How do we make international recruitment more efficient?-lattestnews24

Stanford University management academic, Professor Ramesh Johari, said in 2023 that “it’s very hard to think about a human business endeavour that has not been disrupted by the potential for transactions to take place online”.

Readers of this article work in a sector where one of those business endeavours – the agreement of agent commission terms for the supply of international enrolments – clings on to its 1990s roots.

It’s wildly inefficient as a result, and ensures that providers navigating very real and current challenges, and especially those in Australia, Canada, and the UK, will find mitigation and recovery harder than they otherwise might.

And it is a huge sub-industry within the ultra-large international sector: at least AUD$10 billlion (USD$6.75bn) is spent annually by providers on agent commission alone.

It’s very likely far more, since fewer than 10 UK and Australian universities with published FY23 commission spends account for over 4% of that figure. And tens of thousands of variably sized providers from K-12 & language schools to universities and colleges deploy agent partners.

Is part of the problem that providers, and especially universities, are able to suppress the truth about the scale (and trajectory) of their spends? Are some not just being economical with the truth outwardly, but also inwardly?

Need-to-know basis

Often, one senior role in a university will have sign-off on decisions like agent commission. They are hired to be experts in this and related international spaces.

But is this enough scrutiny for cost centres that regularly exceed 5% of total spends for universities? Is too much advisory being taken at face value by executive colleagues, and by councils?

The best way to discern this is for VCs or CFOs to ask that senior person what the plan is for reversing this bloat in acquisition spend via agents. Under today’s approach to working with agents there are no good options.

Cost will go one way in a dynamic that has no price competition, which offers providers no pipeline control

Cost will go one way in a dynamic that has no price competition, which offers providers no pipeline control, and in which agents regularly supply 80% of a provider’s intake.

Are truly robust conversations happening within providers or does it stop at “if we want the students, we’ve got to pay”? This is a line I have heard myself from multiple beleaguered providers this year.

The Office for Students (OfS) recently went to tender for expertise to undertake financial risk assessment for UK universities, including “the management and governance capability of UK providers”.

The contracted firm should urgently explore the lack of imagination shown by providers collectively turning a blind eye to terrible economics.

No other sector would settle for such a poor supply dynamic. It’s incomprehensible in one that’s struggling for survival, and talking loudly in some geographies about those struggles.

Do enough people outside higher ed know about this space?

Paul Greatrix, registrar at The University of Nottingham, recently wrote in defence of universities, citing a KCL survey showing the British public’s view of HEIs as broadly positive.

Would those surveyed be as happy to know The University of Greenwich appeared to spend £1 in every 10 (9.7%) last financial year on commission to its agents? Or that Coventry spent £1 in every nine (11%) this way?

This is money – £28.7m & £54.9m respectively – that leaves campus, the local area, and most often the country. Related costs such as travel, fam trips, and scholarships are in addition to these.

Cue diminished margins, voluntary severance schemes, and non-investment in student experience. And it isn’t merely the cost of doing business; proportionally, these outlays have been permitted to increase rapidly by some providers.

For example, Greenwich appears to have spent only £1 in every £60 on commission five years prior, meaning at least some of the increase cannot be defended as the cost of generating increased year-on-year revenue via numbers growth.

Since the ratio did not scale, it suggests at least a significant contributing factor was an uplift in per-head acquisition cost.

This is a race to the bottom with no floor, and until providers organise they’ll keep overpaying

In late August, Stephen Nagel, Holmes Institute CEO, spoke at the ESOS Senate Inquiry hearing in Canberra. There, he complained that “there are [providers] paying 40% commission. There are people paying $1,000 bonuses every year. And there are agents who won’t deal with people who won’t pay these higher commissions.”

This is a race to the bottom with no floor, and until providers organise they’ll keep overpaying.

Intled can do better than this

Interim Chair of the OfS, Sir David Behan, in August said “the [UK] sector needs to innovate and find new models, new business models… Carrying on as we’ve always carried on, I don’t think is an option.”

This advice can be applied to agent commission arrangements for UK and other markets’ universities, yet few senior education leaders seem to be examining one of their single largest cost centres.

There’s no doubt that any one university could improve its own agent supply arrangements if it dedicated some thought and personnel to it.

What, for example, would Management or Supply Chain academics in Business Schools make of today’s standard practices, if they were informed about them?

Meaningful change cannot occur, however, whilst so many providers opt to hide the inefficiency of their recruitment operations in year-end accounts that roll commission in with “other operating expenses” – Paul Greatrix’s own employer is one of the majority doing this.

Perhaps those providers preferring to stay the course and shed ever-more margin should be willing to publish the impact on student experience, and to more honestly inform colleagues whose jobs could not be saved.