When things get tough financially, the distance between the attitude of those at the top of an organisation, and the staff who work there, tends to grow.
Leaders feel pressure to keep up morale and offer reassurance and a promise of brighter times ahead. While staff, dealing with the hard realities and immediate consequences of cuts and limited resources on the ground, may retreat into survival mode, convinced that nothing can be done or changed until the money starts to flow again. Optimism bias confronts learned helplessness – and both are dangerous.
Last week Susan Lapworth and Philippa Pickford, respectively chief executive and director of regulation at the Office for Students, warned the sector in England of the risk of “optimism bias” in submitting annual financial returns, which are due next month. Although whether something is realistic or overly optimistic is to some extent a subjective judgement, under the current financial conditions preparing for the worst case scenario is probably just good risk management. If things turn out better than expected it’s always possible to adjust course and loosen up the cashflow; if things turn out worse than expected the consequences are much more serious.
OfS has in the past noted that some universities’ projections on income streams such as international recruitment have tended towards the unrealistic – but typically these have been a post hoc judgement. For the regulator to be anticipating the possibility of poor risk management for some institutions, albeit in a light touch way, signals a meaningful concern. OfS is especially worried about institutions that might avoid acting to correct course early enough, and be at risk of having to adopt more radical action further down the line.
