Universities around the world must "overthrow the status quo" and recruit "new leaders" and a "more diverse faculty" to survive unprecedented economic challenges, according to Deloitte.

The consultancy giant has called for higher education institutions to "radically transform the way they do business" to adapt to falling resources and rising student expectations.

In a report titled Making the Grade 2011, due to be published on 4 August, consultants from 12 countries outline key issues facing universities and consider how institutions can "aggressively execute new approaches" to "meet the educational needs of the future".

Among the "essential strategies" they identify are the adoption of "best practices from around the world and perhaps from outside the academic sphere".

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The report finds in universities a "proclivity towards promoting leading academics to leadership roles rather than identifying (potentially private sector) candidates" and administrators who tend to be "creatures of habit" unused to "paving new ground".

It calls for a "proactive response" to the "perfect storm" of problems whipped up by decreasing government funding, shrinking endowments and rising costs.

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"Streamlining business processes and back-end systems" is advised, as is the constant review of loss-making courses.

Universities must be bold when setting strategic priorities, it adds, observing that decisions are often "made democratically as opposed to strategically".

"Institutions are slow to phase out programmes that no longer meet evolving student needs or to introduce new programmes that lack a proven track record," it goes on. "They must rationalise redundant programmes, evaluate the continued relevance of costly ones and ensure that their curricula keep pace with market changes."

Arsh Maini, senior consultant for Deloitte India, said more vocational courses should also be considered. "Despite the merits of a world-class liberal arts education, there is a danger in supporting a curriculum that is too theoretical. Today's fast-paced world needs construction crews, hospital workers and people to build cell-phone towers."

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'A necessary evil'

Sir Peter Scott, professor of higher education at the Institute of Education and former vice-chancellor of Kingston University, said management consultants were a "necessary evil".

"Although they usually tell management what management already knows, sometimes it's easier to accept things - particularly unpleasant things - from outsiders. The key is whether they understand higher education or are merely trying to recycle ideas they've come up with in relation to Unilever or the NHS."

Institutions' "woefully outdated" back-office systems come in for criticism in the Deloitte report, which also says universities should create more web-based interaction with students and offer educational support online.

The consultants call for a major reappraisal of infrastructure, advising universities to consider disposing of "surplus assets" and selling underused real estate.

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The report identifies a "critical talent gap" in staff and suggests bringing in "new leaders to reinvigorate the workforce" and "hiring a more diverse faculty capable of inspiring and connecting with a new generation of learners".

Overall, Deloitte says, universities should focus on improving in four areas: funding and revenue, operating margins, asset efficiency and institutional strengths.

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Christina Dorfhuber, principal at Deloitte US, said: "To succeed in the future, higher education institutions must take a good, hard look at their organising principles. Ultimately, the victors will be those who can support their decision-making with the strongest business case."

jack.grove@tsleducation.com.