The Debatable Propositions:Why whispered questions deserve

constructive conversations

Genevieve MadiganNational Business Officers Association (NBOA)

• How many of you are familiar with ‘The New Normal’ and ‘Full Steam Ahead’?

• We will be:

– Updating Financial Sustainability– Defining Debatable Propositions– Working together to generate constructive

conversations

Financial Sustainability Update

Smooth sailing, or at least relatively so as compared to what was coming.

The Decade Before the Economic Climate Changed

The Decade Before the Economic Climate Changed

• Tuitions up 30% (real dollars) over 10 years• Overall staff up 32% over 10 years• Student: teacher ratios getting smaller• Financial aid grant dollars up 38%• Enrollment up 20%

12th Grade Tuition (All NAIS Median)

$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

$14,000

$16,000

$18,000

$20,000

1980 1985 1990 1995 2000 2005 2010

Actual

1981+CPI

1981

Historic Tuition GrowthHistoric Tuition Growth

Different Ideas Emerged

“New Normal” National Association of Independent Schools

(NAIS)

“Full Steam Ahead”Independent School Management

(ISM)

The New Normal (NAIS)

• Charge what people can pay

• Design your program to that revenue number

• Moderate tuition increases, cut expenses

The New Normal (NAIS)

• Increase enrollment without increasing staff

• “Sunset” an old program for every new one

• Right size: re-think class size, workload, # of teacher specialists, assistants, school size

• Devote 1/3rd of each fundraising dollar raised to endowment

Full Steam Ahead (ISM)

• Identify Value Proposition

• Charge what it costs (CPI + 2% or more when needed)

Full Steam Ahead (ISM)

• Decide whether you are a price, product, or process school

• Acknowledge that the 20th century “factory” model of education will not prepare students for the 21st century

• Design school to individualize learning using technology

• Dedicate 2% of your budget to faculty professional development

Tuition Continues to Rise

Source: NAIS Facts at a Glance

Faster than CPI

Source: US Bureau Labor Statistics, NAIS Stats Online

We’re Adding Employees

Source: NBOA Business Office Surveys 2008-12

Perceived Financial Health

Strategic Reactions

Increase Number of Students Per ClassroomIncrease Number of Students Per Classroom

Planned Implemented

’09 & ’10 Surveys 26.4% 11.7%

’10 &’11 Surveys 19.9% 10.7%

’11 &’12 Surveys 16.2% 11.6%

’12 Survey 17.9%

Strategic Reactions

Increase Teaching LoadIncrease Teaching Load

Planned Implemented

’09 & ‘10 Surveys 26.6% 12.8%

’10 & ‘11 Surveys 18.4% 10.9%

‘11 & ‘12 Surveys 14.2% 8.1%

‘12 Survey 14.8%

Strategic Reactions

Eliminate Student ProgramsEliminate Student Programs

Planned Implemented

’09 & ‘10 Surveys 6.7% 2.7%

’10 & ‘11 Surveys 5.0% 1.4%

‘11 & ‘12 Surveys 2.3% 2.2%

‘12 Survey 2.2%

Same goes for:

• Reduce Faculty FTE• Reduce Staff / Admin FTE• Decrease Planned Salary Increases• Reduce Salaries• Reduce Benefits

Strategic Reactions

Source: NBOA Business Office Survey 2009-12

Strategic Reactions

Increase Employee Contribution for BenefitsIncrease Employee Contribution for Benefits

Planned Implemented

’09 & ‘10 Surveys 17.5% 11.7%

’10 & ‘11 Survey s 20.7% 12.7%

‘11 & ‘12 Surveys 13.5% 13.2%

‘12 Survey 18.1%

Tuition Growth Trends

$-

$20,000

$40,000

$60,000

$80,000

$100,000

$120,000

$140,000

$160,000

$180,000

$200,000

80-8

183

-84

86-8

789

-90

92-9

395

-96

98-9

901

-02

04-0

507

-08

10-1

113

-14

16-1

719

-20

22-2

325

-26

28-2

931

-32

34-3

5

Tuiti

on

Average Boarding Tuition

Average Day Tuition

Average Boarding @CPI+3%

Average Day @CPI+3%

Average Boarding @CPI

Average Day @CPI

Affordability

Day TuitionIncome needed for

one childIncome needed for

two children

$25,000 $148,088 $234,460

$35,000 $182,000 $312,000

Source: NAIS 2012-13 Trendbook, as calculated by SSS

NOT Adjusted for Cost of Living in NY/NJ/CT

Financial Aid

Source: NAIS Facts at a Glance

Demographics

2012 projected 2017Connecticut 6,407 10,330 New Jersey 15,094 25,180 New York 23,290 38,415

Families with one or more children aged 14-17 and income over

$350,000

Source: NAIS Demographic Center

Productivity Problem

• In classical economics, as workers’ productivity increases, they produce more, and can be paid more, without charging the consumer more.

•In many social services, no increase in productivity of labor means that prices must rise in order to give wage increases. E.g. string quartet.

“Real Life” Game Changers

“Real Life” Game Changers

• Fork Union Military Academy (VA) one Subject Plan

• The Online School for Girls, Global Online Academy virtual learning with multiple schools

• Buckingham Browne & Nichols tuition growth model tied to CPI

• Drew School YES: fixed tuition for each student

• Flipped classrooms• Khan Academy• Banded Faculty Compensation

DEBATE THE PROPOSITIONSDEBATE THE PROPOSITIONS

“Creative thinking comes from making connections across fields

of thought.”Steven Johnson, author of “Where Good Ideas Come From, A Natural

History of Innovation”

Debatable Propositions

• Purposely Controversial

• Can take a stand: for or against

• Spark new thinking around both long-held beliefs or revolutionary concepts

• Eradicate “cherished theories”: things you believe, but have no evidence to support

Critical Thinking Process

For example…

1. The value of the smaller class experience is not as great as the cost.

or…

2. Financial aid should only be used in service of mission, not to increase enrollment.

and…

3. The cost of technology exceeds the value it provides.

how about…

4. Schools need to fully fund depreciation in order to ensure the long-term sustainability of their facilities instead of relying on philanthropic donations.

With that proposition, ask:

With that proposition, ask:

a. What assumptions underlie the proposition?

b. How can we test those assumptions?

c. What data do we have that supports or refutes the proposition?

d. What are the qualitative pros and cons?

e. What other alternatives can we generate? Is there a “game-changer” in the proposition for OUR school?

f. What are the next steps?

Example

• The cost of technology exceeds the value it provides.

The Challenge

Put one proposition on the agenda of your next leadership team meeting or

trustee retreat

Put one proposition on the agenda of your next leadership team meeting or

trustee retreat

Contact Information

Genevieve MadiganDirector, Research and Online ResourcesGenevieve.madigan@nboa.net202-407-7144

www.nboa.net@NBOAnet