What happens when financial expediency overrules organisational strategy?

Recently, the Financial Times newspaper published an article stating that the UK’s York University was lowering its grade requirements for international students on some courses due to ‘financial challenges.’

York University is one of the prestigious ‘Russell Group’ of UK universities which pride themselves on the highest levels of research and education. As outsiders, we are not privy to the nature of the reported ‘financial challenges.’ ?However, the suggested solution highlights a broader challenge facing all organisations – what is the impact of short-term decisions, driven by financial expediency, on longer term organisational strategy?

UK university financial models have become increasingly dependent of overseas students. These students are typically charged 2? times their UK counterparts for their fees. ?Consequently, increasing the number or proportion of these students sounds like an obvious solution to address some form of financial shortfall. To achieve this, it may be necessary to reduce the required grades for these students to make the university more attractive.

But simple solutions may have unintended consequences! If entrance requirements are lowered to encourage more overseas students, then will these students be able to cope with the academic rigour of a top university? Its not going to be sustainable to have high failure rates, particularly when these students have paid a huge amount for their courses, so inevitably there will be downward pressure on academic standards to enable lower performing students to achieve acceptable pass rates. Lower standards potentially start a broader academic downturn, with impacts on the ability to secure high calibre students, academics and research opportunities. Therefore, what seemed like a necessary and easy solution to a financial challenge may turn out to be a more serious erosion of the long-term strategy based around securing and enhancing the superior academic position of the university.

This example is one that all organisations need to consider in their strategy implementation thinking. Strategy is based on having unique or differentiated product and service offerings, targeted at a defined potential customer base and which can be delivered in a sustainable economic manner. Strategy implementation rarely goes according to plan. However, in addressing the challenges that will be faced, it’s important to understand the implications of decisions taken on the entire strategic eco-system. Fixing a financial problem without giving appropriate thought to ‘knock-on effects’ has the likelihood of derailing the entire strategy.

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The author: Nigel Penny is a strategy and performance management consultant with over 35 years international experience. He works globally with major private and public sector clients and has undertaken consulting assignments in over 35 separate countries. He is an ex-partner at KPMG and ex Vice President of Balanced Scorecard Collaborative. He runs workshops in strategic planning providing both training and strategic intervention consulting.?