How we saved Pounds 65,000 and axed 30 jobs
The course covered all topics you would expect to be useful to a new principal. However, in just a few hectic months as principal of North Birmingham College, I had already covered all these issues and more besides. I had turned a Pounds 1.3 million deficit into a small surplus, made 30 people redundant and at the same time negotiated and agreed a new contract for lecturing staff. Like many of my peers appointed since incorporation, I had been forced to hit the floor running.
On a September evening in 1994, the day before my interview at North Birmingham College, I was presented with a tome entitled North Birmingham College Strategic Plan 1994-1997. This document painted a very positive picture of a college with a surplus of more than Pounds 600,000 after the first year of incorporation, which had already grown considerably and was predicting healthy growth for the 1994-1995 financial year and beyond.
This article is not intended to reflect on the competence of the previous administration, but what I could not possibly have known was that this document was too optimistic about the college's ability to grow quickly. Two days later I was offered the post, which I accepted. I asked to see the management accounts. What a shock when I finally received them - the college was drawing on reserves at a rate of Pounds 100,000 per month.
The strategic plan proved to be unachievable, budgets had been made based on the income that would have been generated by the predicted growth, extra staff had been taken on, building improvements had been authorised and capital investment committed.
Before I officially took up my post, I informed governors, management and auditors that the college would become insolvent unless drastic action was taken immediately. Because of the seriousness of the situation, I managed to negotiate my early release from my post as vice principal at Oldham College and took up my appointment at North Birmingham in November 1994.
An overdraft facility was arranged with the bank and only essential expenditure was authorised. While Pounds 200,000 was saved immediately this was still not enough - Pounds 800,000 was needed. The only way to generate reductions of this magnitude was to reduce staffing. The management structure was unwieldy and expensive and I redesigned it based on a flatter, more business-like model.
This solution was drastic and radical - 52 posts were declared redundant, including all the management posts. The new structure was then introduced and staff who had been effected by the redundancies were invited to apply for the new posts. There was no salary protection for any staff. Surprisingly, in view of the job market, a number of managers opted for redundancy rather than reapply for new posts for which accountability had been much more clearly defined. Only when a post was not filled internally, was it advertised externally. In total, 30 staff were made redundant, not all were voluntary.
It was a crazy time. At one meeting in a week, I was consulting both the lecturers' union NATFHE and public services union Unison about the redundancies, and at another I was negotiating the new contract for lecturing staff with NAFTHE. By the end of March 1995, NAFTHE had recommended the new contract to the branch who accepted it and the majority of staff signed generating savings of around Pounds 50,000 in 1995-1996. Throughout the whole of this very difficult period I worked very closely with the unions keeping them informed all the time and giving them full access to the financial information on which the decision to restructure had been made - no industrial action was taken, for which I was grateful.
In April 1995, the new structure came into place generating immediate savings of Pounds 65,000 and savings in subsequent years of Pounds 600,000. The savings made by all these measures solved the immediate financial crisis.
Of course, the down side to all of this was the cost of the redundancy programme. It cost Pounds 900,000 to pay for the redundancies. As the new principal I found it distressing to have to introduce redundancies. But without the restructuring, the college would have had no future. The savings mean there is now a small projected surplus.
It was an eventful first year as a principal. Would I do it again? Of course - but it would be nice to think that the next 12 months will be a little less traumatic!
The author Joan Short is principal of North Birmingham College.