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Business Intelligence: Markers of Sustainability

By Net Assets posted 12-10-2018 11:46 AM

  
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Financial Management |

Assessing a school’s perceived value in the marketplace is one of several key data points that signal its financial health.

Article by Mary Kay Markunas

From the November/December 2018 Net Assets magazine

What data points should independent schools focus on to determine their financial sustainability? A new NBOA white paper that analyzes data from NBOA’s Business Intelligence for Independent Schools (BIIS) data collection platform establishes five key markers:

    1. Enrollment vitality
    2. Net tuition vitality
    3. Non-tuition revenue vitality
    4. Staff productivity vitality
    5. Value perception vitality

Calculating Perceived Marketplace Value

The value perception vitality marker can help schools determine whether tuition increases may help or hurt enrollment. The 2017 NBOA/Measuring Success/ISM report, “Effects of Tuition Increases on Enrollment Demand,” demonstrated that enrollment growth is strongly influenced by how families perceive a school’s use of discretionary funds. If families believe those investments enhance the school’s value proposition relative to the marketplace, tuition increases will not harm enrollment.  

A proxy measure for the perceived value of a school is the ratio of increases in applications to growth in operating spending per student. If the market perceives that a school’s operations spending increases the value of the education provided, the ratio will be a positive number. The greater the ratio, the higher the perceived value of the education. Median values ranged from 104 percent to 81 percent among the schools studied. Values above 100 percent indicate higher value perception, and values below indicate lower value perception.

2015–2017 Median Performance in Perceived Value of Largest BIIS Schools

 

  Top Third

Middle Third

Lowest Third

Application Increases Divided by the Rate of Operating Spending per student

  104%

94%

81%

White paper author Harry Bloom, senior vice president of client solutions at Measuring Success, interviewed four top-performing schools to ascertain how they have enhanced their financial position and sustained growth. Here are two ways two of those schools controlled their operating spending to strengthen perceived value.

Lakeside School in Seattle maintained a positive ratio of application increases to operating spending per student, at 101 percent, by hiring only new faculty and no new non-instructional staff members, among other measures. The 7 percent increase in operating spending was offset by an 8 percent growth in applications.

Potomac School in McClean, Virginia, reduced three-year operating spending per student by 1 percent through “careful management of human resources, encouraging faculty to take on multidimensional roles,” Bloom wrote. This resulted in a 103 percent ratio of application increases to operating spending per student.

To learn more about the five markers of sustainability and read all four case studies, download the white paper. Reporting for schools that submitted data to BIIS is slated to open for reporting very soon.

Mary Kay Markunas is NBOA’s director, research and member resources.

Download a PDF of this article.

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