There are two ways to fix a broken budget: cut costs or earn more money.
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The ANU is focusing on the former, but it's not clear it's doing much on the latter.
This isn't about getting more students or increasing student fees.
Both would help, but both are largely at the mercy of the federal government.
Rather, this is about the ANU tapping into Australia's $45.5 billion market for consulting services, of which the federal government (conveniently located on the other side of Lake Burley Griffin) is a big part of.
The ANU is full of extremely capable people, many of whom already do some consulting work which brings money into the university.
The problem is simple: they could be doing much more, and they're not.
What's stopping them? The short answer is that they have barely any incentive to bring in consultancy money.
As someone who left academia to start a consulting firm with friends (rather than do consulting work within the university), there are clear reasons why this is the case.
It goes like this. Any money that an academic brings into the university gets taxed by the university.
There are various complicated formulas, but the current tax rate is about 36 per cent, with the remaining going into what's called a "research account".
This means that the academic, in terms of their own personal bank account, gets none of this money. Consider this: if an academic brought in enough money to single-handedly close the ANU's budget deficit, they would personally get exactly nothing in return for doing so.
Immediately, you can see that there is an incentive problem here. And it gets worse.
You might think that the academic at least has control over the 64 per cent that went into their research account. But even this isn't true.
Research accounts are heavily regulated. The money can only be spent on activities designated by the university - such as hiring staff, travel or purchasing equipment like laptops - and there are even more restrictions on top of this.
Currently, hiring any new staff requires approval from the vice-chancellor (which is a bit like requiring Mike Henry to approve the new intern at BHP) and this approval process is slow, creates uncertainty and stifles raising external revenue.
Travel also needs to be approved, and there are a ton of rules on what laptops or tech devices you can purchase, all of which must be done through "approved suppliers", which is inherently anti-competitive and results in inflated prices and limited choice.
Worse still, expenditure from these research accounts has been frozen completely in much of the university due to the current financial mess.
That includes funds for many non-salaried researchers like visiting fellows.
Through this one single, bone-headed move, the university has created a massive disincentive to bring in any consultancy money.
The regulations that govern other grants are worse.
The ANU has taken the approach that so many large bureaucracies do: develop policies and rules to protect against the actions of hypothetical incompetents at the cost of the talented people who actually attract such funding to build on its work and mission.
The moral of the story is that the incentives for academics to seek out consulting work are non-existent or negative.
The size of the prize from fixing these problems is huge. A junior partner in one of the big four consulting firms comfortably brings in multiple millions of dollars into their firm each year.
A credentialled academic, properly incentivised with the proper supports around them, could easily bring in a few million each year.
It would only take a few dozen academics to do this, and a big chunk of the ANU's budget deficit would be erased.
It's all about getting incentives right. To do this, the ANU should introduce a three-bucket system.
Whenever an academic wins a contract, the money should be split between three buckets: money for the academic (which is paid directly into their personal bank account), money for the academic's research account (for spending to complete the project and other approved university activities) and money for the university.
Given academics currently get 0 per cent of the money they bring in, even a small overall percentage for the first bucket would likely be enough to enliven some animal spirits.
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The restrictions on how research account money can be spent should be significantly wound back and the bureaucracy around applying for projects should be streamlined.
Academics need proactive support, too. They are not management consultants but subject-matter experts.
The firms and governments who hire consultants love that academics are rigorous in their methods, but are cautious about whether they can stick to a deadline and communicate clearly, concisely and with influence.
The current internal consulting support unit, ANU Enterprise, doesn't work.
It helps bypass some of the ANU's stifling bureaucracy, but is nevertheless perceived as an additional taxing agent. Having something staffed by people at senior levels with experience in management consulting, could easily overcome these challenges.
These are common-sense solutions. The ANU's budget situation is indeed dire. But it's hard to cry poor when millions of dollars is being left on the table.
- Adam Triggs is a partner at the economics advisory firm, Mandala, and a former academic at the ANU Crawford School and a non-resident fellow at the Brookings Institution.
