NAIS - Why Independent Schools Should Utilize Benchmarking

“Now that we have all this useful information, it would be nice to do something with it.” - Unix Programmer's Manual The National Association of Independent Schools (NAIS) benchmarking system indicates that approximately 20 percent of NAIS member schools have not taken advantage of the data generated by the DASL survey (formerly StatsOnline). Here I present reasons why all schools should utilize the survey data for benchmarking, as well as guidelines on how to begin the process.

Why Benchmark?

The primary discretionary budget drivers for most independent schools are tuition, financial aid, and faculty compensation/benefits. Supporting these operating budgets are expected levels of enrollment, annual giving, and the available draw on endowment. A more in-depth understanding of the marketplace — prior to making determinations about these drivers — enhances a school’s ability to make better decisions about its competitive positioning relative to peer schools. Our schools, through the auspices of the NAIS (as well as the National Business Officers Association and many state and regional organizations), have ready access to a depth of accurate market information that for-profit companies can only dream of. In the for-profit sector, due to competitive and/or legal factors, the data is generally not nearly as detailed or accurate as the information captured by our associations. Fortunately, as part of our membership, we are able to access high- quality market information simply by participating in industry surveys and using the NAIS DASL system. Absent extreme economic conditions — or unique circumstances for an individual school — it is unlikely that market conditions will shift dramatically in any one year. However, consistent shifts over a few years can rearrange the competitive landscape in significant ways. As an example, the following chart demonstrates the compounding effect of a school having 2 percent faculty compensation increases and 3.5 percent tuition increases while the respective increases in peer schools average 4 percent and 2.5 percent.

	Annual Increase	Starting	+1 Year	+2 Years	+3 Years	+4 Years	+5 Years
Average Faculty Compensation
Peer Schools	4%	$50,000	$52,000	$54,080	$56,243	$58,493	$60,833
Example School	2%	$50,000	$51,000	$52,020	$53,060	$54,122	$55,204
						$ Variance	($5,629)
						% Variance	-9.3%
Tuition
Peer Schools	2.5%	$30,000	$30,750	$31,519	$32,307	$33,114	$33,942
Example School	3.5%	$30,000	$31,050	$32,137	$33,262	$34,426	$35,631
						$ Variance	$1,688
						%Variance	5.0%

From an equal starting point, in this example, we see how a school that misjudges the market for just a few years is “suddenly” 9 percent lower on compensation — and 5 percent higher on tuition — than its peer schools; the result is a school that may be having increased difficulty hiring and retaining faculty, while simultaneously being a more expensive option relative to tuition. Ultimately, a school could easily wind up not well positioned vs. its peers simply by ignoring readily available market data. Also, in preparing “Rebuttable Presumption” information for head of school compensation decisions, the DASL database allows a school to generate comparative data that includes national schools of similar size, market types, etc. It is considered best practice to use both local and national comparisons in a Rebuttable Presumption analysis. The vast majority of schools utilize DASL to generate actionable information; consequently, failing to make use of this data puts a school at a very significant competitive disadvantage. Fortunately, using some of the following guidelines can make it relatively easy for a school to begin the benchmarking process.

How You Can Start the Benchmarking Process

If you have not already done so, begin participating in the NAIS DASL survey.The DASL survey now incorporates data for a number of other organizations that previously conducted separate surveys; based on your memberships, your survey may be customized accordingly. Be sure to download DASL's data dictionary to use as a guide for accurate survey completion.

Defining Peer Schools

The various pre-defined statistical tables in DASL are interesting for understanding information at a state and/or national level, but generally are not as useful for evaluating local market conditions. To get the most out of DASL, you will need to determine the peer school groups that are appropriate for where your school is today and, potentially, where it is headed.It is important to note that the choice of peer schools for benchmarking is a strategic decision; over time it will, by design, impact key decisions on how your school is positioned in the market. Depending on the number of schools in your geographic area, you may have slightly different peer groups for different variables. For example, your tuition comparison group is likely to primarily include only schools that have the same grades as your school.Alternatively, your compensation peer group may include schools that don’t overlap with all of your grades, but against which you regularly compete for faculty. In establishing your comparison group(s), input from your head of school, director of advancement/development, and director of admissions will, of course, be essential. Depending on how your school is structured, other people may also be helpful in this effort. The key is to identify those individuals that are involved in oversight/planning for the areas that you will be benchmarking, and then gain their perspective on which schools are the ones they “bump up against.” DASL lets you easily define and re-define your “Comparison Groups” at any time. It is quite possible you will need to refine your group(s) as you start to analyze the data and review it with the appropriate constituents; any uncertainty about the ultimate composition of your group(s) should not be viewed as an impediment to starting the process.

Generating Data

Once you have created and saved your Comparison Group(s), generating reports in DASL is fairly simple. The Benchmarking tab will guide you through the process. It is easy to create and revise reports, and it is a good idea to experiment with the different options to get your data structured in a manner that is most useful for you. You can easily save reports in DASL for re-use/updating over time. Reports can be generated for a specific year or for multiple years. Within DASL you can decide to use either the data or the time period as your column set. This flexibility allows you to easily focus on either current or trend data. Your benchmarking database will generally be more useful if you establish it with a reasonable amount of historical data. While you can generate reports on all of the NAIS survey data, it will probably be most useful to start with:

Total Enrollment
Tuition
Faculty Compensation
Annual Giving

This data will help you answer questions such as: “Are we gaining or losing market share?” “Is our tuition competitive to comparable schools?” and “Is our compensation fair based on the years of experience of our faculty?”

Analyzing Data

While the system reports are a useful starting point, you will often find that the greatest value can be achieved by performing an additional level of analysis. All of the reports in DASL can be exported into Excel. Once in Excel, you can analyze year to year and cumulative changes ($ and %), calculate variances for your school vs. peer schools, determine aggregate changes needed to achieve target percentiles, etc.

Using the Data

Most schools have both annual budgeting and long-range planning processes. The benchmarking data should be a valuable input into a school’s decision making in establishing both next year’s budget, as well as guiding the assumptions used for a five- or 10-year financial/business model. As these planning processes are undertaken, appropriate decision makers should review the current market and trend data in context of the school’s competitive positioning, resources, and goals. Virtually all business managers have more things on their “to-do” list than can be done at any one time. Making benchmarking a priority is a vital strategic and operational imperative. Ultimately, the time you invest in benchmarking will yield significant benefits for your school.