The body overseeing tertiary institutions has ''lost its way'' and will cease to exist without major changes, says Tertiary Education Commission chair John Spencer.
The commission is responsible for administering $2.7 billion of funding a year and is about to transform from an allocation model to one of investment the Education and Science select committee heard today.
''In my personal view it's lost it's way, that's why we're changing. It's become very bureaucratic and I don't think it's adding value where it should,'' Mr Spencer said.
Labour Party education spokesman Chris Hipkins questioned why there were eight universities in New Zealand all offering the same programmes and what was being done to change that.
Mr Spencer said the commission agreed the country was too small and had limited resources and consequently universities needed to specialise.
''I think some of the university councils struggle to clearly articulate where they're going and what their place is.
''Take Auckland University with a billion-dollar turnover, $12 billion in assets and 5000 employees but it would rank as one of the top 10 companies in this country,'' he said.
Universities are major businesses and need to be run that way which means taking a governance approach.
''If we're really going to run an investment model those institutions that aren't performing have to suffer.''
The TEC has had a complete overhaul of its board since two years ago but if the direction didn't change the tertiary sector would be better off under the guidance of the Ministry of Education, Mr Spencer said.
The competitive funding allocation process meant some institutions had changed the way they passed students sitting courses to ensure they kept getting topped up each year, Labour Party MP Dr Megan Woods said.
That approach was the beginning of a slippery slope because the wrong drivers were there, Mr Spencer said.
''They realise they can't have it all their way and they know it's limited funding and we can't sit and write cheques out.''
He said it was for the tertiary institutions to establish the role they want to play and set outcomes they want to achieve.
- The Dominion Post
Do you think the appropriation of the Native American headdress for a fashion show is offensive?Related story: Dame Trelise under fire for headdress use