Financial Management |
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:
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
Application Increases Divided by the Rate of Operating Spending per student
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.
Download a PDF of this article.
Key Financial Indicators of Sustainability for Independent Schools (webinar, September 2018)
Business Intelligence: Time to Tighten the Belt? (Net Assets magazine, March/April 2018)
Four Things I Want You to Know About Your School’s Participation in BIIS (NetAssets.org, November 2017)
A Tool for Sparking More Informed Decisions, Better Board Conversations (NetAssets.org, March 2018)#Budget#Leadership
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