A case study of an institutional merger in Hubei Province, People's Republic of China

This monograph is part of the Institute's research on 'Improving the managerial effectiveness of higher education institutions', directed by Bikas C. Sanyal, HEP

A case study of an institutional merger in Hubei Province, People's Republic of China by Min Weifang Deputy Director, Insitute of Higher Education, Peking University

Paris 1994 U N E S C O : International Institute for Educational Planning

The views and opinions expressed in this booklet are those of the author and do not necessarilyrepresentthe views of U N E S C O or of the H E P . The designations employed and the presentation of material throughout this paper do not imply the expression of any opinion whatsoever on the part of U N E S C O or IffiP concerning the legal status of any country, territory, city or area or its authorities, or concerning its frontiers or boundaries. The publication costs of this booklet have been covered through a grant-in-aid offered by U N E S C O and by voluntary contributions made by several M e m b e r States of U N E S C O , the list of which will be found at the end of the report.

This volume has been typeset using IIEP's computer facilities and has been printed in IIEP's printshop

International Institute for Educational Planning 7 - 9 rue Eugène-Delacroix, 75116 Paris © U N E S C O 1994

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Preface

Over the last decade, as a result offinancialstringency, combined with demands for expansion of enrolments and improved efficiency, higher educational institutions have been forced to reduce expenditure, seek n e w sources of funding and improve the utilization of existing resources. This has necessitated changes in the mechanisms, techniques and styles of institutional management. A t the same time, higher education has had to cope with increased diversification and n e w types of students, including adult learners, so as to meet the changing needs of the labour market and foster closer links with industry as well as widen participation through the introduction of distance learning. The implementation of innovation and change in institutional management, however, often faces obstacles and problems, including internal resistance, inadequate staffing orfinancialresources to m a k e the change effective, or insufficient time devoted to preparing and planning for change. It is against this background that in 1990 the IffiP launched a research programme o n 'Improving the effectiveness of higher educational institutions' whose purpose was to increase understanding of the process of planning, introducing and implementing management changes in higher education institutions, in order to improve utilization of resources. T h e project aimed at identifying factors associated with success or failure, exploring ways of overcoming obstacles or problems, and suggesting methods to improve institutional management and increase

v

Preface

the responsiveness of higher education institutions to changing financial, economic and social pressures. T h e research programme has several components, i.e. an information base, case studies and training materials and workshops. The case studies were a particularly important element since they were designed to identify the factors and strategies associated with successful innovation and change, and show the obstacles and problems to be overcome. This information w a s then subsequently used for the training materials and as a major input to the synthesis of the research programme. Several types of innovation and change were pinpointed for particular study: (i)

Change in the organization of institutions: •

N e w forms of decision-making structures and information flows.

•

The merger of separate institutions, departments or units.

(ii)

Changes infinancialmanagement and resource allocation:

(iii)

Devolved budgeting. • Resource generation. Changes in educational delivery systems: •

(iv)

F r o m semester to trimester, from block to credit system, rationalization of curricula, double intakes.

Changes in staff management, including staff development and appraisal.

In total, 14 case-studies and one desk-study were carried out, three each in Africa, Asia and Latin America andfivein developed countries. T h e study published in this volume falls under category (i) above and has contributed to understanding h o w mergers are organized in centrally planned systems as opposed to those which took place, for example in Australia (see Amalgamation at the University of Sydney,

vi

Preface

Australia: the institutional viewpoint by Michael Taylor, H E P / U N E S C O , Monograph, 1994). The Chinese higher education system is n o w suffering the effects of previous policy under which large numbers of small uneconomic specialized institutes were built. T h e Ministry therefore decided to undertake several pilot merger projects in order to gain experience and set d o w n the guidelines for subsequent action. This study concentrates on the merger which took place in Hubei Province. The process took six years from the initial top-level meeting in the Province in 1984, followed by the work of the Task Force set u p to plan the merger, the recruitment of key personnel in 1985, construction of facilities and retraining of staff throughout the period 1984-1990, until eventually thefirstenrolments were m a d e under the n e w n a m e in 1990. The problems of co-ordination, staffing and effects of inflation are dealt with in some depth. The latter was a major factor in certain target ratios not being reached, since enrolment could not expand as rapidly as foreseen. However, the quality of staff and facilities has m u c h improved, unit costs in constant prices started to fall and the studentAeaching staff ratio rose from 3.6 in 1984 to 7.9 in 1990. It is expected that these trends will continue. In addition, whereas the two original institutions were very weak in research work, the present institute n o w undertakes national and provincial level projects as well as work for local enterprises under contract. However, though a success, such a merger required considerable capital resources which the provincial government could not easily fund for more numerous mergers, the time scale being 6-10 years before the required economics of scale can be achieved. The overall results of the research programme will be published shortly in a synthesis of wide-ranging scope which covers the most important domains of university management.

Jacques Hallak Director

vn

Contents

Preface Chapter 1. 1. 2. 3.

Chapter 2.

The national context Rapid expansion of Chinese higher education in the 1980s Reform in the 1980s The currentfinancialconstraints and need for improving managerial effectiveness Provincial context and identification of problems infinancingand efficiency

12

Higher education in Hubei Province Identification of problems in financing and efficiency Institutional background

12

The proposed solution

17

1.

Proposed solution

17 19

2.

The objectives of the merger

Chapter 3.

15 15

21 Chapter 4„ 1. 2. 3. 4.

Planning of the change The mission of the new institution Development scheme of the n e w institution Staffing plan Management of the new institution

22 22 23 24

ix

Preface

5.

Location

24

6.

Finance

25

Implementation of the merger

26

Chapter 5.

Selection of the n e w president

26

2. 3. 4. 5. Chapter 6.

1.

Establishment of the n e w management structure Reorganization of academic departments Promoting faculty development Increase of enrolment Obstacles encountered

27 29 29 30 32

Chapter 7.

Evaluation of merger

36

The improvement of instructional quality The improvement of internal efficiency The improvement of external efficiency

36 37 38

Conclusions

44

1. 2. 2 3. Chapter 8. Appendices

49

References

73

x

Chapter 1 The national context

1. Rapid expansion of Chinese higher education in the 1980s After ten years of decline during the Cultural Revolution (1966-1976), Chinese higher education entered a n e w period of vigorous expansion. The number of regular higher education institutions and full-time enrolment increased from 633 and 1.02 million in 1979 to 1,075 and 2.07 million in 1988, and college students per 100,000 population increased from 115 in 1980 to 185 in 1988. Table 1 gives the number of higher education institutions in China by type and enrolment. A m o n g the 1,075 higher education institutions, 36 national 'key' universities are direcdy administered and financed by the State Education Commission which is also responsible for the overall guidance of the higher education system of the country through formulating policies, decrees and plans of the state. A total of 316 universities and colleges are administered and financed by the line ministries of the central government, such as the Ministries of agriculture, metallurgical industry, public health, etc. Seven hundred and twenty three local universities and colleges are administered and financed by Provincial Education C o m m i s sions, including a few under local government with provincial supervision. Table 2 gives the n u m b e r of higher education institutions by affiliation and enrolment.

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A case study of an institutional merger in Hubei Province, People's Republic of China

4

rat

The national context

schools and hospitals for university staff and their families, housing all the students and employees and dining halls for students and staff, are not considered as 'higher education' expenditure in s o m e other countries. O n e m a y also see that the per student unit recurrent cost of Chinese higher education is more than 2,000 Y u a n in recent years, which is about 200 per cent of the G N P per capita in China. Capital expenditure accounts for a large proportion (36 per cent in 1988), reflecting the increase in establishment of m a n y n e w colleges and universities. Table 4.

China: structure of higher education expenditure and per student unit cost in higher education (in billion Yuan) Recurrent expenditure Total expend. on higher education

1952 1965 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991

Source:

0.27 0.74 1.50 2.32 2.81 3.21 3.44 4.30 5.22 6.08 7.51 7.54 8.18 8.75 9.90 10.01

Subtotal

Personnel expenditure

Nonpersonnel expenditure

0.14 0.63 1.16 1.64 1.91 2.23 2.39 2.78 3.27 3.62 4.29 4.54 5.25 6.02

0.07 0.36 0.49 0.70 0.82 0.92 0.98 1.18 1.26 1.45 1.71 1.82 2.33 2.80

0.07 0.27 0.68 0.94 1.09 1.31 1.41 1.60 2.01 2.17 2.58 2.72 2.92 3.22

Capital expenditure 0.13 0.11 0.33 0.68 0.90 0.98 1.06 1.52 1.95 2.46 3.30 3.00 2.93 2.73

Unit recurrent cost (in Yuan)

830 918 1 844 1798 1 752 1 753 1 922 2 185 2 229 2 477 2 564 2 314 2 521 2 451

NA

NA

NA

NA

NA

7.42

3.42

4.00

2.59

3 430

Constructed by the author according to information from State Statistics Bureau of China (1990-1991) and Department of Planning, State Education Commission of China (1989, 1990, 1991-1992).

5

A case study of an institutional merger in Hubei Province, People's Republic of China

2.

Reform in the 1980s

During the process of rapid development in the 1980s, a nation-wide reform in higher education took place. Before the reform, the Chinese higher education system w a s characterized by over-centralization at the national level, with tight control o n the enrolment quota, the content of curriculum, and the financing and administration of universities and colleges. Such rigid administrative control hampered the development of Chinese higher education by stifling initiative and creativeness. In the mid-1980s the focus of s o m e administrative decisions, as well as responsibility for financing education w a s shifted from central to provincial governments, and to higher education institutions. Provincial governments were given more power for the planning, financing and management of higher education. Universities and colleges have enjoyed increased institutional autonomy and decision-making power, since they were given greater authority to run schools jointly with organizations of other sectors, to adjust the orientation of a speciality or an educational programme, and to revise curricula and syllabi, and introduce n e w courses of study within certain disciplines, hi addition, they acquired responsibilities in financial management and in raising funds and allocating resources. A s to research, they were able to m a k e decisions by bidding for research and development projects, engaging in research projects and consultation services for industries (State Education Commission 1988). These reforms also promoted lateral co-operation a m o n g universities and colleges, and between the higher education institutions and units in other sectors of society. Closer ties have been developed with industries by training students for production units according to their specific requirements for m a n p o w e r , by carrying out contracted research work and development activities for industries, and by providing various kinds of consultation services. Higher education institutions have generated more income from these activities, i.e. from 6 4 million Y u a n in 1978 to 921 million Y u a n in 1988.

6

The national context

3. The current financial constraints and need for improving managerial effectiveness T h e rapid expansion of Chinese higher education system in the late 1970s and 1980s took place without the state paying sufficient attention to issues of economies of scale and cost-effectiveness. M a n y very small universities and colleges were established, whichresultedin a relatively high cost system. T h e total number of higher education institutions rose from 633 in 1979 to 1,075 in 1988, while the average size of universities and colleges remained below 2,000 students. In 1988, the average enrolment in Chinese higher education institutions w a s 1922 students. Three hundred and eighty one universities and colleges have an enrolment of less than 1,000 students, which has led to a low student-teacher ratio and high unit cost. T h e full impact of this poor structure o n the management and financing of the Chinese higher education system, w a s felt during the period of economic austerity andfinancialretrenchment which began in the late 1980s. Although total expenditure o n higher education in China has increased at a rate higher than the increase in Government revenue, the system has nevertheless faced increasingfinancialconstraints. This situation is demonstrated by relatively low faculty salaries and serious shortages of both non-personnel instructional funds and the necessary facilities and equipment, especially at s o m e provincial universities. Personnel costs have accounted for an increasing share of total expenditure, as a result of high rates of inflation in China in the past few years, i.e. though the reported personnel costs account for about 4 4 per cent of the recurrent expenditure in 1988 at national level, a survey of 114 higher education institutions in three provinces, including Hubei Province, in 1989 showed that the personnel costs for provincial universities accounted for about 58 per cent of recurrent expenditure in 1988. This led to a decrease of funds for non-personnel instructional purposes and resulted in understocked laboratories or libraries. M a n y higher education institutions had to cut their subscriptions to periodicals which they had received for m a n y years. Even national universities are short of both equipment in quantity as well as funds to upgrade the large proportion of obsolete facilities and equipment. Furthermore, there are more than three million square meters of dangerous buildings in higher education

7

A case study of an institutional merger in Hubei Province, People's Republic of China

institutions across the country, which need funds for repair (State Education Commission, 1988). T h e financial situation of education has been exacerbated by inflation. Even in the early 1980s w h e n the inflation rate was relatively low in China, (in 1983, the officially announced retail price index w a s 101.5 per cent and the cost of living index was 102.0 per cent) the cost of instructional materials went up quite rapidly. T h e situation has worsened since the mid-1980s, w h e n the rate of increase of allocation to higher education slowed d o w n and the inflation rate went up significantly. In 1985, the officially announced retail price index w a s 108.9 per cent and the cost of living index was 111.9 per cent; and these rose to 118.5 per cent and 120.7 per cent in 1988 (State Statistics Bureau, 1989). The currentfinancialdifficulties of Chinese higher education are also due to low efficiency of the system. This is indicated by:

8

1.

L o w student to total staff ratio and student to teacher ratio. In 1988 the student/staff ratio was 2.1 and the student/teacher ratio was 5.3, while the average studentAeacher ratio is 12 elsewhere in East Asia and the Pacific (World Bank, 1986).

2.

L o w rates of utilization of facilities. T h e rate of classroom utilization was as low as 67 per cent and laboratory utilization as low as 6 2 per cent o n some school days at some regular higher education institutions (World Bank, 1986). Although most universities and colleges are under-equipped, idle equipment still accounts for over 2 0 per cent of total equipment in some higher education institutions (Jiao, 1988).

3.

The unit cost of the Chinese higher education system has been above 200 per cent of the country's G N P per capita, while in developed countries it is about 5 0 per cent of their G N P per capita, in East Asia and the Pacific about 100 per cent, and in those Asian countries at a level of economic development comparable to China about 150 per cent o n average (Tan and Mingat 1989, World Bank 1986).

The national context

4.

Over specialization of courses. Chinese higher education system is divided into 870 types of specialities.

5.

Diseconomies of scale. A survey of 136 universities and college in 1986 showed strong evidence of economies of scale: higher education institutions with enrolments of 2,000 or less had average unit costs considerably higher than those with enrolment of 4,000 students or more (World Bank, 1986). This is demonstrated by a scatterplot of unit costs against size of the institutions in Figure 1, from which one m a y see the decrease of unit costs according to increases in the size of institutions. Another survey of 114 universities and colleges in 1989 gave similar results (Min, 1990).

Efficiency could be improved by internal reorganization of universities and colleges to rationalize small departments, broaden specialities, eliminate duplications of programmes, and m a k e more effective use of staff and physical resources including raising student/teacher ratios and improving the rate of utilization of classrooms and laboratories. Arrangements should be m a d e whereby institutions or departments could share expensive equipment, faculty and other resources. O n e of the most significant opportunities for cost-saving in the long run is to achieve economies of scale, by consolidating small institutions into larger ones together with efficiency measures as mentioned above. This could considerably reduce unit costs in the long run. A simulation of cost behaviour in the Chinese higher education system showed that the unit cost of a college with 2,000 students and a student/teacher ratio of 5:1 is about 400 to 500 Y u a n higher than that of a college with 4,000 students and a studentAeacher ratio of 10:1, which is about 20 per cent of the unit recurrent cost (World Bank 1986, M i n , 1990).

A case study of an institutional merger in Hubei Province, People's Republic of China

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10

The national context

Since the mid-1980s, several pilot merger projects have been carried out in China. For example, in Hubei Province, the merger of Hubei Light Industry College and Hubei Institute of Agricultural Machinery took place in 1985 to: i. Achieve economies of scale; ii. reorganize internally the newly merged university to improve both internal efficiency and external efficiency; iii. expand enrolment to meet the m a n p o w e r needs of provincial industries; and iv. improve institutional conditions (school building, facilities and equipment) to raise the instructional quality. In Shanxi Province, three small colleges (Yuncheng Teacher Training College, Yuncheng Institute of Education, and Hedong University) were merged in order to achieve economies of scale and quality improvement. Another example in Shanxi province w a s the merger of Shanxi Teacher University and Linfen Teachers College. In Guangdong Province, the restructuring of the higher education system w a s also carried out by consolidation of small colleges. Since the merger of the Hubei Light Industry College and Hubei Institute of Agricultural Machinery into the n e w Hubei Institute of Technology took place the earliest, this case study chose to systematically examine and evaluate this particular merger.

11

Chapter 2 Provincial context and identification of problems in financing and efficiency

1. Higher education in Hubei Province Hubei Province is located in central China, with an area of 185,900 square kilometres, of which 4 4 per cent is mountainous, 36 per cent is hilly, and 20 per cent is plain. It has a population of 52.33 million, a m o n g which 40,74 million are in rural areas, amounting to 78 per cent percent of the total, and 11.49 million are in urban area (22 per cent). The economic development of Hubei Province is calculated to be at the upper middle level among the 3 0 provinces, autonomous regions and municipalities in China. Rapid social and economic development in the 1980s, brought increasing demand for educated manpower. Just as at the national level, Hubei Provincial Government gave high priority to the expansion of its higher education system. Currently, there are 63 regular higher education institutions with an enrolment of 130,048 students. Twenty-seven of the 63 are national universities and colleges located in the province but administered andfinancedby the State Education Commission and other line ministries of the central government, accounting for 67 per cent of total enrolment. Although these national universities and colleges are located in Hubei Province, they take in students from the whole country and allocate their graduates to all parts of China. They focus on national manpower needs and serve national development. A m o n g the 60,325 students enrolled in the national universities and colleges, about 15-20 per cent c o m e from Hubei Province, and about a similar proportion of the

12

Provincial context and identification of problems in financing and efficiency

graduates from national universities were allocated mainly to the large national enterprises located in Hubei Province but owned b y the line ministries of the central Government. Very few of them were allocated to local enterprises owned by the provincial or prefectural governments. T h e 36 provincial universities and colleges are administered and financed by the Hubei Provincial Government, and serve provincial manpower needs. They mainly enrol students from the province and allocate their graduates within the province. Table 5 gives the number of universities and colleges by affiliation in Hubei Province. T h e number of local higher education institutions by type and enrolment m a y be compared with the number of national higher education institutions by type and enrolment, given in Tables JA and 2Л 1 .

Table 5.

N u m b e r of higher education institutions by affiliation and enrolment in Hubei Province

Affiliation of institution

N o . of institutions

Enrolment

Average size

N o . of teachers

3

26 247

8 749

5 543

4.74

24

60 325

2 513

12 438

4.85

Provincial Governments

36

43 476

1 207

6 585

Total

63

130 048

2 064

State Education Commission Other Central Ministries

Source:

1.

24 566

StudentAeacher ratio

6.60

5.29

Constructed by the author according to the information from Hubei Provincial Education Commission, China 1989.

Tables 1A to 20A are to be found in Appendix П .

13

A case study of an institutional merger in Hubei Province, People's Republic of China

F r o m Tables 5, 1A and 2A, one can see that the average size of the national universities and colleges w a s 3,206 students (the average enrolment of national key universities run by the State Education commission w a s 8,749 and that of other national universities run by the line ministries w a s 2,513), which w a s m u c h larger than the average enrolment of 1,207 in provincial universities in 1988. There were t w o reasons for the smaller size of the provincial universities. First, m a n y have been established in recent years, but the Provincial government had only limited resources to allocate to each of them so that each is small and because their institutional conditions, such as quantity and quality of their faculty, classroom and laboratory space, dormitory and dining areas, andfinancialresources are limited, the State Education commission and the Provincial Government will not increase their enrolment quota. T h e overall average size of universities in Hubei Province, just as in the whole country, w a s only 2,064 as shown in Table 5, which is m u c h smaller than that in m a n y other countries. T h e smaller size of Chinese universities is closely related to the division of responsibilities for higher education. T h e student/teacher ratio of national universities w a s only 4 . 8 , to 1, while that of provincial universities w a s 6.6 to 1 in 1988. There are reasons for this lower student/teacher ratio at national universities. First, m o r e research projects are undertaken by the national universities; faculty m e m b e r s there are expected to d o more research work and, thus they have a relatively less teaching load. Second, national universities are usually better financed so they could afford to employ more teachers. It should be mentioned that the overall student/teacher ratio in Hubei as well as in China is relatively low in comparison with that of other countries. O n e of the reasons for this is organizational. For example, a m o n g the total number of 24,566 teachers in Hubei higher education institutions in 1988, 8,390 were teaching assistants. In s o m e other countries such as the U S A , teaching assistants are usually post-graduate students w h o work part-time and w h o are not counted as faculty m e m b e r s . Counting these teaching assistants as faculty m e m b e r s , the overall student-teacher ratio in Hubei higher education was 5.29 in 1988, but if they are not considered as faculty m e m b e r s , the student-teacher ratio would be 8.04. E v e n so, this is still below the international average (World Bank, 1986). Thus the improvement of utilization of h u m a n resources in higher education institutions is evidently necessary.

14

Provincial context and identification of problems in financing and efficiency

2. Identification efficiency

of problems

in financing and

T h e general pattern of higher education development of Hubei Province w a s similar to the national pattern. Between 1979 and 1989, the number of universities and colleges in Hubei increased rapidly from 33 to 63 with m a n y of them being very small and highly specialized. Its current problems andfinancialdifficulties are also similar to that of the whole country, i.e. high unit costs and low utilization rates of facilities and equipment, and of h u m a n resources. For example, according to 1989 statistics, the average teaching load for a faculty m e m b e r in the provincial universities and colleges w a s only 4 . 2 hours per week (classroom instruction time); the utilization rate for classrooms w a s 62.7 per cent, and that for laboratories was only 26.1 per cent. In addition, instructional quality is relatively low, because about 2 2 per cent of the faculty m e m b e r s are without the necessary diploma or certificate. T h e existing facilities and equipment are obsolete without funding for renewal. There is also a shortage of library books. Hubei Provincial Education Commission has been aware of these problems since the mid-1980s. It started restructuring the provincial higher education system with the merger of two colleges whose backgrounds w e shall n o w examine.

3. Institutional background Hubei College of Light Industry was set up in 1978 in W u h a n City by the Provincial Government. T h e college, administered by the Provincial Department of Light Industries, w a s designed to produce engineers for this type of industry. In 1984, it had nine specialities including paper-making engineering, food engineering, fermenting, plastics shaping and processing technology, industrial arts, packaging engineering, light industry machinery, and Hght industry automation. The designed size of the college was 2,000 full-time regular students, but it never reached this size because offinancialconstraints. In 1984, total enrolment was 641 students. Each specialty had 71 students o n average. T h e total staff number was 431 including 188 teachers, 86 administrators, and 157 other staff. T h e student/teacher ratio w a s 3.4 to 1 and the

15

A case study of an institutional merger in Hubei Province, People's Republic of China

student/staff ratio 1.49 to 1. Most of the students and staff members lived in staff or student accommodation on the college campus, which occupied an area of 300 Chinese M u (equivalent to 50 acres). Table ЗА gives the number of students and staff members by categories of the college in the years before the merger and Table 4A shows the recurrent expenditures. Because of the small size, low efficiency and poor quality, the college faced increasingfinancialconstraints in the mid 1980s. Hubei Institute of Agricultural Machinery was originally established in 1958. It was closed in 1964. In 1979, the institute was re-established and administered by the Provincial Department of Agricultural Machin­ ery. The Institute had two specialities in agricultural machine building and repair, and agricultural electrification. Total enrolment was only 409 students in 1984, while staff numbered 333 including 102 teachers, 69 administrators and 162 other staff. The student teacher ratio was 4.0 to 1 and the student-staff ratio was 1.2 to 1. The institute occupied an area of 423 Chinese M u (equivalent to 7 0 acres) including a campus of 214 M u and an experimental farm of 209 M u . Table 5A gives the number of students and staff members by categories in the years before the merger and Table 6A shows the recurrent expenditure. A s with the Light Industry College, small size led to diseconomies of scale, low efficiency and poor quality and the college also faced seriousfinancialdifficulties in the mid 1980s, i.e. it was too specialized to be allowed to enrol more students and therefore could not obtain more revenue. In 1984, the provincial government planned to expand the provision of engineers which were urgently needed for economic development, but concluded that both the Hubei College of Light Industry and the Hubei Institute of Agricultural Machinery were too small to be efficient, since both were so highly specialized. There was also a problem of some overlap of courses between the Hubei College of Light Industry and the W u h a n University of Light Industry in the same city.

16

Chapter 3 The proposed solution

1. Proposed solution B y 1984, the higher education authority of Hubei Province fully recognized that it was impossible to achieve a high level efficiency in the running of the Hubei Light Industry College and Hubei Institute of Agricultural Machinery separately as two very small and narrowly specialized colleges. It was also not desirable to close these two colleges, because there were m a n p o w e r needs for college graduates majoring in the specializations produced. Expanding both institutions would result in an over supply of such graduates, while there would still be a shortage of college graduates in electrical engineering and computer science, chemical, general mechanical, civil and industrial management engineering, which arefieldsof high demand for specialized personnel because of the rapid industrial development of the province in the early and mid-1980s. Furthermore, both the governmental agencies in charge of these two colleges, the Department of Light Industry and Department of Agricultural Machinery, did not have the necessary finance to expand the colleges to a reasonable size. In early 1984, there were a lot of discussions, and consultations a m o n g the faculty members, administrators, students, governmental agencies, and industries about the current difficulties, especially the financial constraints facing the two small colleges, and future development approaches for them. T h e Provincial Department of Education of Hubei - later in 1985 it was changed into the Provincial

17

A case study of an institutional merger in Hubei Province, People's Republic of China

Education Commission - suggested merging Hubei Light Industry College and Hubei Institute of Agricultural Machinery to form a single Hubei Institute of Technology, to broaden the programmes and to expand and strengthen it in order to improve utilization ofresourcesand increase the supply of engineers for the province. It was argued that the merger of the two colleges would result in a m u c h larger, more comprehensive institute of technology, which would not only have specialties in light industry engineering and agricultural machineries, but also specialities in general mechanical and electrical engineering and computer science, chemical, civil, industrial engineering, and others. It was believed that the merger would help to achieve both internal and external efficiency, and would improve quality. First, after the merger and expansion, the two sets of administrative systems of the two colleges would become one and in the long run, the student to administrator ratio would increase. Second, s o m e of the courses, such as some basic courses in mathematics, physics, chemistry, biology, Chinese language, foreign languages, were given in both institutions, so teachers' time could be saved. Third, laboratories, facilities and equipment could be reorganized and better utilized. S o m e of the equipment, facilities and library books o w n e d b y the two colleges could be shared by all the students. Fourth, merger and reorganization would not only broaden the programmes of the institute, but would also broaden each of the specialities and provide more selective courses for its students. This would m a k e the newly merged institute and its graduates more flexible and adaptive to labour market needs and technologically induced changes, and thus improve the external efficiency of the institute. Fifth, the merger would help raise the quality level of the institute, because it would provide an opportunity to reallocate faculty members by promoting good teachers, retraining the unqualified ones, and transferring s o m e leading professors from other universities into the newly merged institute. It would become a relatively higher level educational institution with the capacity to attract higher level faculty m e m b e r s than the t w o small colleges. Furthermore, the newly merged institute would build a larger campus on which a stronger academic community could be developed. This

18

The proposed solution

would have a strong impact on both student learning, campus life and local community development. In February 1984, the Governor's Office of Hubei Province called a meeting to discuss higher education development issues. They reached agreement that it was imperative to enhance higher education quality in the province. It was at this meeting that the initial decision was m a d e to merge Hubei Light Industry College and Hubei Institute of Agricultural Machinery. T h e n e w institution would be named Hubei Institute of Technology. A decision was also m a d e that the necessary resources would be allocated for this merger by the Provincial Government. In March 1984, the chief executives and faculty members of both institutions had full discussions and consultations on the proposed merger. They all agreed that to run the two small colleges separately was too costly. They had not only too m a n y constraints for efficiency and quality improvement, but also could not meet manpower needs for provincial development. Therefore, they both supported the decision to merge. This consensus laid d o w n the most important foundation for the further procedures of the merger. In April 1984, the Hubei Provincial Government submitted a report to the central government, that is, the State Council and the Ministry of Education - later in 1985 it w a s changed into State Education Commission - for the approval of the merger of the two institutions. In order to accelerate the process of obtaining approval, Hubei Provincial Department of Education sent a group to Beijing to visit the various central ministries concerned, including the Ministry of Education, State Planning Commission. In August 1984, the Central Government officially informed the Hubei Provincial Government that the provincial proposal for the merger was approved.

2c The objectives of the merger The approved proposal represented thefirstattempt to merge higher education institutions in the 1980s in the province. It intended to achieve the following four objectives:

19

A case study of an institutional merger in Hubei Province, People's Republic of China

(i)

T h e immediate objective w a s to solve thefinancialdifficulties facing the two colleges. (ii) T h e long-term aims were to increase internal and external efficiency by merging the two small colleges and expanding the newly merged institute to achieve economies-of-scale, making better use of resources, and reducing unit costs. T h e plan was to gradually reach an enrolment of 5,000 students. (iii) T h e third objective was to improve the quality of teaching by gradually improving the quality of faculty members and administrators, as well as the supply of equipment and books of the library, etc. which could be justified o n cost grounds if there were more students. (iv) T h e fourth objective was to reduce the extreme specialization of courses that prepared students for only one specific kind of job.

20

Chapter 4 Planning of the change

After obtaining official approval from the central authority for the merger in August 1984, the Hubei Provincial Government circulated an official document for the proposed merger in mid September 1984 throughout the Province. In early October, it called a meeting to decide o n the handing-over issues. Participants of the meeting included the chief executives from all the departments concerned; the Provincial Planning Commission, Provincial Departments of Education, Science and Technology, Finance, Labour and Personnel, Light and Machinery Industries, and magistrates of the local communities involved, as well as the chief executives of the two colleges. T h e provincial authority informed the meeting that the merger was one of the important measures necessary to rationalize the structure and enhance the development of the provincial higher education system. It was officially declared that all the movable and fixed properties of the Hubei Light Industry College and Hubei Institute of Agricultural Machinery, including land, buildings, facilities, equipment, financial and h u m a n resources, were n o w the property of the n e w Hubei Institute of Technology. Authorized by the Provincial Government, the Provincial Education Commission set up a Task Force to plan and organize the merger of the two colleges. The Task Force included the chief executives of the two institutions and also a group of leading scholars and influential higher education administrators from other national universities such as the Central China University of Technology, as well as officials of the

21

A case study of an institutional merger in Hubei Province, People's Republic of China

Provincial Education Commission. T h e Task Force planned the merger according to the m a i n issues, as follows:

1. T h e mission of the n e w institution (a)

After merger, the n e w institution should mainly serve the m a n p o w e r needs of middle- and small- size industrial enterprises (the m a n p o w e r needs of the large national industrial enterprises are served b y the national universities run b y the ministries of the Central Governm e n t ) . T h e n e w institution should also allocate a small proportion of its graduates to secondary technical schools as teachers and to s o m e technological research institutions as researchers. (b) Besides educational programmes for regular full-time students, the n e w institution would also provide in-service training and other types of continuing education programmes such as evening, s u m m e r , correspondence courses for engineers, technicians, managers, and technical school teachers in the province. It would also run s o m e short-term courses o n behalf of industrial enterprises, governmental agencies and vocational-technical schools. (c) In addition to teaching, the n e w institution would establish s o m e scientific and technological research units to undertake research activities. (d) T h e n e w institution would also provide s o m e services and consultancies to the local community, and develop bilateral and multilateral co-operation with other bodies in the area.

2. Development scheme of the n e w institution T o fulfil the mission described above, the n e w institution would set u p 17 specialities, which would b e organized into seven departments including mechanical and electrical engineering and computer science, food, chemical and civil engineering, light industry product design, and industrial m a n a g e m e n t engineering. T h e enrolment of the n e w institution would increase from about 1,000 in 1984 to about 5,000 in 1990. M o s t of those enrolled would be regular full-time students following mainly a four-year p r o g r a m m e for undergraduate students, and a small n u m b e r would b e t w o or three-year short-cycle undergraduate p r o g r a m m e

22

Planning of the change

students or master degree level post-graduate students. This development scheme is given in Tables 7A and 8A.

3. Staffing plan In 1984 before the merger, the combined number of staff of the Hubei Light Industry College and Hubei Institute of Agricultural Machinery w a s 7 6 4 , including 290 faculty members, 7 0 auxiliary teaching staff (e.g. laboratory assistants and libraries), 155 administrators and others (see Tables ЗА and 5A). It was planned to reorganize and reallocate the total staff. S o m e staff members would be transferred. For example, Hubei Light Industry College used to have a speciality in textile industry engineering before 1982, but these staff would be transferred to the W u h a n University of Light Industry, another higher education institution in Hubei Province, but which was under the control of the Ministry of Light Industry of the central government. This transfer of staff required negotiation between the Ministry of Light Industry and the Provincial Government of Hubei. In addition to transfers, n e w teaching as well as administrative staff would be brought from other higher education institutions. The provincial authority was especially interested in bringing some faculty members and administrators from the Central China University of Technology, one of the national leading universities in the country, which was directly under the State Education Commission of China. This would also need lengthy negotiations between the central authority and the provincial government. The newly merged institute would gradually increase its staff along with enrolment growth. Table 9A shows that it w a s planned for the newly merged and expanded Hubei Institute of Technology to achieve dramatic improvement in the utilization of h u m a n resources, the most remarkable improvement being in the student to administrator ratio which would increase from 6.77 to 21.49. Student to teacher ratio and student to total staff ratio would also improve remarkably. Table 9A also shows that the number of workers at the college-affiliated factory was planned to increase from 4 2 to 300, because the n e w institution would need a larger experimental and teaching factory for the engineering students to gain hands-on experience, and for research

23

A case study of an institutional merger in Hubei Province, People's Republic of China

and developmental purposes, as well as for provision of community services. T h e planned number of employees of the affiliated secondary and primary schools and kindergarten was also increased dramatically from 10 to 150, this was because the n e w institution would establish an affiliated secondary school and primary school to provide educational services to the children of its o w n staff and to local residents. A n e w category of employee, i.e. full-time researchers, numbering 110, w a s additionally planned because the n e w institution would undertake some research and development activities.

4. Management of the new institution The decision was taken by the Provincial Education Commission to appoint a n e w President for the Hubei Institute of Technology, w h o should have a very good academic background and rich experience in higher education administration, especially experience in managing organizational change and expansion, in order to provide strong leadership for the n e w institution. It was also planned to select from the existing administrators of the Hubei Light Industry College and Institute of Agricultural Machinery or from outside, some chief executives, including two or three vice presidents, to organize the merger and operate the n e w institution after the merger. T h e Task Force began to organize a search committee for the leadership positions.

5. Location The location of the n e w institution was carefully planned having in mind its long-term development. Hubei Light Industry College w a s originally located in Mafangshan, W u c h a n g District of W u h a n Municipality. It w a s in very inadequate buildings and had limitations for future expansion. Thus, it was decided to choose the campus of Hubei Institute of Agricultural Machinery as the main campus of the n e w institution and m o v e the Hubei Light Industry College. N e w land was purchased near the Institute of Agricultural Machinery. A capital construction plan and n e w equipment purchasing plan w a s drawn up by the Task Force and n e w buildings would start in 1985 on the n e w campus.

24

Planning of the change

6. Finance In order to carry out the merger and expansion, the Task Force requested the Provincial Government to allocate about 47 million Yuan (equivalent to US$17.4 million in 1984) for the n e w Institute of Technology from 1984 to 1990. This was intended to cover the cost of new buildings and equipment. More funds for recurrent expenditures were also appropriated for the n e w staff brought to the merged institution. Table 10A shows the request for appropriation for capital construction and equipment from 1984 to 1990.

25

Chapter 5 Implementation of the merger

According to the carefully formulated plan, the implementation of the merger started with the selection of the n e w president and the establishment of the n e w management structure, followed by the reorganization of academic departments and specialities, and reallocation and retraining of the faculty and staff members under the n e w leadership. In parallel with the organizational and personnel changes, capital construction and equipment purchases were carried out according to plan. Enrolment at the n e w institution was increased steadily, although in the event not as fast as the Task Force planned in 1984.

1. Selection of the n e w president Previous experiences of mergers of higher education institutions in China, had shown the search, selection and appointment of the n e w president for a n e w institution to be the crucialfirststep for a successful implementation of the merger. In this case, the Task Force gave the highest priority to the identification of a person w h o could provide strong leadership at the beginning of the newly merged larger institution, and w h o would be accepted by the faculty, administrative staff and students from both colleges. F r o m a m o n g the m a n y candidates, a Professor from Central China University of Technology, a leading scholar in mechanical engineering in China, was selected and appointed as the n e w president. Besides serving as a senior faculty m e m b e r of a national leading university, the appointee was also a senior research fellow of the National

26

Implementation of the merger

Association of Mechanical Engineering of China, and had rich administrative experience in managing higher education institutions and other professional organizations. Thus, in March 1985, he took office as the president of the n e w Hubei Institute of Technology.

2. Establishment of the new management structure Under the leadership of the president, assisted by three vice presidents, a single management team was established. Since the designed size of the n e w institution and the corresponding administrative structure would eventually be larger than the previous two small colleges combined, at the beginning, all the 155 administrative staff of the two colleges were incorporated in the n e w institution and re-allocated according to their qualifications. O n e might have expected a reduction, since with a combined enrolment of 1,050, the student/administrator ratio was only 6.8 to 1, which was very inefficient. However, a great deal of extra administrative work w a s caused by the merger and since the size of the n e w institute was designed for 5,000 students within a short time, even if the n e w institute kept all 155 administrative staff, it would result in a student/administrator ratio of 32.3 to 1, which is m u c h higher than national average, of 12-16 to 1 in recent years. Actually, as the institute grew, it was found necessary to further increase administrative staff. In 1990 it numbered 270 as shown in Table 13A, giving a ratio of 12:1. S o m e of the problems of incompetent staff members were tackled by incremental approaches, such as full-time or part-time retraining, induced retirement, reassignment within the institution, or transfer and assisting them to find other employers. Changes in personnel matters needed to be carefully handled in order to avoid unnecessary disturbance a m o n g the administrative staff, whose morale and job-satisfaction were crucial to the efficient operation of the n e w institution. The two administrative offices were combined into one. For example, the two offices of personnel, finance, academic instruction, and scientific research were merged, and one director was appointed for each office. M o r e importantly, the n e w institution formulated a whole set of institutional rules and regulations, and developed norms for standardized operation procedures, thus putting a multitude of daily institutional affairs on the right track.

27

A case study of an institutional merger in Hubei Province, People's Republic of China

general office personnel office finance and planning office Vice Presidents for administrative affairs

internal auditing office capital construction office campus security division student affairs office

seven academic departments instructional affair office President

Academic affairs

in-service training division university library research and development division

campus service division retirement office housing and university building management office Services and auxiliary units

affiliated university factory affiliated service company affiliated secondary, primary and kingdergarten

Figure 2 . T h e administrative structure o f H u b e i Institute of Technology

28

Implementation of the merger

Figure 2 shows the administrative structure of the n e w institution after merger, with one vice president each for administrative affairs, academic affairs w h o supervised the seven academic departments) and supervision of services and auxiliary units, such as campus service division including running all dining halls for students and staff etc. plus the retirement office which provides services and arranges activities for the retired staff w h o need special care from time to time, because although they are retired, they still live in university housing o n campus and receive their pension from the university. This overall administrative structure is quite similar to that of other higher education institutions of the same size, which is due to the strong influence of institutional isomorphism of Chinese higher education.

3. Reorganization of academic departments Before the merger there were five departments in the t w o small colleges. T h e highly specialized Departments of Paper-Making Machinery and of Textile Industry Engineering were transferred to the W u h a n University of Light Industry, in order to assist in achieving economies of scale at that centrally administered university. After the merger, departments were rationalized and n e w subject areas were introduced, to form seven departments and two divisions as s h o w n in Table IIA.

4. Promoting faculty development A strong faculty is the key to a successful higher education institution. During the process of merger, the n e w institution gave high priority to faculty development. First, arrangements were m a d e to transfer more than 2 0 leading faculty m e m b e r s from national universities to the newly formed academic departments. T h e n e w president and deans m a d e contact with the staff they wanted and arranged the transfers through the governmental agencies concerned. Second, 132 of the existing faculty m e m b e r s were given opportunities for full-time in-service training, which meant that these faculty m e m b e r s were released from their regular duties, and they could go to other leading universities for advanced studies in their o w n fields, while receiving their regular salaries. Seventeen faculty

29

A case study of an institutional merger in Hubei Province, People's Republic of China

m e m b e r s a m o n g the 132 were sent abroad for advanced studies. Third, in order to improve the faculty's foreign language proficiency, the n e w institution ranfiveintensive English language training programmes, two G e r m a n and one Japanese language training programme for faculty members. Fourthly, after merger, the n e w institute initiated and institutionalized an internal faculty improvement mechanism through which senior faculty members helped junior faculty members in the same fields of studies. For example, they helped the junior faculty to study for further degrees either within the institution's o w n newly established academic degree programmes or by correspondence courses at other universities. Before the merger, there were only 11 associate professors and n o full professor at the t w o small colleges. Five years after the merger in 1990, there were 6 full professors, 71 associate professors, and 180 lecturers a m o n g the faculty members. The improvement of faculty quality led to better instructional quality and a higher academic level of scientific and technological research.

5. Increase of enrolment Enrolment in higher education institutions is closely related to the amount of state appropriation to universities and colleges and is tightly controlled by the central government. Since the merger and expansion of the two colleges was approved by the Hubei Provincial Authority and the State Education Commission (Ministry of Education), the newly merged Hubei Institute of Technology was given a quota for enrolment growth. In 1984, the total enrolment at the two colleges w a s 1,050 students. After merger in 1986, it increased to 1654; and in 1990, it was 3,211. It should be pointed out that the actual growth rate of enrolment was not as high as specified in the Development Scheme shown in Tables 7A and 8A. There were several reasons for this. First, the progress of capital construction and equipment purchase was slower than expected because of higher inflation and other factors. This slow-down m a d e it impossible to take in more students since the facilities were not ready. Second, because of economic austerity since the late 1980s, labour market needs were affected, and caused difficulties in the process of job assignment for s o m e college graduates. Thus central and provincial authorities tried to

30

Implementation of the merger

stabilize the size of college enrolment. Figure 3 shows the pattern of growth of student numbers since the merger in 1984. Monitoring the implementation of the merger and expansion, including the capital construction and purchase of equipment, was the responsibility of the Provincial Education Commission, which had authorized the merger.

Enrolment

4,000

3,000

2,000

1,000

1985

1986

1987

1988

1989

Source: Hubei Institute of Technology, 1990. Figure 3. Increase of enrolment after merger

31

Chapter 6 Obstacles encountered

The merger of two higher education institutions in Chinarepresenteda major organizational change. M a n y problems and difficulties were experienced in the process. Firstly, one major difficulty w a s to co-ordinate all the different governmental agencies concerned, each of which had certain responsibilities or connections with the two higher education institutions. Before the merger, the Hubei Light Industry College was administered by the Provincial Department of Light Industry and the Hubei Institute of Agricultural Machinery was administered by the Provincial Department of Machinery Industry. T h e n e w institution after merger would be directly under the leadership of the Provincial Education Commission. This meant that the two Provincial Departments concerned would lose control of their ' o w n ' colleges, which provided the specialized personnel they needed. Not only would they lose the 'convenience' of direct access to college graduates, they would also lose control of the financial resources of the two colleges, which used to be appropriated to them by the Provincial Department of Finance. After the merger, the m o n e y would not go through them, but directly to the colleges from the Department of Finance through the Provincial Education Commission. Besides the Provincial Departments concerned, there were also several central governmental agencies involved. For example, some of the faculty members related to paper making machinery and textile industry machinery were transferred to W u h a n Light Industry University, which was under the leadership of the Ministry of Light Industry of the Central

32

Obstacles encountered

Government, and others were transferred to the n e w institution from the Central China University of Technology, which w a s directly administered by the State Education Commission (The Ministry of Education). Therefore, it was important to fully convince all these relevant administrative units that the merger was absolutely necessary for improving the efficiency of the two small colleges, and more importantly, to m a k e these agencies work together rather than supporting competing establishments. This problem w a s overcome by negotiation and arbitration at both provincial and national level through the joint efforts of the Hubei Provincial Government and the relevant central agencies. Secondly, another problem w a s that the staff of the two colleges still kept to s o m e extent their o w n identity and sometimes there was friction a m o n g the two groups. In order to develop a harmonious atmosphere in the n e w institution, it is important to keep an appropriate balance of forces between the two groups, especially at the top leadership level of the institute. M a n y meetings and discussions were held by the Provincial Education Commission with the former senior staff of the two colleges on the personnel arrangements for the n e w institution, especially on the posts and transfers to be offered to the staff. T h e Provincial Education Commission then officially announced the removal of all the chief executives of the two colleges from their offices, since these two institutions would no longer exist after the merger. This w a s followed by careful selection and re-appointment of the chief executives and administrators at each level of the n e w institute. T h e leadership group of the n e w institution consisted of people with four different kinds of background: (a) the president and s o m e administrators and assistants c a m e from the Central China University of Technology; (b) the executive vice president c a m e from the Provincial Government, w h o used to be the division chief for education and cultural affairs at the Provincial Planning Commission; (c) one vice president and s o m e administrators c a m e from the Institute of Agricultural Machinery; and (d) one Vice President and s o m e administrators from the Light Industry College. This balanced administration was well accepted by the staff and faculty. N o staff m e m b e r s were on the payroll without jobs at the beginning of the merger, because these changes were carefully planned and prepared, 33

A case study of an institutional merger in Hubei Province, People's Republic of China

and also because at the beginning of the merger, there was a lot of work to be done which needed m a n y people. Thirdly, the main problem facing any Chinese university contemplating a merger is h o w to transfer or re-allocate teachers and other staff from one institution to another. In China, most staff live on the campus in housing provided by the university at a very low rent, and receive dining services, medical care and schooling for their children. Thus to m o v e a university teacher to another institute is extremely disruptive of the entire life of the family. Another more difficult problem was h o w to find n e w jobs for those w h o became redundant as a result of the merger. Thus, the n e w institutionfirsttried to re-assign staff internally, and then tried to transfer out s o m e staff w h o were not suitable for positions within the n e w institution. Supported by the Provincial Government and the Provincial Education Commission, the n e w institution tackled the staff re-allocation and transfer issues in co-operation with the Provincial Bureaux of Labour and Personnel. All the unqualified teachers (faculty m e m b e r s without the necessary diploma) were removed from their teaching positions. S o m e of them were given opportunities for re-training, and s o m e were assigned to administrative positions. Unqualified administrators were also removed from their positions for re-assignment or re-training. During thefirstyear after the merger, most of the staff were re-assigned, and 57 faculty and staff members were transferred out to other organizations, while 110 leading faculty members and young teachers were transferred into the n e w institution. Since the C a m p u s of the Institute of Agricultural Machinery was chosen as the location of the n e w institution at the beginning of the merger, it w a s impossible to m o v e all the staff and families of the Light Industry college to the n e w site, thus the n e w institution ran a school bus between the two campuses at the beginning and then gradually m o v e d the Light Industry College Staff to the n e w campus as n e w buildings were completed. Fourthly, the financing of the merger. In this case, capital expenditure was needed to enable the two small institutions to combine on a single campus and to obtain sufficient funds represented another challenge. At the beginning, the Provincial Government of Hubei planned to allocate 4 7 million Y u a n in thefirstfiveyears, of which 3 2 million was for capital construction and 15 million for equipment. However, because inflation rates were very high in the late 1980s, the planned amount w a s not sufficient to complete the planned projects. For example,

34

Obstacles encountered

the price for red brick was 0.06 Y u a n a piece and for timber was 200 or 300 Y u a n per cubic meter in 1984 w h e n the merger w a s planned. However, it increased to 0.14 Y u a n and 600 or 700 Y u a n respectively in 1988 w h e n the construction projects for the merger were begun. The price for steel products and cement increased in a similar w a y . However, the state appropriation remained as originally planned, since the Government did not have thefinancialcapacity to increase the appropriation as inflation speeded up. Thus the newly merged institute ran into difficulties to raise enough funds for its construction projects and purchase of equipment. It still remains as a serious problem at the present time. The n e w institution has had to slow d o w n the construction process and equipment purchase.

35

Chapter 7 Evaluation of merger

T h e effects of the merger o n improvement of managerial effectiveness m a y be evaluated from three aspects: (i) internal efficiency; (ii) external efficiency; and (iii) quality.

1. The improvement of instructional quality Quality improvement is seen as a major benefit of the merger and expansion, due to the upgrading of faculty, introduction of n e w courses, and improvement of facilities. The upgrading of faculty was achieved through both the bringing in of n e w senior teaching staff from other national leading universities, the retraining of the existing teachers with good potential for professional development, and transferring out or inducing retirement of less competent teachers. Within five years, the number of full professors increased from 0 to 5, associate professors from 11 to 71, and lecturers from 129 to 177. Table 12A shows the statistics of the faculty of the n e w institution over 1985-1990. Besides the upgrading of the faculty, instructional quality w a s also raised through improving institutional conditions, especially teaching faculties. F r o m 1985 to 1990, the n e w institution completed 74,385 square meters of n e w buildings for teaching, student and faculty living purposes. The total value of teaching equipment increased from 1.14

36

Evaluation of merger

million Y u a n to 10.86 million Y u a n . Library books increased from 150,000 volumes to 350,000 volumes. Foreign language academic journals increased from 87 subscriptions to 309. Laboratory areas increased from 4,627 square meters to 18,276 square meters and the number from 17 to 31. Experimental courses which require laboratory and practical work increased from 29 to 61, and the number of experiments in the programme from 246, which accounted for 6 0 per cent of the experiments required by the nationally formulated instruction outline, to 405, which is 76 per cent of the required number. Student computing time for the whole institute (computer practice) increased from 4 5 0 hours to 33,500 hours. Students can gain more hands-on experience through more laboratory sessions and computer use, which are extremely important for quality engineering students.

2. T h e improvement of internal efficiency O n e of the main benefits of the merger was that it allowed an expansion of students to take place, which increased the internal efficiency of the n e w institution. First of all, utilization rates of h u m a n resources were improved. T h e student to administrator ratio w a s very low before the merger, e.g., in 1982, it was 3.71:1 at the Hubei Institute of Agricultural Machinery. In 1984, the average student to administrator ratio at the two small colleges w a s 6.77 before the merger which increased to 8,57 in 1986, 10.01 in 1988, and to 11.89 in 1990 after the merger. Similarly, the student to teacher ratio was increased from 3.62 before the merger in 1984 to 7.87 after the merger in 1990. The average student to total staff ratio of the two small colleges was 1.37 in 1984, which increased to 3.01 in 1990, as shown in Table 13A. T h e improvement of utilization of h u m a n resources was remarkable, although the n e w institution's enrolment has only expanded to 3,211. It is anticipated that as the enrolment target of 5,416 is achieved, the utilization of the h u m a n resources at the n e w institution will be further improved. Second, the utilization offinancialresources was also improved remarkably. T h e proportion of recurrent expenditure o n personnel, including salaries, subsidies, and employee welfare, was reduced from 54.7 per cent in 1984 before the merger to 30.6 per cent in 1989 after the merger, which meant that there would be more funds for improving

37

A case study of an institutional merger in Hubei Province, People's Republic of China

teaching conditions. For example, in 1984, the two small colleges spent 200,600 Y u a n for equipment, which accounted for 10.66 per cent of the their total recurrent expenditure; while in 1989, the n e w institution spent 2,996,700 Y u a n for equipment, which accounted for 33.15 per cent of annual recurrent expenditure. From 1984 to 1989, T h e total personnel expenditure increased by 2.69 times from 1,027,800 Y u a n to 2,767,700 Y u a n , while during the same time period, the non-personnel expenditure increased by 7.35 times from 853,000 Y u a n to 6,273,400 Yuan. Thus, the financing of the n e w institution was improved remarkably. Because the n e w institution was m u c h larger in size, it could better exploit economies of scale and achieve lower unit costs as demonstrated in Figure 1 in Chapter 1 of this report. T h e effect on unit costs should be seen in two stages. The immediate effect was an increase in unit cost as n e w staff were brought in to run the n e w institute and n e w equipment and facilities were provided for the transfer to the n e w site and the introduction of n e w subject disciplines. However, unit costs have fallen as student numbers have risen from 1,373 to 3,211. From Table 14A one m a y see that the unit cost in 1984 constant pricesfirstrose from 1,791 Y u a n to 2,465 Y u a n in 1986, and then fell from 2,465 to 1,914 Y u a n in 1988 and 1,629 Y u a n in 1989. Third, there was also an improvement in the utilization of classrooms, laboratories and other facilities. In 1989, the average utilization of classrooms was 5 2 hours per week, and that of laboratories 16 hours per week in the n e w institution. This represented a 2 0 per cent and 15 per cent of increase respectively in comparison with the two small colleges before the merger. It is anticipated that the utilization of classroom will reach 60 hours per week and that of laboratories 28 hours per week w h e n enrolment is 5,000 students.

3e The improvement of external efficiency Besides the remarkable improvement in the internal efficiency, that is, the better utilization of h u m a n , financial resources, and physical resources of the n e w institution, the merger of the two small colleges also led to an improvement in external efficiency, that is, better serving labour market needs and the socio-economic development of the province.

38

Evaluation of merger

According to the M a n p o w e r Projection Office of Hubei Province, there were increasing needs for engineers in the province from the mid 1980s to the year 2000 as shown in Table 15A. Although a certain proportion of the engineering graduates needed would be provided by the national universities (which mainly serve the national enterprises run by the Ministries of the central government), the engineering manpower needs of the provincially run m e d i u m and small size enterprises would rely on the provincial colleges. However, before the merger, the students of the two small colleges were locked into two very narrow specializations: agricultural machinery and light industry engineering. Thus, on the one hand, in these twofields,there was a tendency to over-supply of specialized personnel and on the other hand, in other engineering fields, such as electrical engineering and computer science, mechanical, chemical and industrial management engineering, there was a shortage of specialized personnel. The merger and expansion into the n e w Institute of Technology has broadened significantly the specializations of the institution, and m a d e it a more comprehensive engineering institute with seven major departments and seventeen specialities. Every year, the institute would be able to adjust enrolment of each of its departments and specialities according to signals from the labour market A s shown in Table 15A, demand for engineers was tremendous in Hubei Province, but the supply of engineering graduates for the provincial economy was limited. Table 16A provides the statistics for graduates in Hubei by type of institution from 1987 to 1989 of both the national and local universities and colleges. O n e m a y see that the total number in the last two years was about 35,000 to 36,000, of which about one-third were produced by the provincial universities, in somefieldsof study, it was more than one-third, while in others it m a y be less. For example, in teacher training, provincial universities produced 6,070 graduates in 1988, accounting for 75 per cent of this type of graduate, while a m o n g the 15,019 engineering graduates in Hubei in 1988, provincial universities only produced 1,048, accounting for just 7 per cent. If w e take 15 per cent of the 13,971 engineering graduates produced by national universities as being the number allocated to Hubei, the province would get 2,095, which together with the 1,048 engineering graduates from provincial universities, would give 3,143 a year. However, according to the Hubei Province M a n p o w e r Projection Office, the province needs more than 10,000 engineering graduates each year

39

A case study of an institutional merger in Hubei Province, People's Republic of China

from 1985 to 2000. Even if this m a n p o w e r projection has exaggerated needs, it would be safe to say that the unmet demand for engineering graduates in Hubei is quite large. A m o n g the 1,048 engineering graduates produced by provincial universities, 498 were graduates of the Hubei Institute of Technology, accounting for 4 8 per cent of the total. According to current enrolment numbers, this percentage will increase to about 60 per cent in the coming years. Table 17A gives the current enrolment pattern byfieldof study and grade, from which one m a y see its capacity to produce engineers of different types. Since the institute produces 4 8 per cent of the total engineering graduates of local universities, and what it produces is far below the demand for engineers in the province, all of its graduates were able to obtain employment in their fields of specialization. A survey of the employment situation for graduates of the past four years has d e m o n strated this very clearly (Hubei Institute of Technology 1990). It should be mentioned that the repetition and drop-out rate of Hubei Institute of Technology has always been less than 1 per cent. This is quite usual in Chinese higher education institutions, because of the following reasons: (a) the college students are carefully selected through the national entrance examinations, and only a s m a U proportion of senior high school graduates m a y enter university (about 30 per cent of high school graduates, which accounts for 3 per cent of the 18-22 age group), (b) In general, if a college student fails to graduate from college, he/she will not get a job-assignment from the government. This has served as an incentive to keep the students from dropping out of college. The n e w institution has also broadened the courses of each speciality and thus m a d e the students more flexible and adaptive to technologically induced changes and labour market needs. Students were provided with 20 per cent more general courses such as mathematics, physics, chemistry, and computer sciences. They are also required to take s o m e inter-disciplinary studies. For example, students in the mechanical engineering department would also take some required courses related to electrical engineering and computer sciences; students in the food engineering department also take courses related to chemical engineering. Recently, the Hubei Institute of Technology organized a team of 12 staff members, which were divided into three groups, to conduct a

40

Evaluation of merger

province-wide survey of the performance of its graduates in the workplace. T h e team visited six prefectures including Jinzhou, Yichang, Xianning, Huanggang, Yunyang and Xiaogan areas and seven municipalities including Xiangfan, Huangshi, Ezhou, Yicahng, Jinmen, Shiyan and Shashi cities of the provinces, where they met with managers from more than one hundred enterprises. These factory mangers highly appraised the graduates of the Hubei Institute of Technology. They considered them to have a broad and solid knowledge base. S o m e of the graduates had already m a d e significant contributions and been given awards by the enterprises. For example, a graduate from the Department of Food Engineering in 1988 and currently working at the Jinmen Edible Oil Refinery, solved several technological bottle-necks for the factory and was appointed Deputy Director for the Food Production Workshop of the factory. Because m a n y graduates of the n e w institution have shown their skills in production processes, the institute has acquired a very good reputation in the whole province. Before the merger, the two small colleges were very weak in research and community service. They had no research projects. After the merger, the n e w institution has also greatly enhanced its capacity for both activities. It has conducted both national and provincial level research projects, as well as research and development projects for enterprises. Table 18A shows the number of research projects undertaken from 1985 to 1990. The n e w institution has earned a good reputation and established better links with industries in itsfirstfiveyears of development with 121 research and development projects. For example, a national level research project on concrete w a s carried out and another on n e w materials for iron casting. Both projects achieved significant results. The Department of Electrical Engineering and Computer Science developed a n e w computerized acupuncture device which has been very popular in the market. The Department of Chemical Engineering helped the Puxin Plastic Factory to develop a n e w product, a special kind of plasticfloorboard, and helped to design and establish the production technology and equipment, which m a d e the factory very profitable. Since the merger in 1984, Hubei Institute of Technology has also increased its capability to generate revenue, as shown by Table 19A. A n official evaluation of the merger has been carried out by both the national and the provincial authorities. At the provincial level, an

41

A case study of an institutional merger in Hubei Province, People's Republic of China

evaluation team was organized including executives and specialists from the Hubei Provincial Government, its Education and Planning C o m m i s sions, Department of Finance and Construction Bank. This provincial team visited the campus once a year to evaluate progress, accomplishments and problems of the n e w institution after the merger. The national evaluation team, organized by the State Education Commission of China in December 1990 was composed of six members. They included the Vice Presidents of Beijing Industrial University and Nanjing Normal University; the Director of the General Office of the Department of Higher Education of State Education Commission; the Division Chief of the Planning and Construction Department of the State Education Commission; a Professor of Economics of Education at Beijing Normal University; and the Director of Shanghai Institute for H u m a n Resources Development. This national evaluation team, together with the provincial team, conducted a systematic evaluation for the n e w institution from December 1990 to January 1991. Both the national and provincial evaluation team concluded that the merger of the two small colleges and the expansion and development of the n e w institution was: • consistent with the basic national higher education policy on the rationalization of the higher education structure and exploitation of economies of scale; e carefully planned and efficiently implemented; • eliminated the dual administrative offices of two institutions, and established a rational management structure; raised the quality of instruction as indicated by (a) improved qualifications of faculty members; (b) better staff development programmes to improve teaching quality; (c) offered a higher percentage of experimental work as recommended by the nationally formulated instructional outlines; and (d) provided more library books per student; • improved its internal efficiency as indicated by (a) improved student/teacher, student/administrator, student/total staff ratios; (b) lower unit cost; and (c) higher rates of utilization of classrooms, laboratories, and other faculties; • improved its external efficiency as indicated by (a) broadening of the specializations of the institute; (b) increase in flexibility and adaptability of graduates for a more dynamic economy;

42

Evaluation of merger

•

(с) ability to introduce n e w programmes, courses or activities in response to labour market needs; and (d) stronger capacity for research and development activities; cost-effective.

In terms of the expected benefits, the cost of the merger and expansion was considered reasonable from the provincial evaluators's perspective. However, evaluators from the central authority were more cautious about making afinaljudgment on this aspect. They believed that more systematic cost-benefit and cost-effectiveness would be needed and long term effects should be carefully examined before reaching a final conclusion. Evaluations were also conducted by the Institute of Higher Education of Beijing University through interviews of s o m e of the administrators, teachers, and students on the merger of the two small colleges. T h e responses were very positive and favourable. For example, the President of the n e w institution, and Director for Scientific Research, both from the Central China University of Technology, believed that the merger was absolutely necessary for the rationalization of the structure of higher education in the province, for the improvement of managerial effective­ ness and academic quality, and for long-term development of the two small colleges. Before the merger, there w a s n o leading engineering college in the province.

43

Chapter 8 Conclusions

1. The experience of this merger underlines the importance of co-ordination and co-operation between different governmental agencies. In China, universities and colleges are administered andfinancedby three levels of governments: s o m e of them are run by the State Education Commission or other ministries of the central government; some by the provincial education commissions or other provincial departments; and s o m e by the municipal or prefectural governments. At each level of government, there are also different governmental departments or bureaux in charge of different types of colleges. Thus, w h e n a proposed merger is to take place of two or more institutions with different administrative affiliations, or a proposed transfer of functions from provincial government to a central Ministry, or from one provincial department to another, it is crucial to convince the governmental agencies involved of the necessity and importance of the merger and its consequent benefits. The process of negotiation a m o n g the governmental agencies concerned and their co-operation was extremely important. Rationalization of the overall structure of higher education needs all the various agencies to co-ordinate education activities and run institutions jointly with others rather than support competing establishments. Figure 4 shows the distribution of higher education institutions, from which one m a y see that there are m a n y small institutions next to each other. Further joint mapping and restructuring should be considered to rationalize the higher education system in Hubei to achieve economies of scale.

44

n.

Conclusions

IP fif

45

A case study of an institutional merger in Hubei Province, People's Republic of China

This case study has shown that despite all the problems and obstacles, institutional mergers are possible. At a time w h e n m a n y other provinces are considering restructuring higher education, this is extremely significant. Based on this experience, the Hubei Provincial Education Commission is planning other mergers, for example, three small medical colleges, each with only a few hundred students, and all facing financial difficulties. 2. This merger has been a 'top-down' process, which nevertheless was very successful in obtaining the support of the staff w h o seemed fully aware of the need for the change. Since it was a provincial government initiative, funds were forthcoming. However to rationalize and merge most of the small colleges in the province will take a considerable time given the capital which will be necessary. Since the reform in the mid-1980s, universities have been given more autonomy in institutional management. It might be possible to go some w a y towards merger and saving administrative and support services costs by allowing colleges themselves to suggest mergers by submitting a plan for a multi-campus institution with one administration for admissions and services and proposals whereby they might share some facilities (school, hospital etc. ...) and core programmes (languages and basic sciences). 3. The merger process and its development w a s m u c h affected by economic constraints. Though under the reform the government gave certain management autonomy to institutions to enrol fee-paying students and students sponsored by industry, in recent years the government also formulated enrolment quotas for these two types of students. Also, it is not the case that m a n y of the general public and industrial organizations can afford to pay the costs of students at the present time in China. In 1989, the total number of intake of n e w college students was 597,100, a m o n g which 503,700 were enrolled according to the state plan, 56,700 were enrolled by contract with industries, 25,800 were fee-paying students, 7,800 were for short-cycle courses for cadres, and 3,100 were for in-service teacher training programmes. This pattern has been quite stable for the past three or four years. Thus the increase of self-supporting students w a s constrained both b y the government-formulated quota and the financial ability of students and industry to pay the costs of higher education. 4 . The experience of the merger of Hubei Light Industry college and the Hubei Institute of Agricultural Machinery underlines the importance of

46

Conclusions

academic leadership of the newly merged institution. The n e w president was a key figure. First, as a leading scholar, he had very high prestige a m o n g the faculty members of the two small colleges and thus could help to set a higher academic standard for the n e w institution. Second, he came from neither of the two small colleges, but from a national leading university, and thus helped to avoid unnecessary problems of partiality and keep a reasonable balance between the administrators of the two colleges, so as to reduce possible frictions a m o n g the staff members, and to build up organizational cohesion in the n e w institution. 5. The experience shows that there are no immediate savings from a merger, given the cost of the investment required. In this case, the province allocated a substantial s u m for n e w buildings and equipment and for bringing senior faculty members and executives into the n e w institution as shown in Table 20A. The costs for staff development include retraining of staff and language courses. There are still m a n y costs related to the merger which are not shown in Table 20A, such as costs for transfer and redundancy of staff, because these costs were included in regular recurrent expenditure without a separate account. Thus the latter increased dramatically from 1.89 million in 1984 to 9.04 million in 1989 as shown in Table 4A. At the beginning of the merger, unit costs actually rose in 1985, but have since fallen, though not dramatically. Nevertheless, there is clear evidence that h u m a n and financial resources as well as facilities are used more intensively, and the merger allowed the establishment of a more comprehensive engineering institute with m u c h broader specialization and allowed the expansion of student numbers from 1,050 to 3,211. 6. The experience of this case also underlines the need to distinguish between benefits of a merger and benefits from economies of scale, due to expansion. In this case the expansion after 1985 had a m u c h bigger effect than the merger alone. In other words, the merger laid the foundation for subsequent expansion, which resulted in the higher rates of utilization resources and improved institutional effectiveness. Since the expansion of enrolment in China is strictly controlled by the Central Government through the 'Higher Education Enrolment Quota', as noted in point 3 above, it is necessary to carefully examine the feasibility of any proposed merger and expansion taking into account this state regulation.

47

A case study of an institutional merger in Hubei Province, People's Republic of China

7. It may also be concluded that the merger w a s a creative and beneficial process, i.e. this major change had a multiple effect throughout the institution, not only o n management processes which became more conscious of the need to increase efficiency, but also o n the research process as demonstrated by the growth in research and income generation of Hubei Institute of Technology. There are also other effects, i.e. o n the composition of the student population and the behavioural patterns of students. In a very small college, there w a s only a small group of students locked into a narrow field of specialization, while a larger and more comprehensive institution has morefieldsof studies, more options and more students, a m o n g w h o m more interactions can take place which broaden students' perspectives. In general, students are more active academically and socially in a large university than in a small college. Thus the merger also had an effect on campus culture. Besides, a larger and stronger higher education institution also has stronger influence o n and more active participation in community activities and benefits community culture and development. 8. Finally, the need for a long term strategy is very important as can be seen from the time-table given in Appendix I. In this case benefits took the form of enhanced status and better facilities, as well as the opportunity of expansion. T h e Hubei Institute of Technology plans further development and thus it m a y be only at the end of this century that the full effects of the merger can be evaluated.

48

Appendices

49

Appendix I Time-table of the merging process

Stages

Time

Starting official discussions and negotiations

February 1984

Obtaining provincial discussions and approval

M a y 1984

Obtaining central government approval

August 1984

Starting implementation

September 1984

Formulating and approving development scheme for the new institution

February 1985

Appointing n e w key personnel

March 1985

Announcing officially the establishment of the new institution

M a y 1985

N e w construction and equipment

October 1984 to 1990

Staff adjustment and retraining

October 1984 to 1990

Starting enrolment in the n a m e of Hubei Institute of Technology

Since September 1990

51

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