Friday 21 October 2016

How Diarmuid Hegarty built a €27m business out of education

The Griffith College founder says the expansion of third-level education needs to draw in the private sector, writes Sarah McCabe

Published 23/08/2015 | 02:30

Diarmuid Hegarty, president of Griffith College, thinks student loans are inevitable
Diarmuid Hegarty, president of Griffith College, thinks student loans are inevitable

It is a rain-soaked Wednesday morning in August and the streets are quiet. Schools are still closed and every second email I send receives an 'out of office' reply.

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But the headquarters at Griffith College is buzzing with people. The reception hall at its leafy campus in Dublin 8, a former military barracks, hums with the sound of different languages.

Students from all over the world, here for summer courses, wander through the corridors. In a few weeks' time, they will pack their backs and the college's standard semester will begin.

Around a few quieter corners, past a staircase whose walls are dotted with pictures of Griffith's honorary fellows - Catherine Day, Mary McAleese, Denis O'Brien - is Diarmuid Hegarty's office. Hegarty founded the private college 40 years ago and is still happily ensconced in the thick of it.

Though he is reluctant to admit it, Griffith is a runaway business success. It enjoyed revenue of €27m in 2014, takes in 7,000 customers every year and owns some of the country's most valuable property assets.

Its Dublin campus, five acres of sprawling stone and greenery on the edge of the city centre, boasts vast housing space as well as offices - some 664 beds of student accommodation.

It also has campuses in Cork and Limerick and is in expansion mode, planning a Belfast college next. On the product side, there are courses in everything from fashion design to business to computer science. It is the second-largest private college in the country, after Dublin Business School, which has 9,000 students, although DBS only has a Dublin campus.

The only obvious hole is medicine - but Hegarty is planning to soon provide a degree in gerontology, the care of old people.

Private education is associated with sky-high fees but tuition prices are reasonable. The average tuition price for an Irish undergraduate is €5,500 a year. International students pay more, but not that much more. A non-EU, non-English speaking student, who will need the most support, pays around €8,000 a year for tuition. Postraduate degrees are more expensive again.

About three-fifths of its undergraduate population are Irish, with two-fifths coming from overseas.

The cost of sale, for Griffith, averages out at €5,000 per student per year. At State-run third level institutions, the cost per student is more than twice that. How on earth does he manage to do the same thing at much less cost?

"For one thing, our salary costs are not as high. Our salaries are not controlled by benchmarking. That does mean we often lose people to the public sector. But we are competitive for academic talent. We give young staff more advancement opportunities and we are more flexible.

"We also use our assets intensively. This place is full of students, days, nights, weekends, in the summer. The ugly business term is to 'sweat the asset' but that is what we do, we make full use of our resources.

"Research costs dramatically push up the cost of state universities," he adds, "and universities invest heavily in research because it is crucial to their rankings."

"The reality is that universities are putting increasing emphasis on their international rankings. And you cannot maintain a high ranking without substantial research costs.

"I am in favour of research - one of our strategic aims is to build up our research output - but not research for research's sake.

"It needs to be of value, with a commercial element, because that way industry will help to fund it and it is sustainable."

Hegarty founded Griffith College at his parents' dining table in south Dublin, as a part-time job while training to be an accountant with PwC predecessor Coopers and Lybrand.

He earned his qualification in 1972 - "when the pass rate was incredibly low," he says.

"Eight out of 10 students were failing. So I started to offer private coaching. There was huge demand for it and eventually I gave up the accounting job to teach full-time."

The business grew steadily through the Eighties and three other early employees took equity stakes in it - Reginald Callanan, Tomas MacEochagain and Pierce Kent. It outgrew various Dublin offices until it bought the Dublin 8 campus in 1992. It moved into Cork in 2005 and Limerick in 2006.

Despite his success, Hegarty is an agitated man. Student grants have been in the news in the week of our interview, with the long-running debate over whether parents' assets should be means-tested making headlines once again. Some 64pc of students received a grant last year, data from the Union of Students Ireland shows.

But students who chose to attend Griffith or other private colleges cannot receive grants -regardless of their parents' income.

This infuriates Hegarty. One student took this rule to court last year. It was settled, he says.

"All I am asking is that students who are eligible for grants should be entitled to them, regardless of what college or university they choose to attend.

"If we are going to give support for third-level, let's give it to the student, let them choose their course and future.

"That drives efficiencies. Giving it to a pool of select universities drives inefficiencies."

But where's the sense in sending a poorer student to a €5,000-a-year private college when they can get a degree for free at State university?

"The problem of students' not affording third level and the provision of private education are not the same thing. Keeping third-level education in the hands of the State is not sustainable."

An expert group on the future of third-level education, chaired by former ICTU man Peter Cassells, found last year that the number of people entering Ireland's third-level system will jump by 29pc between now and 2028. That means an extra 13,340 students every year - or 53,000 more students over the course of a four-year degree

"That's two-and-a-half times the capacity of UCD," says Hegarty. "We are going to need another two-and-a-half UCDs just to stand still by 2028. That is a crisis.

"Are taxpayers going to spend billions trying to build that capacity through the public sector or are we going to draw on the resources of the independent sector?

"Look at the cost savings achieved when Ireland opened up the air-travel market. When I began my career and flights to and from the UK were controlled solely by Aer Lingus, it cost £250 to fly from Dublin to London. Opening up air travel to private competition drove incredible efficiencies and consumer benefit.

"UCD's and TCD's solution is not to close down Griffith College or any other private university. It is to secure more funding.

"Their funding must go up - anyone who thinks the €3,000 registration fee will stay that way is naive. But it cannot come from government. If government has to spend an extra €1bn on education, it should go to primary and secondary schools. Otherwise the same amount will just have to be spent on prisons and other social costs," he says.

His solution is an SSIA-style fund for education. "The parent or parents save an average of €650 a year once their child is born, for 18 years. For every €10 they save, the State matches it with €5.

"Over its lifetime, the fund is invested in infrastructure and development projects, with a State-guaranteed return of 4pc a year. After 18 years, you have enough to pay for a three-year degree costing about €8,000 a year," he says.

To support that, and for students whose parents would not or could participate, he proposes a student loans scheme.

"Student loans are inevitable. People who baulk at them turn around and take out €500,000 mortgages. I am not talking about US-style student loans. I am talking about loans in the region of €15,000, which are affordable and a fair price to pay in exchange for the income-generating potential that you get from having a university education."

The problem of capacity, however, is also being addressed by the rise of e-learning. Will universities slowly be made redundant by remote online learning?

"I don't think so. It will be blended. Studying purely online without teacher support works for one in 10 people. Teacher-centric teaching gets results."

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