John Lewis University

With all the changes in university funding, and Deputy PM Nick Clegg’s call this week for a John Lewis economy, is it time for a John Lewis University?

The John Lewis Partnership operates a UK-wide chain of upmarket John Lewis department stores and Waitrose grocery supermarkets. It’s unusual in that the business is owned by its 76,000+ employees, and also unusual in that it seems to be thriving in these very tough economic conditions.

As regular, long-standing readers will know (hello, and how are you both?), I’ve taken an interest in new providers of UK higher education – notably BPP and New College of the Humanities.

In that light, a partnership model for a new university seems very interesting indeed. But I can see some very formidable barriers in the way.

We are all John Lewis now (fsvo ‘we’)

Nick Clegg, the Deputy Prime Minister, said this that he wants a John Lewis economy. He seems to be talking about employee share ownership, which is to my mind an entirely different thing to John Lewis. Employee share ownership can be a good thing – e.g. with a small startup. But it’s more problematic for large companies, where it’s easy for employees to end up with all their eggs in one basket financially: if their company goes bust, they’re left without their savings and pension as well as their source of income. This is widely regarded as very imprudent financial management. Also, employee share ownership (outside of small startups) is a tiny fraction of total ownership, so the employees get the risk exposure but little ownership influence. There’s also the question of how to get there from here. If employees are to get more shares, it must mean they get less salary, or are (effectively) paid more. I’m not sure either of those is a particularly easy sell in the current climate.

The difference with John Lewis is that it’s all the way: the business is (effectively) owned by the employees, and nobody else. John Lewis is owned by a trust which exists for the benefit of the partners – which is every single employee after a qualifying period. They control whole thing. No private equity, no shareholders. That gives a very real and substantial sense of ownership and control.

I think it’s a little bit of a hostage to fortune to hold up a single organisation as the solution to all ills, particularly when that organisation is unusual. That applies whether it’s John Lewis or the Open University.

And even  Charlie Mayfield, chair of the John Lewis Partnership, has said [FT] – in response to Nick Clegg – “I don’t believe the John Lewis model is a panacea. It is not right for everybody.” I don’t think it’s right for all universities. But I think it might work for a university.

New funding, new universities?

There have been several waves of ‘new’ universities in the UK, and so far as I can make out they are always regarded with suspicion and hostility on arrival. The first I can think of is New College, Oxford, which was shockingly new in the C14th when it was founded but is rather less so now, and can probably now be safely classed as ancient, along with the flood of half-a-dozen-or-so non-Oxbridge universities (St Andrew’s, Glasgow, Edinburgh etc) that followed in the subsequent two centuries. Then the redbricks (Birmingham, Manchester, Leeds etc) turn up in the early C20th and are regarded as a bit sus until the arrival in the 1960s/70s of the Robbins Report universities (UEA, Sussex, York, etc), who then go on to become ‘pre-1992’ institutions when the polytechnics convert.

Now we have another wave.

The UK – or, more accurately, England – is well underway with another transformation of higher education, where the vast majority of funding will come from students (via Government-arranged loans) rather than via arms-length funding bodies.  David Willetts (Minister of State for Universities and Science) has been banging on about wanting to open up for new providers; this reorganisation is expressly designed to make it possible for this to happen. So new entrants are likely to be showered with Governmental blessing and good wishes (though not cold hard cash).

As I’ve said before, if you can do it, now is a pretty good time to start a business: the technical recession is over, though growth remains sluggish; high and rising unemployment is likely to make it easy to hire people; and there’s time to get an organisation together and in good financial shape before the boom time returns. (If, indeed, it does.)

A John Lewis University

So what about a John Lewis University? Or, less brand-challengingly, a partnership university?

I think there’s a lot to be said for a university that is owned by its employees. The idea of a self-governing community of scholars is not a new one, and is one that many academics like the sound of, but it’s not at all how universities are managed at the moment.

Imagine – as a not-public-sector outfit, regulation would be much lighter. The governing Senate would have real power. There would be serious scrutiny of leadership and management.

Research might be a big issue: opting out of the REF would probably also opt you out of Research Council funding, with all the esteem it attracts, and while charities, foundations and the private sector are freer to fund what research they like from whom they like, they will notice that. Across the sector, teaching subsidises research, largely through academic time. This, of course, could happen with a partnership university, but if the money is all coming from students the community would have to ask very hard questions about how much research, and what sort of research, is justified. That question is being asked in all universities, of course, and the great thing about a partnership university here would be that the community of scholars would be the ones who get to give the answer – for good or ill.

It would, of course, have to de facto buy in to the whole ‘student-as-consumer’ model, since that’s how it would have to be funded.

The major stumbling block is getting started.

Start with the money

As others have noted, converting an existing university to this sort of model is very, very difficult. Not just the legal and administrative stuff, which would be fearsome (amending Charters and Statutes is famously hard). For one thing, it would mean transferring the current assets of a charitable body to its employees, which is rather problematic. I would guess it wouldn’t work, either. You’d need to make sure that the people involved were entirely sold on the idea and committed to it: there’d be a very rough ride to start with, and not everybody wants to be involved in the decisions that affect them.

Where do you get the money to start from? You can’t raise money from outside commercial or mainstream investors – they’d want a share in the business, and the whole point is not to have outside shareholders. Commercial credit or bonds run in to essentially the same problem: they’d require a fair degree of constraint over the organisation – at minimum they could bring things to a grinding halt by calling in the loan if they disagreed with a decision. Paying the bondholders would have to be the main priority, and that would quickly turn the organisation in to an ersatz private for-profit company.

A network of small individual owners – whether shares or bonds – is less instantly unappealing. You could imagine a whip-round of supportive members of the public, academics who like the idea but don’t feel they can join in, parents, even students (not that they tend to have money). That might work as a means of raising funding, and there may well be milage in the idea of a university created by public subscription, but it’s not the idea I’m chasing in this particular post.)

A wealthy philanthropist could work nicely – and is in fact exactly how John Lewis started. John Spedan Lewis, son of the founder, essentially gave it away to the employees.

But absent a fairy godfunder (a term I can’t believe doesn’t exist in search engines at the moment), the only way forward is capital and capital-in-kind from the founding employees.

Academics aren’t, by and large, hugely wealthy, but they’re not – on average – on the breadline. Salaries are fragmented these days, but if we take point 43 on the national spine as a mid-point-average, it’s £44,166 a year, which is close to the top decile of individual incomes.  (There are, of course, many many people teaching in higher education on much lower incomes, paid hourly with negligible job security – that’s rather the antithesis of a partnership-of-employees.) Raising a year’s salary is hard, especially in the current credit climate, and with so many people with very serious housing-related debts. I can just imagine the look on the face of a bank’s Customer Relationship Manager when you try to explain that you want to take out a loan of more than a year’s salary … oh, and you also plan to resign from your job. Any credit would have to be secured on the academic’s personal assets, not the new university (or the ownership model doesn’t work). So I think we could use a figure of £50k as the very top of what a real believer in the project could chip in as founding capital.

New College of the Humanities started with seed capital of £200k, which sounds encouraging … except that it then promptly got £10m of private equity to cover two years’ costs. I don’t know how many employees it has or expects to have, but I’d bet it’s less than the 200 you’d need to raise £10m at £50k a pop.

So at the very least, a partnership university isn’t going to be able to afford to spend as lavishly as NCH on things like ‘star’ academics, premises, and advertising. On the other hand, in the current climate, it could rely on extensive coverage in the press just by existing.

The basic economics should work just fine, once it’s going (if it’s going). There’s no fundamental reason why a partnership university should have a cost structure much greater than a conventional university or private sector outfit, and I’ve not heard any universities saying they can’t afford to supply an education at the price on offer. There are some structural constraints though. There’s getting started, which will require a substantial cushion of cash. (The process of getting money to universities from Student Finance England – who make the loans – is unclear but is already complex and lengthy.) There’s economy of scale. It’s unlikely that a partnership university could offer an OU model at the price point the OU is doing (£5k FTE), since that is built on substantial economies of scale. There’s also the possible challenge of deep-pocketed commercial rivals engaging in predatory underpricing to try force a weakly-capitalised partnership university out of business. But I suspect unmet demand for places is so high, and the commercial sector so small, that this isn’t a serious worry in the short term.

What about the workers?

I’m also not sure there’s a lot of suitably-capable people who are – or could be convinced to be – keen to do this sort of thing.

Most academics aren’t particularly entrepreneurial, or they’d be entrepreneurs, not academics. There are a handful of notable exceptions, of course, but they are very much the exception.

While many if not quite all academics will whinge and moan about bureaucracy gone mad, unaccountable leadership, creeping managerialism, and an overweening commercialisation, I suspect not all would actually like to have to make all the decisions themselves – just the ones they disagree with. The great benefit, of course, is that if they had to make the decisions, they’d be able to own it, and would probably be far more effective in carrying it out. But that’s not how everyone wants to work.

There’s also a time/capital issue. By the time you’ve worked your way to an established academic position, and thus be in a position to raise largish sums of money like £50k, or even just to be in a position to work for a long time without a salary, you’re likely to have acquired substantial costs and/or dependents, and thus be disinclined to take large risks.

Another problem is belief and buy in. It’d need to be a bunch of academics very committed to students, and to public goods and principles – otherwise they’d be better off working in public sector universities. But most academics who think that way are very unhappy about the change in university funding (I know I am), and may well be very ambivalent at best about being perceived as supporting or validating the approach.

Will-ett happen?

There’s also the question of public and wider sector support. A university like this would need substantial approval, or there’d be no point – and no students – in it. A commercial enterprise can appeal to those who are ideologically keen on the private sector; a partnership university that can’t convince those who are ideologically keen on the public sector – including most of those in conventional universities – is going to struggle.

So with all these hurdles, I’m starting to suspect it’s not going to happen. The idea has been kicking around for a while – there was an article in the Times Higher Education floating it over a year ago, and I stumbled on some stuff by Molly Scott Cato of similar vintage – she’s clearly not forgotten as she wrote to The Guardian on the topic this week. According to the logs, I made the first draft of this blog post in April 2011, but didn’t finish or publish it. There’s doubtless many other people who have considered very similar ideas.

But nothing has happened yet – to my knowledge.

It would be extremely interesting and exciting if it did. The whole range of what’s needed to set up a new university – and one with such a special nature – is daunting but would be a fascinating challenge. It’d take a lot to wrench me away from the OU – I very much believe in what we’re doing here. But it’s very far from being the only great social good to be done in higher education, and a partnership university – with the right ethos about student learning, technology, and access – could be a force for good.

I deduce from the fact that I’m not proposing to get on and do it, and neither is anyone else, that it’s not going to happen.

Unless, of course, a fairy godfunder happens to read this and wants to support it. If you’re a wealthy philanthropist, do feel free to get in touch – I’d be happy to discuss this half-baked idea. I’m sure all of my objections can easily be overcome with shedloads of cash.

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Author: dougclow

Data scientist, tutxor, project leader, researcher, analyst, teacher, developer, educational technologist, online learning expert, and manager. I particularly enjoy rapidly appraising new-to-me contexts, and mediating between highly technical specialisms and others, from ordinary users to senior management. After 20 years at the OU as an academic, I am now a self-employed consultant, building on my skills and experience in working with people, technology, data science, and artificial intelligence, in a wide range of contexts and industries. View all posts by dougclow