Higher education is a human capital business with an increasing international competition and changing management paradigms. Universities must efficiently manage their revenue growth and expenses to create competitive advantage. As in other businesses, they must decide in which activities they strategically should invest to create the best outcome and impact for the future.
The Value Chain Framework of Porter
The value chain framework developed by Michael Porter disaggregates a company into its strategically relevant activities that result in higher revenue or lower costs. Porter differentiates primary activities and support activities as shown in the following graphic:
The value chain framework can be applied to higher education and research institutions, too. The main products of universities are teaching and research. Primary and support activities must aim to increase the product value for the core stakeholders and to reduce the internal costs to create it. In higher education, delivering courses is, for example, a primary activity. A support activity in this context is the maintenance of a learning management system.
Product Value: The Position in the Global University Ranking
A significant competitive advantage of a university is its academic reputation and its position in the global university ranking. Times Higher Education (THE) outlines the following criteria to measure the value of a university considering its impact on the society and the individuals:
Teaching: The teaching metric is measured by five performance indicators: teaching reputation, staff-to-student ratio, doctorate-to-bachelors-ratio, doctorates-awarded-to-academic-staff ratio, and institutional income. These give a good indication of the prestige, facilities, and resources of the teaching environment, all of which have a direct impact on the student.
Research: If students have the opportunity to learn from leading researchers, they benefit both intellectually and practically. The quality and volume of research is therefore relevant for them, too. The research metric is measured through research reputation, research income, and research productivity on the one hand and the research quality on the other hand. The research quality category looks at citation impact, research strength, research excellence, and research influence.
International Outlook: Universities are no longer compared just with rivals in their own city, or even their own country/region. World-leading universities are competing globally and attracting students and researchers across the world.
The Organizational Setup of Universities
The primary and secondary activities of a university become manifest in its organizational setup. In higher education, business units are typically called "departments". Business processes do not usually correspond 1:1 to business units or departments – they run across units.
The following graphic shows an example of how the strategically relevant activities become manifest in the organizational setup of a university (simplified view).
The president or rector is the highest ranking executive officer of the university providing overall leadership to the institution. The president serves as a lead fundraiser and as a key representative of the university and its academic community to external agencies. Presidential duties include fostering a positive public image of the institution as the site of higher learning. This includes maintaining a close relationship with the institutional governing board, and foregoing points of common cause and agreement with the entire university community and its constituents.
The responsibilities of the board include the preservation of the university charter, institutional performance evaluations, fundraising, liaison with external agencies and political bodies, budget approval, oversight of campus policies and investment strategies, and perhaps most important, hiring and evaluating the ongoing performance of the university president.
The president generally works closely with the provost, the second ranking officer, who is responsible for academic affairs, and a chief financial officer who is responsible for the institution's fiduciary operations. The finance and administration department in this example also includes human resources and information technology.
The department responsible for enrollment management and student affairs is a unique area to higher education, responsible for the enrollment strategy and student services.
Advancement and development can be a department within the university or an external group affiliated with a university primarily responsible for fundraising.
