Скачать презентацию Financially Sustainable Schools Six Steps to Re-engineering Your Скачать презентацию Financially Sustainable Schools Six Steps to Re-engineering Your

faacde0fb1f884892153e6b0b2b29959.ppt

  • Количество слайдов: 91

Financially Sustainable Schools: Six Steps to Re-engineering Your School’s Financial Future Patrick F. Bassett, Financially Sustainable Schools: Six Steps to Re-engineering Your School’s Financial Future Patrick F. Bassett, NAIS President, Mark Mitchell, VP for School Information Services, and Corey Mc. Intyre, Chief Financial Officer

6 -Steps: Financially Sustainable Schools: “Birthing” of Next Generation Model Preliminary Steps: Form a 6 -Steps: Financially Sustainable Schools: “Birthing” of Next Generation Model Preliminary Steps: Form a Task Force! Meet 3 Times with an NAIS facilitator: Create and test hypotheses. 1. Trend Analysis: What are your school’s five- and 10 -year trends? 2. Ratio Analysis: How do your school's "dashboard indicators" benchmark against those of comparable schools? 3. Financial Planning Assumptions: What are the basic assumptions your school makes about its position in the marketplace (“elasticity” of demand pricing), mission imperatives, and expectations for the future?

6 -Steps: Financially Sustainable Schools: High Stakes Planning 4. Data Markers of School Success: 6 -Steps: Financially Sustainable Schools: High Stakes Planning 4. Data Markers of School Success: How does your school measure success? What are the budget-related factors that function as "proxies" for success? 5. Re-engineering Strategies: What are the "brutal facts" about your current financial position? Where are you vulnerable now or potentially in the future? What strengths can you capitalize upon? What are your means for diversifying income and containing costs? 6. Projecting Alternative and Preferred Financial Futures: What are the likely, possible, and preferred financial futures for your school, and what decisions will you have to make to achieve your objectives?

6 -Steps: Financially Sustainable Schools: High Stakes Planning The Charge: § Mine data to 6 -Steps: Financially Sustainable Schools: High Stakes Planning The Charge: § Mine data to project from trends and set goals for shaping your future. § Make decisions that less “opinion-rich” and more “data-rich. ” § Right-brained thinking (A Whole New Mind ~Daniel Pink): out of box creativity, pattern recognition, crossplatform applications.

Step 1: Trend Analysis Step One provides a statistical base for assessing where the Step 1: Trend Analysis Step One provides a statistical base for assessing where the school has come from financially and what the trends might suggest about the school's financial future. Goal: To determine your school's financial trends in comparison to NAIS industrywide comparison groups. Questions To Ask: § What are the five- and 10 -year trends of your school in terms of the key financial factors: admissions and enrollment; staffing size and compensation; giving and endowment; overall income and expense streams? § What do your school's trends suggest about the future? § To what other schools should you compare yourselves and why? § How do your school's trends compare to your benchmark group trends? How might external, community-wide trends impact your future and goals? Tasks To Undertake: § Give your CFO/Business Manager the assignment, using your own school's financial, enrollment, staff size, faculty compensation and giving data from the benchmarking section of Stats. Online, to determine your school's five-year and 10 -year trends, compared to those of your benchmark group and NAIS's national data.

NAIS Data: 10 -Year Trends § Tuitions Up Dramatically: Median NAIS tuition ØUp 30% NAIS Data: 10 -Year Trends § Tuitions Up Dramatically: Median NAIS tuition ØUp 30% in real dollars = CPI +3 (vs. college tuitions, where net cost is stable) ØInelasticity of pricing? Moody’s Report. Some schools haven’t hit the break point where increased price dampens demand. Question: For one’s mission OR market, are you seeing a price break point in the near future? § Enrollment Stable or Up (on average but not everywhere): For schools that are full, enrollment growth not an option to fund budget growth. But Katrina made us wonder, “What is ‘full’”?

NAIS Data: 10 -Year Trends § Salaries Up Modestly (11. 1% adjusted for inflation): NAIS Data: 10 -Year Trends § Salaries Up Modestly (11. 1% adjusted for inflation): Question: What would marketcompetitive salaries be based on public school averages to recruit nationally? Ø$35 K starting; $50 K median; $75 K high (and 1/3 higher in high-cost urban markets) ØAttrition: 10. 1% NAIS; 11% US Businesses; Schools: 16% public; 22. 8% small privates.

NAIS Data: 10 -Year Trends § What’s Driving Increased Tuitions? Overall staff up 31. NAIS Data: 10 -Year Trends § What’s Driving Increased Tuitions? Overall staff up 31. 8%. Student: Faculty Ratio = 8. 6: 1 Day and 7. 1: 1 Boarding. Class size conundrums. Question: If you add a program, what program will you sunset? § Diversity up: Students of color to an average of 20%; faculty of color to an avg. of 10. 0 %; 20% of faculty of color seems to be the “tipping point” for schools.

NAIS Data: 10 -Year Trends § Financial Aid--Grants Up but Numbers Flat: SSS Applicants NAIS Data: 10 -Year Trends § Financial Aid--Grants Up but Numbers Flat: SSS Applicants from families under $60 K declining; over $100 K skyrocketing. Where is the middle class? “Have Not”s vs. “Have a Lot”s vs. “Don’t Have Nearly Enough”s § Giving up Significantly (22%): Averaging about $1200 gift from parents (65%), $6000 from trustees (95%), $350 from alumni (20%), $750 from Grandparents (15%). How much more giving capacity does your constituency have?

Sample Trend & Analysis Sample NAIS School Sample Trend & Analysis Sample NAIS School

Data-informed Questions To Answer § If this were your school, would this growth rate Data-informed Questions To Answer § If this were your school, would this growth rate (80% vs. benchmark schools 40%) be sustainable over the next five or ten years? If not, how will you explain slower growth in the upcoming near future to faculty? § What is funding the rapid rate of increase? Has tuition or another revenue source risen as rapidly? Have other budget lines taken a temporary backseat to the teacher salary priority of the early 2000's? § Has teacher efficiency (average class size, student-teacher ratios, course load, etc. ) grown as well? Has the school increased enrollment significantly without significantly increasing faculty? § What does the local or national labor market indicate as the outlook for future faculty? Will the characteristics of the labor pool show the need for even more aggressive or more moderate growth in teacher salaries?

Step 2: Ratio & Variance Analysis Step Two provides a snapshot of current key Step 2: Ratio & Variance Analysis Step Two provides a snapshot of current key ratios as a basis for posing the principal strategic financial planning questions. Goal: To benchmark your school's key ratios against those of comparable schools to determine where you exceed the norm and can use your relative position advantageously, where you fall below the norm and can improve, or where you deliberately ignore the norm and can articulate why. Questions To Ask: § How do your school's "dashboard indicators" compare to those of similar schools? § In a variance analysis, where and why do your ratios look different? § What are you doing that gives you a financially sustainable advantage? § What are others doing that give them better ratios and better results? How can you emulate them? Tasks To Undertake: § Give your CFO/Business Manager the assignment to develop a Dashboard Indicators Report using NAIS's School Indicators / Financial Calculator

Data-informed Questions To Answer § If this were your school’s data and your tuition Data-informed Questions To Answer § If this were your school’s data and your tuition and financial aid per student is lower than your benchmark schools, are you charging too little? If you charged more, could you increase the number of students receiving aid and the aid amounts? § Since your annual giving per student and special events income per student are lower than your benchmark schools, how can you raise the bar among your constituents? § While your "other income" outperforms your benchmark schools, can you continue to grow in non-tuition, non-giving sources of income? § Even with a smaller budget, your salaries and benefits expenses per student are competitive: Can you continue to be so?

Data-informed Questions To Answer § Since at the faculty level you are significantly more Data-informed Questions To Answer § Since at the faculty level you are significantly more efficient (higher student per faculty ratio) than your benchmark schools, can you sustain this? § While your faculty members have higher work load ratios, they have lower average salaries. Is there a demographic reason for this (e. g. , a younger than average faculty)? Or is this a time-bomb for you in terms of faculty morale and competitiveness in attracting and keeping faculty? § While you are overall more efficient in faculty, you are less efficient in administrators and overall staff (fewer studentsto-administrators and students-to-staff): Why is the case? Is it an advantage for you or a potential area to seek greater efficiencies? § Your giving profile shows good participation among parents and trustees, but lower average gifts, and your alumni participation rate is extremely low: What's your plan to improve on your performance in this arena?

Data-informed Questions To Answer § Your admissions funnel is slightly less competitive than that Data-informed Questions To Answer § Your admissions funnel is slightly less competitive than that of your benchmark group, and your student attrition is slightly higher: What does this suggest regarding external and internal surveying and marketing? § Your non-compensation expense per student (i. e. , program and instruction-related budgets) is nearly 25 percent lower than your benchmark group. Why? Is this a concern or an opportunity? § Your endowment per student is significantly lower than your benchmark group. Can you improve this ratio?

Step 3: Ten Financial Planning Assumptions § Step 3 helps a school to identify Step 3: Ten Financial Planning Assumptions § Step 3 helps a school to identify frankly its current financial picture and prospects and then make the tough policy and strategy choices to ensure a strong future financial position. § Goals: To assess your school’s trend lines and benchmark variances, determine “the brutal facts, ” and make the necessary policy choices to improve one’s particular market / mission position and placement along a financial continuum (from financial vulnerability to financial equilibrium). § Questions To Ask: What are the basic assumptions your school makes about the school's position in the marketplace, mission imperatives, and expectations for future budget-related growth? How do you bring these assumptions to light and examine them? § Tasks To Undertake: Discuss and determine where your school now finds itself on each of the following 10 financial planning assumption continua. Where along each continuum you would like to position the school in the future?

Financing Sustainable Schools: Ten Planning Assumptions 1. Market Position & Pricing: Do you have Financing Sustainable Schools: Ten Planning Assumptions 1. Market Position & Pricing: Do you have high demand, an affluent base, little sign of pushback on price, and no mission imperative to keep tuitions low? Or, are you seeing a softening of demand, attrition because of high pricing and tuition hyperinflation, a shrinking market of families who can afford your school, or a change in mission-determined clientele? Somewhere in between? Should your tuition increases be high, (>CPI +2), moderate (

Financing Sustainable Schools: Ten Planning Assumptions 3. Tuition Dependency: Should your goal be to Financing Sustainable Schools: Ten Planning Assumptions 3. Tuition Dependency: Should your goal be to “charge what it costs” so tuition pays for operations (and make giving dedicated for capital purposes)? Or should your goal be to diversify income to reduce your dependency on tuition as primary income stream? 4. Staff Salaries: Do you believe that you must benchmark compensation against the high end of NAIS and suburban public school salaries? Or do you believe the historic “climate advantage” independent schools have enjoyed will allow us to attract and keep high quality faculty at 10 -20% “below market”? Will the generation shift in teachers be a financial boon or challenge?

Financing Affordable Schools: Ten Planning Assumptions 5. Program and Staff: Should you add services, Financing Affordable Schools: Ten Planning Assumptions 5. Program and Staff: Should you add services, program, and staff as demand for additional programming increases? Or, should you freeze the growth of staff (since it is the primary factor in driving increased costs and tuitions)? Consider reducing staff through attrition or “right”-sizing? 6. Class Size: Can you increase class size moderately (and thereby increase productivity) without jeopardizing your market position, the effectiveness of the program, and the morale of the faculty? Are their other means by which to increase productivity without increasing class size? Or is class size limited by factors you can’t touch?

Financing Affordable Schools: Ten Planning Assumptions 7. Facilities, Equipment & Technology: Should you declare Financing Affordable Schools: Ten Planning Assumptions 7. Facilities, Equipment & Technology: Should you declare a truce? Retro-fit current facilities so that they conserve energy? Adopt a “green” posture regarding all future building and renovation? Or expand renovate at will to secure market advantage? 8. Debt vs. Endowment: Should you mortgage the future via attractive bond financing options (yielding immediate market benefits, costs amortized over time, and expenses paid by those benefiting from new facilities)? Or do you forgo building until pentup demand helps you build via fundraising? What is your debt-toendowment ratio, and how does it impact your liquidity and financial strength? (<1: 1? ) What should your budget –to- endowment: budget ratio be? (<1: 1, after debt? ) What’s the long-term financial sustainability strategy to reach the preferred budget: endowment ratio?

Financing Affordable Schools: Ten Planning Assumptions 9. Giving: Do you have the capacity to Financing Affordable Schools: Ten Planning Assumptions 9. Giving: Do you have the capacity to expand annual and endowment giving significantly? Or are you seeing the rate of increased giving flatten or decline? Should you adopt policies on giving and budgeting that would contribute annually to the growth of the endowment? 10. Alternative Revenue Streams: Do you have additional capacities to exploit your physical and intellectual capital to generate significant new revenues? Or do you think offering services to other audiences will dilute focus and mission?

Step 4: Ten Data Markers of Success (NAIS’s “Stake in the Ground” Approach) § Step 4: Ten Data Markers of Success (NAIS’s “Stake in the Ground” Approach) § Step Four will help you identify and set goals for success. § Goal: In the context of strategic sustainability the two most important goals are achieving outstanding student outcomes combined with institutional financial equilibrium. § Questions To Ask: How does your school measure success? What are the budget-related factors that contribute to this success? By these measures, how is your school doing relative to other schools? What are the measurable proxies for successful schools? § Tasks To Undertake: Utilizing Stats. Online and the school's own other data collection mechanisms, determine your school's position in the arenas listed below, since each of these categories can be seen as data equivalents or proxies for school success. What percentile are you? Where do you want to be? It’s likely you’ll be at the a 25 th percentile in some variables and aspire to be at the median percentile for those, and at the median percentile in others and aspire to be at the 75 th percentile for those, and at the 75% percentile in others and aspire to be at the 90+ percentile for those.

Ten Markers of Success: Market Demand 1. Market demand: number of applications per acceptances Ten Markers of Success: Market Demand 1. Market demand: number of applications per acceptances measure the market’s perception of the school’s success (high ratio a proxy for reputational value). The higher the ratio, the greater the pricing (tuition) flexibility. Day Schools Boarding Schools Percentile(25) 1. 3 Percentile(25) 1. 4 Percentile(50) 1. 6 Percentile(50) 1. 7 Percentile(75) 2. 3 Percentile(75) 2. 1 Percentile(90) 3. 5 Percentile(90) 2. 7

Ten Markers of Success: Low Attrition 2. Low annual student attrition: measures stability of Ten Markers of Success: Low Attrition 2. Low annual student attrition: measures stability of school and satisfaction of parents (low percent a proxy for high stability and satisfaction. Attrition @ Boarding Schools: Attrition @ Day Schools: Percentile(25) 4. 4% Percentile(25) 6. 2% Percentile(50) 6. 4% Percentile(50) 9. 6% Percentile(75) 9. 3% Percentile(75) 15. 3% Percentile(90) 13. 8% Percentile(90) 23. 7%

Ten Markers of Success: Giving 3. Generous giving: measures constituent loyalty (generosity as a Ten Markers of Success: Giving 3. Generous giving: measures constituent loyalty (generosity as a proxy for high support and attributed effectiveness). Day Schools Alumni % Parent % Trustee % Alumni Avg Gift Parent Avg Gift Trustee Average Gift Percentile(25) 5. 5% 52. 6% 94. 5% $160 $605 $2, 351 Percentile(50) 11. 1% 66. 2% 100. % $301 $967 $4, 199 Percentile(75) 19. 5% 80. 4% 100. % $455 $1, 510 $6, 765 Percentile(90) 29. 6% 92. 1% 100. % $663 $2, 455 $11, 705

Ten Markers of Success: Giving 3. Generous giving: measures constituent loyalty (generosity as a Ten Markers of Success: Giving 3. Generous giving: measures constituent loyalty (generosity as a proxy for high support and attributed effectiveness). Boarding Schools Alumni % Parent % Trustee % Alumni Avg Gift Parent Avg Gift Trustee Average Gift Percentile(25) 10. 8% 32. 6% 93. 1% $365 $897 $4, 399 Percentile(50) 20. 2% 47. 6% 100. % $543 $1, 218 $7, 913 Percentile(75) 29. 1% 55. 6% 100. % $698 $1, 743 $10, 784 Percentile(90) 35. 8% 65. 9% 100. % $980 $2, 501 $17, 719

Ten Markers of Success: Faculty Salaries 4. Competitive Faculty Salaries: measures a school’s capacity Ten Markers of Success: Faculty Salaries 4. Competitive Faculty Salaries: measures a school’s capacity to attract, keep, and reward high quality faculty (salaries a proxy for competitiveness in recruitment and high quality teachers) Day Schools Highest Median Lowest Percentile(25) $62, 830 $43, 299 $30, 000 Percentile(50) $73, 500 $49, 500 $34, 000 Percentile(75) $86, 280 $56, 205 $38, 645 Percentile(90) $100, 400 $64, 665 $43, 364

Ten Markers of Success: Faculty Salaries 4. Competitive Faculty Salaries: measures a school’s capacity Ten Markers of Success: Faculty Salaries 4. Competitive Faculty Salaries: measures a school’s capacity to attract, keep, and reward high quality faculty (salaries a proxy for competitiveness in recruitment and high quality teachers) Boarding Schools Highest Median Lowest Percentile(25) $51, 515 $34, 344 $23, 455 Percentile(50) $59, 450 $38, 814 $26, 000 Percentile(75) $68, 338 $45, 950 $29, 760 Percentile(90) $77, 750 $51, 395 $33, 050

Markers of Success: Moderate Tuitions 5. Relatively moderate tuition and moderated annual tuition increases: Markers of Success: Moderate Tuitions 5. Relatively moderate tuition and moderated annual tuition increases: measure value in the value proposition (a proxy for comparative “affordability” and moderated inflationary pricing). Day Schools Avg. Tuition Day Schools % One Year Change Boarding Schools Avg. Tuition Boarding Schools % One Year Change Percentile(25) $13, 629 4. 8% $26, 369 5. 0% Percentile(50) $17, 775 5. 7% $29, 964 5. 5% Percentile(75) $22, 383 6. 7% $33, 562 6. 6% Percentile(90) $26, 904 8. 1% $35, 660 8. 5%

Markers of Success: Financial Aid 6. A substantial, stable, and sustainable proportion of students Markers of Success: Financial Aid 6. A substantial, stable, and sustainable proportion of students receiving financial aid measures a school’s commitment to diversity (financial aid a proxy for socio-economic diversity) balanced by financial prudence. Day Schools: Students on Tuition Assistance as % of Enrollment Day Tuition Assistance as % of Day Tuition Percentile(25) 15. 1% 47. 0% Percentile(50) 19. 8% 57. 2% Percentile(75) 26. 5% 66. 8% Percentile(90) 35. 3% 74. 1%

Markers of Success: Financial Aid 6. A substantial, stable, and sustainable proportion of students Markers of Success: Financial Aid 6. A substantial, stable, and sustainable proportion of students receiving financial aid measures a school’s commitment to diversity (financial aid a proxy for socio-economic diversity) balanced by financial prudence. Boarding Schools: Students on Tuition Assistance as % of Enrollment Day Tuition Assistance as % of Day Tuition Percentile(25) 29. 5% 50. 9% Percentile(50) 35. 8% 59. 5% Percentile(75) 45. 5% 74. 3% Percentile(90) 51. 4% 81. 8%

Markers of Success: High Productivity 7. Comparatively high student: faculty and student: total staff Markers of Success: High Productivity 7. Comparatively high student: faculty and student: total staff ratios: measure workload productivity (a proxy for institutional efficiency): Day Schools: Students: FTE Faculty Percentile(25) Percentile(50) Percentile(75) Percentile(90) 7. 7 8. 7 9. 8 11. 3 Students: FTE ALL Staff 4. 1 4. 7 5. 4 6. 2

Markers of Success: High Productivity Boarding Schools: Students: FTE Faculty Percentile(25) Percentile(50) Percentile(75) Percentile(90) Markers of Success: High Productivity Boarding Schools: Students: FTE Faculty Percentile(25) Percentile(50) Percentile(75) Percentile(90) 6. 0 6. 9 8. 0 8. 9 Students: FTE ALL Staff 1. 9 2. 3 2. 7 3. 2

Markers of Success: Funding Professional Development & Technology 8. Significant budget for professional development Markers of Success: Funding Professional Development & Technology 8. Significant budget for professional development and technology: measures commitment to human resources and innovation (a proxy for investment in supporting a high-quality learning environment). Day Schools: Prof Development Technology Budget as % of Expenses Percentile(25) 0. 48% 0. 71% Percentile(50) 0. 72% 1. 13% Percentile(75) 0. 97% 1. 73% Percentile(90) 1. 19% 2. 50%

Markers of Success: Funding Professional Development & Technology 8. Significant budget for professional development Markers of Success: Funding Professional Development & Technology 8. Significant budget for professional development and technology: measures commitment to human resources and innovation (a proxy for investment in supporting a high-quality learning environment). Boarding Schools: Prof Development Technology Budget as % of Expenses Percentile(25) 0. 29% 0. 75% Percentile(50) 0. 40% 1. 31% Percentile(75) 0. 67% 1. 93% Percentile(90) 0. 96% 2. 48%

Markers of Success: Grow Endowment 9. Growing endowment: measures commitment to financial security (a Markers of Success: Grow Endowment 9. Growing endowment: measures commitment to financial security (a proxy for inter-generational equity and long-term stability). Day Schools: Endowment Value Percentile(25) Percentile(50) Percentile(75) Percentile(90) $2, 357, 986 $7, 570, 734 $20, 607, 992 $46, 968, 628 Endowment per Student Value $6, 166 $14, 760 $35, 575 $68, 754

Markers of Success: Grow Endowment Boarding Schools Percentile(25) Endowment per Student Endowment Value $4, Markers of Success: Grow Endowment Boarding Schools Percentile(25) Endowment per Student Endowment Value $4, 828, 441 $25, 080 Percentile(50) Percentile(75) $14, 262, 780 $42, 959, 912 $59, 525 $171, 239 Percentile(90) $104, 547, 199 $286, 689

Markers of Success: Student Outcomes 10. Student outcomes measure overall success of mission (persistence Markers of Success: Student Outcomes 10. Student outcomes measure overall success of mission (persistence and graduation rates a proxy for effective preparation academically and constitutionally to succeed in future competitive academic environments): Note: Student outcomes can be determined on a more extensive basis by results on the NAIS Alumni Survey (and benchmarked in part against other independent schools and against public school results from the Annual College Freshmen Survey).

Step 5: Re-engineering Strategies § Step Five entertains means by which to pursue your Step 5: Re-engineering Strategies § Step Five entertains means by which to pursue your strategic financial objectives. § Goal: Based on the school’s planning assumptions and target markers for success, determine which strategies are the most likely to succeed for your school. § Questions To Ask: What are the "brutal facts" about your current financial position and your current or potential financial vulnerability in the future? How do you develop, adopt, communicate, and "sell" strategies that will ensure an optimal financial future for the school? What strategies should you adopt to secure financial equilibrium? § Tasks To Undertake: Create a task force of entrepreneurial board members, faculty, and administrators to consider options to recommend regarding developing additional or enhanced revenue streams and curtailing the growth in expenses.

Strategies – Revenue Enhancement § Grow enrollment (without growing staff) § Capitalize upon intellectual Strategies – Revenue Enhancement § Grow enrollment (without growing staff) § Capitalize upon intellectual property ü Calvert School (MD): curriculum for home-schoolers (net $1. 5 m/yr). Now one version of website in Russian. ü Elmwood Franklin (NY): Achieve! Storefront Tutorials (projected $100 K/yr. ) ü St. Richard's School (Indianapolis): auxiliary education center for tutoring, technology, adult education, testing preparation (SAT), GED ü The Norman Howard School (NY) -- En. Compass: Resources for Learning struggling learner assessment, coaching, tutoring, college LD assessment & guidance; training/consultation for schools; community workshops and seminars. ü San Francisco School (CA): Kids Battle the Grown-Ups trivia game co-authored by 6 th graders. Net $70 K royalties so far. 2 nd game, Kids Rule, now carried by Wal-Mart and Toys “R” Us. (See WSJ 1/20/05 “Extracurricular Business”)

Strategies – Revenue Enhancement § Full utilization of physical assets: ü Lake Forest Academy Strategies – Revenue Enhancement § Full utilization of physical assets: ü Lake Forest Academy (IL): Outsourcing to Sodexho weddings ($500 K/yr); sale of adjoining property to high-end developer for endowment; ü Many schools: adult ed in evening; sports clubs during class time & weekends (See the “Money” issue of Independent School-Fall 2003. ) ü Georgetown Prep (MD): Luxury apartments on 3 acres of leased property (Income = $1. 3 M year on 99 -yr lease. ) ü Hilton Head Prep (SC): Women's wellness Retreat (Summer Session for Moms and their teenage daughters); also: homeschoolers can take one course at the school for 1/5 th tuition. ü Shattuck-St. Mary’s (MN): Building a golf course on adjacent property and selling lots (Net $2 M in first year). Development of five “centers of excellence”: Hockey, soccer, the creative arts, etc.

Strategies – Revenue Enhancement § Enhanced fundraising to build endowment üSerious deferred giving programs: Strategies – Revenue Enhancement § Enhanced fundraising to build endowment üSerious deferred giving programs: e. g. , most boarding schools. üGrow endowment via a combination of allocating to endowment 1/3 rd of all capital campaign, annual giving, and special event proceeds to endowment and/or a commitment of 1 -3% of annual budget contribution to endowment.

Endowment Growth To Neutralize CPI+2 (Peter Aitken chapter in NAIS’s book on Affordability and Endowment Growth To Neutralize CPI+2 (Peter Aitken chapter in NAIS’s book on Affordability and Demand) § Minimum Starting Point: school’s endowment the same size or larger as its (balanced) annual operating budget. [1] § Use a 3. 5 percent endowment spending rule so from year one of the new approach, the endowment draw initially contributes 3. 5 percent of total operating revenue. [2] § Expect the endowment managers to achieve an average 8 percent annual appreciation over the long term. § Set the development goal of adding 3 percent annually to its endowment through capital gifts. [3] § Assume general inflation averages 3 percent. § Keep the school’s budgetary inflation to 5 percent (CPI + 2)

Endowment Growth To Neutralize CPI+2 (Peter Aitken chapter in NAIS’s book on Affordability and Endowment Growth To Neutralize CPI+2 (Peter Aitken chapter in NAIS’s book on Affordability and Demand) § Results: endowment draw as a percentage of total operating revenue will increase by about 2. 4 percent annually. – Over twenty years it would raise the endowment contribution from 3. 5 percent of total operating revenue to 5. 6 percent – Over 50 years the endowment contribution would increase to 11. 3 percent of total operating revenue – Over 100 years the endowment contribution would increase to 35 percent. – These increases represent relief for tuitions. Over time, the school grows less tuition dependent and more affordable.

Endowment Growth To Neutralize CPI+2 (Peter Aitken chapter in NAIS’s book on Affordability and Endowment Growth To Neutralize CPI+2 (Peter Aitken chapter in NAIS’s book on Affordability and Demand) [1] The average value of the ratio of endowment market value to annual operating revenue for 738 NAIS member schools reported in 2006 -07 was 1. 5: 1. The median value was 0. 7: 1. [2] The average value of the percentage of endowment funds transferred to operations for 752 NAIS member schools reported in 2006 -07 was 3. 4 percent. The median value was 4. 0 percent. [3] The average value for endowment increase via capital gifts (including pledges) for 54 large enrollment, NAIS member, PS-12 or K-12 day schools that are institutional sponsors of the Joint Research and Planning Office (JRPO) reported in 2006 -07 was 4. 9 percent. The median value was 1. 5 percent.

Strategies – Containing Costs § Increase “productivity” üstudent/teacher ratios: “case load”--# students or class Strategies – Containing Costs § Increase “productivity” üstudent/teacher ratios: “case load”--# students or class meetings--vs. “course load” approaches ü“Breaking the Trade-Off between Efficiency and Service" by Frances X. Frei, HBR Nov 2006: i. e. , instead of “classic accommodations” for “customer-introduced variability” (i. e. , issues of arrival, special request, capability, effort, subjective preferences), brainstorm strategies that are lowcost/automated, that reduce the variability, that re-norm behaviors, etc. ). E. g. , high fees for tardiness at after-school pickup; online option for specialized course requests; etc. § Moderate the arms race for new facilities § Sunset a program every time you add one: undertake periodic “sacred cow” hunts.

Strategies – Containing Costs § Charge a la carte for additional services: counseling, ESL, Strategies – Containing Costs § Charge a la carte for additional services: counseling, ESL, LD tutoring. § Benchmark compensation packages: “Moneyball” what to look for in hiring talent. § Seek efficiencies via consortia purchasing and outsourcing (maintenance, housekeeping, facilities and food services, even grading)

Step 6: Projecting Preferred Scenarios § Step Six will allow your school to experiment Step 6: Projecting Preferred Scenarios § Step Six will allow your school to experiment with varying financial scenarios by projecting and adopting a plan for an alternative and preferred financial future. § Goal: To project varying financial alternatives, experimenting with the major variables that determine a school's financial bottom line. § Questions To Ask: When you enter your school's assumptions about growth in each key budget area into the NAIS School Indicators/Financial Calculator, how do the results project out over a five-year period?

Step 6: Projecting Preferred Scenarios § Tasks To Undertake: Go to the NAIS Stats. Step 6: Projecting Preferred Scenarios § Tasks To Undertake: Go to the NAIS Stats. Online site, and enter your school’s financial planning assumptions into the NAIS Stats. Online Financing Schools Calculator to project, save, print, and debate several financial futures. – First run: What if you changed nothing (i. e. , projecting your school's last five years' budgetary trends for the next five years)? – Second run: What happens when you project all of your assumptions from Step Three (Financial Planning Assumptions) into the calculator? – Third run: What happens when you project all of your goals from Step Four (Data Markers of School Success) into the calculator? – Fourth run: What would it take to make the five-year projections "work" (budget balances or surpluses) to address your assumptions and meet your success markers to create your re-engineered and preferred financial future?

Stats. Online Dashboard Indicators & Calculator Stats. Online Dashboard Indicators & Calculator

Stats. Online Dashboard Indicators & Calculator Stats. Online Dashboard Indicators & Calculator

Stats. Online Dashboard Indicators & Calculator Stats. Online Dashboard Indicators & Calculator

Stats. Online Dashboard Indicators & Calculator Sample NAIS School, Anywhere, USA Stats. Online Dashboard Indicators & Calculator Sample NAIS School, Anywhere, USA

Sample NAIS School, Anywhere, USA Sample NAIS School, Anywhere, USA

Sample NAIS School, Anywhere, USA Sample NAIS School, Anywhere, USA

First sample projection based on preliminary assumptions. First sample projection based on preliminary assumptions.

Sample NAIS School, Anywhere, USA Sample NAIS School, Anywhere, USA

Deficits in Year 3? Typical Response: Hit the “back button” to increase tuition more. Deficits in Year 3? Typical Response: Hit the “back button” to increase tuition more.

Sample NAIS School, Anywhere, USA Results: Higher tuition income stream…. Sample NAIS School, Anywhere, USA Results: Higher tuition income stream….

…and good surpluses for five years. But falling back into the same pattern of …and good surpluses for five years. But falling back into the same pattern of hyper-inflationary tuition increases. The challenge: create surpluses by changing other variables.

The End The End

Appendix: Related Slides Appendix: Related Slides

Moody’s Update 2005 • “Moody’s continues to believe that the majority of independent schools Moody’s Update 2005 • “Moody’s continues to believe that the majority of independent schools in our portfolio retain pricing flexibility and will continue to grow total net tuition revenue and net tuition revenue per student. However, this pricing flexibility is finite, and already you have heard some cases where pricing is becoming more sensitive as parents consider lower cost day schools and church-related institutions as an alternate to the more expensive boarding schools. Tuition flexibility is greatest at highly rated schools which typically hold premier academic reputations nationally and increasingly internationally. ” • NAIS: Price is related to demand which is driven by PAVS factors: • Prestige (i. e. , perceived “rank” and “status” of school) • Affordability (i. e. , perceived affordability) • Value (i. e. , perceived outcomes) • Sacrifice (i. e. , willingness to use discretionary dollars on education) Often schools price themselves by their desired market position rather than the real market position—and therefore “discount” more heavily.

Financial Equilibrium § Revenues equal or exceed expenses. § Year after year, the rate Financial Equilibrium § Revenues equal or exceed expenses. § Year after year, the rate of growth in revenues equals or exceeds the rate of growth in expenses. § The value of financial capital is preserved or augmented over time. § The value and functional efficiency of physical capital (i. e. , plant, equipment, and technology) is preserved or augmented over time.

Financial Equilibrium § The effectiveness of human capital is preserved or augmented over time. Financial Equilibrium § The effectiveness of human capital is preserved or augmented over time. § The ability to maintain or improve delivery of the school's stated mission is preserved. § Resource allocation is aligned with mission imperatives

% of Filers Who Applies for Aid? Source: School and Student Service for Financial % of Filers Who Applies for Aid? Source: School and Student Service for Financial Aid (SSS) processing system data

The Disappearing Middle Class If independent school tuition is around “the price of a The Disappearing Middle Class If independent school tuition is around “the price of a Ford, ” why is everyone feeling so pinched now rather than 30 years ago? The Middle Class: Dual Income Family @$75, 000 (Source: Harvard Magazine, Feb, 2006 “The Middle Class on the Precipice”) The Ford Analogy - a “crime of logic”: one payment every 3 -5 years vs. 13 consecutive annual payments for each of two kids.

Should Tuition = “Cost of a Ford”? The problem: Pay for the Ford one Should Tuition = “Cost of a Ford”? The problem: Pay for the Ford one time over five years; pay for tuition for 2 kids, for 13 consecutive years.

Middle Income Affordability Facts § Wealthiest 5% of US family households begins at $173, Middle Income Affordability Facts § Wealthiest 5% of US family households begins at $173, 00: Some of these would qualify for aid at high-cost schools with more than one child enrolled SSS Source: US Census Bureau, 2005 Current Population Survey, http: //pubdb 3. census. gov/macro/032005/faminc/new 06_000. htm

Affordability Index Tuition “Full Pay” Income* Lower $13, 378 $103, 625 Middle $14, 963 Affordability Index Tuition “Full Pay” Income* Lower $13, 378 $103, 625 Middle $14, 963 $109, 505 Upper $17, 135 $116, 825 % of Families in US at That Income Level % of Income for Tuition 12. 9 17 – 18% 13. 6 14. 7 *Minimum income needed to pay one tuition at amount listed. Assumptions: Using 2005 -06 SSS Methodology for a family of four, two parents, two children, parents age 45, both work, no assets - parent or student, DC state/other taxes, no adjustment for local cost of living

Costs of Losing the Middle Class? Resource: “Accreditation & Class Issues” ~Ruby K. Payne Costs of Losing the Middle Class? Resource: “Accreditation & Class Issues” ~Ruby K. Payne § Loss of the value set that the middle class brings to the mix: drivers of work ethic, achievement orientation, and sacrifice for material security. § Absence of balancing tonic for ills of affluence: overinvolvement of the parents; intense academic and social competition; misguided parental intervention in student consequences. § Potential barrier to attracting young, idealistic “Teach for America” talent who seek diversity. Return

The Data on Class Size Preschool K-5 6 -8 9 -12 All Student: Fac The Data on Class Size Preschool K-5 6 -8 9 -12 All Student: Fac Ratio All NAIS Schools 15. 5 17. 5 16. 0 14. 2 16. 3 8. 6 Catholic NAIS Schools 17. 0 18. 0 16. 0 17. 7 9. 3 Public Schools – Now 21. 1 23. 6 15. 6 Parochial Schools 23. 6 23. 2 17. 2 Public Schools 1950 s 30. 0 22. 0

Shattuck-St. Mary’s – Supplemental Sources of Income (SSI) Analysis SSI Traditional Revenue Impact? Facility Shattuck-St. Mary’s – Supplemental Sources of Income (SSI) Analysis SSI Traditional Revenue Impact? Facility Development Ropes Course YES NOT YES Weddings/Banquets YES NO NO Golf Course Development YES NOT YES YES YES Sports Complex Facility YES YES English Language Institute YES YES NO Summer Theater/Dance Workshops Learning Differences Symposium Sports Camps

Shattuck-St. Mary’s – SSI Details Was Facility built (B) or Financed Program (F) or Shattuck-St. Mary’s – SSI Details Was Facility built (B) or Financed Program (F) or Donated Impact? Enhanced (E)? (D) Ropes Course B D Leadership Development Weddings/Banquets E D - E&B F&D Golf E D Recruitment E&B F&D Athletics English Language Institute - - Recruitment Learning Differences Institute - - Faculty Training Sports Camps - - Recruitment Golf Course Development Summer Theater/Dance Wisps Sports Complex Facility

SSI’s: Inspiring Donors to Fund Facilities § Design the program and SSI that a SSI’s: Inspiring Donors to Fund Facilities § Design the program and SSI that a new facility will provide the school. (Soccer development program; lease revenue; Dane Family Field House) § Prepare presentations for donors that show both the program for the students and the SSI. § Fund the program and facility through donations and SSI revenue. (Dane Family Field House: $1. 2 mm in donations, $1. 6 mm in financing)

Shattuck-St. Mary’s – Looking Ahead Under Consideration Existing Asset Fiber Optic Substation Location, Available Shattuck-St. Mary’s – Looking Ahead Under Consideration Existing Asset Fiber Optic Substation Location, Available Space Wind Turbines Location, Electrical Usage International Summer Travel Faculty, H of S relations. Alumni Hotel Stay Rebates School visitation Summer Film Festival for students Alumni body Independent School Credit Card Program Staff credentials Non Profit Accounting Services CFO experience Faculty Placement Service Administration’s experience Incubator for Start Up Businesses Parent body, State interests, HS program, campus, alumni body

The Demographics of Charitable Giving Source: New. Tithing Group, from IRS 2003 Tax Returns The Demographics of Charitable Giving Source: New. Tithing Group, from IRS 2003 Tax Returns Adjusted Gross Income (AGI) Avg Total Giving Under $50, 000 $ 277 $50, 000 - $74, 999 $ 1, 336 $75, 000 - $99, 999 $ 2, 153 $100, 000 - $199, 999 $ 3, 471 $200, 000 - $499, 999 $ 8, 236 $500, 000 - $999, 999 $ 20, 790 $1, 000 - $1, 499, 999 $ 39, 817 $1, 500, 000 - $1, 999 $ 58, 376 $2, 000 - $4, 999 $ 100, 345 $5, 000 - $9, 999 $ 288, 540 $10, 000 or more $ 1, 744, 229

Title Hypotheses Testing Source: The Mc. Kinsey Quarterly: 4/20/2006 Which pair would you choose Title Hypotheses Testing Source: The Mc. Kinsey Quarterly: 4/20/2006 Which pair would you choose given an opportunity to flip over just two cards to test the assertion, "If a card has a vowel on one side, then there must be an odd number on the other side"? Confirmation Bias: Most incorrectly choose U & 7; 7 offers no new info with a vowel on the back: answer is U & 8. Related to “possession bias”: people 2 to 3 times more likely to prefer what they have to what they may get: coffee mug vs. chocolate experiment: charge $7 to switch, would offer $3. 50 to buy.

Design: Where’s there space for creativity? Can we apply systems from other industries to Design: Where’s there space for creativity? Can we apply systems from other industries to the school business? Seattle’s Virginia Medical Center adoption of the Toyota Production Line Systems (HBR Case study) to be the “quality leader”: Goal to become the" value leader” not the “price leader”? Mapping the value streams and workflow in schools.

Data-driven Decision Making § 19 th century Rx: Leeches § Pierre-Charles-Alexandre Louis (1830) § Data-driven Decision Making § 19 th century Rx: Leeches § Pierre-Charles-Alexandre Louis (1830) § Mortality Rates for Treatment of Tuberculosis : – Leeches: 44% – No leeches: 25%

Data-based Strategic Planning METHODOLOGY & INFORMED DEBATE DATA STRATEGY Gov’t, School & Other Sources Data-based Strategic Planning METHODOLOGY & INFORMED DEBATE DATA STRATEGY Gov’t, School & Other Sources FEEDBACK

Grounding Principles of “Six Steps” § Data-driven rather than subjective § Ongoing rather than Grounding Principles of “Six Steps” § Data-driven rather than subjective § Ongoing rather than start-and-finish § Interactive among school constituencies, board, and staff § Flexible in process, structure, and language § Separates what an organization does (strategy) from how it is structured (design)… …so that re-design is possible to achieve financial sustainability