Almost every week the education press seems to carry yet another story on further education college mergers, whether proposed, completed or abandoned. This year alone has seen five successful mergers, with some 25 going through or planned. The question is how difficult is it to marry up two or more once totally independent entities to create a better whole and what do colleges need look out for?
The nationwide further education area reviews have recommended merger for many colleges. It's a hard thing to achieve, as one college principal I’ve met tells me he knows only too well.
To build up a merger proposal, he says, you have to ensure your mission statements share key values and that you are acting as equal partners. College governors have a duty to ensure partner statements are congruent, be they about shared behaviours, responses to problems in terms investment in quality, and many other issues. If you are hearing something totally different from what you had envisaged at the start, slow the process and maybe withdraw.
Due diligence is vital but not 100% proof. If your potential partner’s financial or quality circumstances change after you’ve agreed to merge – say they have to pay an additional hefty sum in lenders’ ‘breakage’ fees – will this reduce the funding benefits and expansion plans (?) – of any merger? Will it remove your main reason for merging?
Most college boards and senior teams aim to make a difference for their students and the communities they serve. Financial pressure can cause you to rush into a merger without taking enough time to interpret what you are being told about values and vision – factors probably more important than any financial investment. Steady evaluation is critical. Fail here and an unsuitable merger can, overnight, rip the heart and soul out of your college.
Of course, once past clarifying values, if a college is about to go under because its finances are a dog’s breakfast, there might be more urgency for moving forward.
Take your time setting up shadow boards and getting to know each other, my colleague tells me. Quite often colleges are relatively close to each other so they maybe already have existing partnerships.
Each partner also has to have a clear understanding of the value of sound leadership at governance level and on a day-to-day basis, how critically important this is and what it means for the service you provide. The essence of education is about people serving people. If you get leadership wrong at senior or governance level, you lose the people who provide the service, and then you might as well pack up and go home.
One yardstick of a successful merger mentioned in area review guidance is the ability to demonstrate a 62% staff to income ratio alongside a 40% debt to income ratio. In a sector facing a significant rise in pension and other costs – a key factor in adding pressure on staffing budgets – and uncertainty regarding funding, it is often levels of debt that cause problems for colleges in the first place. So clarity about how the ‘Restructuring Fund’ will be administered up front is critical.
Debt is a constant problem, with the sector suffering from a demographic dip in student numbers and a significant reduction in funding over the past 10 years. Colleges need to be prepared. Many banks are upping the pressure by saying they will exercise breakage costs if colleges change their payment plans, and by raising interest rates when covenants are broken. The irony is if the government removed debt from colleges, and funded provision at a reasonable rate, most colleges would be flying within months.
One other thing. If you are merging with a college, be prepared – and patient – to see at least an initial dip in service provision levels. If one college has a low grade from Ofsted and the other a good grade, it can take years to sort that out.
So what’s a good template to follow? The mergers that really seem to be working are service-driven and area-focused. There are a number of examples of sixth form colleges merging with their FE college partners to create a single post-16 provider serving their town and really focused on getting the best for their students and community.
Mergers like these demonstrate leadership beyond self-interest. They clearly show that governors can come together with their senior leaders to prioritise the idea of service to the community above the organisational construct of a college. Watch out for this type of merger – they have success written all over them.
The comment and arguments raised in this blog/article are the opinions of the secret lecturer and theirs alone. The primary purpose of the article is a catalyst for discussion about key issues in the sector and the content does not reflect the views, opinions and policy of AoC, AoC Create or AoC Jobs
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