Fortune’s Fool

I have yet to meet anyone working in a Finnish university who believes the introduction of the ’full-cost model’ of research funding has been anything other than a total fiasco. The pity of this sorry tale is that the purposes for which the new accounting and financing system were devised are correspondingly laudable.

Even this last statement is, admittedly, guesswork on my part. Nobody ever explained to me why the new system was brought in, other than vague aspirations towards ‘greater transparency’ and the customary response to anything that appears to be a pointless extension of bureaucracy: ‘blame the European Commission’! I have simply fumbled around in my brain to try to figure out what the various ministries and public agencies involved in the decision to impose upon us the full-cost model might really have had in mind.

In the past, academic research in the Finnish universities was supported via two non-congruent streams of financing. On the one hand, university departments and faculties were rewarded according to the number of degrees they produced. On the other, the direct costs of research were met by grants from the Academy of Finland and similar agencies, plus the dribble of funding from the Ministry of Education to establish and maintain graduate schools. Degree-led funding covered the basic ‘infrastructure’ for research, whilst project funding covered the salaries of research assistants and graduate students, plus other dayto- day costs of actually performing research, which in my subject, for example, are considerable.

This ‘old system’ worked tolerably well but suffered several rather obvious drawbacks. Since project funding only paid part of the real costs of the research that it was supposed to support, any research that did not lead directly to doctoral or other degrees was a financial drag on the universities. This obviously includes the very top echelon of science, conducted by professional researchers such as postdoctoral fellows up to Academy Professor. Large-scale prestige projects involving teams of many scientists, for example those funded by international agencies, were another burden on the system. Paradoxically, the more toplevel projects that university departments were able to secure competitively, the greater the financial drain on resources that should properly have been directed towards teaching.

With funding proportional to the number of degrees awarded, universities had no incentive to favour high-quality science. Instead, supporting research that was cheap, irrespective of its impact, originality or applicability, was the most cost-effective strategy. The problem was compounded by the salami-slicing required for doctoral graduation. Instead of publishing one ground-breaking paper in a high impact journal, intending doctoral graduates were encouraged to subdivide their findings into multiple works, each of which told only part of a potentially important story, and thus was rarely recognized or cited.

The full-cost model, if properly implemented, avoids many of these pitfalls. The concept is simple: project grants come with an inbuilt overhead component that supports the research infrastructure of the departments where the science is done. The more such grants that are awarded to a given unit, the better endowed it becomes. Instead of research parasitizing teaching budgets, the inflow of top researchers into a department focused on the most competitive science actually supports teaching of the highest quality.

Since the Academy and similar organizations base their funding decisions on international peer-review, such a system should nurture the best science, in other words quality over quantity. Use of the full-cost accounting system also makes our universities theoretically better able to participate in large-scale international projects, since the real costs of the work can be charged.

So what has gone wrong? The answer, regrettably, seems to be virtually everything. Three major mistakes have been made.

First, the Academy’s total budget has not been increased to take account of the new accounting model. Simple arithmetic shows that if the overhead component of grants rises from 12.5% to 100% or more, the volume of research that can be supported by an unchanged bottom line is approximately halved. Yet the new system has been applied only half-heartedly. Degree-led funding of the universities remains in place alongside it. In short, the incentive for cheap, low quality research remains, whilst the number of internationally competitive projects that are funded has been cut drastically: an absurd outcome.

Second, despite the aspirations to transparency, the calculation of the indirect components of research funding is utterly baffling. I am not the only one who is baffled. Even those who are supposed to administer the new system are at a loss to explain it. The employer costs per salaried post funded by Academy grants have risen from about 28% to 53% of gross salary. Quite what this apparently arbitrary figure is supposed to fund or how it has been arrived at is completely inexplicable. Social insurance, holiday pay and other fringe benefits were built into the old system, so what has been added? One wonders whether those who designed the new system have factored into it an excess funding component, in the expectation that the stress of having to handle the additional administrative burden will lead to a large number of staff being laid off on long-term sick leave. On top of that, the actual overhead is figured at exactly 100% of the combined salary and employer costs, a suspiciously round number that seems to equate to the assumption that for every usefully employed person in research there must be another whose job it is to burden him/ her with useless administrative tasks.

On top of all that, we find that the Academy pays, in the end, only 80% of the total cost of each project. Why this is 80% and not 86% or 72% or not simply 100% is another complete mystery of the system. Where is the extra 20% supposed to come from and why? Logically it can come from only two sources. Either it must be provided out of the university’s degree-counted financing, thus institutionalizing a need for the old non qualitybased system to remain as a parallel funding stream. Or it is paid simply by recycling the overhead, so that the real overhead is substantially less than 100%.

Third, the burden of additional, pointless administration created by the full-cost model is not merely an abstraction based on arithmetical musings. For those of us who devote ourselves (in theory) to scholarship and creative thinking it is a daily or, more precisely, an hourly, reality. In order to meet the goal of ‘transparency’ an enormous amount of time and effort is now being wasted on creating an (electronic) paper trail to justify the overhead charged on research grants in minute detail. Such a procedure is applied to no other sector of the economy. Imagine that every time you went to the store to buy a bar of chocolate the cashier had to issue a detailed breakdown of how the 1,75 euro price of the confectionery was attributed between the personnel costs of the cocoa bean farmer, the chocolatier, the designer of the wrapper, the marketing agency responsible for its advertising and the staff of the shop, before handing over the cash. Commerce would grind to a halt.

In sum, the full-cost model is, potentially, a great tool to target research funding to those units conducting the most successful, competitive and innovative science. However, its implementation in Finland has been seriously botched. It is leading to a decrease, not an increase, in the share of funding attributed to peer-reviewed top science and a major diversion of resources into unnecessary administration.

What is to be done? Many of us, labouring under the weight of the bureaucracy spawned by the new system, merely wish that it would be abolished, and that we would just go back to the old way. I believe this would be a classic mistake of throwing out the baby with the admittedly very rancid bathwater. Instead we should proceed to the next stage. University funding based on research degrees should be abolished and the money transferred to the Academy to restore or preferably increase the volume of project support. The overhead percentage charged by each university should be negotiated with the Academy and other agencies based on global costs, and internally distributed between the different levels of administration by a simple formula. It should remain invisible to project grant applicants, reviewers and grant-holders, who simply need to judge and administer the direct costs of a project. Individual researchers and their units should be released from trying to document every minute invisible cost. Then we can focus on doing science.

Professoriliitto valitsi akatemiaprofessori Howard T. Jacobsin Vuoden Professoriksi. Valinta julkistettiin 3.12.2009 liiton 40-vuotisjuhlaseminaarissa.