Size doesn’t matter: evidence on college size and organisation performance

As someone interested in how size and mergers affect organisational performance in the public sector – particularly FE and housing – I was pleased to stumble across a study published by the Department for Innovation, Universities and Skills last year.

The study entitled The Evidence Base on College Size and Mergers in the Further Education Sector reviews the subject of college mergers including some economic theory. Laura Payne of DIUS observes:

Economic theory suggests that there may be potential for larger colleges to be more efficient.

The review certainly sets out the potential benefits of merger and the economies of scale. There is also some reference to diseconomies.

The most interesting aspect of the report is a statistical analysis of the performance of General FE colleges. It finds:

There is no evidence of a relationship between college size and success rates. There is some correlation between size and average OfSTED inspection grade, but the correlation coefficient is small and does not suggest a strong relationship.
...There is no relationship between college size and financial health.

The good news is that mergers do not on average do any harm:

There is no evidence to suggest that merged institutions perform any better or worse than institutions that have not been involved in a merger.