Definitely not a desirable scenario

We have no choice. Aarhus University has to make budget cuts. The budget cuts will affect the entire university, and I’m going to be honest with you: we already know that layoffs will be necessary in 2014. We’re facing a difficult process, says Rector Brian Bech Nielsen.

2013.11.29 | AU Admins Template

We aren’t used to this at Aarhus University. Cutbacks haven’t been on the agenda for many years, especially not at the level the university is facing now.

The current situation is that revenues are stagnating, while costs continue to rise. Rector Bech Nielsen and the rest of the senior management team must put the university’s budget back in balance.

"We are coming out of a growth phase during which our revenues increased quite dramatically. And our costs increased along with them. And that’s how it is at a university: You do research, you teach, and you run your administration with the money you have. What’s happening now is that our revenues are stagnating, while our costs continue to increase. So we’ll have a permanent annual budget deficit if we don’t do something about this,” explains Rector Bech Nielsen.

With the introduction of the new three-year Danish Finance Act budgets, Danish universities now have a more long-term overview of their financial situation, which enables them to plan accordingly. This insight has provided a very clear picture of the financial situation at AU that the senior management team can’t afford to ignore.

“In the senior management team, we started working on the budget for the period 2014-2016 right after I became rector, and it was clear that it was a major challenge. We’ve been working to clarify the magnitude of the challenge, and we have the results now. We’ve checked and analysed the numbers carefully, and our conclusion is that our costs need to be reduced by about DKK 200 million. And these reductions need to take place before 2016,” says Rector Bech Nielsen.

Balance before 2016

Last year, the Board gave the university permission to operate with budget deficits in 2013 and 2014, drawing on our equity to make up the difference, but the budget has to balance starting in 2015.

“We can cut costs in different ways. We can cut infrastructure costs; some of our staff might retire earlier than they’d planned; we can limits new hires for a time. We’ll be looking at a variety of measures. This process won’t begin until the departments have finished their budgets. We’re currently working on the budget for the entire university, and it won’t be approved by the Board until 18 December, so we’re at an early stage in the process.”

According to the rector, it’s not yet possible to determine how many staff members the university will have to say goodbye to. We won’t know this until early next year after negotiations with the relevant organisations and liaison committees.

“I’m aware that we’re prolonging the period of uncertainty by announcing this so early and in such a relatively imprecise way. But we want to be open and involve the liaison committee system, so this is how it has to be. If you want to take that approach, you can’t keep the process short. We are convinced that transparency is the only workable approach at a university. What’s more, I believe that it’s high time that we inform our staff of the situation, so that they get the facts about the cost reductions we’re facing from us instead of through rumours,” the rector says.

A difficult situation

Aarhus University has been in a state of constant change since the mergers in 2007, and clearly, these changes have been a challenge for the organisation. The psychological WPA carried out earlier this year revealed problems with stress and burnout. And now staff will have to deal with cost reductions and layoffs. The senior management team is well aware that this will be a difficult period: both for the employees who will have to leave the university and for those who stay behind.

"It’s a difficult situation for the employees we will have to say goodbye to. These are people who’ve dedicated their working lives to AU, and we’re happy to have them here. So this is definitely not a desirable scenario,” says Bech Nielsen.

And he is very aware of the fact that it also will be hard for employees who have to say goodbye to their colleagues.
“Psychologically speaking, it’s tough when close colleagues disappear. So there’s no doubt that this will affect all of us.”
The senior management team is also conscious of the need to adjust staff workloads in a situation with fewer employees.

“Some work will have to be given a lower priority or just not done at all. It’s not as if this is about staff who’ve been sitting behind their desks doing nothing,” says the rector. He emphasises that the current process of following up on the workplace assessment will continue. A lot of work to find solutions to work environment challenges has already been done, and the cost reductions must not derail the process.

The administration faces the deepest cuts

Relatively speaking, the deepest cuts will be made in the administration. But the rector emphasises that
“this is not about making the administration a scapegoat, by any means. It simply expresses the fact that we haven’t seen the growth we expected. According to our calculations, our administrative costs can be reduced by about ten per cent as a result of increased efficiency and professionalisation.”
But the administration is not the only area that will experience cuts. The four main academic areas will be affected as well.

"In the senior management team, we agree that the necessary cutbacks are so extensive that it makes no sense to suboptimise one main academic area in relation to the other. That’s why the heaviest cuts will be borne by the broadest shoulders. For example, this means that Science and Technology, which accounts for about 44 per cent of our turnover, will make the deepest budget cuts. The cost reductions here are also proportional to what ST’s projected deficit would be in 2016 if we don’t make these reductions.”

Back on track

The senior management team freely admits that the necessary cost reductions could have been introduced earlier. Which is to say that Aarhus University operated with deficit budgets in 2012 and 2013. This was a conscious decision: cutting costs at this point wasn’t considered a realistic option.

“When you’re in the red, you’re living ‘beyond your means’- there’s no denying that. Should we have intervened earlier? We could have done something last year, when the three-year Danish Finance Act budgets were introduced. The three year timeframe is what we need to make budget forecasts. We could have done something at that point, and that would have meant that we wouldn’t have to make such deep cuts now. On the other hand, we had a situation with an organisation that was facing extreme challenges, and our projected increase in revenue indicted that we would be able to handle the budgetary challenges,” explains Rector Bech Nielsen, who goes on to add that it’s not just a matter of reducing costs:

“We have to increase our revenue. Cost reductions aren’t enough on their own. We have to increase revenue from external funding.”

Rector Bech Nielsen predicts that the university will be back on track financially after about two years, with a balanced budget and the necessary funds to enable the departments and main acdemic areas to take on the new research, education and consultancy activities that society expects of us.

"The university will have healthy finances again, so that we will be able to handle the fluctuations and challenges the future brings. And that’s where our focus needs to be. Our working lives shouldn’t be about dealing with financial headaches: instead, we should be focussed on contributing to the university’s continued academic development. We’ll get there, and the university will achieve operation stability. And it will also continue to develop as it has throughout its history And I wouldn’t be suprised to find some form of growth scenario on the other side of this two-year horizon,” says the rector.

Over the coming months, information about the process will be posted on the homepage. Staff will also be brief by their immediate supervisors on a regular basis. Staff also have the option of joining the discussion about the university’s financial situation at

Staff, Frontpage