Introduction

During the last decade dramatic changes have emerged in the way governments interact with colleges and universities. Governmental authorities are no longer as receptive to the traditional self-regulatory processes that have dominated university development for centuries. A new economic motivation is driving states to redefine relationships by pressuring institutions to become more accountable, more efficient, and more productive in the use of publicly generated resources. Earlier attempts by states to measure institutional efficiency and performance have generally been met with passive resistance or benign neglect in academic circles. Although this trend still prevails, an increasing number of educational leaders are now exhibiting an awareness that the status quo is no longer a viable option for higher education. Barnett (1992) points out that our higher education systems have entered "the age of disenchantment" and "society is not prepared to accept that higher education is self-justifying and wishes to expose the activities of the secret garden. With greater expectations being placed on it, higher education is being obliged to examine itself or be examined by others" (p. 16). This observation reflects the increasing societal requirement that colleges and universities must become more responsive to national economic needs and new governmental demands for increased performance.

As part of the changing relationship between government and higher education, state governments are placing an increasing burden on higher education to play a pivotal role in transforming the existing low-wage economic structures into high-performance, technology-based economies. Governments are increasingly looking to the different sectors of higher education to augment learning skills and improve workers' ability to develop and use technology, thus enhancing productivity and strengthening the state's economic position. According to Marshall (1995), former U.S. Secretary of Labor, "Education is the crucial element in this transformation process. It can no longer be considered apart from the state's overall economic strategies" (p. 62). Marshall is inferring that education, and increasingly higher education, has become an essential component of national economic investment strategy. In a competitive and global environment, increasing educational investment to produce a highly educated and skilled workforce is a vital element for future economic growth. Without this investment and reliance on education, and especially tertiary education in industrialized societies, the competitive status of a nation will substantially deteriorate in the coming years.

This reliance on higher education as a principal economic engine is accented by today's world economy, which is changing national economic and educational needs more rapidly than ever before. Higher education increasingly determines a society's evolutionary potential and, in economic terms, affects international competitiveness and choice of industrial location. In nations with comparatively sophisticated higher education systems, governments are adopting new economic and managerial strategies to assess and compare college and university performance. Government reporting and funding mechanisms for higher education are in the midst of a major transformation from complete input-based systems to the adaptation of more competitive outcomes-based approaches (Barnett & Bjarnason, 1999; Brennan, 1999; Ewell & Jones, 1994; Gilbert, 1999; Layzell, 1998; Schmidtlein, 1999).

Since the early 1990s, government interest in performance funding and budgeting for higher education has substantially increased in OECD nations (Burke & Serban, 1997; El-Khawas & Massey, 1996; Jongbloed & Koelman, 1996; Layzell, 1998; Peters, 1992; Piper & Issacs, 1992). This transformation has resulted from the realization that to strengthen their competitive positioning, states and nations must increase their involvement in the development of human capital and research through higher education. As Marshall (1995) observes, "In this more competitive world, dominated by knowledge-intensive technology, the keys to economic success have become human resources and more effective population systems, not possible new organizations of production, not natural resources and domestic economies of scale" (p. 53). For most Western democracies, higher education has become the critical link to future economic success. As The Economist (1997) stated, "In such an economy-one in which ideas, and the ability to manipulate them, count for far more than the traditional factors of production-the university has come to look like an increasingly useful asset" (p. 4).

To achieve the ends of economic growth, governments resort to many devices that are presumed to create greater efficiencies in the use of public dollars while expanding the reach of higher education. Budget reductions and general resource constraints have become commonplace, while institutions are being asked to serve increasing numbers of students and constituencies (Dill & Sporn, 1995; Eicher, 1998). Methods for administering higher education are being transformed, while colleges and universities are being urged to engage in new tasks and assume new responsibilities (Marcus, 1997). The entire nature of the traditional relationship between government and higher education is in the process of significant change in stretching the public dollar to serve more students in attempting to maximize economic returns.

In this new era, governments have adopted public policies advancing the democratic concepts of massification and universality of higher education and have generally rejected the more traditionally restrictive practices grounded in meritocracy and exclusion (Gumport, Iannozzi, Shaman, & Zemsky, 1997; Trow, 1974). The rapid expansion of postsecondary education, in most cases, has proven to be a formidable task for institutional leaders who have not been afforded corresponding levels of public financial resources. Coinciding with national pressure to expand higher education services has been the creation and refinement of state evaluation systems devised to monitor and assess institutional effectiveness and productivity (Cowen, 1996). Such government initiatives devised to seek greater efficiencies by employment of evaluative techniques to assess and compare the performance of colleges and universities constitutes the current thrust of the "accountability movement" in higher education. These challenges have resulted in systemic modifications in the management and financing of higher education institutions. It is the nature of these developments that provides the impetus for this article.

Accountability Versus Autonomy

As history reminds us, universities have generally experienced difficulty in living up to the expectations of societies at large. Controversies over institutional autonomy and government control are as ancient as universities themselves (Ashby, 1966). As Berdahl (1990) observes, universities are inherently in a state of ambivalence with society because they are "both involved and withdrawn; both serving and criticizing; both needing and being needed" (p. 170).

So what makes the recent performance-based accountability movement distinct? The accountability movement currently inundating many OECD nations is premised on the perception that traditional measures of institutional performance and effectiveness such as peer review and market choice are not sufficient indicators of institutional value. The conflict encompassing this issue was best defined by the British Committee of Public Accounts (1990), which after an internal review of English public universities expressed concern about the nature of autonomous governance, stating, "We do not accept that their [the universities') independence and autonomy, although undoubtedly valuable in many respects, is a valid argument against the attempts to defend against the shortcomings in realistic and effective management and control of the public funds on which universities are dependent" (p. ix).

Thus, despite unparalleled economic and scientific achievements attributable to higher education during the last three decades, public dissatisfaction with colleges and universities continues to permeate legislative halls. The torrent of popular criticism has forced many institutions to reexamine their educational missions and to seek new funding alternatives (Mora & Nugent, 1998; Williams, 1998). These developments place arduous burdens on higher education systems as policymakers attempt to monitor educational quality and performance while insisting on greater accessibility.

Front and center at issue is the general allegation by governmental leaders that higher education is simply not responsive to societal and economic demands. State legislators in the United States and members of Parliament in Britain have repeatedly attacked higher education for being locked away in "Ivory Towers" exhibiting only reluctant adaptation to the growing economic demands of the nation and a global economy. The disconnect between higher education and the external community has only increased as demand for greater equality through access and economic productivity have received more emphasis (Karabell, 1998). Others have countered that higher education systems have been given little credit for their adaptability and their dramatic evolution. As Neave (1995) observes, "For an institution supposedly reputed for its non-adaptability to `social change,' for its `non responsiveness' and for its `resistance to change' in general, the immobility so often ascribed to it by pamphleteers has been remarkably absent these ten years past, so much that we have swung in the opposite extreme and, taking adaptation for granted, dispute not whether the institution is capable of it but the speed at which it takes place" (p. 4).

Merely to contend that governmental authorities have turned to the concept of performance-based accountability for the limited purpose of forcing higher education to change the way it conducts business is to oversimplify and minimize the more complex economic and societal developments that have occurred since the mid-1980s. During the last fifteen years, two significant fundamental developments have combined to stimulate an increased state-level interest in higher education performance: (1) the "massification" of higher education systems and (2) limitations of public expenditures for higher education.

The Effects of Massification

The expansion of the higher education system in Western Europe and other OECD nations during the last fifteen years has been viewed by some as the most significant higher education development of this century. Throughout most of Western Europe, the term "massification" is traditionally employed to note the rapid enrollment growth in higher education. According to The Economist (1997), massification is "the biggest single change in higher education over the past two decades. Before long, it will become a normal expectation of every student in rich countries to have access to some form of postsecondary education" (p. 5).

The impetus behind governmental interest in moving toward the massification and universality of higher education must be attributed to the aforementioned theory of human capital investment and national economic growth. Universities, once portrayed as cultural training grounds for young minds, have become major agents for government investment in human development. Global economic advantages are rapidly emerging in nations where widespread educational investments have become national priorities. In this environment, higher education is viewed as a vehicle to increase the stock of human capital that enables more effective competition in world markets. Therefore, governments increasingly view higher education as a stakes game too important to leave to the universities themselves or to traditional peer faculty and governance processes that have dominated higher education for generations. As Slaughter and Leslie (1997) observe, "These changes are putting pressure on national higher education policy makers to change the way tertiary education does business" (p. 31).

These trends have manifested in the United States in student enrollment increases of over 70% since 1970, resulting in new institutions, centralized governance structures, and widely diverse student bodies (Digest of Education Statistics, 1997). Currently, approximately 68% of high-school graduates enroll in some form of postsecondary education in the year following graduation (Mortenson, 1998). The massification of higher education is obviously a high priority public policy issue as state governments anticipate larger secondary school completion rates and more traditional and adult students who will be seeking postsecondary access in the next ten years. This is true at all levels of government. In an attempt to bring national attention to the issue of increasing postsecondary education accessibility, President Clinton, during a Commencement Address at Princeton University in 1996, declared, "The clear facts of this time make it imperative that our goal must be nothing less than to make the 13th and 14th years of education as universal to all Americans as the first 12 are today" (The New York Times, 1996, p. A1). This statement discloses an acceptance of a basic tenet that the democratic concepts of massification and universality of postsecondary education have become a national economic priority.

Expanding access and the resulting enrollment growth experienced mostly by public sector institutions have compelled governments to give greater scrutiny to the use of public resources. Most Western democracies have expanded and opened higher education admissions in what heretofore were largely closed higher education systems. The results of these rising enrollments have been dramatic. In Western Europe, student enrollment in higher education has risen by approximately one third since the early 1980s. Some of the most drastic increases have been experienced in Greece, France, and Britain, where enrollments have grown by approximately 70% since 1985 (UNESCO Statistical Yearbooks, 1995). What is increasingly apparent to policymakers is that the overwhelming majority of students will continue to take advantage of the accessibility and affordability of governmentally funded institutions. The Memorandum on Higher Education delivered by the European Community Commission (1991) very clearly supported this conclusion and pointed out the need for expanded access, stating,

Projections of enrollments in the past have always tended to underestimate the demand for higher studies among young people. The demand is fueled by changing social structures and cultural values as well as by the demands of the labor market for more highly educated manpower. As these factors will not only persist but will become more acute in the coming decade, an overall increase in demand for higher education would appear likely. This increase should reflect the circumstances of the new decade and show a more even growth in the participation of males and females and a greater expansion in part-time and continuing education students. (p. 75)

As postsecondary enrollments have substantially grown during the last decade, the composition of the student body also changed. Substantial numbers of adult learners above the age of twenty-five are now being found in university classrooms, lecture halls, and qualifying examinations (Karabell, 1998). This is reflective of the growing demand for lifelong learning in OECD nations. Such development also reaffirms the failure of the more elitist higher education systems that excluded many of the current adult learners from participation at a much earlier age.

Limitations of Public Expenditures

As enrollments have continued to increase much faster than policymakers had anticipated, basic tensions have emerged between advocates of massification and proponents of the older, less accessible systems of higher education. Many university academicians and administrators were swept along with the new reforms regardless of whether they agreed with or opposed the expanded enrollments. Unlike most government leaders, their primary concerns focused on the limited amount of new public financial resources available and the consequent threat to the maintenance of quality in higher education systems. As The Economist states, "The tension between the numbers and quality dominates the debate about higher education in most advanced countries" (p. 4). Administrators and faculty fear that if current fiscal trends persist, colleges and universities will continue to experience larger class sizes, less individual attention and faculty/student interaction, and eventually, reduced academic performance.

Despite acknowledging the possible deleterious effects on educational quality, many governments have opted to maintain current policies by mandating even greater higher education enrollments without corresponding public resources (The National Commission of Inquiry into Higher Education, 1998). During the late 1980s and early 1990s a number of adverse macroeconomic conditions contributed to the international trend to limit public expenditures to higher education. In response to public concerns about other governmental services, policymakers deprioritized higher education in favor of medical care, social welfare, benefits for the elderly, primary and secondary education, and crime prevention1 (Slaughter & Rhoades, 1996). These changes, when coupled with a general voter backlash against increased taxation, reduced the fiscal capacity of many governments to support colleges and universities with public resources during a period when expanding enrollments became a national priority. For example, in the United States, state government funding as a percentage of all revenue sources for higher education fell from 44.9% in 1985, to 38.2% in 1995 (Digest of Education Statistics, 1997). As a result of public revenue declines experienced by colleges and universities in the United States, student tuition and fees increased sharply to offset reductions in state appropriations during the 1980s and early 1990s. From 1980 to 1995, tuition and fees as a source of institutional revenue grew from 12.9% to 18.9% at public institutions (Alexander, 1998). To make matters worse, as a rapidly approaching new wave of graduating high-school students demand more access to postsecondary education, pressure to increase current tuition rates to maintain per student expenditure levels will continue at public colleges and universities in the United States.

In some Western European nations during the same period, reductions in per student expenditures for higher education occurred despite moderate increases in public funding for higher education as a share of total educational spending. In Britain, limited tax support for increasing student enrollments resulted in a 22% reduction in public funding per student from 1985 to 1993, and a 40% decrease since 1976 (The National Committee, 1997, pp. 43-46). In other Western European nations per student expenditure as a percentage of the national GDP per capita declined during the same period. Austria, Denmark, France, Germany, Belgium, Norway, Sweden, and Switzerland experienced declines in per student expenditures, forcing many institutions to adopt new managerial strategies (Eicher, 1998).

To complicate this distressing fiscal trend, declines in per student public support for higher education has occurred as college and university costs have increased at rates exceeding inflation. For many political critics of higher education, the lowered place in the queue for public resources derives not only from increased competition from other government services, but from the sense that institutional costs are out of control and massive expenditures are being recklessly used to promote agendas foreign to public interests. Governing officials frequently assert that reducing public funding will not only make institutions more efficient, but more accountable to state demands (Gumport, Iannozzi, Shaman, & Zemsky, 1997).

Unfortunately, many policy decisions to place less emphasis on public funding of higher education has occurred during a period when governments have embraced the concept of massification. According to The World Bank (1996), this development has forced "many public systems to operate with overcrowded and deteriorating physical facilities, inadequate staffing, poor library resources, and insufficient scientific equipment and instructional materials" (p. 2). Faced with these challenges, many OECD governments have followed the U.S. example and begun shifting the funding burden for higher education to the users or students. This funding shift has resulted in wide variations in college and university fees among OECD nations.2 For policymakers, the issue of student fees remains extremely contentious and politically volatile. By limiting traditional public funding alternatives, colleges and universities have been given no alternative but to seek state authority to charge users and students for the services they receive to ensure educational quality for expanding student populations. In return for growing fiscal reliance on student user fees, governments are demanding more stringent and informative accountability requirements.

Measuring Institutional Performance

According to Layzell (1998), the development of performance and outcomes measurements to assess and monitor the effectiveness of colleges and universities "is ultimately based on the desire for greater accountability" (p. 104). At the government level, performance-based accountability is implemented by establishing institutional objectives and periodically assessing progression toward these goals. Increasingly, performance-based systems have incorporated fiscal incentives into the new managerial framework, forcing institutions to become more productive in attaining predetermined objectives or risk reductions in annual appropriations. Performance-based planning and funding has also become a convenient means for governments to compare and rank the productivity of one institution against the productivity of another. League tables, scorecards, national rankings, and report cards are some of the popular devices developed by governing officials to compare institutional performance measurements.

Underlying the ostensible concern for improved public sector performance, outcomes indicators have emerged as an instrumental economic rationality devised to improve institutional efficiency and effectiveness. As Peters (1992) observes, "The call has not been restricted to education, indeed, it has provided major rationale for restructuring the whole public sector, for privatization strategies and the introduction of managerialist techniques and practices" (p. 127). During the last decade, performance-based policies have clearly emerged as the model of choice for resource allocation to public colleges and universities.

The United States

Since the mid-1980s the United States has witnessed a substantial change in its relationship with individual states and higher education. Because federal involvement in postsecondary education is primarily limited to direct student aid, research funding, and specific categoricals, state governments have inherited a leading role in educational reform through policies designed to improve institutional accountability and productivity. Although the relationship varies from state to state, state governments typically provide over 35% of operational funding to public higher education institutions (Digest of Education Statistics, 1997). How and where these resources are spent continues to be increasingly scrutinized by legislatures attempting to get more value from existing resources.

Issues dominating higher education policy debates in the United States during the last five years alone have focused on quality measurements, institutional comparisons, outcome assessments, faculty workload reviews, time-to-degree reductions, and reallocation strategies. Van Vught (1994) observes that "the United States was instrumental in starting the movement toward greater accountability" (p. 41). In 1978 the State of Tennessee first addressed systemized accountability by establishing a series of performance or incentive funding initiatives that began shaping a portion of the higher education funding structure based on measurable outcomes. The Tennessee system established a performance-based funding method allocating monies to institutions according to predetermined governmentally generated priorities. Today, the performance-based funding system continues to be used in Tennessee and constitutes 5.45% of all state operating resources allocated to public universities.

As national interest in performance-based accountability has grown, other states have adopted performance funding policies. According to Burke and Serban (1998), 27 states were using some form of performance funding or budgeting system that linked institutional outcome measures to financial resources. Of these, 13 states had directly linked institutional performance to annual funding, whereas 21 states had indirectly linked institutional performance to funding through their internal budgetary process (see Table 1). In addition, 8 of these states had adopted both performance funding and budgeting systems linking annual appropriations directly and indirectly to performance-based measurements.

Like Tennessee, most states using performance funding and budgeting systems in the United States allocate less than 6% of annual operating funding through these mechanisms. South Carolina is the only state to adopt a performance-funding scheme as the primary vehicle for allocating state funding to higher education. In 1999 nearly 100% of South Carolina's state operating resources to universities were appropriated by means of performance-based criteria. The South Carolina scheme envisions the use of 37 indicators in 9 distinct performance categories, including mission focus, quality of faculty, quality of instruction, institutional cooperation and collaboration, administrative efficiency, entrance requirements, graduates' achievements, user-friendliness of institution, and research funding.

TABLE 1

The extraordinary interest in performance-based accountability in the United States has emanated from a taxpayer backlash against increases in public college spending and widespread public concern for improving institutional productivity. As McKeown (1996) observes, "Many states are either beginning to use or are considering performance funding, which is a natural outgrowth of the current public demand for the most effective use of tax dollars" (p. 6). Although most states have initiated numerous changes aimed at improving the quality of higher education, performance funding is the only budgetary reform to date that directly links financial incentives to achieved results in policy areas states consider important.

Along with performance-based funding initiatives, many states and governing authorities have adopted a series of additional outcomes-based mechanisms devised to provide governments with comparative institutional data. Concerns about faculty productivity emanating from governing authorities and legislatures have led to adjustments in faculty workload policies in more than thirty states (Hauke, 1994; Layzell, 1996). Information related to workload reporting and standards, instructional and research-oriented workloads, and total faculty activities are increasingly being generated and monitored by governing officials. This enhanced governmental interest in workload issues represents an increasing demand for developing comparative institutional data that measure faculty and institutional performance and productivity (Presley & Englebride, 1998).

Another manifestation of the new pursuit of institutional performance is found in growing governmental interest to develop policies that decrease the time it takes students to complete their degrees. Policies related to time-to-degree and faculty per degree ratios are being used in several states, such as Florida, North Carolina, and Indiana, to force institutions to increase the number of students participating in higher education, while creating a corresponding pressure to reduce the time it takes students to complete degrees.

In most instances, states have tended to increase the accountability of their higher education systems by implementing an array of performance measures that attempt to determine what is called "value for resources." Ewell and Jones (1994) noted four approaches commonly used by states in measuring such value. First, value-added measurements to departing students in the form of inputs, processes, and outcomes have been mandated in nearly one half of the states. Second, efficiency measurements to assess resource usage, such as faculty, space, and equipment, have seen widespread adoption by governmental agencies in performance contingent systems. Third, return on investment and needs measurements have been used to determine institutional effectiveness and productivity. Fourth, an approach built on the notion of "consumerism" that is designed to measure the impact of higher education in meeting individual and state needs has also been commonly adopted (pp. 12-14).

As most states anticipate enrollment expansion during the next decade, governing authorities and legislatures will remain focused on generating creative ways to measure the productivity and efficiency of public institutions. The increased emphasis on performance-based accountability in the United States reflects a growing national interest in identifying measurable outcomes. This combined with the growing movement to assess student learning and performance as another dimension of performance-based accountability, may continue to push state governments in the United States to couple formulaic funding levels with institutional and student performance standards.

The United Kingdom

In response to the increased drive for greater accountability and performance, Britain has witnessed unprecedented intervention by the central government into the financial affairs of higher education. Partington (1994) refers to this governmental encroachment as a direct "legacy of Thatcherism" and the priorities that were and continue to be part of the conservative Tory philosophy (p. 147). Understanding the new performance-funding initiatives requires a brief discussion regarding the course of their implementation.

During the last decade, the relationship between the Parliament and higher education has dramatically changed and no longer resembles the governance and funding structures that were in place until the midI980s. With the passage of the Education Reform Act of 1988, the initial stages of a power transformation began to evolve. The Act eliminated the University Grants Committee (UGC), once perceived as a buffer or mediating institution between central government control and institutional autonomy. The UGC was perceived by the Thatcher governments of the 1980s as a defender of vested interests representing traditional university values (Salter & Tapper, 1994, pp. 199-202). The consequence for representing the traditional higher education establishment against new Tory demands was the replacement of the UGC by the University Funding Council (UFC), which, following its amalgamation with the Polytechnics and Colleges Funding Council (PCFC) in the Further and Higher Education Act of 1992, has been superseded by the Higher Education Funding Councils (HEFCs).3 The creation of the HEFCs substantially changed the nature of the higher education environment by centralizing state authority over higher education. As Salter and Tapper (1994) observe, "After decades of prod and nudge politics, of wait and see, the state has acquired powers which mark a qualitative shift in its relationship with the institutions of higher education. It is now in a position to orchestrate change on a scale and in a manner which knows no precedent" (p. 1).

The mission of the Higher Education Funding Councils was to promote the quality and quantity of learning and research in higher education institutions, cost-effectively and with regard to national needs (Davies, 1995, p. 3). Within two months after their creation, the central government issued a series of guidelines for the HEFCs reaffirming the changing relationship between government and higher education. First, the guidelines demanded that Funding Councils develop sectorwide funding methods for allocating resources for teaching and research. Second, Funding Councils were to specify clearly what institutions are expected to provide in return for teaching and research while securing greater fiscal efficiencies as student enrollment expanded. Third, Funding Councils were to increase accountability of research funding from sector institutions. Finally, the guidelines declared the need for the maintenance and enhancement of quality by relating funding to the Council's performance assessments of teaching and research quality (Davies, 1995, pp. 6-10).

By 1993, the HEFC in England (HEFCE), Britain's largest HEFC with 131 institutions, had established several assessments and performance practices as funding allocation tools. The first component devised by the HEFCE was a research assessment that directly linked funding to the results and performance of academic units and institutions (El-- Khawas & Massey, 1996). This new funding approach removes a sizable amount of funds from a predictable formula basis and gives it a new performance formulaic foundation with external governmental and peer assessors distributing a portion of the funds. This represents a major departure from the competitive federal research funding practices in the United States. Under the new English system the amount of departmental research funding became dependent on a series of performance indicators, including quality publications (to measure output), number of citations (to measure quality of impact), research income, research students, and peer review (Cave, Hanney, Henkel, & Kogan, 1997).

The second component emphasizing academic performance was the quality assessment of teaching and learning effectiveness incorporated in 1993 by the HEFCE. These quality assessment procedures directly linked funding to judgments made about academic quality in teaching and learning. The current assessment uses an output rating scheme to measure six dimensions of teaching quality (El-Khawas & Massey, 1996).

Each of these policy initiatives represents an important departure from previous funding schemes for higher education. Scott (1989) predicted two prominent changes that occurred as a result of these fiscal reforms: first, "universities will be bound by much tighter rules when they receive state grants, which will certainly involve more detailed auditing and performance measurement." Second, "universities will have to bid against each other to participate in specific initiatives for which funds will be earmarked and accounted separately" (p. 303). The 1988 and 1992 Acts ultimately established the foundation for the centralization of fiscal control and the implementation of new performance and quality standards for higher education. It is also important to note that these changes occurred during a time when the Tory government mandated that higher education double its enrollment by the turn of the century without any additional publicly generated resources.

Today, three British government departments, including Education and Employment, Science and Technology, and the Cabinet Office, are exerting unprecedented influence on the ways in which activities of universities and colleges are conducted and managed. Through the Higher Education Funding Councils, the Department of Education and Employment (DEE) has designed and operates a funding system based on performance criteria and quality measures in teaching and research. By using the HEFC system of performance and quality indicators, resources are allocated based on governmentally defined guidelines. Some of the indicators reflect the growing economic needs of the state by emphasizing technical, industrial, and business-oriented demands for higher education. The DEE continues to increase its influence over higher education by monitoring employer decisions and encouraging industrial partnerships. The Cabinet Office has implemented a Higher Education Charter, which focuses on the notion of "consumer satisfaction," and a set of obligations that institutions are expected to meet. The extent of this requirement will include satisfaction surveying of consumers, students, research contractors, employers, and members of the local community.

The statement that best exemplifies the British government's philosophy for infusing performance-based accountability into the mechanics of higher education institutions was summarized by Salter and Tapper (1994) when they stated that "the pressures upon the state to control higher education's resources, and force it to respond to what we have called the `economic dynamic' are overwhelming and inescapable. Modern economies require an ever-changing blend of new knowledge and educational manpower if they are to function effectively, and no state can afford to leave its higher education system to its own devices" (p. 18). Shattock (1994b) symbolically referred to this transition period as the end of an era of independent academic culture in Britain.

Emerging Performance-Based Reforms

If one takes a broad view of the European continent, it is evident that higher education is in the midst of an immense transition period during which performance-based accountability reforms are widespread. In most cases, the dynamics encompassing these reform efforts are reflective of those that U.S. and British policymakers have been struggling to address over the last decade. The need to monitor and assess institutional performance is a recurrent theme among European nations with mature higher education industries. For example, in Finland a new funding model was implemented in 1997, incorporating a performance component that constituted 3% of the entire university budget (Hamalainen & Moitus, 1999; Holtta, 1998, p. 59). The performance-funding component is based on five indicators measuring institutional efficiency and effectiveness in academic activities: first, by measuring an institution's ability to attract external funding from domestic and international sources; second, by measuring an institution's relative position in the institutional rankings in international student and faculty exchange; third, by measuring the efficiency of adult education services; fourth, by measuring career placement of graduates in the labor market; fifth, by measuring the success of the institution in creating academic quality in teaching and research (Holtta, 1998, p. 59).

Like Britain, Finland and other European governments are struggling to find the proper balance between institutional autonomy and performance-based assessments. In Germany, Sweden, Denmark, and Austria, universities are gaining more financial autonomy through pilot funding programs and limited block grant allocations as part of the tradeoff for increases in centralized performance-based demands (Cave, Hanney, Henkel, & Kogan, 1997). In the Netherlands, policymakers have implemented a research funding mechanism similar to the British plan where research productivity is assessed on a government rating scale (El-- Khawas & Massey, 1996).

Influenced by recent U.S. and European trends and their own fiscal dilemmas associated with rapidly expanding higher education systems, the Canadian provinces of Alberta and Ontario also have recently adopted performance-based funding as a mechanism to assess university efficiency and quality (Barnetson, 1999; Gilbert, 1999). The Alberta performance system uses a 1-3 ranking process to assess institutional quality, research, and efficiency. Universities acquiring higher rankings may receive up to a 2.75% or a $6.05 million funding increase. In Ontario the Ministry of Education and Training will implement a plan in 2000 linking up to 6% of annual appropriations to three performance indicators measuring college graduation rates, graduate employment rates, and alumni, employer, and student satisfaction (London Free Press, 1998). The new funding scheme will allocate approximately $16.5 million to universities and $14 million for community colleges. Institutions that rank in the top third in their category will receive twice as much funding as the middle third, while those in the bottom third will receive no funding.

These international performance-based initiatives represent a sea of changes in the relationship between governments and higher education. In attempting to produce greater accountability, the state is entrusting university and institutional leaders with educational missions that are calculated to address the necessities of a national economy in a competitive global marketplace. In this more competitive model governments carefully scrutinize the overall progress and performance of universities in addressing the economic needs of the state through the use of fiscal incentives and disincentives. Universities, on the other hand, are expected to compete intensely for additional resources based on predetermined performance objectives established by the state. In this kind of performance-based system the responsibility for improvement rests with individual institutions and departments.

Commonalities Among Performance-Based Systems

In reviewing the progression of the recent performance-based accountability movement in the United States, Britain, and other OECD nations, two important commonalities emerge. First, performance funding and budgeting policies have intensified the tension between policymakers and higher education administrators and faculty because of divergent objectives. Government authorities prefer to use indicators that measure institutional efficiency, consumer satisfaction, job placement, and value for resources. They also advocate using performance measurements as a means of comparing institutional productivity and performance. On the other hand, university administrators and faculty favor performance measures that reflect the quality of the educational experience in a manner that elucidates their own specific institutional mission(s). University leaders also advocate the adoption of performance measures only when they are premised on the assumption that the results will be used in a noncompetitive manner to improve one's own performance.

Second, it is clear that the nature of the state's relationship with higher education has evolved from one of authoritative oversight, to one of active involvement in financial arrangements and economic decisions. This represents a significant change in governmental expectations of higher education. According to Goedegebuure et al. (1994), "The trend for national governments is to retain the prerogative to set broad policies, particularly budgetary ones, while increasingly transferring the responsibility for growth, innovation, and diversification in higher education to individual institutions" (p. 1). Under these new arrangements, governments are simultaneously devolving more control over programs and budgets to individual institutions while directly intervening in higher education systems in order to ensure greater economic efficiency, quality of outcome, student access, and accountability.

McGuinness (1994) recognized that these fundamental changes in the relationship between governments and higher education were caused by new economic demands. Higher education has evolved into a foundational component of national economic growth. It is being called upon to resolve the economic problems of nations without adequate investment in most circumstances. Once it has been established that the primary purpose of higher education is to serve the economy, then it becomes the responsibility of the state to ensure that the institution is held accountable in successfully achieving this task.

Conclusion

For nearly two decades pressures on states to gain greater control over higher education resources has been overwhelming and inescapable. Driven by a `new economic dynamic,' societies throughout the world are requiring an ever changing combination of highly skilled workers and knowledge that only education can provide. As Salter and Tapper (1994) stated, the stakes have become far too great for nations to leave their higher education systems to their devices, and "such action would amount to an abdication of responsibility which no present-day government or its bureaucracy could tolerate either in terms of their internal organizational dynamic or in terms of the external demands upon them" (p. 18). During the last decade, this governmental responsibility has emerged in policy form under the mask of performance-based accountability.

In seeking ways to measure greater productivity and performance, governments are reflecting a more utilitarian view of higher education. From a utilitarian perspective, economic values are supreme and the quantification of fiscal resources is the true measure of value. Unfortunately, university leaders who are unable to define and demonstrate educational objectives and achievements in utilitarian terms will have limited success in meeting the new demands placed on higher education. These pressures do not appear to be withering away as governments advance mixed messages to higher education, demanding greater performance without additional financial investment. As Breneman (1993) indicated, these financial changes are not an aberration in historical funding patterns but are a new reality to which higher education will have to accommodate.

In this utilitarian environment, it is inevitable that governments will seek greater accountability and performance. States are not being driven in this direction because of an authoritative desire to control and regulate, as Levine (1997) insists. Governments are attempting to better monitor and assess colleges and universities in practical ways because of their utilitarian compulsion to acquire more value for resources.

Higher education does not have to be completely comfortable with this utilitarian approach. There is nothing wrong with institutions being uneasy with externally mandated performance-based accountability. In fact, as Bender (1997) observes, "The university ought never to be too comfortable in and with society-and vice versa." He further stated, "There ought to be a degree of friction deriving from the critical spirit that is central to academic intellect" (p. 31). This friction is essential for developing effective performance measurement systems that truly assess educational quality and productivity.