From Memberanda, Fall 2012

As the U.S. economy limps forward, school leaders are realizing that tuition revenue alone cannot sustain their institutions. For many families (everywhere but Manhattan) the cost of tuition has become prohibitive, and while an influx of full-tuition-paying international students has helped to meet revenue goals for some schools, the gap between a school’s operating budget and tuition revenue continues to widen.

At the 2012 fall meeting of SSATB’s Admission Leadership Council, “affordability” was named as the single largest challenge facing independent school admission directors. One ALC member noted that the “value proposition” hasn’t always been well understood by parents, who compare the cost of independent school tuition against free education from their local public school. Leo Marshall, Director of Admission & Financial Aid, The Webb Schools (CA), emphasized that he is essentially competing with universities, since prospective families are making decisions about whether to save their money for college or invest in an independent/private secondary education. In the ALC’s “Right on Time” blog (hosted on SSATB’s website, admission.org), Tom Sheppard, Director of Enrollment Management, Stevenson School (CA), reminded the admission community just how serious independent school finance is in a weak market. Sheppard’s blog called for an admission seat at the leadership table, given the profound revenue responsibility being placed on enrollment for school operations. According to Sheppard (citing SSS statistics), since 2002 day school tuition rates have increased 5.77 times faster than the average income for the top 5% of families at all income levels. For most schools, the strategy of increasing tuition at the rate that’s needed to balance the operating budget is not the answer; nor is a growing reliance on financial aid to close the gap.

Lessons from Higher Ed: Is Entrepreneurship the Answer?

Higher education has been grappling with the effects of tuition dependence for some time, and last fall, Moody’s Investor Services’ report cast an uneasy light on higher education’s heavy dependence on tuition revenue. In response, traditional development activities – from alumni giving to community outreach programs – have made way for more strategic thinking around revenue streams, and as state funding gaps continue to widen, even public universities have had to devise more “entrepreneurial” solutions to run balanced operations. For example, Purdue University’s Innovate Purdue “is part of a campus initiative to increase sources of revenue beyond tuition and state appropriations … with the additional benefit of boosting economic development in Indiana through the creation of new businesses and products.” At the University of Wisconsin-Oshkosh, energy efficiency has been a driving force in managing costs: UW has the Western Hemisphere’s first-ever anaerobic dry fermentation biodigester, which “will produce energy that can be sold back to the grid, create marketable carbon credits, and leave waste products for which there is also a market” (Pelletier, Public Purpose).

These new revenue-generating (and cost-containment) strategies encompass everything from green initiatives to new ways of financing education. The National Association of Independent Colleges and Universities (NAICU) recently published a list of affordability measures being introduced by private, nonprofit colleges and universities, including tuition increase restrictions, replacement of loans with grants, fixed tuition guarantees, special scholarship programs, and loan repayment assistance. These measures are a direct response to the need for private colleges to compete with less expensive public universities. So how might SSATB’s member schools take lessons from our university and college counterparts?

Independent School Finance Strategies: 2012

In 2006, NAIS began to observe ways in which independent schools were building non-tuition revenues. The NAIS 2006 Non-Tuition Survey reports that independent schools implementing traditional non-tuition revenue efforts – summer programs, extended day programs, facility rentals, etc. – report an associated income stream of $100,001 to $250,000 per year (34 percent of survey respondents), while another 21 percent report $250,001 to $500,000 of annual revenue from these programs. Because these strategies alone are not producing enough income to balance budgets, independent schools are now following their higher education cousins into entrepreneurial arenas – most notably in ventures designed to leverage a school’s brand overseas.

John Farber, Head of Old Trail School (OH), in his recent article “The Independent School Financial Model is Broken: Here’s How We Fix It” (Independent School Magazine, Fall 2012), makes a similar argument for this kind of entrepreneurial paradigm shift at the independent school level. He argues that “the smart move today is to reach out to new constituents/customers who are not already making major financial investments in our schools.” Farber emphasizes that “if there’s a good way to raise revenue that is not mission-focused, it’s fine to do so because that revenue will primarily be dedicated to supporting the school’s mission.”

Focus on Enrollment Management

Yet these creative and entrepreneurial solutions for generating non-tuition revenue may still not be enough. Evidence exists that a shifting admission paradigm is required to help manage these new complexities. For example, in some states, higher education dollars are being allocated in new ways and tied to outcome measures like retention and graduation rates. As Paul Hamborg, president of Enrollment Research Associates, emphasized at the recent NACAC conference, enrollment managers have to think beyond the head count and look at ways to “shape the class to better fit the incentives states are offering” (Chronicle of Higher Education, 10/8/12). In this way, Hamborg argues that admission deans will play a pivotal role in bridging the public higher education funding gap by helping to generate the student outcomes necessary for financial stability.

What then is the role of the independent school admission director in working with the school’s leadership team to ensure financial sustainability? Jim Nondorf, Vice President and Dean of College Admissions and Financial Aid at the University of Chicago (and a featured presenter at the 2012 SSATB Annual Meeting), emphasized his strategic leadership role within his university, noting that he has the ear of the president on a weekly and monthly basis. However, the reality in many independent schools could not be further from this scenario.

According to initial findings from the recent 2012 SSATB State of Independent School Admission Survey, only a small percentage of independent school admission directors have a seat at the leadership table when tuition is set at their schools. When asked about the role of admission in determining tuition, 58 percent report that admission is given the tuition amount to work with but has a limited influence on the decision; 29 percent report that admission makes requests or suggestions regarding tuition, but is not directly part of the decision; and only 13 percent report that admission plays a key role in deciding tuition. As Tom Sheppard described in his blog, “The fine tuning of enrollment and revenue goals for the coming school year is about to take center stage at the board and administrative level. For some fortunate admission directors, this is an opportunity to participate in a negotiation of enrollment goals, tuition levels, and financial aid budgets, all driven by the school’s revenue needs. For others, it is a time to sit anxiously on the sidelines before school heads and boards deliver news of seemingly impossible milestones to be reached.”

In support of Sheppard’s depiction, SSATB’s survey finds that one-third of Directors/Heads of Admission regularly attend board meetings (35 percent), while a similar number present at board meetings only when specifically called to attend (31 percent). One in four (26 percent) provide information to the board but do not usually attend meetings, while about one-tenth (9 percent) are not involved in board activities at all.

Growing Leadership in Independent School Admission

Dr. Jerry Lucido, Executive Director of the Center for Enrollment Research, Policy and Practice at the University of Southern California, spoke to SSATB’s Admission Leadership Council at its 2012 fall meeting and articulated key enrollment management issues for independent schools:

• Competition: increasing intensity and an expanding range of competitors, including each other, charter, schools, home schooling, and the early programs of colleges and universities

• Finance: increased importance of tuition revenue, student financial aid, overburdened family incomes, and the need to demonstrate value (the value proposition)

• Mission Attainment: recognition that sustainability in student enrollments (in type, quality, and in student retention) and in school finance (tuition, aid, and endowment) is critical to long-term mission attainment

• Emerging Constellation of Responsibilities: admission, marketing, retention, outcomes, market and institutional research

• Pathways to Leadership: admission professionals need to achieve recognition for the more important role they now play, accept the responsibilities of that greater role, and obtain the skills and experience required for it

The pathways to leadership described by Dr. Lucido emphasize the need for professionalization within the independent school admission community. According to the SSATB survey, about one in five admission leaders (20 percent) have gone back to school for an advanced degree. The most frequently acquired advanced degree is in educational leadership. Just o v e r h a l f o f admission leaders s u r v eyed ( 5 6 percent) expect to still be in admission five years from now, while about one in four (24 percent) envision being head of school or in another administrative role. Given the evolving nature of the job of admission, and the breadth of skills needed to perform effectively as an institutional revenue leader, SSATB remains convinced of the need for increased management training, so that directors are fully equipped to work in tandem with business officers, development directors, heads, and trustees to design methods for thriving in financially uncertain times.

If independent schools are to become more entrepreneurial with their financial model, a team approach is needed within school management that brings together all key personnel with responsibility for revenue and cost containment. SSATB contends that admission directors must become part of the business strategy and entrepreneurial conversations within schools in order to embrace increased responsibility for building sustainable financial models. As Lawrence Lesick, Vice President for Enrollment Management at Ohio Northern University, notes, the current model is not sustainable. “Schools are going to have to show the value proposition. Those that don’t aren’t going to be around” (Chronicle of Higher Education, 10/8/12).

Sources:

“Summary of Findings.” 2006 NAIS Non-Tuition Survey, April 2006. Web.

Preliminary Results. SSATB State of Independent School Admission Survey, October 2012.

“Education as a Global Commodity.” SSATB Trends in Admission, Fall 2011. Print.

“Examples of New Affordability Initiatives for 2011-12.” National Association of Independent Colleges and Universities, Feb. 29, 2012. Web.

Farber, John. “The Independent School Financial Model Is Broken: Here’s How We Fix It.” Independent School Magazine, Fall 2012. Web.

Pelletier, Stephen G. “Rethinking Revenue.” Public Purpose, Summer 2012. Web.

Sheppard, Thomas. “Shifting the Paradigm: Why Schools Need to Overhaul the Relationship between Enrollment, Tuition, and Financial Aid Goals.” SSATB/ALC Right on Time blog, October 2012. Web.

Sigurdson, Chris. “Delivering on Discoveries Will Boost Purdue, Economic Development for Indiana, Nation.” Purdue University News Service, Sept. 28, 2011. Web.

Supiano, Beckie. “How Falling State Support Affects Enrollment Management.” The Chronicle of Higher Education, Oct. 8, 2012. Web.