Independent Schools are Businesses

Independent schools are businesses, and I believe that we must continue to reinforce this fact to our heads of school, trustees, faculty, staff, etc. as essential to the successful operation of an independent school. Recently my colleague, Jeff Shields, President & CEO, National Business Officers Association (NBOA), was interviewed by Rob DiMartino, Founding Member, @Finalsite. I agree with so much of what Jeff articulates in this interview about the importance of the role of the business officer, until his last comment about a school NOT being a business: “They possess skills and expertise that cannot be found anywhere else within the staff leadership structure, and therefore they have a tremendous responsibility to encourage “business-like” operations while making it clear that they understand and appreciate that the school is not a business (The entire interview can be found here – October 30, 2015.)

I would like to offer a different viewpoint. I looked for some definitions of “business”.  Here are a couple I believe are relevant to this discussion.

• Investopedia – An organization or enterprising entity engaged in commercial, industrial or professional activities. A business can be a for-profit entity, such as a publicly-traded corporation, or a non-profit organization engaged in business activities, such as an agricultural cooperative.
• BusinessDictionary – An organization or economic system where goods and services are exchanged for one another or for money. Every business requires some form of investment and enough customers to whom its output can be sold on a consistent basis in order to make a profit. Businesses can be privately owned, not-for-profit or state-owned.

As articulated above, there are some basic principles of a business that apply to independent schools:

• A business must generate and collect revenues, just like a school.
• Most businesses have employees and therefore must pay compensations, just like a school.
• Most businesses own or rent buildings and other necessary equipment, just like a school.
• Nearly all independent schools have an outside accounting firm perform an audit to ensure that the school is following Generally Accepted Accounting Principles (good business practices).
• Human resources issues, as well as a myriad of other regulatory requirements, apply to schools just as they do for other businesses.

Dr. Richard J. Soghoian, Head of School, Columbia Grammar and Preparatory School, NYC in his controversial book, Mind the Gap, says:

Always Run Your School as a Business! Yes, a school is a business, and no, ‘business’ is not a bad word when applied to a private school. Our business is to offer the highest quality education possible for all our children in the most cost-effective ways possible: the best teachers paid as much as possible, the best and safest facilities maintained at the highest levels, and a diverse student body supported through ever-larger amounts of financial aid.

Independent schools are businesses. We are in the business of education. There are some unique factors that guide our business, but ultimately if as an industry we expect to be sustainable we must operate our schools as a business and in a business-like manner.

We hire business officers to ensure that our schools handle all of these essential elements of business in an accurate, timely, and appropriate manner. Doing so is critical to the success and sustainability of our schools.

There are some questions about the validity of the independent school business model. Most of our schools do not charge what it costs to deliver the product; clearly this is not something that is viable for most businesses and many will argue it may not be sustainable. Most of our schools depend upon annual fund giving and/or revenues from an endowment; these are the advantages of being non-profit organizations. There are clearly other advantages derived from incorporating our schools as not-for-profit entities, but this does not change the fact that they are businesses. Business officers do need to clearly understand the culture of independent schools and especially the unique culture and mission of their school. I know this took some time for me when I first was hired as a Business Manager. I had worked in both for-profit and not-for-profit businesses, but the business of education was different and it took time for me to acclimate. I believe that bringing a solid business background to the position led to my success as well as the success of the school. It had been managed in a very “unbusiness-like” manner for decades and in a short period of time, we were able to balance a budget and get the school back on track.

Independent schools have a difficult time responding quickly to changes in supply or demand. It is difficult to change pricing. It is difficult to reduce costs that are primarily related to compensation. None of these issues change the basic premise that a school must operate as any business to thrive and be sustainable. Business officers at independent schools understand this.

Many of the trustees of our schools are successful business people and most also understand the importance of operating a school as a business. It takes the collective intelligence, efforts, and enthusiasm of everyone working together as a team to be successful. This includes the business officer, who must fully understand the business of education, gain the trust of the educators, and then teach them the basic principles of a business. Because even the most devoted educator expects to be paid their salary, be provided with a benefit package, be certain that all of the bills are paid in a timely manner, be sure that tuition is collected in a timely manner, etc.

Ultimately, independent school sustainability depends upon the leadership understanding the importance of operating each and every school as a very effective business. Our students, parents, trustees, faculty, and staff depend upon this.

During a recent presentation I attended, Joseph W. Seivold, Headmaster, Berkeley Preparatory School, Tampa, FL told the audience of primarily heads, senior administrators, and trustees to remember that “school is a business”. In a follow-up conversation Mr. Seivold said, “Our schools are businesses; marketing, customer/client relations, and building brand loyalty all have real applications in our ‘industry’, and we ignore them at our peril. For me, what makes the work exciting is that what we are ‘selling’ is so vitally important.  We are making a positive difference in the world with each client gained, engaged, and impacted.”

I encourage all decision-makers at our schools – even those with only a nominal amount of budget responsibility – to remember that a school is a business. Certainly we are in the business of education, but if we wish to thrive well into the future, sound business practices are essential for our success and sustainability.

I hope you will share your thoughts. Are we in the business of education or is independent school education not a business at all?

Marc Levinson
Former Executive Director, MISBO