Key Survival Factors for Independent Schools

At a recent Conference, this Consultant overheard the following comments by members of this particular regional independent school group: “Half of our schools are growing in enrollment while the other half are declining” and “NAIS tells us that the focus for our schools must be long-term financial sustainability and this means that we have to think outside the box, think about a new paradigm.”

While waiting to present to a group on the topic of board stability and the tradeoffs of income and expense in independent schools, this Consultant thought about these crucial financial indicators for long term-school health. We simply do not talk about them often enough.

1. How do we deliver/spend 60 to 85% of our total expense, i.e. on staff salaries and benefits? Are we examining whether the methodology by which we are delivering these funds is rational and mission appropriate? Are our schools truly thinking about creative options to save money and that will have a bigger mission-based impact?

Littleford & Associates estimates that perhaps only about 2500 schools worldwide have engaged in a meaningful and productive board/administrative/faculty dialogue about the need for a mission-based philosophy of compensation and a salary and benefit system that flows from that mission and philosophy of compensation. The number of schools in the world that have engaged in such a serious comprehensive study across traditional stakeholder groups is unfortunately very small.

2. Why are we not focusing on board stability, longer serving boards, more effective committees on trustees, longer serving chairs and longer serving heads? In depth and long term research demonstrates that all of these strengthen schools financially.

Very few independent school boards have no term limits for fear of being saddled with tired, ineffective or disengaged trustees. What we sacrifice in having these term limits are the loyalty, generosity, wisdom and stability of our boards and their crucial work in overseeing the head, ensuring financial health and the continuation of the school’s mission.

The role of the Committee on Trustees is too often ignored. In some schools the board chair is also the COT chair, placing too much power in the hands of one individual. Seldom does the COT really perform all eight of its crucial functions or do them well.

3. Why are we not engaging our current parents and alumni more effectively in telling (and selling) a school’s story in order to strengthen enrollment demand and its competitive position in the local marketplace?

All schools should not only listen to the stakeholders and address their proper concerns but equally engage those groups in developing parent and alumni ambassador programs that recruit, train, motivate, and organize parents and alumni to “sell” the school to prospective applicants. Most schools either do not use parents’ and alumni’s skills, professions, contacts, and leverage to tell a school’s story or they do it poorly. This type of program can be more powerful and far more cost-effective than expensive branding services.

Similarly our schools can use these same groups more effectively than they do to boost fundraising.

4. Why do we not consider and conduct internal succession planning more often? Successful heads promoted from within reduce institutional instability and tend to have a longer tenure because they know what kind, and how much change the culture will tolerate.

Only 10% of heads are hired from within BUT only 10% of them are “fired.” SO why are we not engaging in more succession planning and in developing talent inside the School? Independent and international school boards feel that insiders are captured by their former peer group and unlikely to make tough decisions. They overlook talented administrators as potential successors and then lose them to other schools that appoint them to head of school. Corporate boards on the other hand know the importance of training for succession from within the culture and do it regularly. They usually try very hard NOT to lose a valued staff member with strong leadership potential.

5. Why do we not pay more attention to what head compensation really represents? It is not just a contractual arrangement but a tool and a signal to heads and potential heads of how the board views its leader and how it nurtures and rewards that person and his or her family. Overlooking this key underlying message has led to many unnecessary losses of fine heads and misunderstandings between boards and heads.

One might not think that this theme is as important as the other topics noted above. However, if a school can recruit or retain a top notch head of school then the potential for a healthy stable school is much greater. There are incentives by which heads today are recruited, tools for effective evaluation, creative rewards for strong performance, golden handcuffs for retention as well as penalties for leaving early. Boards should be smart about how they contract with a head of school, how they design the compensation package and contract and the tone with which they negotiate or extend a contract. Many a school head search ends “at the altar” with a misunderstanding or misstep by one or both parties about compensation expectations. And many a head departs prematurely over a contract extension that is allowed to lapse or is handled poorly.

While there are many options for independent schools to consider in building a stronger financial base such as developing profit centers like busing, a school store, lunch programs, evening and weekend classes, summer camps and programs, programs and campus sites abroad, extended day, language classes after school, etc., the items noted are the most important initial areas to examine.

Branding is Powerful: Proven Strategies

Your mission statement counts, but only if it can be readily known and interpreted.

A prominent Canadian School for boys has a “tagline” that is also its mission: “Men of Character from Boys of Promise.” That resonates with the entire School community from a five year old child to alumni. That tagline is omnipresent on the website and reflected in the pictures of daily school life. What I like so much about this School, for which my Firm did board governance and strategic planning work among other assignments, is that the tagline drives the discussions and the benchmarking and differentiates it from the competition, a cross-town behemoth. A tagline, when it is used properly and often and when it permeates the school’s leadership initiatives and faculty conversations, becomes the driving force which successfully separates a school from its competitors AND embodies its mission.

Branding starts with mission. Branding should result in a unique and powerful tag line emblazoned across the home page of the School’s website and visible in all forms of social media. Our Firm reviews thousands of websites for branding and benchmarking purposes, and “Men of Character from Boys of Promise” is one of the very few where the tag line just STAYS THERE. The words themselves, the boldness and the constancy together make a strong statement: “This is who we are. This is true. We act on this.”

There is an historic School for girls that had a wonderfully effective tag line: “We will find a way OR we will make one.” The School still uses it, but in this Consultant’s opinion, it is unfortunate that it is no longer displayed as prominently. Think about it. Fifty years ago, how many occupational choices did women have in the workplace? Teacher? Nurse? Secretary?

Another School for girls has a simple but compelling tagline that does drive programs: “Girls Can Do Anything”. Because it appears in small script in the corner of the home page of the website, the message is somewhat lost and its impact weaker.

An international boarding school in Europe situated in the mountains and surrounded by incredible views, had a successful capital campaign a few years ago based upon the slogan, “Reaching New Heights.” In this Consultant’s opinion, THAT would be an ongoing, eye-catching tagline for this School with wonderful opportunities for skiing, mountaineering and outdoor expeditions; a strong track record for college placement; and a tight-knit network of alums worldwide.

This Consultant worked with a School in China to develop carefully a tagline that would resonate equally well in both the Mandarin and English languages and would convey what local Chinese and international families seek for their children: challenge with a “softer” side. Their website now says: “Empowering and Inspiring through Challenge and Compassion”. The tagline needs to be displayed more prominently, in this Consultant’s opinion, but the message does please both Chinese and non-Chinese cultures, and this is not an easy task.

Many schools talk about the same deliverables: excellence, inspiration, integrity, respect, responsibility, passion, empathy, etc. These are not inherently weak words, but when used in a tagline, they need to be put together in a unique, succinct and powerful way. A successful tagline will have these four qualities:

  1. Memorable: Once one hears it, just once, one remembers it.
  2. Genuine: It is true, or evolving as a truth.
  3. It differentiates the school from the local competition.
  4. It sends an emotional “chill” down the spine.

And most important, it must drive board policy and administrative actions and decisions. The head should be like a clergyman speaking from the pulpit where he or she takes every occasion in front of students, parents, alumni, faculty and the larger community to talk about these core words and how they translate into empowering children to be able to lead successful, healthy lives.

The process of choosing a tagline has to be undertaken carefully. Commercial branding and advertising firms may not be sensitive to the politics and history of school cultures and how to position a school successfully within its main peer competitive group. In choosing a marketing consultant, knowing the competitive grouping is crucial; knowing faculty cultures is imperative; and knowing how to work with heads and boards is essential.

John C. Littleford
Senior Partner

Beneath the Surface: Trends in International Schools

The Trends

Having recently spent nearly eight weeks in China, India, Jordan and Peru working with some prominent international school clients, I have come away with a few distinct impressions.

The more traditional and typical nonprofit international schools with parent elected boards certainly remain a mainstay for the English speaking international ex pat community or for those seeking an English based curriculum aimed mainly at preparation for universities in the US, Canada and the UK. However, the expansion of newly minted proprietary schools or those built by corporations, especially in China, is a fascinating development. Now, unlike in years past, most of these schools are accredited by CIS or other accrediting associations. They no longer have the label of being in business simply to make money.

In working with many of these corporate school models, I have perceived that they are not reluctant to pay competitive salaries and provide more than adequate resources and often the very best facilities. In fact, a number of these companies want to create flagship operations that create the benchmark culture, academic achievement, university placement record, and “cachet” that will enable them to build additional campus sites elsewhere.

I am not speaking here of some small minded family owned schools where investors or family members are earning quite a handsome return on their initial investment in the creation of the school campus and brand. Some (but not all) of these are leaning too heavily on school operations for repayment.

However, where a founder, owner or company has put down USD 40 million or more to build a plant and carry a school for the first few years in order to build brand name, results and reputation, there is a legitimate expectation that the school pay a return on investment equal to about 10% of budget. Many of these corporations consider this a fair rental value for the use of the campus. (In fact a number of non-profit international schools in China pay lease rentals as well on part or all of their campus lands and facilities.)

What I find remarkable is the extent to which founding families and corporations are investing in reputation, status, and long term staying power and marketing competitively to ensure strong results. I have a new found respect for some of these schools and their founders.

The same trends that I described in China, I have seen in India even though India’s booming growth lags a few years behind that of China and its economic results are more uneven. But here too, I have found a few entrepreneurs and founding companies/families whose impressive success in commercial and residential development have provided the impetus to move into other areas such as international education. By “international” I mean providing resident children holding national passports with the same opportunities and benefits of a global education that expatriates and some nonresident local passport holders receive.

I found the same in Jordan, where there are a number of family and corporate (as well as traditional international) school models. Here the Royal Family has also formed two new “international” schools.

The Challenges

Language and Identity

One challenge in these more corporate/family/sponsor models is the enrollment mix of expats versus locals. Or, stated differently in terms of identity and vision: Are we an “international” school or a local school with an international curriculum? Often this is related to languages spoken in the hallways and at recess and/or in the home.

Where any language, (for example, Korean, Japanese, Chinese, or Arabic) is the primary and dominant language spoken at home by 25% to 50% or more of the school population, we begin to hear the question “How ‘international’ is the character of the school?” It may have English as the primary language of instruction; offer the IB; place its graduates primarily in universities out of country, but it may still feel either uncomfortable to non native nationals or too “local” for expat families.

These questions of enrollment mix can be complicated and subtle. For example, the student population of one client school is 25% local Chinese nationals; 14% Koreans; 25% with Chinese ethnic background but perhaps speaking excellent or moderately competent English; and another 15% speaking several other languages from around the world. The flavor of the School seems “international”, but how can one know for certain or monitor which language(s) are spoken in the hallways or after classes?

An interesting observation from my recent visits is one School’s view that it is impossible to enforce or pressure the use of English outside of the formal classroom, while on the other hand, another client says that spoken English in the hallways as well as in the classroom is exactly the expectation. Its high school students tell me that while the policy can be difficult to enforce, by and large it works. Their feeling is that if you are a “local” speaking the local language in the corridors or at recess, you are not really living one aspect of the School’s mission, i.e., to ensure that the quality of English enables students to attend top universities in the US, UK, Australia, etc.

Then there is always the push back from those growing numbers of local families who feel the local language (Chinese, Hindi, Arabic, Spanish etc) is not strong enough to give those students the choice to stay at home for university; or to have the ability to land a good job “in nation” and to have connections locally that further one’s eventual career. This is a constant tug in international schools where a substantial number of the population is local, whether by passport or nationality.

Even in the best bilingual schools, both languages are never equally well spoken and understood. One is always slightly favored.

On the other hand, in Beijing, for example, everyone wants BOTH: excellent Mandarin AND very strong English. This dual language proficiency is particularly difficult to achieve yet it is viewed as providing the widest and most attractive range of educational and career opportunities.

Mission and Vision

When these schools engage in strategic planning, almost always an enrollment/marketing/vision exercise is key to ensuring that the parents and students share a common vision about the school’s identity. If the school does not assess the “mission congruence” of new families applying, the school may find itself drifting away from the mission of the school. The enrollment determines the mission over the long run and in many international schools, over the short run as well.

An example of this was one client where the high school parents and faculty all agreed on a more western model of turning out “well rounded” children. Involvement in community service, the arts, athletics and student leadership were all important facets of the mission, in addition to a focus on academic rigor. After a while teachers noticed that more and more of the younger parents in particular did not buy into the mission of the “all round’ child as reflected in low or sporadic student participation in extracurriculars and athletics. These parents simply wanted stronger local language, math and science and prominent university placement, all clearly with Harvard in mind.

This occurred because the School had not been interviewing entry level families to assess mission congruence but had been simply accepting their children based upon test scores or academic potential. As a result of a strategic planning process, that School now does interview all incoming parents to ensure that the parents indeed want what the School’s mission offers and are not just saying what they think the School’s admissions office may want to hear.

Mission congruence is absolutely essential to keeping the “international” in many of these schools where the title may exist but the reality of what an international school means, may not. There are many good, local, private schools worldwide that have taken on the label of “international” and have adopted the IB and thereby presume that they are international schools. A great number of state schools in Australia have adopted the IB. Does that make all of these Australian schools “international?”

So are these schools “international” or local schools with an international curriculum? The answer is that they need to be addressing and monitoring internal and external perceptions on an ongoing basis. The best ones are trying to generate sufficient market demand by EACH of the subsets of their populations to ensure the integrity of the mission as an international school with a truly mixed and international community, while still meeting the needs of an appropriately sized segment of the “local” community.

For example: if a school in a country with a tradition of vegetarian cuisine is serving vegetarian only meals, and the expats feel that practice is a symbol of the local nature of the School population, does that have anything to do with being an “international school?”

If a school in Latin America is using the South American calendar but is still serving a subset of a North American and European expat population, does the use of this calendar signal a local school rather than an “international school?”

If most of the students from the school go to universities “in country” rather than any number leaving the country for university does that make it a local school rather than an “international” one?

If 70% of the parents are local or local language speaking, and only 15% or less of the parent body speaks English as a primary language, does that make it an “international” school or not?

What is an “independent” school versus an international school? In other words, when do these so called international schools just become perhaps very good but clearly local independent, private schools with a global as opposed to a local vision and purpose?

Lessons Learned to be a truly “international school”:

Achieving mission clarity;

Marketing effectively to distinct and varied populations, including ensuring that the local population of self payers or any single non English speaking nationality does not become more than 40% of the total school population;

Ensuring the target language remains the lingua franca of the hallways and dining room; and

Ensuring the continued ability to attract, hire and retain reasonable percentage of foreign hire teachers

A Final Note

One school client asked me to interview a group of high school students. They told me they were very confused about the English language instruction they had been receiving. First they had a group of teachers from the UK who taught them with a distinct British accent. Then teachers mainly from New Zealand replaced those and the students began to take on another new accented English. Now they have mainly American teachers, and the confused students have noted yet again dramatic differences in the way English is “spoken”.

All of this represents just one of many elements of an international school that a leader needs to understand: An international school culture is not all about just the IB or about the number of overseas hires a school brings on board. It is also about the mix of teachers; the training of the teachers; and their attitude about the school’s mission and their workload expectations. It is all about how long they may stay and about trying to ensure that institutional memory does not reside entirely with the local teachers who never leave (as teaching there is one of the best jobs in the country) and the international teachers who always leave (except in Western Europe where they almost never leave).

John Littleford
Senior Partner

More Marketing Bang For The Buck

How does a school reduce an often overblown mission statement containing overused words to less than five to seven pithy, powerful and memorable ones? How does a school communicate them effectively internally and externally according to a carefully thought out marketing strategy? Can a school do this cost effectively and engage the appropriate support of the faculty and parent body where it can be most helpful?

With the assistance of Littleford & Associates, many schools have launched a comprehensive marketing program with several components aimed at increasing enrollment and retention. It begins with this consultant conducting on site focus groups with current parents and faculty to hear their interpretation of the school’s mission and how it delivers on that mission in all aspects of its program. The participants hear that feedback in summary form and the School acts on it in any or all of the following ways:

  1. Improves the articulation of its mission
  2. Revamps its handling of admission inquiries from the initial phone call to enrollment
  3. Recruits and trains enthusiastic parent volunteers to cultivate prospective families
  4. Identifies more ways to sell the key strengths of the School to prospective parents
  5. Responds to existing parents’ most important concerns in order to increase retention.

After this work, one Head said, “Your time with us recently has had a huge impact on our community. The Focus Groups and feedback session have allowed us to build enthusiasm in our community and to acknowledge our strengths as well as the challenges we face. Since your departure we have recruited leaders and many volunteers to work in each designated area with a kickoff meeting scheduled for next week. The morale has been very high!”

John Littleford
Senior Partner

Beneath The Surface: What The Numbers Reveal

Recently several schools have retained Littleford & Associates to assess worldwide workload patterns, length of school day and many aspects of how they manage their income sources and expenses. Undertaking such a study requires a certain amount of “courage” because faculty could worry that it may lead to greater workload; more minutes per week; larger class size; fewer stipends; and less release time. However, the potential benefits of such a sophisticated survey far outweigh any political risks, even to a faculty. The results and revelations can be empowering. They can lead to a clearer definition of a full time job, greater equity and fairness and the creation of a more viable financial model.

One of the most intriguing highlights of these surveys that included more than forty internationally known and highly respected peer schools was the vastly varied pattern of workload for teachers. Therein lies an interesting question. Since salaries and benefits make up 70% to 85% of the costs in schools, why are schools not paying more attention to workload patterns? Productivity seems to be a term that we use in the business context constantly but avoid in the school context.

I. The Real Costs Associated with Workload Patterns

In the above examples, teacher work days ranged from 161 to 192. Minutes of in class teaching time per week for secondary school varied from 600 to 2500 minutes. Some schools paid teachers nothing for taking on extra curricular assignments after school, and one paid up to $15,000 a year plus reduced class loads for similar tasks. These are but just a few of the interesting and surprising findings of these surveys that point out huge workload discrepancies.

These recent studies forced the participants to count “minutes” per week actually spent teaching in the classroom. This required calculating time spent in car pool, recess and lunchroom duty; transition times for elementary school teachers; and break time while other “specials” took over. This required listing how many “specials” are offered in the elementary grades and the time given to IT, library, music, art, PE and other non-homeroom related classes. The statistical range is both fascinating and baffling. How can great schools of enrollments averaging 1000 students or more have staggering differences in workload behaviors?

Most of the Schools who participated in these surveys were International Baccalaureate Schools. The real cost of the IB model is very high. The model often requires the positions of PYP (Primary Years Program) Coordinator, MYP (Middle Years Program) Coordinator and other administrative roles. These are stipended positions that are often but not always accompanied by reduced work loads. Even in those schools without the IB, however, it is common practice for department heads and the directors of many other activities and functions to have a lower workload.

For example, if a school pays someone 80,000 USD annual salary plus $2500 for being an MYP coordinator or a department head AND reduces his or her course load from four to three classes this costs the school $2500 plus $20,000. Reducing workload while adding stipends is one of the most expensive ways to staff our academic and extracurricular programs. Seeing these true costs in black and white can lead to the important discussion of how to reduce and control them particularly when lock-step salary scales leave few variables to manipulate.

II. The Definition of a Full Time Job

Even before conducting these recent studies Littleford & Associates was becoming increasingly aware of the importance of studying workload patterns in our independent and international schools. Rarely in all of our 25 years of interviewing over 60,000 teachers individually worldwide in over 3000 schools did we have a teacher ever tell us that he or she was not overworked. Most felt underpaid as well.

At one end of the spectrum, this consultant has seen a full time job defined as five classes a day, five days a week, times 20 students in each class, plus two after school coaching assignments with no extra pay for those roles. At the other end, this consultant has observed teachers with a workload of three courses meeting a total of four times a week; one or two “preps”; no extra assignments after school, advisory, or homeroom; and freedom to come and go during the day when one does not have a class period. Teachers at both of these extremes have told this consultant that they felt overworked.

What is at the bottom of the workload issue? The definition of a full time job. In the old boarding school model a full-time job was teaching four classes; coaching two sports, serving dorm duty two to three evenings a week and every third weekend; and having an advisory group of students. As the independent school movement spread south and west in the US, it adopted the compensation patterns of public schools. Internationally the same pattern evolved. Increasingly, almost all the leaders and teachers of those schools came from the “state” sector schools in their home countries. That background or training may have been excellent but it represented a very different way of thinking about a full-time job.

Many years ago, schools decided that the norm for middle and upper day school teachers was two or three “preps” daily. Now for many middle school teachers, one prep is the norm and may be the norm as well for an upper school history teacher. But what about a foreign language teacher who is upset about having four preps? That is an unfair comparison when one fails to take into account that the middle and upper school teachers with one prep may be teaching 80 students and the foreign language teacher 35 to 40 students. This is one area where total student enrollment per teacher is relevant in a workload comparison.

Another dangerous workload pattern grew out of a desire for a more flexible schedule, such as a rotating one where teachers may meet their students for only three or four periods a week. These teachers tell me their load is “four courses” or even “five courses”, by which one might infer incorrectly that they teach these classes every day. This is why calculating minutes per week or per every two week cycle is critical.

One client school grants workload reductions of one course for activities ranging from yearbook, drama, dance and school newspaper to handling carpool. At one time this school required four classes (or courses) a day five days a week plus two “extras” at no additional income. That went by the wayside long ago as this School administration (and many others) fell down the slippery slope of negotiating with teachers nearly every new duty or task that needed to be done. How did this happen?

Expectations of a teaching professional have increased exponentially along with parental expectations of an independent or international school education. Teachers are now asked to serve on committees; help to evaluate their peers; learn and participate in curriculum mapping; and participate in open houses, for example. We have failed to differentiate between performing extra work on the one hand and giving to a chosen profession out of a desire for self-enrichment and student improvement.

Most of our teachers are fully professional and fill whatever gaps they may have in their daily schedules with related tasks in a conscientious effort to be productive and resourceful. At another recent client School all of the teachers interviewed were quite comfortable with the expectation of teaching four courses plus one extra activity such as coaching or a club. Their issue was not so much workload or absolute compensation as a lack of transparency about how compensation is delivered at this School.

III. Do These Workload Patterns Point to a Formula for Success?

What is also interesting is the relationship between schools paying higher teacher salaries and those with higher workloads.There was really no pattern in these studies. That is, strong schools with higher workloads were paying high salaries, BUT so were lesser known schools with lower workloads. Can the schools with lower workloads paying higher salaries really justify both? Can they justify this pattern, if in terms of national or international reputation they are no better known or regarded than schools with lesser salaries and higher workloads or higher workloads and higher salaries?

What if we compared IB or AP scores of these schools? Could we conclude that low workload and high salaries automatically result in better scores? It is doubtful. More likely, one can attribute high faculty morale and higher student test scores not just to competitive salaries and reasonable workloads but to the health of the core faculty culture. Of course, the students’ genetic makeup and home environment greatly affect test scores as well.

Yet it may be that some of the schools with the higher workloads (and where excellence, high tuition, and satisfied parents are the norm), may find that they have actually found the “right” long term pattern for sustainability. That is, these schools may have struck the balance between equitable expectation, distribution of workload, leadership and selfless dedication to school mission and the teaching craft.

IV. Income Areas

Another surprising outcome of the surveys above was that very few of those Schools are generating enough money from profit centers. Here are some of the key findings.

Application fees were the most common additional source of income. Eleven of the nineteen Schools in one study have such fees. The yield from them, however, varied from $1,400 to $604,000 per year.

Nine Schools reported income from facility rentals and nine from building/capital assessments. Again, the ranges were wide. Facilities rentals raised $1,790 to over $1,000,000 per year, whereas the building/capital assessment brought in from $5,000 to $5,000,000. Bus services, too, created additional sources of income for a number of Schools: $110K to nearly $3 million. Another School, however, reported a net loss from its bus service of nearly $50,000. We did not explore the fee structure and circumstances of each of these services, but unless a service is offered purely for safety reasons with no possibility of a profit, a loss should be unacceptable.

Many schools offered summer programs and after school programs. Summer programs aided the bottom line considerably: $35,000 – $1,174,190. After school programs contributed more modest amounts raising $34,000 to $210,000 annually. Re-enrollment fees, however, helped a good deal, generating $160,000 to $1,400,000 in revenue.

Several Schools also gained from food services, from $60K to over $1 million. Many Schools outsourced food services, allowing vendors to capture the proceeds rather than the School.

Many charge a technology fee which yielded an average of $500,000. Other Schools recorded a variety of other income-producing sources: one time per student or per family entry fee – $1,045,158; registration fee – $955,000; non mandatory activity costs – $955,603; adult learning – $109,613; and building fee – $2,237,125.

Only a few reported having a school store but we know from our work with other clients that an established well run store easily can provide net revenue of well over $300,000 a year for a school of 1000 or more students.

Clearly, then, some Schools are making good use of these funding sources, but the majority are missing out on these income-generators altogether. Profit centers can generate 10% or more of total income per year and about one third of that is “net”.

IV. Summary: Opportunities

If the current economic downturn has no impact on our willingness to examine our core workload patterns, then we will have missed an historic opportunity to review the logic of our financial, hiring and workload decisions. Furthermore, unless schools find the moral and the political “courage” to examine with teachers in a frank and honest dialogue the real impact of our current workload patterns (not to mention the related field of compensation and benefit patterns), the entire question of “sustainability” remains largely unanswered.

More schools should consider seriously a workload study that compares “apples to apples” in terms of how schools use teacher time, how they pay or do not pay for extra assignments, coaching, and advisory assignments. Littleford & Associates can customize a survey such as the one described above that meets your school’s budget and needs. The end product is a comprehensive and sophisticated tool that contains more detail and shows more patterns than statistics available through on line sources. It can serve as the springboard towards discussion by school leadership about real improvement in your bottom line, program delivery and even in faculty culture.

However, if the client wants to address successfully the questions that these surveys raise and if the faculty is to be open to changes that these surveys may suggest, then it wise for an objective outsider to come on site to obtain a sense of the school culture and climate, including school receptivity to change, and to assist in the presentation of the survey methodology and its key findings.

We recommend further that more schools study how to create new, and improve existing profit centers. Collectively income from bussing, food service, school store, facilities rentals and other opportunities can throw off potentially sizeable sums to offset large commitments needed for financial aid, building improvements, professional growth and improvements in program and faculty compensation.

John Littleford
Senior Partner

Compensation And Tuition Setting: The Message Is Mixed

Many schools did not raise tuition for 2009-2010 but others did by 5-8% or more. A few schools pulled principal away from their endowment to bridge this crisis in hopes of stabilizing enrollment. The fear here is that being too “tight” this year could produce more dire enrollment consequences in 2010-11.

Clearly, schools are worried about “summer melt”, i.e., the possibility that moderately positive predictions of enrollment could collapse when the first tuition payments are due. Those schools that require a very large non refundable enrollment deposit hope that forfeiture of the deposit will make parents think through their enrollment decision very carefully and be less inclined to walk away.

Given the uncertainty of the global economic picture, worries about an enrollment shortfall for the 2010-2011 school year appear to be greater than they are for the upcoming year. Much will depend on the public and parent perception in the ensuing months of the value of their personal assets and their perceived return on the value of the tuition dollars they will be spending. Do parents believe that they are getting sufficient value for the tuition charged? Is the school delivering on its mission and providing excellent “customer service”? Are these enough to prompt parents to feel they are making a good investment?

Many schools (including Harvard) gave no increase in faculty or staff salaries but also clearly some schools did, from 1% to 8% or some across the board cash amount for all.

What accounts for the differences in school and therefore board behavior on compensation and tuition setting policies? These decisions are not simply the result of financial analysis and a reaction to a drop in endowment values or local employment trends. Much more comes into play: school climate, faculty culture, the head’s political capital and leadership, and the leadership of key board members and their willingness to trust the head’s instincts about what the parents and faculty will bear.

I. The Range of Choices

Some heads, in listening to parents tell truly sad stories of financial losses and stress, felt that the community needed a respite from tuition increases. This requires a tradeoff. Most could not afford to draw off an endowment that had declined sharply in value, thus they elected to cut expenses including providing no salary increases in some cases. Many of these heads also believe that it is better to avoid terminating anyone (or perhaps just not replace those leaving from normal attrition) thereby keeping the culture feeling “safe.” This is the “cultural safety mode.”

Other heads have used economics to tackle the difficult job of letting go some of those who might be deemed dispensable either due to staff redundancies or mediocre performance, while still raising faculty salaries modestly for the remainder of the staff. This leader uses a financial situation to make strategically significant decisions that help the school over time. Give this leader the benefit of the doubt and give him or her some credit for turning a crisis into an opportunity to improve the school. This is the more“moderately assertive management” mode.

Still others see an opportunity in these difficult times to remake the school, raise the overall teaching quality, upgrade the curriculum and finally “move out” under performing teachers whom the school and head may have let slide in normal and more bullish economic times. The economic agenda in these cases also represents an incentive and an opportunity to raise the quality of the staff and the teaching across the board. This is the “high risk for potential high award” management mode that many business-minded boards are in fact encouraging. Many heads are basically uncomfortable with this approach as it reflects a culture shift and requires a great deal of political capital and skill in order to survive it. Nonetheless it has been necessary and used in a number of cases.

The practices vary widely as do the goals of heads and boards in attempting to walk that fine line between on the one hand, keeping parents calm and re enrolling their children and on the other, continuing to ensure that the school offers competitive salaries to attract and retain the best teachers and that the culture remains healthy. It also touches upon the family school and business model metaphors that are often seen as conflicting. The right approach is somewhere in between.

II. The Not So Publicly (But Privately held) Goals

A. Keep the culture intact. Fire no one. Raise no one’s salaries. Do not raise tuition. Be cautious and conservative.

This risk averse thinking is quite pervasive worldwide among independent and international schools. Where the head is longer term and embedded fully in the culture, and where the head’s trust factor with the faculty is high, this may be the dominant mode. This strategic response may not, however, meet with the approval of the business oriented trustees on the Board some of whom may have lost their own jobs or are feeling the pinch of tuition more than ever before.

Some of these trustees are pushing mostly established heads to dig deeper and make some substantial reductions in overhead, expenses and even staff positions. Most of these heads are successfully resisting these pressures currently. They are betting that things will ease up in the fall, that there will not be a major summer “melt”. They worry, however, that if the scenario plays out differently they will lose some substantial political capital with their boards.

B. Keep the culture intact, let people go only through attrition and perhaps some part timers. Be prudent.

The assumptions behind this decision-making mode are not dramatically different from the first, except that it does reflect some willingness to let go of the individuals whose positions are dispensable and/or those who are part time and may not need the position as much (but often do need the benefits). It may also include easing out some individuals with a relatively low workload whose responsibilities another teacher or staff member might be able and willing to assume. When a head can accomplish these kinds of staffing shifts with grace and aplomb and without apparent damage to the culture or faculty morale he or she demonstrates real leadership talent and political skill. There is a potential long-term strategic benefit here.

C. Reshape the culture gingerly by making delicate “incisions” where teachers should go. Be moderately assertive.

This is a more assertive style than the first two and reflects both some instinctive leadership behaviors and also some board pressure on these heads to make some selective moves on teachers who need to go. The head can do this thoughtfully and carefully with buy outs and agreements so that the fall out is minimal.

Older teachers who were ready to leave the profession are deciding to delay that retirement because their retirement assets have shrunk so much. One way to address this issue is to consider again the idea of an early buyout plan. This provides the option to those age 55 or older and with 15 years tenure the option of taking a full year’s salary over two or three years while keeping them on benefits during that time. The money remaining on the table are the resources the school has available to hire a younger replacement. This is a time tested tool for providing a dignified and supportive departure for more senior faculty who clearly are ready to leave teaching but fear financial insecurity.

Without some kind of protection such as this the result is likely to be damage to the faculty culture and the mobilization of parents and students to protect the “wronged” teachers.

D. Raise tuition modestly to ensure that there is something to increase faculty salaries. Be moderately assertive again.

This reflects again a strong head of school who is willing to sell the tuition increase to the parents and to make a strong case with the Board for this decision in order to ensure a modicum of a faculty salary increase. There is no cutting of staff here. This head is making a statement to the parents, board and faculty that he or she will stay the course of continued tuition and staff salary increases despite the times. The risk here is that if the bottom drops out in the near future, these heads will be feeling the pressure to make some substantial cuts late in the summer.

This reasoning reflects a concern that the program is underfunded as it is and that a decrease in real or perceived value will damage the long-term health of the school. These heads think that by holding the line on value they will enroll and re-enroll students and be in a stronger position to respond to continued hardship should it persist.

This decision also may be in part based on what is the morally right thing to do. Why should teachers who are underpaid consistently subsidize the education of those whose families can afford to pay for the services provided?

E. When really pressed, do not raise salaries or tuition, cut some staff around the edges and reduce faculty benefits by cutting out retirement contributions for one year and/or shift more of the burden of their own health coverage costs onto the faculty. Be aggressively economically driven.

This head is already under tremendous pressure from his or her board. He or she may have prepped the faculty for no salary increases but for temporary cuts in benefits that have always seemed sacrosanct. The morale of the staff here can be maintained at least in the short term if the head makes the decisions with candor and provides regular updates on the status of the budget and enrollment. A head in this situation must also be willing to add BACK some benefits if the enrollment at school opening turns out to be higher than projected and may be able to add a one-time bonus if and when enrollment hits budget. He or she must be cultivating board support for these potential “give backs” in order to deliver on promises.

Heads able to pull off this scenario are those who may or may not be popular with the staff, but who know that there are some potentially dire consequences of waiting too long to prepare the staff for an enrollment downturn. These schools generally are already showing some substantial enrollment losses, i.e., up to 5 % or more. Failure to act would be imprudent or fiscally irresponsible. These are also schools where the board will not allow the head NOT to act in these circumstances and will expect an analysis of the causes of the downturn. The situation might have more to do with perceived value and lack of aggressive marketing than pure cost.

III. More than Just the Financials

Whichever model the head/director is using, it is a reflection of these internal factors in addition to external ones outside of the school’s control:

A. The head’s own leadership style. Is he or she directive or analytical and believes moving too fast is often worse than not moving at all? Is he or she an amiable who tends to want to “keep the peace”? Is he or she a driver who will tend to look at a crisis as an opportunity for change and improvement?

B. The board’s temperament collectively and make up individually in terms of personal circumstances and business/investment backgrounds. When the board is pushing the head for more aggressive cuts, the head must either execute that policy or take a stand against it. If the decision is to take a stand the head needs to measure the likelihood of success and the potential fallout. Keep in mind subsequent years and long range effects.

C. The climate and culture of the faculty. If the faculty trusts this head and know him or her well and if the communication is early, consistent and honest, then the tone may become more somber but not turn negative. If the head is newer or there is a long history of poor communications between administration and faculty or high head turnover, then long term harm to the already sensitive culture could ensue. Heads should follow a strategy of consistent but not too frequent communications with the faculty. You do not want to scare them. You want them worrying about the students not their paychecks.

D. Parent support, financial strength and view of the benefit/cost ratio. Never before have parents asked more forcefully and more often about whether the cost is worth the benefit relative to a state/public school or a less expensive competitor. If the school has made a powerful case that it IS, then the parents will likely hold tight. (Parents seldom seem to think in terms of hourly cost that may be only $8.00 to $16.00 per hour, certainly reasonable even compared to local daycare rates.)

Again perceived value of the investment is key. At this first stage most of our families who are feeling the financial tightening are making lifestyle choices: vacation or household luxuries or tuition; country club or independent school. The next round of decision-making will be tougher. Our schools must demonstrate added value to survive.

If the head has strong connections to the board and parents and therefore indirectly with the students, then leadership decisions, even those resulting in some pain to the staff or constituents, will be tolerated and even supported.

Where the head’s political capital is already low or where the head misreads his or her own board or staff or parent body, these difficult economic times can and will result in even more school trauma and potentially the premature departure of the head. Tough decisions will use political capital. These are the times that will make good heads think that they are starting from scratch to build loyalty. Do not take anything for granted. Do not count on too much political capital even if you think you have a substantial reservoir of good will.

IV. Conclusion

One piece of good news for heads: most boards tell this consultant that the current economic times prompt them to want their head to stay longer and avoid a search in the near future. A search represents change, transition, money spent, and risks that the schools would prefer to avoid. It also means that more boards are thinking seriously about internal succession planning. Our research shows that in the past only about 10% of our schools worldwide chose this option. Internal succession planning means more than having a familiar figure waiting in the wings. It means ensuring that the values and mission of the institution are instilled in that person who is the chosen successor.

Another lesson learned: schools must become substantially better at defining the real value for the cost of tuition and SELLING it internally and externally. That exercise is a worthy one even though it may have been thrust upon us. It should be an ongoing one. Few schools go broke for charging too much. They may go under because current parents do not perceive they are getting the value for their tuition dollars and because prospective parents are not hearing that value message.

Littleford & Associates works with schools in the areas of healthy board governance, financial management and analysis, school climate, communications, crisis management, compensation and evaluation of staff and heads, marketing, fund raising and mentoring of heads and board chairs. We can help you maneuver these difficult waters by helping you build a strong board; undertake a school climate/value assessment; recruit a marketing force of volunteer parents; help provide appropriate strategic planning; and help you redesign current salary and benefit systems to make them more effective in the delivery of scarce compensation assets.

John Littleford is also available to provide short-term assistance to heads and boards “on the spot” through consultation via teleconference.

John Littleford
Senior Partner

How To Get A Handle On Controlling Expenses And Increasing Income In Difficult Economic Times

For independent schools all sources of income and expense are like the various points on a waterbed. If you push down on one area, the other areas pop up. There are “trade offs” to budgeting decisions in the operations of independent schools. How do independent schools analyze these tradeoffs and make appropriate financial management decisions that support the mission and vision of the School? And how can these decisions be made promptly, effectively and decisively when the era of scarce resources and tight budgeting is facing us?

The first, important exercise, that very few schools undertake, is to assess their “sacred cows”. These are their treasured goals that are often in conflict with one another.

The “Sacred Cows” that we all aspire to achieve, preserve and enhance are as follows:

  1. Competitive Faculty Salaries
  2. Strong Program, Curriculum, and Technology that is “State of the Art”
  3. Low to Moderate Class Size
  4. Appropriate Maintenance of the Physical Plant (to avoid deferred maintenance)
  5. A Strong Financial Aid Program to Help Ensure Diversity and Provide a Safety Net
  6. Management of Enrollment: Enhance Income and Fill the Seats
  7. Moderate Increases in Tuition and Fees
  8. Enhanced Annual Giving, Endowment and other Gift Income
  9. More Profit Centers (School Store, Dining Room, Summer Schools, Internet Ventures)

There is a simple, starting exercise to determine each trustee’s position with regard to these issues and priorities. Ask every trustee to rank each of the nine “sacred cows” as to whether they want to see more of it (a PLUS); about the same level (a ZERO); or less emphasis given to that area (a MINUS). Then add it all up to see if there is a sense of direction and agreement.

The key to achieving the school’s goals and yet balancing the budget and controlling expenses, especially in a time of economic downturn, is to know how to balance the “Sacred Cows.” Schools can do this in a way that the board, faculty and administration all support, by appropriately educating these constituencies to ensure that they understand the underlying tradeoffs. To learn HOW to assess and then balance the “sacred cows”, read further.

The income sources among the “Sacred Cows” are:

I. TUITION AND FEES

Do the Board and Head want to be able to increase this area to generate more income? A recent article in the New York Times indicates that with college endowments down, draws on endowment will be less at the very time when the need based financial aid pool must grow to meet demand and provide a safety net even for current students. According to this article, colleges will need to increase tuition aggressively while raising financial aid aggressively. The “Robin Hood” effect may appear even more evident than it has in recent years in our pricing strategies.

Does the Board want to keep tuition increases moderate right now, or is it important to raise tuition more aggressively? What will your constituency support? What is the justification for a tuition increase beyond the standard 2%? If the percentage increase in tuition must, in fact, be higher, more key questions follow.

Has the School a strong need, such as competitive teachers’ salaries, that will clearly motivate the parent body to dig deep into their pockets to pay more for attracting and retaining strong teachers? The teacher pool may stabilize now that more people are out of work and looking for jobs and the teaching profession, never a high status one in the US, may be more appealing as it tends to have more job security.

Has the School thought of creatively “packaging” tuition and fees? Many years ago a consultant urged schools not to “nickel and dime” the parents to death by charging fees for books, labs, lunch, and athletics. The goal was to “lump” all these into one, flat tuition.

Experience has taught us that the schools that took this advice put themselves at a competitive disadvantage vis-�-vis their peer schools. Interviews and research have shown that parents focus primarily upon the “tuition” figure and perceive a higher number at the school where the fees are lumped in with tuition.

Pricing strategy in the independent school world follows pricing strategy in the business world where a $10.00 item is priced at $9.99. While infuriating on one level, because we know intellectually that $9.99 is $10.00, on the recognition and emotive level, the item STILL costs $9.00 to us. The same is true with “unbundled” tuition and fees.

Parents widely understand enrollment fees, building fees, renewal and replacement fees to cover the children’s “depreciation” of the building.

Should the parents who are new, and did not contribute to the capital campaign that just built the new lower school and science wing, be able to use the facilities without a “construction” fee? This fee is the equivalent of the average gift all other parents made in the capital campaign. New parents will, after all, have more long-term use of that building than current parents.

Thus, the general concept is to set your goal, determine what the school needs and then move forward. If “tuition”, as a “sacred cow”, should not be raised above 2-3% in your school culture, and you have analyzed and maximized fee income as well, you then move forward to address the other “sacred cows” to determine in what other areas you can gain income or control expense. That leads us to: TOTAL SCHOOL ENROLLMENT.

II. TOTAL SCHOOL ENROLLMENT

Enrollment management is one way to generate income. The more students, the more flexible income, as certain fixed expenses remain constant. There is still only one head, one business office, etc. However, for some parents a fixed enrollment is a “sacred cow”; the school already feels “full” to them, and there is a sense of worry about becoming too big, losing that sense of “community.”

Actually, there is very little proof that size leads to a loss of sense of “community” if the UNITS within the school are small enough.Independent schools with high schools having over 400 students do seem to lose “community.” A high school enrollment of up to 400, however, does seem to work. A high school of 400, a middle school of 300 and a lower school of 500 are common numbers among independent schools. That is 1200 students, if the market warrants it and the space allows for it.

How to fill the School if parents are feeling the pinch and losing substantial personal wealth and retirement assets and potentially as well, their jobs? Independent schools have never been particularly effective at marketing the benefit to cost ratio in our schools. Most of us speak of “excellence” in ways that do not clearly demonstrate why we may be a better placement for some students than the good local high school magnet program that now offers the IB as well. Why not just revert to the local public schools?

Independent schools must focus on differentiation plus the traditional qualities of environment, character, faculty to student relationships, individual attention, and participation in a range of activities as well as motivating environments, stimulating teaching and greater peer group motivation. We need to focus on these as well as on our new buildings and our growth in programs and centers of excellence. Parents need to know that the reduced discretionary income available to them should still be spent on the unique cultural differences between independent and international schools on the one hand and the state/public schools on the other. Telling that story effectively, consistently and powerfully is the key to marketing for a healthy, more full enrollment.

However, if this “sacred cow”, which is a valuable income source, is viewed as untouchable, ie the current size is fine and it is not shrinking, then we move on to the next source of income: GIVING.

III. GIVING OF ALL KINDS

Annual giving, planned giving, capital giving, endowment giving are goals of most schools. The important question: Is the School willing to “prime the pump” and spend more to make more? Does the School have the necessary skills in the advancement office to increase dramatically the level of giving? What will be the effect on giving from the economic downturn? It appears that percentage of donors may remain constant while the actual amount of contribution goes down.

Giving also comes from special events, which parents and alumni, grandparents and past parents may not see as “fund raising” but simply as good fun that they would provide for the family anyway. Many schools have auctions, gift fairs, outdoor events, and celebrations of all kinds which are aimed more at “friend raising” than fund raising. Nevertheless, these events can often bring in significant dollars.

Most schools would place “giving” high on their list as a desirable “sacred cow.” The key is: How to do this? How much money does the “pump priming” take? Most experts believe that within five years of establishing an advancement office, the total money raised each year from all sources of giving and events should be five times the total cost of the development office (including staff salaries).

If you lack skilled development office personnel or the funds necessary to generate more giving, or are already focusing sufficiently on your giving strategies, then move on to PROFIT CENTERS.

IV. PROFIT CENTERS

A “profit center” is any school activity that generates more income than it costs. Very few schools have studied seriously the idea of profit centers. Many schools need these.

They include bus operations, for example, and few schools realize that yes, running a bus system can and should make money. Food service can also generate a profit where there is a required lunch program and fee. This also allows for better control over food quality, quantity and a range of diets than “canteens” and vending machines.

One school of 1000 students nets over $350,000 a year from the school store. This store sells books and supplies. However, it also sells popular name brand clothing that also carries the school logo. The school buys at wholesale and sells at retail, at least a thirty percent mark up. These schools also sell everything that could be attractive to grandparents, and spectators turning up at athletic events where a cart full of school store supplies is wheeled out to the games.

Other profit centers include: rental of the facilities; night classes for adults; and summer school camps and programs. One school rents signs out to corporations for a three-year period. The signs are in the gym and along the football and soccer fields. They are of uniform quality, color and size, and bear only the companies’ names, no slogans. The signs are tastefully done, build good will with local corporations, and the income generated is over $100,000 a year. To “sell” this idea to area businesses, the School quantifies the number of spectators that would see these signs in each setting each year.

Internet courses and classes and the development of innovative curricula have also brought in funds for a number of schools as well as partnerships with corporations. Profit center net income ought to generate at least 10% of the annual operating budget.

If there are no opportunities for viable profit centers, or those existing cannot generate sufficient margins, then consider CLASS SIZE.

V. CLASS SIZE

We think of all class sizes as “sacred.” Somehow if the average class size is 16, and the faculty student ratio is 1 to 7, that is “sacred.” For another school, it may be a maximum class size of 20. The reality is that we have very little evidence of the “break points” in class size where one number above the break point provides less effective instruction. There is little difference between 16 students and 18 students or even between 20 students and 22 students, in both research-proven delivery and results.

In fact, a class of 25 homogeneously grouped eighth grade students in advanced algebra might receive better instruction than 17 students of mixed abilities. So, class size is relative. Its importance is more in parental perception.

Would a school be willing to increase average class size from 18 to 20 or from 17 to 19, to achieve an extra 5 base points to faculty salaries?

Class size is a unique “sacred cow”. It is BOTH a source of income as it grows, AND a source of expense, if a school is trying to reduce it. If class size is a “sacred cow” that is too sensitive to adjust, then move on to EXPENSES.

The “Sacred Cows” of expenses are as follows.

VI. SALARIES

Are faculty and staff salaries competitive enough right now? Or do they need to be raised significantly? What is the school’s philosophy of compensation? Few schools have a philosophy of compensation, and one SHOULD BE in place.

For example, one boarding school with limited resources recruits aggressively to attract bright young graduates from Ivy League schools. These young teachers coach three sports, advise, do dorm duty and teach three classes.

After three to four years in the north woods boarding school, they are worn out and have little or no social life. Most leave.However, this school utilitizes its scarce salary resources to identify those 4-6 teachers each year that it dearly wants to keep. It retains them by bumping the base salary $6,000-$10,000, cutting back on one coaching responsibility, and giving them a modest leadership role to enhance their sense of self-esteem. The latter gives them the ability to translate that leadership role into another major job at another school in a few years. This strategy tends to keep these key teachers.

Schools need a SALARY SYSTEM that maximizes the effectiveness of the salary pool. What does the school wish to stress in rewarding its faculty? Quality of teaching? Workload? Attitude? Mentoring fellow teachers? Going the extra mile? Professional growth? Demonstrating leadership? Relationships with students? Relationships with parents?

Whatever the school wishes to reinforce in its teachers, it needs to devise a salary system and a philosophy behind that system that enables the school to spend those salary dollars wisely.

If salaries are a key “sacred cow”, then reduce or press down on other areas and press forward on this one. If salaries are high enough now, and if there is a clear philosophy of compensation delivery, then move on to another “sacred cow.”

VII. PLANT

Most schools do not want to defer maintenance. However, it may be necessary and may be the better of two evils if the choice is EITHER to lose good faculty (or not attract them in the first place) or to tax the physical plant for a few years. Neither picture is healthy in the long run. However, when facing economic stress and tough choices, schools need to have these discussions at the FULL board level and NOT JUST at the finance committee level. Trade offs of “sacred cows”, such as salaries and capital expenditures, are crucial to effective policy formulation and ultimately crucial to the realization of the mission of the school.

If physical plant cannot be ignored, then analyze PROGRAM.

VIII. PROGRAM

The questions are simply: Do we have enough? Is technology becoming TOO high a priority? Are there other things on which we should focus such as the International Baccalaureate degree, foreign languages, the Library, the Arts? Science?

The board should review the degree of the “richness” of its program currently, and with the guidance and full input of the head of school, determine if program is an area of expense reduction, increase or maintenance at the current level. If program is “untouchable”, then move on to FINANCIAL AID.

XI. FINANCIAL AID

Has the school committed adequately to this area? NAIS has recommended 10% of the budget be set aside for need-based financial aid to help ensure that independent schools are not enclaves of the wealthy but have an appropriate degree of social, economic and racial diversity. Yet very few schools are at the full 10% level or more. This “pot” will need to grow more than ever before to deal with current economic pressure on parents.

The question for any budgeting process is: what are the school’s values on this topic versus its resources currently? Can it discount seats, or is the school full? Are faculty utilizing too much of the financial aid (or tuition remission) resources?

SUMMARY

A board of trustees functions effectively as a true, policy-making entity when, together with the head and management team, it takes on the challenges of weighing the school’s “sacred cows”. This is not a purely financial analysis of how to maximize income sources and control expenses. When trustees engage in an in-depth dialogue with one another, raising the various questions posed above, it is behaving as a group appropriately holding the mission of the school in “trust”.

The NINE SACRED COWS are a friend to those schools who know how to use the formula wisely and to understand the assessments behind it. To those who ignore these basic issues and trade offs, an opportunity has been missed.

Littleford & Associates helps schools world wide to enhance income through innovative tools and to control expenses, auditing spending patterns and guiding clients to achieve their mission more cost effectively.

John Littleford
Littleford & Associates

(The “sacred cows” concept was first introduced by John Shank, Professor at the Amos Tuck School of Business Administration at Dartmouth, and an advisor to John Littleford on his book, “Faculty Salary Systems in Independent Schools”, and a friend.)

John Littleford
Senior Partner

A Mission That Resonates in a Soft Admissions Market

This consultant has worked with hundreds of schools on marketing. Marketing begins with mission. Most mission statements are worthless as marketing tools. They may be no longer be connected in reality to the practice of education in the school.

When I ask trustees and heads in unrehearsed settings to describe their mission in five words or less, what occurs is a scramble for all forms of “motherhood and apple pie” words such as: “individual attention”, university preparation, small class size, faculty/student relationships, the whole or well rounded child, integrity, character building, academic rigor, and/or a nurturing environment.

Most schools will use some if not all of the above words that are essentially similar. As part of Littleford & Associates’ work with schools worldwide, our Firm sees literally thousands of mission statements of independent schools. They are poor marketing tools because there is little differentiation of mission among them, and one might even say that some schools’ mission and vision statements are practically interchangeable. A school’s goal should be to create a powerful mission statement, not one that sounds like so many others, and all of which begin to sound like platitudes.

  1. Formulating the Mission

    To ensure that the existing mission has relevance to the present and future as well as the past, schools can review their missions and modify them slightly while still retaining the integrity of the School’s founding values. They should not be allowed to become “stale”, and they can and SHOULD mold the mission to the needs of families and students today and yet speak to the future.

    It is important to reduce a wordy overblown set of mission statements to strong memorable phrases that can evoke emotion and memory and which can be used to measure the purpose and success of programs offered and the philosophy by which teachers are recruited and retained.

    Littleford & Associates has conducted workshops in conjunction with strategic planning or on marketing alone which have included a motivating exercise on mission statement brainstorming and development. Board members and administrators find this to be an enjoyable activity that kick starts long-range planning and marketing efforts.

    For one girls’ School, the motto is: “Courage, Humility, and Largeness of Heart”.*

    The School states that “Each teacher has the courage to be innovative while honoring the values and traditions of the School; the humility to seek the best in themselves, their peers, and the students; the largeness of heart to nurture each girl’s social, emotional, and intellectual growth.” What is interesting here is that these key words influence the core language and behavioral patterns of the Head, Faculty and particularly the older students. The School measures itself by how well it carries out these thoughts.

    This motto is consistently the theme of this School’s internal and external communications and marketing materials. For example, it is the focus of the School’s website, and the students say in their own words what it means to each of them.

    Such phrases are a highly effective and inexpensive marketing tool when communicated well and frequently both internally and externally. The most successful consumer marketing companies are proof of this.

    In visiting a K-6 elementary school not long ago, I asked the Head about a sign on the wall behind his desk: “Knowing How to Make the Right Choices.” He said it is the School’s mission “writ short,” which is also on the wall of each classroom and which every parent, student, child in the School can recite. If asked, they can all give me a personal example or one of another child showing exactly how the school environment fosters within its children an ability to make the appropriate choices. The statement means much more than choosing to use drugs or not; go to prep school or not; be “nice” or not; work hard or not; respect others or not; to serve others or not.

    “Knowing How to Make the Right Choices” is seven words, five without the articles. More powerfully, when asked what the mission really means in the daily life of the children in and outside of school, I was given ample evidence that the constituents knew its exact meaning and that a “values” centered education underpinned every aspect of academic, social, and extra curricular life. One sixth grade student said: “Hurting another student’s feelings is a choice you make. I try never to make that particular choice.”

    The mission of another school, this one a boarding school, was reflected in a CD. In the seven minute presentation, no narrator spoke. All comments came from the students and there was no mention of the mission at all. But the last shot and the tone, demeanor and banter throughout the film left one with the overpowering sense of the mission: Integrity. It was as clear as a bell.

    At another boarding school, teachers go way beyond the normal “duty” of teachers and dorm counselors but truly act as surrogate parents (firm and even stern ones), but always with a sense of compassion. Letters have been shared with me by parents of students who attend and have attended this School. This consultant was and is amazed at the detail, structure and rules of the game by which all students at the School are expected to abide, AND by the sheer rejection of those values which involve using drugs, abusing the rules, sexually misbehaving or in any way flouting the core mission of the School.

    The mission is, in essence, to provide the traditional home and structure in an academically rigorous, character building setting. Athletics and fine arts are all a part of this culture, but the real test and taste of it are in the admiration in which it is held by BOTH current and former students and in the awe and admiration that parents feel and convey.

    Many schools using this approach to mission development and refinement have seen 10% to 15% increases in admission inquiries and applications. There is a “buzz” in the market about them.

    Demand is up in most New York City day schools, but nationwide the market is definitely softening. The schools that can make their mission statements distinctive, understood and memorable, including conveying brevity in the expression of it, are more likely to achieve a top position in their market. Structure AND freedom to choose, emotional AND physical security and safety, as well as rigor AND nurturing with a focus on a few key values may win this admissions struggle long term.

    One School makes a point of not falling into the trap of the usual “nurture” words, but in Latin conveys the mission message (and logo) everywhere on campus and consistently in all written communications and marketing materials: ” Not to Be Served But To Serve.”** That is as categorical as it gets. It is direct, blunt and in this School environment, it is honored and admired according to many students, parents and faculty as well as alumni. The School is over 100 years old, yet this is an “out of the box” statement which has withstood the test of time.

  2. Selling and Telling the Mission

    At one School, the Head’s annual opening remarks to the parents are always a powerful reflection of the School’s mission in specifics. Those remarks are mailed in hard copy to every parent in the School to ensure all have “heard” the message. The head is always the primary “vision keeper” and “visionary” and must articulate the mission in a way that finds resonance within the community of staff, and outside the community with parents. The mission must have integrity and be consistently adhered to, or it will lose any power other than as a set of words required by an accrediting organization.

    At another day school, 75 parents have been mobilized to help the School’s Admissions Office reach out to the community at large to assist in conveying the mission internally; marketing the school externally; helping to ensure reduced attrition, and in supporting a smoother and more personalized admissions process. The entire volunteer effort is chaired by trustees who oversee groups of parent volunteers focusing on specific areas of marketing the mission to the internal and external communities. This can be as, or more powerful than, any set of glossy materials or elaborate campaign developed by an outside PR firm.

    For this School, Littleford & Associates conducted several workshops with board members, a cross-section of faculty and a cross-section of current parents. Phone interviews were also conducted with parents who had chosen and not chosen to enroll their child in the School. Our Firm provided specific written recommendations.

    After laying this groundwork, parents were chosen to chair six committees: Internal Marketing; External Marketing; Admission Process; Retention Strategies; Centers of Excellence; and Parent Opinion Survey. These Committees are enthusiastically working and pleased to be engaged in productive work on behalf of the School to which they deeply committed. The Administration appropriately directs and oversees their work and will acknowledge their volunteer contributions. In addition, the School has tripled its Parent Ambassador Group which conducts individual tours for prospective parents and follows up with personal phone calls and thank you notes.

    As part of its mission, after its efforts to diversify met with much skepticism, one school without a single African American student, began a process of reaching out to that community by buying advertisements in local news media targeted to the African American community. That included a radio station which then invited the School’s head to be on a talk show. From that forum and his adept answering of some tough questions came invitations to speak at a number of African American churches and to meet with Sunday School groups of students and parents.

    Within five years, this School went from having literally no African American students to being a much more diverse environment with almost 12% of the student body from this community. The African American community and current families have become a marketing arm of the School, marketing initially undertaken by the Head alone with one other staff person. As a further signal of the School’s significant commitment to diversity and as well as outreach, it gave birth to an academy for young African American boys from grades 3-12, an academy that has grown over the years to serve public school boys. The Academy offers summer and weekend programs that help to develop academic skills, leadership skills and provides mentoring relationships with male leaders in the African American business and professional community. It was featured on Oprah Winfrey recently. ***

    At another school, there were no students of Chinese or Japanese background at all, (but in a larger community where such populations were growing). This school claimed a strong mission commitment to international education and moved aggressively to prove it by building direct student and faculty exchange relationships with some of the best known schools in Japan and China. This effort began over 15 years ago. Further outreach was achieved by renting the School’s facilities on Saturdays and Sundays to the local Chinese and Japanese language schools. This took careful negotiation and subtle moves in determining fair rental values over time. The net result was substantial earnings for the School in additional profit center income as well as a new influx of students of Chinese and Japanese descent whose parents were now familiar and more comfortable with the School through the rental arrangements. The international focus of the School, through it stated mission, now began to bear concrete fruit in community reputation and a growing admissions demand for entry. It developed a known “center of excellence”. Every school needs at least three or four that are known to the internal and external community.

    Mission and marketing are intimately related. The head can TELL THE MISSION through the vision by using ACTUAL STORIES OF REAL STUDENTS. The mission can also be revealed in practice through the staff’s actions and words that become the benchmarks by which all parents, students and graduates will judge the integrity and success of the school.

* Oldfields School, Glencoe, MD

** The Taft School, Watertown, CT

*** Episcopal High School, Baton Rouge, LA

John Littleford
Senior Partner

Managing The Bottom Line:

The Impact of the Finance Committee, Financial Audits and Marketing the Mission

  1. GOVERNANCE AND FINANCE: THE ROLE OF THE FINANCE COMMITTEE

    When asked the most important committee of the board, many board members will respond “the finance committee”. In reality, it is probably the committee on trustees, and the executive committee (where it exists) that do and should outrank the finance committee. However, finance committees and their chairs are indeed powerful in most of our schools. Sometimes that power is wielded well; other times it is problematic.

    Research from Littleford & Associates world wide demonstrates that a majority of board “air” time is spent listening to financial matters and finance committee reports. Instead, the committee’s report should be mailed out a week or two in advance of the board meeting so that trustees have time to digest it. If properly reviewed and understood, finance committee issues and conversations should not dominate board meetings.

    Board members want (or should want) to feel empowered appropriately without micromanaging. They wish to participate in substantive discussions of strategic issues, not just of a financial nature. It is not that these monthly budget reports, leverage analyses, and long range financial plans are unimportant. However, a well oiled board process will not permit financial discussions to take more than 25% of board time so that adequate discussion of other strategic challenges and/or opportunities is possible.

    Some schools split the role of finance chair from that of the treasurer. That is neither wise nor necessary. Historically, some boards felt that the role required a split for the purpose of checks and balance. In the majority of schools, these roles are filled by the same individual which, and that seems the wiser clearer course. Then there is no confusion for the chief financial officer or head about having two bosses on financial matters.

    For most boards, little attention is given to the audit. Equally important as the audit is the management letter. If there is no management letter, there should be one. If the management letter is not reviewed carefully, the board may be missing important information.

    Periodically, a board should evaluate its accounting firm, consider alternative firms, request competitive bids and seek “name recognition” firms with some degree of regional or national prominence. While Arthur Anderson’s demise put a dent in the myth of the prowess of national accounting firms, large firms may offer greater expertise and more independence than some local firms, which may have close and historic ties to individual trustees.

    One school recently learned that its annual operating deficit was double that which both the business office and the audit reflected. While poor business office oversight was at least partly to blame, the audit was conducted by very inexperienced staff. Recent management reports from the auditing firm had raised no “red flags” and had offered few or no specific recommendations for improving the accounting or reporting or for monitoring the red ink more carefully.

    Every finance chair, board chair and head as well as the business manager should review the school’s 990 form before it is filed each year. In some business offices, a staff accountant, not the business manager, completes the Form. It is a risk not to know the key numbers on the Form, what they represent and their implications. The 990 forms go on the Internet, usually within two years or less. They can expose the school to careful scrutiny of a wide range of financial issues, and not just the pay of the top school officers.

    A. The Composition of the Committee

    In this consultant’s experience, there seem to be two major styles of finance committee chairs, and thus of financial committee discussions and results:

    1. The accountant, CPA, or banker who typically has a more conservative focus. These individuals tend to be quite moderate about managing budgets, setting tuition, taking economic risks or seeking the opportunities in well-run profit centers. Their strength lies in conserving assets. Their weakness may lie in not seeing enough the opportunity offset to prudent risks and to stretch to reach the mission. They may not seek out profit centers as new areas of potential revenue.
    2. The entrepreneur or venture capitalist with the less cautious approach. These individuals may well be the ones who oversee a major, complex municipal bond offering with the offset of a successful endowment campaign and a targeted level of increased enrollment. The positive outcome may be impressive new buildings and the purchase of new land. The weakness inherent in this approach may be an overestimation of giving, an underestimation of the effect of an enrollment shortfall and shortsightedness about long term debt management.

    Recently, a board, through the encouragement of a savvy aggressive finance chair, took on major bond debt to build an expanded plant. Enrollment projections did not materialize. The resulting disappointment and financial stresses led to a pendulum swing: the succeeding finance chair began to question the administration too closely and to micromanage, all with good intentions, but with an intimidating effect on the business office. The Board was trying to make up for what it perceived as an earlier lack of sufficient oversight but in actuality may have been a result of overly optimistic projections.

    Chairs and heads should attend all finance committee meetings, and the partnership of head and finance chair should be almost as close as the CFO/finance chair partnership. However, the CFO should not have, or appear to have more power or influence than the head and to be in effect running the school.

    Planning for the succession of the finance committee members and especially its chair requires almost the same kind of care needed for a review and nomination of candidates to replace the board chair. The chairs of the board, of the committee on trustees, and the of finance committee, represent the most powerful positions on the board. Filling those assignments requires great care and planning.

    Parent representation on finance committees has been suggested in recent years as a way to solicit parent opinion and to “test” prospective trustees through their involvement in finance committee discussions. This can be quite risky as these parents are not screened, chosen, oriented or trained as trustees.

    Yet they can exert substantial influence upon finance committee deliberations and the outcome of the annual discussion about tuition and faculty salary increases. This is an inherent conflict of interest which well-trained board members strictly avoid. It is this consultant’s view that the finance committee is NOT the place to screen prospective parent trustees. The Buildings & Grounds or Investment Committees may be better choices.

  2. FINANCIAL AUDITS: WHEN AND WHY THEY ARE NEEDED

    Periodically, a board will feel uneasy about the “buckets” in which a school is putting its money. The questions may center on program and priorities or how the school compares with other similar schools in its spending habits and in its percentages for each category of budget.

    While some very useful comparative data can be obtained from NAIS for a stated group of schools (shielded by name, for confidentiality), that data may skew a board’s perception because each school’s culture, character, history, and mission tend to be fairly unique. The quality and accuracy of the data may also vary depending on the individual in each school who completes the request for data.

    Furthermore, schools need to compare apples to apples, and that is not always a simple matter when looking at raw comparative data. For example, what some schools list as “administrative” positions, others may include in “faculty” and vice versa. Thus, simple comparisons of percentage of budget that one school spends on “administration,” versus another school, may lead to raised trustee eyebrows.

    It is at these times that an outside financial audit may be very helpful, particularly if the audit is not prompted by inappropriate board intrusion or directed at any office or individual.

    In a recent situation, a school was seeking clarification of whether its tuition needed to continue to rise at the same rate as it had in recent years. Despite board attempts to educate them about the financial management of the school, some parents were beginning to complain more than usual about tuition increases higher than the rate of inflation. In the past such increases were prompted largely by faculty salary needs and the local competition.

    The board commissioned Littleford & Associates to assist them in demonstrating to parents and even more to themselves that management was setting the right priorities and not losing sight of ways to save money. The audit focused on the school’s unique mission, individual needs and peculiar spending patterns that related to the mission, and on some expenditures that seemed out of kilter compared to other regional independent schools.

    In interviews with board and staff, it became apparent that the school was under spending rather substantially in two areas of the administration and over spending considerably in two other areas. While the overall administrative numbers looked similar to other NAIS schools, the “mix” was very different and reflected personalities (some dominant), history, and unusual circumstances. This situation had led to two offices with similar purposes spending more money on personnel than was necessary and to an inefficient division of labor. In contrast, two other offices underperformed due to an inadequate budget and support staff. In the long run, this allocation of resources could have proven harmful to the school’s ability to thrive.

    Each employee was valued. The School was maintaining its competitive position in the local market. Those were not the core issues. In this case, the need was to understand how the unique mission should drive the patterns of expenditures ranging from plant to each area of the administration. For example, it was learned that parent expectations placed a peculiar set of demands on the buildings and ground staff. This raised the plant budget to a level that seemed too high until one uncovered the fact that it resulted from parent expectations, program history and space limitations. While this pattern was probably not a healthy one for the long run, solving space constraints would eventually slow this expenditure trend.

    Thus, the audit needed to do the following: reflect and support the mission, while still offering guidelines as to how to save money and increase revenue from multiple sources; explain more thoroughly to parents how and why the school spends money in certain ways; and provide the head with an outside perspective and the hard data and trend analysis to make some overdue adjustments in internal structures and organization. The School had moved on these ideas.

  3. MARKETING FOR MISSION: ENROLLMENT AS THE “DRIVER” OF MOST REVENUE SOURCES

    In most day schools, the financial model is tuition driven. Salaries and benefits can account for 70-85% of total expenses. Finance committees find few remaining budget categories and variables to manipulate in order to improve the bottom line. Savvy and creative internal and external marketing, however, can boost enrollment thereby alleviating pressures on the budget, at least for some schools.

    Mission is at the core of all great schools, and the marketing for the school’s enrollment must start with mission. The kind and number of students sought relates to the profile and diversity of students each school seeks.

    There are six key areas of focus that play, or should play, an important part in the planning and execution of all admissions and marketing efforts including the age old “process” of how we treat our inquiries.

    1. Internal Marketing

      The sign of a successful school is one where this consultant has observed a short powerful mission statement over the head’s desk. That same mission statement is in turn prominently displayed in most classrooms of the school.

      The power of this mission is captured in five words, and in checking at random with a wide age range of students, faculty and parents, the same were five words were recited consistently in the same order over a visit of three days. The School was clear about its values and mission.

      In addition, many of those questioned could relate a story of a child from the school who characterized one or more of those mission goals. The stories were true, powerful and reflected positively on a school that carried out what it promised its constituents. This mission was not only grounded in the history of the school, but was active in the present and relevant to the future.

      Most corporate cultures and their success are measured by the extent to which first, the employees and then the consumers understand the company’s mission and believe its products reflect that mission. Internal marketing always precedes external marketing. Until a school is clear about its mission to the community it is serving currently, it will never have a clear message to a community it is trying to attract.

    2. Admissions

      The admissions “process”, i.e., tracking admissions from inquiries to acceptances and to enrollment, is well known to all admissions offices. However, the key is PERSONALIZATION.

      First, schools should have a designated admissions phone line that is never answered by voice mail and is always listed separately in all telephone directories.

      Second, process involves recruiting parents to be tour guides (and other similar roles) in and telling the school’s story to prospective parents. Tours should be individual (not group) tours led by positive, enthusiastic and trained current parents from a range of grade levels. Develop a program of volunteer parent ambassadors: select a “leader” who reports to the Admissions Office; motivate and mobilize them to show their pride in their school; and ensure that the head acknowledges their positive contributions to the Admissions effort publicly and appropriately.

      Student guides, who represent their School in the most positive ways, should also be part of the effort.

      Third, the best schools involve newly accepted students and their families into orientation, games, special events and the life of the school long before the start of the school year when the students and parents are formally a part of the school family.

      One family recently related to this consultant that while one school was still struggling to put together the calendar for the following year, another which her child ultimately chose to attend had already met with the family, produced the child’s academic schedule for the upcoming school year, created a buddy system and invited the child to a party and the parents to a “coffee”. This was all accomplished by mid February for the school year beginning in the following September. In certain markets, parents are sophisticated “shoppers” who are impressed and swayed by such individualized attention, organization and follow through.

    3. Retention

      Retention of current good students is more important than admitting new ones. Every child lost, whose departure was not the school’s decision, is negative publicity for the school. Retention strategies are not accidental. They are purposeful.

      One example of a school’s retention strategy is an outdoor and environmental education program that involves every child at the school from grades 4-12 and takes place during the same week in January.

      The 4th graders have the simplest form of outdoor training. That training and those opportunities become more complex, demanding and awe inspiring until they culminate with the senior class rafting trip which is one of the most powerful in the nation. Students whose parents may think of changing schools will often hear the response: “I can’t miss the trip next year!”

      In K-12 schools, eighth graders should visit the high school, and in K-8 schools, lower school students should visit the upper schools. When done well, these events are fun, meaningful and create an impression that is conveyed at home and to peers.

      It is interesting that mothers make the vast majority of educational decisions about independent schools. Schools that advertise on mid day talk shows that draw a mainly male audience are missing their cue. The key radio opportunity is the “drive time” for working and non working moms and the music and NPR stations that draw their attention.

    4. External Marketing

      One of the most intriguing and underutilized forms of external marketing is direct mail, which is about five times more productive for independent schools than for businesses. For $10,000 to $15,000 a year, most schools can rent a targeted mailing list and undertake three mailings a year: a “teaser” piece; a dining room table piece that arrives three months later; and an invitation to an open house. Mailings can be sent to those families within a reasonable commuting distance who have school age children and incomes at or above a certain threshold. After two or three years of mailings in this sequence to this market, almost all schools will see a significant increase in their inquiry pool.

      Evening “coffees”, frequent weekend open houses at which current faculty attend, outreach to churches and business and professional groups, and speaking engagements for the head, are all examples of good marketing. Some of the best marketing efforts designed to attract more minority students to independent schools have come from prodigious efforts by heads to seek speaking engagements in minority churches and to stay afterwards for the coffee and Sunday school gatherings.

    5. Centers of Excellence

      Every school should be able to boast at least two or three centers of excellence. More important, everyone in the community at large should know and be able to relate those centers of excellence fairly quickly when asked about a particular school. If there is no “image” of the School (especially for a day school) or no name recognition in the community then a major effort is needed in establishing centers of excellence.

      One school began a Mandarin language program long before any of the other schools in the community. That program had the effect of “presidential coat tails” in that many families were drawn to the school assuming it must be excellent all around or at least have an outstanding foreign language and international education program. The “coat tails” of the Mandarin program attracted both those who had no interest in studying Mandarin and those who did.

    6. Community and Parent Surveys

      Most schools are familiar with periodic parent opinion surveys, undertaken by an outside firm and aimed at gauging parent opinion of all programmatic aspects of the school. Such surveys should always be done in the fall, and the goal should be a 60% rate of return. A poor response rate tends to result in mainly critical voices.

      A parent opinion survey can encourage the administration to use proactively the good news from the survey as an effective marketing tool and to use the criticism to convey to current parents how the school intends to learn from it.

      Questions about admissions and financial status, if confidentiality is assured, can be interspersed within the questionnaire. Such data is a powerful source of information for setting tuition, financial aid levels and annual fund goals.

      Community image surveys are also a good tool to ascertain if the community even knows about the school, or if they so, whether the information is accurate.

  4. SUMMARY

    When properly organized and focused, the finance committee monitors and forecasts the financial health of the school but should not dominate either the board or the head. Audits allow an independent assessment of current fund allocation and management. And effective internal and external marketing can boost enrollment and thus relieve pressure upon the committee to “find” money in alternative revenues, or through cutting budgets. Such marketing can also lead to increased community visibility, fund raising effectiveness and school pride, thus strengthening the school over the long run.

John Littleford
Senior Partner

Profit Centers: Has Your School Tapped These Revenue Sources?

Profit centers are growing in use in independent schools. They have been major sources of revenue for years for colleges and universities, yet independent schools tend to think that they are too small to take advantage of many of them.

The most common ones include: bus service, food service, summer programs, facilities rentals, school stores, affinity advertising, and partnerships with corporations.

Food Service

Many schools do not offer a required sit down food service. Yet for others, this mode of dining is civil, traditional and profitable. A required food service program provides better quality food, better accountability of the food service and a higher level of service overall because the overhead is high enough for the school to demand bargaining power with the vendor.

At vendor operations where lunch service is optional, students pay only for what they buy per day, or buy from small vendors and vending machines. The school earns very little by comparison. Lunch carries no “cultural” identity other than “grab your food.” Schools miss another important socialization opportunity for students.

Bus Service

Bus service is abhorrent to some schools which contract with bus companies at high prices, or are fearful of owning buses due to insurance rates, the nature of operating and repairing buses and hiring and monitoring a reliable staff.

However, the potential benefits of operating a bus service can far outweigh these perceived negatives. Many schools overlook the intangible benefits that a bus service can provide. It ensures consistent on-time arrivals. It can project a school’s marketing and recruitment efforts far from the school’s door because seeing the school’s name on the side of a bus all over a city can enhance awareness of school name and image.

Busing is also an important tool for ensuring racial, ethnic and geographic diversity. Busing can “reach out” and deliver non traditional families to the school.

Bus service can generate substantial income over expense even if the school has TV monitors in the buses with daily Discovery channel programming. The secret lies in having a good bus service director, buying good used buses rather than new buses, and ensuring high hiring standards for drivers to keep insurance rates down.

School Stores

School stores sell uniforms, athletic clothing, brand name logo clothing, school supplies, and school logo materials from children’s pajamas to coffee mugs. Stores appeal not only to students but to parents, and especially to grandparents. If a school sponsors a grandparents’ day, it is not uncommon for the entire inventory of the school store to be sold out in a day.

Schools with enrollments of 300-500 routinely can net $50,000 to $100,000 a year. Larger schools have been known to net well over one million dollars a year. Profit margins are typically 33%, and products are priced competitively with items sold at local clothing stores.

Facilities Rentals

Rental of facilities include everything from the gym, to the athletic fields and include the conference rooms, library, classrooms, pool, hockey rink, tennis courts, etc. The rentals may be timed to be used when the school is not in session, or when demands on the space are not as high. Schools can develop long term relationships with skating clubs, hockey clubs, neighborhood sports organizations, etc. If a rental relationship is well maintained and expectations for insurance, usage and maintenance are made clear, such rentals can also be major community relations opportunities.

Advertising

Affinity advertising provides an interesting option. Most schools have had some experience with allowing certain vendors to advertise through traditional means such as cola machines on campus. However, many schools have found opportunities to sell tasteful ads on standard signs featuring the names of the companies but no slogans or promotions. Such signs may be posted on the fences of the baseball diamond, the football field, inside the gymnasium and hockey rinks etc. The signs should all be in the same color background and lettering to ensure a tasteful representation for the school.

The school can sell the signs on the basis of a calculation of how many visitors will see them annually through attendance at functions and events. Several schools net well over $250,000 a year from such signs. The corporate sponsor pays for the sign and an annual rental of space fee. One school carries 10 of these on the football field, 8 on the baseball fields, 6 in one gymnasium and 6 in another. Sign rental brings in $10,000 a year after costs.

Corporate Partnerships

Corporate partnerships offer a variety of opportunities. An example is a university alumni club renting summer dormitory and dining room facilities for gathering regional alumni in nice locations. They may also include corporate sponsored partnerships in science ventures, and economics courses and programs. The potential is as varied and broad as the creative outreach of the development, alumni, business or athletic departments to corporate prospects.

Summer Programs

Many schools have highly successful summer programs that yield additional annual revenue, often in the six-figure range. Depending upon the school’s physical plant, it can offer a variety of sports programs and lessons for a range of ages, as well as enrichment in technology, foreign language and science. Schools with an entry level PK program can offer a summer “camp” that orients these youngest students to their new school. Extended care hours may also be appealing depending on the area demographics.

A high-quality, well-run summer program can be an excellent marketing tool for attracting new students. It is also a supplemental source of income for faculty.

The program must be competitively priced, but the school must ensure that the pricing includes an adequate margin over the cost of liability insurance for activities that may not be offered during the course of the normal school year; faculty and staff salaries; additional operating costs such as utilities; and wear and tear on the facility.

Summary

When they are well-managed, profit centers can reduce overall pressures on other sources of revenue such as giving of all kinds and tuition and fee income. Food service and busing are income sources resistant to economic downturns, and demand for them is price inelastic. If a school’s facilities are attractive to and needed by another organization or group, this rental income can be a stable source of revenue in tight economic times and create good will within the community. High quality summer programs are also always in demand among working families, in particular.

A school should not overlook the intangible benefits of many of these profit centers in enhancing the school’s marketing efforts and image and broadening its outreach to other constituents. Over time, they can result in increased enrollment and new and larger contributions from individuals and organizations which might otherwise not have been reached.

It is well worth the time and effort involved in researching how other schools successfully manage profit centers through NAIS or other sources of statistical information and through associations of business managers or bursars. Your school may be missing an important opportunity to realize significant gains to your bottom line as well as intangible rewards that translate into long-term financial gains.

John Littleford
Senior Partner