Counting Heads: Securing the Class of 2020

Counting Heads: Securing the Class of 2020

From The Yield, Winter 2013 

Meeting the needs of the present without compromising the ability of future generations to meet their own needs can be viewed as sustainability or, in the instance of independent schools, survival. The myriad of challenges faced by admission officers – finding full pay families, the unstable economy, and competition from charter schools – seems daunting when one considers that operational costs at independent schools have been supported mainly through tuition increases.

With boards of trustees stacked with CEOs, CFOs, foundation chairs, and other business types, schools are challenged from above to look at long-term sustainabil­ity from the perspectives of those battling similar situ­ations in corporate America. At times, academics and administrators resist this mandate from above, citing that the board doesn’t know the school, kids, faculty, and/or culture as intimately as they do, but many board mem­bers can offer cautionary tales from their own experience or that of colleagues who did not heed the warnings. Ultimately, short-term financial solutions may be at the expense of long-term, sound financial choices that will ensure that a school’s doors remain open to the class of 2020.

Ian Symmonds & Associates published a piece titled The Seven Essential Characteristics of Sustainable Schools and Colleges, stating that “Sustainable schools and colleges are always strategically poised...They are culturally agile and externally oriented, reading the tea leaves of culture, and constantly challenging their assumptions about the future. They have set a strategic course of direction, but are nimble enough annually to make adjustments. And, they only focus on five or fewer strategic priorities at any given time. They are focused.” (1)

So, where do strategy and survival meet if the current model is not sustainable? How do boards ensure sufficient resources to support a schools’ future and while being strategic about each move, along with other institutional challenges? And, how does the admission office work its way into the strategy given that it is generally responsible for 80-90% of the school’s operating revenue?

A $350,000 Promissory Note?

John Palfrey, Head of School at Phillips Acad­emy (MA), shared with the 700-plus attendees at SSATB’s Annual Meeting this September a clear picture of the irrational reliance of tuition increases to sustain an independent school.

“If you look at an Andover graduate from the early 1980s, he or she may have a child in the 9th grade at Andover at the cost of $47,000 in tuition,” he said. “This represents a 6.4% year-over-year tuition growth since the parent grad­uated. Assuming that same rate of growth, we would wel­come the current student’s child to Andover at the cost of $350,000 per year. This jump from $47,000 is extraor­dinary and prohibitive to any institution’s sustainability.”

Palfrey’s point: The sustainability of independent schools hangs in the balance without drastic change.

With a very small amount of the population able to afford an independent school’s tuition from their discretionary income, how does this challenge intensify as tuitions con­tinue to climb with schools scrambling to meet enroll­ment needs and budget targets?

NAIS reports that expenses are up 5.4% for day students, while income per student is only up 2.5% from 2008- 2009. For boarding students, the expense per student has only risen 2.9% since 2008-2009, but the income per student has dropped 16%. Worse, NAIS reports that the average endowment per student has tumbled by 62.4% since 2008-2009 (2).

At a packed panel session at SSATB’s Annual Meeting in Philadelphia, Chris Hooker-Haring, Dean of Admis­sion and Financial Aid at Muhlenberg College (PA), de­scribed that for many schools “the full-pay family is rarer and rarer.” Hooker-Haring reported that, in 1987, 50% of Muhlenberg’s students were on financial aid, and in 2012, that number was 87%. Even with the availability of more financial and merit aid, he emphasized that “there is a big difference today between a family’s ability to pay and their willingness to pay, and, if you have trouble reaching your enrollment goals, this is your market telling you some­thing about your net price point, as well as about other facets of who you are as an institution.” Hooker-Haring recommended that schools do a tremendous amount of mathematical modeling to predict the likelihood of stu­dent yield. “If you are dependent on the admission office to fund the institution, then you need to be modeling and, if necessary, go outside the institution for the expertise to build these models.”

To complicate matters further, admission directors are dealing with a new type of family — the skeptical, educat­ed shopper. Leo Marshall, Director of Admission and Fi­nancial Aid at The Webb Schools (CA), believes this new consumer has the upper hand, and it’s time for schools, and particularly admission directors, to get creative. “We are in a consumer-oriented market, where families are used to everything being customized specifically to their interests and needs,” he explained. “It is clear these candidates and their families are much more aware they are in a ‘buyer’s’ market and, to that end, the traditional revisit programs ‘good­ies’ with their names on them, or calls from alumni and students, are not working to get them to sign and enroll. Schools that do not understand this will not yield candidates in the numbers neces­sary for sustainable enrollment.”

Counting Heads

While Palfrey is the first to admit that Andover is in a privileged financial position, he recognizes that it is still not realistic for Andover, or any other institution, to rely on reserves to build a stable and sustainable future. His first piece of advice: Do more with less, or at least the same. His second piece of advice: Look to a blended learning model as a way to cap faculty costs.

While layoffs are never an easy subject for any organi­zation, many schools have gone this route, or simply not refilled positions when a staff member retired or left. Pal­frey cited a reduction in positions in alumni relations/ fundraising at Andover, one less position in admission, and cuts to faculty in educational areas where student de­mand was substantially lower than in other areas. “We’re doing what we can to avoid these circumstances, some­times shifting staff from one resource to another, but we need to hold the line and not refill positions when it’s not necessary,” he said. Staffing freezes and/or layoffs aren’t the only tactic schools are using to cut “headcount” expenses. With the rise of healthcare costs, schools are taking measures to manage or minimize these costs. According to NAIS Facts-At- A-Glance, between 2008-09 and 2012-13, schools have lowered the median percent they are contributing to de­pendent health benefits from 60% to 50%.

Dallas Joseph, Chief Financial Officer of the Baylor School (TN) and SSATB Board member, cited “right­sizing” as Baylor’s bold step toward sustainability. Baylor’s team had a jump on rightsizing, choosing to make the changes in 2002 after a demographic analysis of the Chat­tanooga area indicated a saturated day market and limited families who could afford Baylor’s tuition. Through shifts in reliance on boarding students instead of day students, reduced enrollment goal numbers, and changes in budget practices (i.e. a balanced budget was less dependent on meeting enrollment goals), along with building a partner­ship between the business office and the admission team, Baylor barreled through the economic downturn and into a more secure position.

Calculating Attrition

Still, some schools have approached headcounts by maintaining the students they currently have. At Duke School in Durham, NC the push to recognize and maintain financial sustainabil­ity started about four years ago, when Duke School Head of School, Dave Michelman, ana­lyzed the numbers related to the school’s attrition. Because of the transient nature of the area, the leadership team knew there would always be some attrition.

However, the team was startled to learn that the 10-year average attrition rate was 14%. “Our team felt, even with the transient population, we could lower that number to around 11% the first year if we put the right resources to it,” explained Russell Rabinowitz, Director of Finance and Operations at Duke School.

After an internal campaign to educate teachers on their vital role in keeping students enrolled and developing marketing and educational materials for parents on the value of Duke School’s project-based learning model, the school surpassed the first year goal lowering attrition from 14% to 7%.

“Over the last two years, we’ve hovered between a 5-7% attrition rate,” said Nicole Thompson, Duke School’s Di­rector of Admission. “We recognize that the attrition rate will never be zero, but we have to continue to push. Ei­ther way, our leadership team recognized that financial sustainability was more than an admission department problem, but something we needed to tackle as a school.”

Auditing Tuition

Other unique solutions have arisen around tuition’s role in attracting and maintaining students. Following the trend of high­er educational institutions like George Washington University, University of Col­orado, University of Kansas and others, tuition locks or tuition guarantees are combating current cash flow prob­lems while helping to secure income for schools by fight­ing potential attrition issues. The Peak School in Breck­enridge, CO is offering tuition locks for the career of a student based on grade of entry. Per Peak’s website:

Students who apply for admission into 6th-9th grade for the 2013-2014 school year will lock in the tuition rate of $12,685 for their career at The Peak School.  Elementary Students – Make a $2,000 donation to The Peak School to lock in the tuition rate of $12,685 for the career of your student.

Duke School also made changes to its tuition as a way to attract families. The school developed a tuition index in­stead of the traditional tuition and financial aid informa­tion found on most schools’ websites and in informational packets. “If you visit our site, we purposely put a tuition range, not a set amount,” explained Rabinowitz. “Our thought was our school population falls somewhere in a range, so why not approach it from this angle eliminating the sticker shock that makes families feel they can’t afford independent school tuition?”

As an admission director, Thompson has felt that this ap­proach has brought families into the admission funnel, and she feels the school’s inquiry numbers are on the rise. “No matter where families fall on the index, we’ve given them the opportunity to feel that they can afford our tu­ition. This allows the admissions team the chance to sell the school’s value and engage the families beyond a snap judgment. We’re only in our third year of this program, but in an unstable economic environment, we feel our numbers are up.”

Eric Furda, Dean of Admissions at the University of Pennsylvania, told SSATB Annual Meeting attendees that his institution’s tuition has increased by less than 4% each year, but that this is still outpacing the growth in family income. Furda believes that schools put them­selves in a box with the all the auxiliary services and shiny new gyms. “The way out is to focus on instruction.” He emphasized that schools need to reinvest in their core educational missions and make decisions about where to sacrifice, so that they can charge families less. Furda recommended making all costs not related to instruction — like your school’s after-school program — “a la carte.”

Other practices have schools preserving cash by reex­amining their tuition remission policies for faculty and staff. According to NAIS 2013-2013 Facts-At-A-Glance, schools are adjusting tuition remission policies for administration, with only 50% of schools contributing to tuition remission for administration families, down from 60% in 2005-2006.

Creating a Leadership and Influence Balance Sheet

If the SSATB 2013 State of the Indepen­dent School Admission Industry (3) report pointed to anything, it’s that admission leaders need to develop influence on campus in general, and as the financial sustainability time bomb ticks away, it’s more vital than ever for admission leaders to become participants and influencers in the school’s fiscal future.

SSATB contends that to overcome these internal barri­ers, it is necessary to raise awareness of the role, respon­sibility, and strategic position of admission in relation to incoming revenue. SSATB’s “whole-school admission model” is a key way for admission staff to communicate effectively and extensively with top leadership and key ac­ademic and administrative staff, while developing allies to build their case and role as vital to the financial strategy.

“At one of my first meetings on campus as a new head, I immediately recognized how strategic the admission and financial aid team were to the mission and future of Andover,” stated Palfrey. “Admission and financial aid officers need to be part of the sustainability puzzle. I’ve worked with Jim Ventre, Andover’s Dean of Admission, to help everyone at Andover understand that if we do not take admission and financial aid as a strategic function, we lose sight of our future.”

Additionally, leadership and influence must be looked to off-campus. As more schools close their doors, the indus­try of independent schools as a whole must come togeth­er. Organizations like SSATB, NAIS, and NBOA have already begun the discussion across its constituent bases and with one another on the best methods to edify, di­rect, and influence school leadership. Regional organiza­tions are stepping up their professional development and leadership conferences to address the hard facts of the industry’s future. Admission directors must look to these resources for data and information that can be brought to campus leaders in order to educate each school’s commu­nity about industry trends, concerns, and successes.

One interesting case study is happening at St. Anne’s-Bel­fied School in Virginia with the help of a grant from the E.E. Ford Foundation. In conjunction with the Universi­ty of Virginia’s Darden School of Business, the school is closely examining the sustainability of its financial model. Acknowledging that the school relies heavily on tuition (84%) to cover its operating expenses, the project seeks to apply the most current business thinking and analysis of the school’s long-term fiscal strength, based on current data and assumptions about the future. As Bo Perriello, St. Anne’s-Belfield’s Director of Admission (Grades 5-12) describes, “Now is the right time for this kind of study. Our school is currently in a position of market strength. The last thing we want to be doing is asking these tough questions when it is too late.”

While 2020 may not seem around the corner, time is ticking. As Ben Franklin famously said, “You may delay, but time will not, and lost time is never found again.” It’s time to get counting.

Sources:

(1) The Seven Essential Characteristics of Sustainable Schools and Colleges. http://static.squarespace.com/static/500ee7a3c4aaf86e468510a3/t/5242c0a0e4b0c4a5c2a3128e/1380106400878/Seven%20Essential%20 Characteristics%20of%20Sustainable%20Schools%20and%20Colleges.pdf

(2) NAIS Facts at a Glance: 2005-2006, 2008-2009, and 2012-2013.

(3) 2013 SSATB State of the Independent School Admission Industry, SSATB, Princeton, NJ, 2013.

 

 



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