In recent years, higher education sectors across the Anglosphere — Australia, New Zealand, the United Kingdom, and Canada — have experienced increasing financial pressure. As more universities fall into deficit, the risk to long-term financial sustainability grows. The nature of these challenges means incremental actions won't be enough; institutions need to redefine and reorient what they do by considering coherent decisions across four layers, namely strategic direction, funding model, operating model, and enablers. 

These Anglosphere countries share many similarities. They are characterized by highly educated populations served by institutions with an average of 15,000 equivalent full-time students, research funded through a model of cross-subsidization from other income streams, and a significant reliance on international students as a source of income. 

Universities are increasingly weighed down by structural and policy constraints

Across the Anglosphere, universities are battling many of the same challenges. These include increased scarcity of and competition for government funding, policy constraints on student growth and associated fee income, exposure to volatility of demand from key countries such as China and India, greater competition from non-university digital education providers, and inflationary costs.

A significant number of universities across Australia, New Zealand, and the United Kingdom experienced a net operating loss in 2022 — a stark contrast to the state of these sectors in 2018, when less than a quarter were in deficit.

Universities are exploring new avenues for sustainability

Universities may adopt a wait-and-see approach in the hope that governments step in and provide further funding, or they can choose a more proactive route that sets them up to be sustainable in their own right. Historically, scale has been a key avenue to drive financial sustainability, with larger student cohorts supporting investment in research and other strategic priorities. Currently, scale is unlikely to support long-term sustainability, given the scrutiny on international education and slow, or even declining, population growth in university-aged population domestically.

As such, universities may need to rethink not only the role of their institution and how this translates into future size and shape, but also the funding sources and operating model that will set them up for success. They can approach this by making a coherent set of decisions across four layers. 

Aligning strategy to a more focused direction

Universities will need to take a more nuanced view of scale when setting their strategic direction. Comprehensive coverage of disciplines may not be the right approach for all universities. Pivoting to a more focused set would enable more targeted investment and distinguish the university as a leader in its chosen fields. This could involve responding to specific societal or economic needs in certain disciplines, such as addressing the growing need for applied learning subjects like engineering or applied health.

Making deliberate decisions around funding

With market and policy shifts limiting growth in student numbers, revenue will increasingly rely on less-constrained sources, such as industry funding through partnerships and commercialization agreements, philanthropy, and other service-related income. Universities also should prioritize their resources to improve financial performance, ensuring any use of funds contribute directly and meaningfully to their mission. This may involve ceasing some activities all together, identifying crucial functions that can be completed at lower cost, and simplifying those that are similar across all institutions. Taking advantage of these opportunities frees up funds for universities to invest in what will enable them to better fulfill their mission in a sustainable way. 

Streamlining operations and governance for better efficiency

In a cost-constrained environment like a university, efficiency across all aspects of its operations is vital. There needs to be an operating model that aligns people, processes, systems, and governance. Academic and professional staff can become burdened with multiple layers of unnecessary governance, so streamlining governance and clarifying accountabilities ensures time and resources are spent on the most important issues, releasing capacity for value-adding activities. 

Reinforcing change through behaviors and institutional culture

Like in many large organizations, even small changes to the way things are done tend to be met with resistance, so redefining the role and shape of a university will require careful planning, persistence, and commitment from the leadership team. Benefits cannot be realized until change is embedded in such a way that it becomes part of institutional culture. Investing time to engage people across all levels of the university around the challenge and the path forward is critical to create champions who will embody and drive behavioral change. 

Advancing towards more sustainable higher education institutions

For many years, universities across the Anglosphere have weathered fluctuating conditions. But intensifying constraints and resulting financial pressures signal a more fundamental shift is needed in the state of higher education sectors. Universities now have a choice: manage the financial strain through short-term levers, or take this opportunity to rethink their long-term strategy and role as a higher education provider.