Written by Dr. Harry Bloom, SVP of Client Solutions
While it is still unclear the extent to which the COVID-19 outbreak will bring in its wake a painful recession, it is already apparent that it will cause financial hardship to many school families whose employment is at risk and to schools that are experiencing shutdowns, unanticipated expenses and enrollment uncertainty. For all schools, this is exactly the right time to take initiative and embark on a disciplined process of operational and financial improvement that uses hard comparative benchmarking data, coupled with analytics and research to identify and realize meaningful improvements. There is precedent and abundant experience confirming the appropriateness of such action.
The year was 2009. The recession had officially begun in December of 2007, and the roughly 700 Jewish Day Schools in North America were reeling from its impact. While enrollments were down, severely in some segments of the market and more moderately in others, the more serious financial threats were due to demands for tuition assistance that increased by as much as 50 to 100 percent in certain schools and communities. Smaller schools, schools without extensive reserves or endowments, and those in communities populated by families suffering from layoffs and compensation cuts struggled to meet payroll. Virtually all schools deferred investments in programs and facilities and focused on survival. Administrators and Board members urgently sought philanthropic help from national and local philanthropic organizations to stay afloat.
Bringing to Bear the Best of Management Science on the Financial Challenges
During this precarious time, experts from Yeshiva University’s School Partnership Institute, where I was employed, and The AVI CHAI Foundation, recognized that while securing incremental philanthropic dollars might be a short term answer for struggling schools, a more sustaining answer would be to teach schools to utilize cutting edge management tools to learn to enhance their own sustainability.
Drawing upon our team’s experience working at leading consulting firms and large corporations, we designed a rigorous benchmarking-driven financial reengineering process that enabled a school to evaluate every aspect of its operations and financial performance relative to that of peer schools and to identify potential opportunities to improve. Relevant school leaders were tasked with evaluating the opportunities using analysis and research and with deciding which merited implementation.
We formed a cohort of 30 schools across five communities with about $250 million in combined revenue to test the effectiveness of this approach and provided them with expert counsel and project management support.
Consistent with the principle of management by objective, we secured agreement from each school that it would strive to achieve a three-year goal of a ten percent improvement in operating margin relative to a “business as usual” base case. Thus, for example, a school with an $8 million budget at the beginning of the program, would have generated improvements of $800,000 or more, relative to a business as usual base case, after three years.
The program was a success. Eighteen of the schools met or exceeded the 10% improvement goal, another five schools achieved 7-9% improvement, and seven achieved between 0-7% improvement. A total of $23 million in operating margin improvements were confirmed by the participating schools. Those schools that failed to achieve 7% or greater improvement tended to have had significant leadership turnover during the pilot program. What was equally impressive was the range of individualized improvement pathways the schools took. This is a testament to the autonomy school leaders had to act on the benchmarking opportunities in light of their missions, cultural norms, staff resources, and risk profiles.
Recent School Success Using the Same Program
Since this inaugural program, scores more schools have executed all or part of the program successfully—in some cases focusing their improvement activities in a particular arena such as enrollment growth or advancement or purchased goods and services and sometimes taking a whole school approach.
Benchmarking-driven financial reengineering has become a staple of Measuring Success’ toolkit and recently has been adopted by a diverse set of schools including Greenhill School in Dallas and St. John’s Preparatory School in Boston. Both of these successful efforts were featured in stories in NBOA’s Net Assets Magazine (read about Greenhill here and St. John’s Prep here) as well as in conference presentations and webinars. Cynthia Fanikos, St. John’s Prep’s Associate Head of School for Finance/CFO had this to say about the program: “The process allowed us to take the time and analyze where the School is today in order to strategically plan for the future. The discussions took our leadership team into a deep dive, honest assessment of each individual department. With the help of the consultants’ guidance and partnership, the School is well supported in stewarding its financial resources and ensuring that the value of a Prep education remains affordable and accessible in future years.”
To learn more about how to apply the process of Benchmarking Driven Financial Reengineering to your school’s situation, please visit the Measuring Success website where you can view recorded webinars by leaders of Greenhill School and St. John’s Preparatory School discussing their experience with the Benchmarking and Financial Reengineering program. Additionally, we invite you to contact Dr. Harry Bloom at email@example.com to discuss the details behind the program and how to consider its applicability to your school
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Rightsizing Your School to Maximize Value for Tuition: Lessons Learned from Our Work with 30 Schools
Hosted by Dr. Harry Bloom. April 23rd at 2PM Eastern
Since Measuring Success published its seminal 2016 research study on the effect of tuition changes on enrollment, many schools have been focused on the issue that most directly drives enrollment: Perceived Value Proposition. In this interactive webinar, Measuring Success will share its learning about the factors that do and do not drive perceived value, and about how to consistently maximize it and grow enrollment.