Improving Financial Sustainability: Schools Experiment With New Models

Well-known speaker and strategist Guy Kawasaki famously said, "Ideas are easy. Implementation is hard." I think this quote aptly describes the efforts to rethink the independent school business model. Although there are only so many levers a school can pull to improve sustainability, the nature of a school as a set of interdependent systems makes this proposition complex. Higher education faces the same challenge. A recent article on this theme, “The Future of Higher Education: Will Higher Education Seize The Future Or Fall Victim To It?” suggests four paradoxes that school leaders will have to confront to create a more sustainable future:
  1. Even amid growing awareness that the business model is broken, colleges and states are doubling down on it.
  2. The way we are managing our educational model is undermining its relevance and value.
  3. We need to change quickly, but our institutions are operating at capacity and our governance models are not supportive of rapid innovation.
  4. The research is clear that the value of a degree is increasing, but public skepticism of the value is growing at the same time.
I think all four paradoxes are true to some degree for independent schools as well. One quote from the article particularly resonated:

Simply doing what we have done before—adding a few new academic programs, increasing tuition discounting, or investing in new facilities to attract faculty and students—will not be enough to dispel public doubt, nor to increase the relevance and value of higher education, nor to prepare students for a rapidly evolving future. Changing demographics, new technologies, fundamental shifts in public funding models, declining financial support, and growing public skepticism have created a tipping point for the academy.

Independent schools are at a tipping point too. The changes in the 21st-century marketplace provide opportunity to think differently about how we can best serve students while remaining financially viable, but we need to act quickly and to become more comfortable with risk. Two years ago, I wrote about how independent schools were approaching the business model post-recession. Although there were many ideas that emerged during that period, not much change occurred as evidenced by a study conducted by Vanderbilt University graduate students on behalf of NAIS.  

In the past two years there has been more experimentation. Some schools are tweaking around the edges, while a few are fundamentally rethinking the model. Recently, I interviewed a few school heads and trustees to see how they are approaching the challenge of financial sustainability.

Leveraging Assets

Brad Weaver, head of Sonoma Country Day School (CA), is always thinking about how to leverage the school’s assets to become less tuition dependent. He is not afraid to experiment—his approach has been to bring many minds together to think about supply and demand. For the region where SCDS is based, land is in demand and the school happens to have a relatively large campus, thus focus centered on leveraging that asset. For years, the school had been running a summer camp but making only a small profit. There were many larger entities looking to offer summer camps in the region so the school decided to experiment with outsourcing summer programs to local and national partners. They now work with five providers—Steve and Kate's Camp, Federated Indians of Graton Rancheria, Warriors Basketball Camps, Santa Rosa Symphony's Summer Music Academy, and iD Tech. The result is a more robust summer experience for children in the area, increased awareness of the school, and about 20 times the profit that they were making on their own. The school also has begun leasing out an unused portion of their campus to a neighboring organization. The additional revenue is helping them to minimize tuition increases, especially important as so many of their families lost homes because of the wildfires that swept through the region. 

Taking Advantage of Market Shifts

Tekakwitha Pernambuco-Wise, head of Sea Crest School (CA), located in Half Moon Bay outside of San Francisco, is always studying trends, looking for market shifts that could offer new opportunity. A few years ago, she began seeing new patterns in how families wanted to educate their children, which led the school to experiment with customizing contracts. In one case, a family wanted to travel part of the year, giving their children a global experience. To do so, the school worked with the family to negotiate a part-time contract.

Families like the one described above represent a growing international trend known as World or Road Schooling. According to an article in The Guardian, “More families than ever are taking ‘edventures’—long-term trips where children learn on the road.” There is now a website called Vagabond Family that offers resources to families considering this kind of experience. With the rise in teleworking, we will no doubt see more mobile families seeking to partner with schools in different ways. 

Pernambuco-Wise also observes a growing homeschool population in her school’s recruiting area, so she is now considering a la carte models in which families can sign up for specific programs to meet their child’s personalized needs.

Rethinking Price

Trustees are working closely with heads to rethink financial models. Dan Goldsmith, trustee at the Montgomery School (PA), located in Chester Springs outside of Philadelphia, told me of the board’s journey to rethink pricing in the wake of declining enrollment. Many schools have considered dropping tuition price as competition rises and the school-age population decreases, but few have attempted it. This board decided to try a bold bet that if it reduced tuition, it would be able to tap into some nonconsumption in the market. It branded the program as “Excellence Within Reach,” describing it this way:

The decision to reduce tuition is grounded in the knowledge that independent school tuitions have reached an all-time high, forcing many families out of the private-education marketplace. While remaining at the forefront of academic excellence, Montgomery is taking the lead in increasing accessibility and affordability for independent schools. This bold move will benefit the students and families we serve today and in the future.

The school fundraised to give the cushion it needed to meet budget while hoping to expand enrollment. So far, the bold move is paying off—the school saw the largest increase in new students in the history of the school.

Launching Micro Schools

A few schools have tinkered with the overall school model, launching entities that are different from the home campus in that they have a smaller footprint, partner to leverage services already existing in the community, generally have an experiential component, and charge considerably less than area independent schools. Winchendon School (MA), a boarding school one hour outside of Boston, launched Winchendon Brooklyn this year. Unlike the large home campus, Winchendon Brooklyn is co-located in a building with the Child Development Support Corporation. Head of Winchendon Brooklyn Sean Duncan, who was recently featured on NAIS's Member Voices podcast, describes the new school this way:

Our institutional design is centered on the concept of access to opportunity, and we reflect back on this theme across the entire school. Whether it’s being creative with our fundraising and budget so we can have a robust scholarship program and a tuition point 25 percent less than prevailing tuition rates at other leading day schools; through the development and implementation of a robust city-centered academic curriculum that has our students accessing educational opportunities all throughout the city; or through active engagement with our network of community partners in Clinton Hill to sponsor co-programs accessible to our neighborhood and borough, we are dedicated to creating access to great learning for as many people as possible.

Lakeside School (WA) also launched a micro school this year, The Downtown School: A Lakeside School. Like any start-up, Sue Belcher, head of school, describes this year’s motto as “perpetual beta.” They are experimenting with distributed leadership, community partnerships, new communication tools, and new ways of thinking about learning. The road to the school’s launch was profiled in the summer 2017 issue of Independent School magazine, “The Micro Wave: Seattle's Lakeside School Embraces a New Education Model.”

When You Can’t Afford Not to Take the Next Step

Annie Wright Schools (WA) have a long and unique history. Founded in 1884, the schools consist of a preschool through eighth-grade coed school and an all girls’ upper school. Head Christian Sullivan, in looking at the long-term sustainability of the school, felt that it could be a disadvantage for them not to also have a boys’ upper school. There were huge cultural obstacles to overcome in launching a new single-sex division and concerns that it could change the nature of the community. Sullivan and the board worked hard to bring the community together on the proposed expansion and launched the boys’ school with ninth grade in 2017 and are adding a grade per year. This expansion will put the school in a much better place financially, allowing it to retire long-term debt, and expand its reach. As Kawasaki says, implementation was not easy, but it was time to bring this idea to life.

I invite you to join the conversation about reimagining schools. How can we provide greater access, serve our students more effectively in this 21st-century economy, and create a model that will thrive well into the future?
Author
Donna Orem
Donna Orem

Donna Orem is NAIS President.

Comments

Cherise Sonderman
9/18/2019 11:46:02 AM
This is a critical discussion that all Board and Heads are having. I would love to hear more about other school's changes to their tuition models.

Thank you for writing this great article and for keeping the discussion going.

Katherine Titus
11/19/2018 3:02:49 PM
Donna, thank you for forcing this conversation. As you know, at Mercersburg Academy, we reduced our day tuition by 10% and only increased boarding tuition by 1.5% this year. We have adopted a new strategic plan that emphasizes our commitment to access and affordability and would be excited to partner with other schools on this conversation. I would welcome a chance to be part of that dialogue with other school leaders and to challenge assumptions regarding costs in our schools.

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