The protesters hanging around Unitec's suburban Auckland campus are not your usual young and carefree mob.

These students of our biggest polytechnic are opposing the (admittedly, management-led) revolution, liking its high-profile design and visual arts school just the way it is, thanks. As well as school-leavers, these conservatives - who are siding with departmental staff - include many adult students who have paid $6000 to $7000 a year to go back to the classroom.

The management line that the department is producing graduates not equipped for the workplace doesn't wash with those who've been there.

The department has been a poster child for Unitec, rolling out cutting-edge names in creative and contemporary arts - such as Anna Wallis, Jane Dodd and Octavia Cook in jewellery; fashion designer Cybele Wiren; accessories makers Deadly Ponies; visual artist Hayley King. Staff include equally prominent names across the spectrum of visual arts - their reputations the clincher in many students' choice of design school.

But according to managers who have effectively sacked the entire department of 53 staff, the school is failing to produce what industry requires. Nor is it sufficiently aligned with industry - failings which, if true, run foul of the Government's new tertiary education strategy that makes "delivering skills for industry" priority No 1.

Last month, all staff were invited to reapply for just 17 positions, with rewritten job descriptions, for next year. When school resumes, remaining academic staff are expected to provide about half the teaching hours for the department's 600 students; the rest will be filled by "experts" drawn from industry. Students are expected to spend more time off-campus, undertaking projects for industry and doing more online learning. Staff will organise and co-ordinate the external learning and, next year, prepare two new degree courses to replace the current qualifications from 2015. These are expected to be more general than the current discipline-specific programmes.

It's a model that frightens education unions for its potential to revolutionise polytechnic staffing, just as industry-focused charter schools with untrained teachers worry the secondary sector.

"It's fair to say we are fundamentally repositioning the role of an academic in this space," Unitec chief executive Rick Ede admits. "We see the need for quite different jobs in this mix - they are academic jobs but a different balance of things we are asking them to do. That is quite confronting for the Tertiary Education Union."

Stressed and angry staff say they have shot down every management argument to justify the change, to no avail. Though a few see benefits in the concept, most maintain they already have the industry alignment that management says is lacking. Some say the restructuring process has ushered in a "culture of fear" and bullying.

Art patron Sir James Wallace, commentator Hamish Keith, leading gallery owners and other industry players have leaped to the school's defence. Keith says the decision ignores a review last year that confirmed Unitec's strong reputation in design and visual arts and praised the professional standing of staff.

Most students say the industry-driven model is not what they signed up for. "We don't know who will be teaching us, whether they will be teaching someone else's brief or writing a new brief," says interior design student Sharlamon Mar, who expects to graduate next year. "It feels like we've had the carpet ripped from under our feet."

Photography student Yvonne Shaw says courses are expected to be more cross-disciplinary, and have less academic rigour.

"We are not here to have a general degree; we are here to learn specific skills relevant to our pathways. They are saying there are no changes to the programme [for 2014] but staffing is an integral part of the programme."

TEU president Lesley Francey says the department seems to be a guinea pig for a new model of tertiary education delivery, with few permanent staff, and casual workers used as cover.

Unitec managers aren't shying away from the interest shown by rival institutions in their new model, and they see potential to extend it to other departments if it succeeds.

There would seem obvious cost savings in reducing departments to a core of fulltime academic staff, with hired guns brought in as needed.

The institute, like others, is under financial pressure, citing reduced Government and Tertiary Education Commission funding, falling rolls and inflation in its case-for-change document. Income from research has plummeted, a trend that again defies Government prodding to find alternative revenue streams.

But managers deny the move is driven by cost cutting or casualisation. Ede says it's not clear there will be savings - outside professionals aren't cheap and spare money will initially be diverted to equipment upgrades. The school hopes to increase enrolments, so costs will rise.

The restructuring follows a quality assurance review last year (which was favourable, say those involved) and further industry research this year. Ede says industry feedback was that graduates in the product design area were "seriously missing the mark" and management concluded significant reform was needed.

Concerns included a lack of mechanical skills, with the need to upskill some recruits. Critics say management has drawn only on research that suits its case.

Ede links the issues to Unitec's past pursuit of university status, which saw its traditional technical and vocational focus broaden to theoretical learning. Getting students "work-ready" should be a core function of a technical institute, he says.

"This is about the institution making a choice ... it's back to the future as an institute of technology."

The restructuring follows the suspension last year of the contemporary crafts programme, including jewellery, apparently because of falling demand.

To those at the artistic end of the creative arts spectrum, the focus on product design raises big questions about the downstream effects of Government policies. Will a highly successful incubator of creative talent be stymied to meet the short-term requirements of one industry sector?

"They don't understand - we don't live in a manufacturing economy," says gallery owner Anna Miles. "They don't understand our New Zealand market."

Miles declares an interest as a former Unitec lecturer whose partner still lectures there. But in vouching for the calibre of output by students and staff, she is far from alone.

"We had students doing thrilling stuff in the most diverse range of things - painting, photography, jewellery, sculpture, ceramics, graphic design. Graduates don't necessarily pursue the traditional model - they go into other areas. A lot of the staff are practising visual artists, photographers, designers - it's not like they are unable to adapt to change."

Lesley Francey of the union says the quality of output will suffer with casual staff. "You want graduates to be employable but the emphasis is on short-term employable skills. In essence they will be turning out widgets."

Architects of the restructuring, faculty head Leon Fourie and head of department Deanne Koelmeyer, are both from institutions (in South Africa and Australia respectively) that have long made extensive use of industry professionals.

Fourie says only 47 per cent of last year's graduates found work related to their qualification. Koelmeyer says design professions are changing rapidly. New Zealand, like Australia, needs to produce versatile graduates capable of reinventing themselves, she says.

Staff counter that Unitec already does just that. "We believe the rationale is based on a skewed and tiny sample," says senior lecturer Rachel Carley. "Teachers are the industry - we are seriously engaged."

Not all staff oppose the new model. Cris de Groot, senior lecturer in product and furniture design, says it is the norm at leading institutions around the world.

He says polytechnics need to focus more on applied learning as universities encroach on their territory.