The instrumental perspective is also relevant in explaining the similarities in how the institutions work to establish their strategic agendas; here, the increased professionalization and specialization of the university administration seems to be an important factor (Enders et al., 2013; Ramirez and Christensen, 2013). In all institutions, the strategic processes have become routine and are characterized by a rather standardized set of procedures and processes, where faculties and departments are allowed to provide input, and where the administration is given the job of trying to balance external and internal needs (King, 2015; Krücken and Meier, 2006). Hence, there is considerable convergence found in how institutions organize their strategic processes. As the administration is heavily involved in institutional evaluations of past performance, conducting risk-based analysis and developing the first draft of the strategy, their role has become more important in strategic processes, a trend similar to that witnessed in other European countries (Seeber et al., 2015; Stensaker et al., 2014). This finding is also supported by the fact that the Ministry still seems to be engaged in some “control” of the smaller institutions—those with less administrative capacity—as manifested through more frequent meetings between the smaller institutions and the Ministry. The latter tendency suggests a more conditional autonomy being applied to institutions, underlining the importance of investigating the different aspects of autonomy (see also Christensen, 2011; Verhoest et al., 2004).

The cultural perspective offers valid explanations for other results of our study, not least concerning how external reform ideas can influence specific organizational practices. This is clearly illustrated when looking into the role of the institutional leadership—the rectors—in the two governance models. Our data suggest that rectors took an active and dominant role with respect to initiating and driving strategic change regardless of the internal governance model they worked within. In all institutions, the institutional leadership spent more time and effort on issues related to external accountability, profiling, branding, and marketing, and so appear to be taking on a role similar to that of corporate governance (Bleiklie et al., 2015; Ferlie and Ongaro, 2015; Rutherford and Meier, 2015). This seems to have an interesting consequence with respect to how decisions are organized and followed up internally. In a recent study on higher education management and leadership, Teelken (2015) underlined that academic managers generally employ a variety of coping strategies to tackle the new expectations directed at them. Our data indicate that because much of the strategic attention of the institutional leadership is directed outwards, there is less capacity available for internal matters. This creates a situation where the more professional and specialized administrations have space to take on a more prominent role. As such, dominant cultural scripts concerning how a “modernized” management should act create new ambiguities and complexities in higher education institutions (Vakkuri, 2010). While institutions may indeed benefit from more professionalized administrative support regarding the way strategic processes are initiated, organized, and followed up, the consequences include a potential de-coupling of the academic leadership from how change processes unfold internally. This may offer a more nuanced explanation for earlier studies that have reported on a stronger hierarchy in reformed universities (Bleiklie et al., 2015; Paradeise et al., 2009; Seeber et al., 2015).

Furthermore, the cultural perspective is also relevant for explaining how cultural traditions and practices influence reformed internal governance models in the institutions analyzed. For example, the assumption that modernized governance models with an external chairman and an appointed rector would lead to the board being engaged in more control activities; this was not confirmed by the data. Boards with an external chairman spent no more time on control activities, nor were they reported to be more interested in control. In general, external board members did not indicate that they saw the control function as especially important, and they also interpreted the lack of dialog between the Ministry and themselves as an indication that their role was broader than just being representatives of the Ministry. While these findings are in line with studies from both public and private organizations that provide inconsistent evidence for the impact of boards in general (Aguilera et al., 2008; Dalton et al., 1998), this finding also suggests that sector specific values, norms, and practices have infused all boards regardless of their composition. The cultural perspective is also significant for explaining that all external board members, regardless of governance model, demonstrated a very high respect for their institution and the expertise and academic authority of the rector. Such sector specific values and norms seem to have contributed to the convergence of the institutions’ strategic process.

Some institutional divergence can still be observed within a cultural perspective. In implementation and follow-up processes, external board members as well as rectors and directors emphasized the importance of informal meetings and seminars held in between formal board meetings, with such arenas clearly reflecting long-standing traditions and practices in the individual university and college. In these settings, representatives of the board met various representatives of the institution, including deans, department heads, center leaders, and research group leaders, allowing for more open exchange of views. Although they seem almost “co-opted” into these arenas, the board representatives viewed these sessions and events as very important input to later decision making. As such, long-standing governance traditions in many of the institutions seem to have been well adapted into the changed formal decision-making structures. That new governance structures adapt to existing cultural practices within the institutions, is a finding that is familiar within the reform literature (Christensen, 2012; Hood, 2007; Pollitt, 2009), also suggest that corporate governance models may have a different function than is often assumed. As the board appoints the rector in the modernized governance model applied in Norway, this appointment may also create a bond between the board and the institutional leadership that limits the control functions a board is expected to maintain.

Limitations, conclusions, and the contributions of the study

In this study, we have, due to methodological reasons, focused on strategic issues only. As such, a clear limitation is that a focus on other issues may have yielded different results. The study has also limitations in that our study yields few indications as to what the outcomes of the strategic processes are with respect to institutional performance. However, given the few differences in how institutions in general work to realize their strategies, it can be argued that the role and impact of specific institutional governance modes perhaps are exaggerated, and that institutional performance may be driven mainly by a range of other factors.

The strong tendencies in the current study toward convergence in how institutions design and organize strategic processes confirm other studies pointing to the importance of environmental changes when explaining institutional transformations (Krücken and Meier, 2006; Ramirez, 2006; Ramirez and Christensen, 2013; Stensaker and Vabø, 2013). However, through applying an instrumental and a cultural perspective in the analysis the current study add to the existing knowledge in several ways. First, while much attention has been directed at the redesign of institutions’ governance structures (de Boer et al., 2007; Enders et al., 2013), the current study demonstrate how different driving forces intertwine and reinforce each other, resulting in strong tendencies toward convergence and less emphasis on the institutional diversity and distinct institutional profiles which often legitimize the reforms arguing for more institutional autonomy. Second, by analyzing strategy as a process, the current study has identified several elements that contribute to a better understanding of how hybridity and complexity arises during organizational adaptation, and that much more attention should be given to the administrative and professional micro-processes of university affairs than to the formal governance structures and leadership.

One implication of our study is that while institutional autonomy indeed may be important for institutional performance (Aghion et al., 2010), we need to study in more detail the conditions which determines the “actual” autonomy (Christensen, 2011; Vakkuri, 2010) to be able to better specify governance factors that may allow us to distinguish better between formal and real autonomy. The current study should be seen as a step in this direction.