In the wake of the Great Recession, many schools faced a new normal. To retain families that had lost household income, schools would need to increase their financial aid budgets dramatically. They’d need to conduct more outreach and admit more applicants to yield the same number of enrolled students. They’d need to emphasize their careful stewardship of funds. In 2010, NAIS published the first Trendbook to help schools make sense of this new landscape, stating that schools must adapt in order to survive and thrive. Ten years later, that message still holds true: We’ve continued to see shifts in everything from enrollment to education technology, and schools must be nimble and embrace opportunities. The 2019–2020 Trendbook continues to try to help schools weather the challenges of today as they strategize for tomorrow. It explores many big questions like: How can your school adapt to the demographic changes that are reshaping the student population? How can your board structure encourage innovation? What can you do to advance social-emotional learning and healthy technology use among your students? In this edited conversation, two Trendbook authors, Joe Corbett, research analyst at NAIS, and Myra McGovern, vice president of media at NAIS, take a closer look at some of the trends independent schools face today as well as the implications. Joe Corbett: I recently worked on the Enrollment Outlook chapter of this year’s Trendbook. One of the things that struck me was how different the picture can be for different schools. If you look at the trends in the aggregate—all independent schools and all grade ranges—enrollment has remained stable for the past 10 years. But the median masks the trends for different groups: There are schools that have seen more than 10% enrollment growth in the past 10 years and others with declines of more than 10%. It raises the question: What’s leading some schools to be so successful and some to struggle? Myra McGovern: The demographics of an area certainly played a key part. Where the population of school-age children was declining, there were more schools experiencing enrollment stress. But if we look at the country as a whole, the population of younger children declined. And this had a dramatic effect. In our analysis of schools by grade range, we can see that elementary schools are much more likely to be struggling with enrollment than high schools. Corbett: Another trend we’re seeing is that tuition growth has been outpacing inflation over the past 10 years. As incomes remain pretty stagnant for a large part of the country, it becomes this question of “are schools pricing themselves out of range for an increasing number of families?” McGovern: It’s certainly important for all schools to think about how families in their local market experience tuition costs and tuition growth. In areas where income has remained steady or even declined, or in areas where other elements of the cost of living have grown dramatically—such as housing or health care—families may feel particularly squeezed by tuition increases. Families may feel that the school is no longer accessible. There’s also a question of value. The degree to which people think tuition is affordable or expensive is also driven by how much they value what you’re offering. One of the things that we also look at often in the Trendbook is what’s driving different cost increases in independent schools and what’s really behind tuition increases. Corbett: Are the tuition increases driving increased spending or are the increased costs driving tuition increases? To say it more simply, are schools going to increase tuition so they can add all these great services that they just don’t have the money to offer right now, or have they added these services and now need to increase tuition because they can’t afford to maintain these services that are already created? Are the expenses pushing the revenues, or are the revenues pushing the expenses? McGovern: I think many boards take a cost-plus pricing mentality. They think, “What is our budget and the costs to deliver our current offerings?” Then they charge either that amount for tuition or that amount plus a little more. In contrast, market-based pricing starts with the question “What is the market willing to pay?” But consider value-based pricing. You start with the customer perspective—“What do families really need?”—and then figure out what value they assign to that service. Then you design or refine offerings that will meet customers’ needs within those constraints. But all this raises an interesting question: How are schools deciding what services and programmatic offerings go into the school “product”? Corbett: The idea that the expenses are driving the revenue seems to resonate in many of the conversations I’ve had with heads, boards, and school administrators. It’s this idea of keeping up with the Joneses. Schools think that the other schools in their area are adding new facilities or making their campuses look nicer so they must do the same. They worry parents are going to think they’re not as good if they don’t. Expenses are the driving factor that are causing tuition increases, so in many cases, schools also have to do capital campaigns and focus on giving, which is another huge ask of our families. McGovern: Right—annual giving and sometimes capital giving on top of tuition. But I wanted to ask you a little bit about your analysis of the costs—what’s really driving the tuition increases? Corbett: When you’re looking at a school’s expenses and schools in general, the biggest expenses typically tend to be salaries and benefits (education is very people-intensive) and the larger facility costs of running the school. And so within that, teacher salaries have been increasing at modest levels; facilities costs are increasing much faster. The fastest growing sizeable segment of a school’s budget is typically administrator salaries, which are usually in the range of 10–15% of a school’s budget. That expense has been growing much faster than other expenses, largely driven by the addition of new administrators for new programs, rather than by salary increases for existing staff. McGovern: And while many of these are likely good programs and the people who are hired contribute a great deal, these expenses are not necessarily related to direct services to students. Corbett: Facilities and new school programs are visible—you can point to them and say this is what we’re doing—as opposed to more nuanced things, like the way teachers interact with students or the level of individual attention the student gets. Ultimately, those nuances are much more important to student and family experiences, but they’re harder to advertise. It’s much easier to say look at our new innovative STEAM building, when in reality, that might not be as important to parents. McGovern: In marketing, schools often focus on those features, like the new STEAM program or the new athletic center. But if you really look at what’s driving families to come to your school and if you ask them about their process for looking for a new school, you will find that it’s much more nuanced. This is why NAIS used the Jobs-to-Be-Done (JTBD) research methodology to learn more about what truly motivates families to choose one school over another. Corbett: As we uncovered in the JTBD work, people don’t decide based on the school’s features or on their own demographics, but based on an immediate context they’re in. And so I think the perfect example is why would parents in the same household (same level of income, same demographics) send their kids to two different schools? Maybe one child isn’t being challenged enough in math, let’s say, and the parents feel like the child is getting bored, and so the school that they’re looking at for that child will be very different from one for a child who is struggling with bullying and social aspects of school. They might end up sending those children to the same school because of convenience and costs, which can sometimes override the other struggles; but if the struggle is strong enough, those two children could end up going to different schools. The context is different, so parents will evaluate features of the school based on their specific context. McGovern: One of the things that often happens in periods of enrollment stress is that schools try to be all things to all people as a way of getting bodies in the door. But this really backfires because if schools are all things to all people, they are no one thing to anyone. It’s far better to know what you do well and to think about what the market is demanding than to try to meet all of the different parent jobs. Corbett: The more that I talk with heads and boards and think about this, the more I think that being strategic is really about picking and choosing what you are but also—maybe more importantly—what you’re not. McGovern: Right! And that clearer value proposition is much more compelling to prospective families. Using JTBD is also a great way of prioritizing projects. If you’re doing strategic planning, it’s always good to evaluate the initiatives based on that parent perspective. Schools often create new programming or offerings that are based on things that they internally think are improvements. In the NAIS Strategy Lab, we refer to this as supply-side innovation because the suppliers of the service (those of us working in schools) are driving the change. Demand-side innovation, on the other hand, is change driven by customers’ needs. In your planning, you have to determine which initiative is really going to move the needle and improve the student and family experience. What responds to the context they are in and helps them achieve that job to be done? Prioritize and invest in those things rather than the nice-to-haves. Corbett: It’s this idea of being strategic. In my opinion, the real secret to controlling expenses and slowing tuition growth is knowing what you are and knowing what you aren’t—through the eyes of the parents. Specializing can help focus costs on what is really critical. On the Jobs Jobs-to-Be-Done (JTBD) research begins with a series of interviews with people who have just started using a product or service (“hired”) or just stopped using it (“fired”). The interview results are analyzed to find common behavior patterns that are observable (what customers did) rather than aspirational (what customers say they would do). NAIS used the JTBD methodology to better understand what motivates parents to choose independent schools. By analyzing interviews with parents and conducting a cluster analysis, NAIS was able to identify four primary reasons (jobs) parents choose independent schools. Parents in each of the four jobs have similar functional, emotional, and social needs that they are trying to fulfill. Find out more about parents’ jobs for independent schools. Do You Have a Conversation to Share? Have you had a great conversation with a colleague recently that broke down silos or got you thinking about your work in a new way? 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