Forging a Strong Head-Business Officer Relationship

Winter 2020

By Tim Fish, James Palmieri

Heads of school and business officers, along with the board, most often live and breathe in the realm of school finance, ensuring that the school’s annual budget and financial resources are capable of sustaining educational and other programs consistent with the school’s mission and strategy. But another dimension of their work must focus on strategic finance, which goes beyond year-to-year planning and management to ensure that the school’s current and future resources can sustain the school’s long-term viability and stability and uphold its responsibility to provide similar, if not better, programs to future generations.
As a result of the changing financial and enrollment landscape in our industry, these school leaders are under pressure to drive more revenue and reduce rising expenses to name but a few of the challenges. Heads of school, in general and out of necessity, are becoming more business-focused and financially savvy. More and more, heads are becoming the chief executive officers of their schools, and they are being supported in this expanding role by school business officers who provide them with the data, insights, advice, and confidence they need to learn and guide the institution.
Many heads today rely on their business officers to be one of the primary points of contact when they are off campus or otherwise occupied. In many schools, the duties of business officers have grown beyond finance and accounting to include facilities and operations, human resources, risk management and campus safety, and technology. “During the past several years, the desired skill set has expanded from managing to being a strategic partner,” says Jeff Shields, president and CEO of the National Business Officers Association (NBOA).
Schools making the most progress in this area—strategic finance—have invested time and energy in the development of a strong and unique relationship between the head of school and the business officer. They have learned to develop a partnership that leverages their complementary skill sets, appreciates their differences, creates the context for innovative thinking, provides mutual support, and engenders trust within the community. When this relationship is working at its best, schools are able to align their resources with their mission, address their greatest challenges, and innovate to ensure long-term sustainability.

Cultivate Trust and Vulnerability

The head of school and business officer partnership is unique because it requires a coordinated relationship with the board, often involves highly confidential information, and must constantly blend the daily operational demands with strategy development. For this reason, heads and business officers need to confide in each other to triage and manage the daily adventures at the school. No two days are ever the same. 
“Heads of school are expected to understand the financial business model as much as business officers must understand the school’s program,” Shields says. “The most successful partnerships are built upon trust, candor, and respect for each other’s unique staff leadership role with the board of trustees, as well
as faculty and staff. This relationship may be second only, in my opinion, to the relationship that is imperative between the head of school and board chair.”
Heads of school and business officers need to create a safe space where they are free to confront the brutal facts, learn from and challenge data, propose new ideas, and align on messaging. In his book, The Advantage: Why Organizational Health Trumps Everything Else in Business, author and management expert Patrick Lencioni describes five behavioral principles for building a cohesive team. Each principle builds on the one below in a pyramid that culminates in results. The base—the foundational principle—is trust. And leaders, Lencioni says, must practice vulnerability-based trust, where members of a team can “say and genuinely mean things like ‘I screwed up,’ ‘I need your help,’ ‘Your idea is better than mine,’ ‘I wish I could learn to do that as well as you do,’ and even ‘I’m sorry.’ ” Once this level of trust is established, a team can go on to engage in real conflict, develop deep and lasting commitment, create true accountability, and realize transformative strategic results. 
“You can’t overvalue the idea of the head of school establishing trust in the chief financial officer (CFO)—and trust on a fundamental level that is different than with any other members of their admin team,” says Christopher Jones, head of the Cannon School (NC). “While the head of school has ultimate ownership for the finances and administration of the school and the relationship with the board, in a lot of ways, the CFO is responsible for the quality of the relationship,” says Jones, who spent eight years serving as the CFO/chief operating officer (COO) at the University of Chicago Laboratory Schools (IL) before joining Cannon. “Much of the information that the board is thinking about is what the CFO has to touch every day. A large part of their governance responsibilities has them focused on the bottom-line outcomes that the CFO or business manager is responsible for providing. In many ways, the CFO is responsible for how well the head of school is relating to the board when it comes to the numbers and the data that the board needs.”
It’s essential to establish a sense that we’re in this thing together, Jones says, which requires being able to show vulnerability. “My CFO has done this on a couple of occasions in a way that earns trust with me right away,” Jones says. “He owns up to a mistake and does it in front of a committee of the board or the administrative team. He’s willing to say, ‘I didn’t get this exactly right. I’m making clear to you that I see an area where I could get better. And I’m going to say it out loud.’ You can go to battle with somebody like that. When you have that level of vulnerability, you can do anything.”
In 2016, when Fran Bisselle took the helm at Hathaway Brown School (OH), she succeeded a longtime head who had been leading the school since 1987. Bisselle, an experienced head of school, made it a priority to develop her relationship with Hathaway Brown’s CFO and associate head, Valerie Hughes, who has been serving the school since 1998. “Leadership can be lonely,” she admits, but having Hughes as a teammate has been a big win for her. Together they’ve focused on trust, transparency, communication, and confidentiality, while constantly making efforts to ensure they’re on the same page and advancing forward with a shared vision.
Together they have worked closely to refinance the school’s debt and revamp its budget to accommodate current programming and objectives, including major campus construction projects. They also added an additional board committee, the Strategic Financial Task Force, and charged the members with generative thinking and developing a 10-year plan for Hathaway Brown. The task force is assessing the changing market and area demographics and is focused on exploration: Who do we want to be? What are we going to be? How are we going to be that?

Assume the Best and Listen More 

Leadership teams and board members need to see visible evidence that the head of school and the business officer are on the same page. While school heads are the sole employee hired and supervised by the board of trustees, more often than not, the business leader also serves as an officer for the school, with an active role on the board and its related committees. Business officers need to feel that the head of school has confidence in them to work directly with board members and board committees in the best interest of their shared vision for
the school.
This kind of confidence is built when leaders strive to assume the best in people and work to listen more and talk less. “As a leader—and in all my relationships—I want to be mindful of the ratio of time I am listening as opposed to talking,” says Gardner Barrier, head of school at Forsyth Country Day School (NC). “I also want my default assumptions about people be positive and good-willed.”
Chief business officers need to feel informed and respected—and equipped with the information needed to thoughtfully perform and provide strategic insights. And business officers and heads need to constantly be in communication about priorities. “We always need to be aligned with our purpose and principles that shape those priorities,” Barrier says. “That requires regularly scheduled time for conversation—and not just to address immediate concerns, but also to wonder, to ask what-if questions, to challenge each other’s thinking, and generally to better understand each other.”

Leverage Differences

Heads of school and business officers typically rise to their roles from very different places; the head of school comes from academic administration, and the CFO comes from a business background. The head of school is charged with creating momentum, hiring great people, growing the school, and increasing programmatic impact. The business officer oversees the budget, strategic finance, operations, risk, and compliance, and believes that data is an ally. Schools are truly better when these two individuals bring their unique viewpoints and experiences to the work—and when they understand that both roles are constantly shifting and expanding.
“Heads and business officers are like peanut butter and chocolate—different, but actually better together,” says Corey McIntyre, CFO at NAIS and finance committee chair at Duke School (NC). “Business officers are better when they learn from heads, and heads are better when they learn from business officers,” says McIntyre, who served as CFO at The Langley School (VA) for several years before joining NAIS.  
But instead of leveraging their differences to form that critical bond, the differing perspectives can get in the way, at least initially. Sometimes heads and other leaders have trouble relating to business officers, seeing them as the “no” person or the person who doesn’t get strategy. “They think business officers are overly myopic, the stereotypical bean counter,” McIntyre says. “But the solution is not to work around business officers, but rather to think about how to bring them in and get their perspective. It’s critical.” 
Their different backgrounds can lead to a culture clash. “I started at Langley after having been at PricewaterhouseCoopers, and the culture shock was pretty intense. There’s a lot of nuance in schools—and a lot of potential for misinterpreting what the other is saying.” If heads don’t understand where the business officer is coming from, there could easily be a negative reaction to their communication style.
And there’s great potential for business managers to misstep because they haven’t read the culture properly. They may have a good perspective and be trying to do the right thing, but they don’t know how to communicate. “In my corporate life, there was no parsing,” McIntyre continues. “Everything was direct and clear. It was like, ‘you’re not doing this right it, fix it.’ I would get a monthly email with all the managers from our office ranked by their metrics. That everybody-can-see-you’re-at-the-bottom mentality was the culture—there was no ‘we don’t want to shame people.’ That’s not to say that schools need to adopt that kind of culture—just that heads should understand that’s where many business officers are coming from.”
One other critical piece heads must consider is that business officers do have a unique perspective. They believe that numbers don’t lie (usually). Accounting reports show good and bad news equally. They’re designed by accounting principals to be impartial, objective, and conservative. Business officers are steeped in these reports, so they will often be the first to see warning signs and bad news that won’t come up otherwise. “Grounding in details and numbers is different than grounding in relationships and ideas,” McIntyre says.

Let the Reimagination Begin

Once a strong relationship is firmly in place, heads and business officers can make significant progress on their journey to reimagine the business model that drives the school. 
Dunn School (CA), a boarding and day school located on a bucolic 55-acre campus outside of Santa Barbara, is largely dependent on tuition; in a typical year 94% of its expenses are funded by student fees. Following the 2007–2009 financial crisis, Dunn’s leadership team—which included a new head of school, business officer, and finance committee chair—launched a financial sustainability committee to establish appropriate goals and metrics to chart the school’s progress toward their shared financial vision.
To help provide an accessible yet comprehensive view of the school’s finances, the committee compiled a one-page document, consisting of 12 metrics, 12 goals, and eight years of financial and operational data that came to be known affectionately as “The Heat Map” because of its bright red blocks (when goals were not met) and green blocks (when goals were met). “Many of the initial Heat Map metrics and goals were designed around the school’s survival, however, the school aspired for perpetual existence, and the path to perpetuity must be measured by more aspirational goals as well,” says Chad Stacy, Dunn’s CFO. As the Heat Map has evolved, one of its metrics, the sustainability ratio, has become a committee favorite for its ability to combine balance sheet improvement, expense discipline, and comparability. This metric is calculated by combining two key balance sheet and income statement numbers from the school’s IRS Form 990: total net assets and total expenses.
Dunn used the sustainability ratio as a guide to benchmark against peer institutions and observed an upward trend between 2017 and 2019, all while the school’s enrollment growth rate more than doubled in comparison to those in its peer group during this three-year period. With the metrics, goals, and benchmarks set, Dunn school turned its attention to establishing improvement initiatives required to advance these metrics, including establishing a capital expenditures reserve, an investment committee, drafting a new investment policy, hiring a new investment adviser, and setting a maximum endowment draw rate, as well as moving the annual budget approval cycle to accurately align expenses to revenues. Dunn’s head, CFO, and board all believe that they would not have been able to make this degree of progress if deep and trusting relationships were not in place.
In 2015, at The Gordon School (RI), the board of trustees actively engaged enrolled families in conversations about the existing tuition and financial-aid system. The talks revealed some major issues that ran contrary to the school’s mission of building an inclusive community. As a result of these talks and having developed a better understanding of the makeup of the school community, the head of school, CFO, and admission director partnered to reimagine tuition in a way that has moved the dial on recruitment, yield, and financial-aid goals, particularly in terms of equity and access. These leaders set measurable goals for attracting a broader range of families, diversifying the payer mix, and improving families’ experiences. Over a three-year period, Gordon researched, designed, and implemented a customized tuition model called Family Individualized Tuition (FIT). Data from the program’s first two years reveals it has helped Gordon meet its revised goals.
Gordon first aimed to improve how families received financial-aid information by making the application process more transparent and predictable. In doing so, it has eliminated the system of financial aid. All families applying to the school engage with a customized parent portal to answer 11 questions regarding adjusted gross income, net worth, and outside tuition support. Within 10 days of completing an application and visiting the campus, families learn their individualized tuition price for the next three years.
FIT has also helped school leaders spend more time talking to prospective families about the school’s culture and community and less time negotiating discount prices. When parents understand how the tuition price is calculated and that people with similar financial profiles will pay the same amount, they feel “a sense that the administration and board were thoughtful in the model’s design,” says Tom Cicatiello, Gordon’s CFO. “It really gave the parent community confidence that we were moving in a mission-centered way.”
Gordon leaders are experiencing how a change in language and culture around tuition can better support intentions to create a more inclusive community. In the first two years since FIT was introduced, results include a more diverse payer mix and an increased enrollment of new students of color. In 2015, school leaders found that half of the school’s students were paying full tuition and half were paying less than 50%. With FIT, every family pays a customized tuition price that is the maximum they can afford. In fiscal year 2019, the percent of new students paying more than $25,000 more than doubled. Further, the FIT model helped Gordon’s leaders set measurable goals for enrollment, revenue, and the student demographics in the years ahead.

Leaders Unite 

Without question, the financial health of a school lies squarely at the feet of the board of trustees, its head of school, and its business officer, in partnership with the entire school leadership team. It is the responsibility of this collective group to live and communicate its mission and value and defend its defining freedoms. Practicing strong financial stewardship and ensuring deliberate operational efficiencies with a carefully constructed business model gives schools the greatest opportunity for success. Successful fiduciary oversight of our schools takes remarkable people and immeasurable time, but the outcomes are undeniably worthwhile.
“Never has collaboration been more important in the school community,” says Donna Orem, NAIS president. “Heads and business officers can model the principles of distributed leadership by working with partners in facing the school’s most pressing challenges and strategizing around emerging opportunities.” NAIS and NBOA exist to support schools in these efforts and provide tools, resources, and thought leadership to inspire and equip leaders. Our business models create our school models, and our schools enhance lives.

Relationship Starters

Want to establish a strong partnership? Here are some ways to get there.
  1. Develop an awareness and appreciation for each other’s leadership and communication style, perhaps by using tool like the DISC assessment.
  2. Develop a “value” mindset—valuing differences, different perspectives, and learning.  
  3. Appreciate the dialectic of constraints and possibilities, details, and the big picture.
  4. Heads should make business managers feel their perspective is understood and valued, even if it’s not always followed.
  5. Sit on the same side of the table as partners; keep challenges and opportunities on the other side.
  6. Welcome budget constraints as drivers of innovation.  
  7. Bring financial statements to life. Review them together regularly, establish that as rhythm. Think of it not just as fiduciary reporting, but as a jumping off point to merge perspectives, build trust, combine knowledge, and create something better.
  8. Know that the business office numbers can be trusted.  
  9. Find a cultural mentor for the business officer who is new to schools.
  10. Involve business officers in school activities. Coach a team, go to plays, teach math to fourth graders, or read books to kindergarteners.  
  11. Practice empathy exercises.
  12. Heads should learn basic accounting principles to better understand the basis for business officers’ approaches.
Tim Fish

Tim Fish is the chief innovation officer at NAIS.

James Palmieri

James Palmieri is senior vice president at the National Business Officers Association.