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Putting Your Vision into Motion
Corey McIntyre, NAIS Chief Financial Officer
Afternoon Intention
 Recap
– Financial sustainability challenge
– Trends and forces
 School financial model
 Challenges and responses
2
Independent School Challenge
Sustainable, Excellent, and Affordable?
 Tuitions out pacing inflation
 Parents demand highest quality
 Improve quality = add cost
 Higher cost > higher tuition > less accessibility
3
Financial Sustainability Forces
 Workers
– Flex time
– Transient
 Families
–
–
–
–
Telecommuting
Changing demands
Real estate prices
Disposal income
 Students
– Differentiated needs
– Changing brains
 Technology
– Exponential pace of
change
– Podcasts
– You Tube, Google
– Second Life
4
Financial Sustainability Forces
 Workers
– Flex time
– Transient
 Families
–
–
–
–
Telecommuting
Changing demands
Real estate prices
Disposal income
 Students
– Differentiated needs
– Changing brains
 Technology
– Exponential pace of
change
– Podcasts
– You Tube, Google
– Second Life
5
Changing Brains
 National Institutes of Mental Health Human Brain
Project – Neuroinfomatics
– Visual cortex 15% larger than 15 years ago
 3M research, 100 images viewed, recall rates:
 Kids 90%
 Parents 60%
 Grandparents 10%
6
Financial Sustainability Forces
 Workers
– Flex time
– Transient
 Families
–
–
–
–
Telecommuting
Changing demands
Real estate prices
Disposal income
 Students
– Differentiated needs
– Changing brains
 Technology
– Exponential pace of
change
– Podcasts
– You Tube, Google
– Second Life
7
Second Life?
8
Linden Dollar L$
 $64 million GDP
 3,000 entrepreneurs
making $20,000
annually
 Anshe Chung, SL
real-estate mogul
9
Gov. Mark Warner Interview
10
Virtual Relay for Life
 $40,000 raised
 1,000
participants
“walked”
through
Mexico, South
Africa, Skydiving from
Eiffel Tower
11
“Second Life” Schools
 Harvard University
 University of Texas at Austin
 Francisco State University
 New York University
 Vassar College
 Trinity University
 University of Buffalo
12
College Classes in Second Life
13
School Financial Model
 Why is this so hard?
– Baumol’s “Cost Disease”
– Inherent efficiency obstacles
14
Cost Disease Model – W. Baumol1
Activity
Industries
Characteristics
1 1966 William
Dilemma
Productivity stagnant
Theater, Heath care,
Legal Services, Fine
Dining, Education
Labor intense
Hands-on commitment
Personal attention
Productivity enhancing
Manufacturing,
Technology, rest of
economy
Automated production
Economies of scale
Consistency
Baumol, William Bowen. Performing Arts: Economic
15
Cost Disease Model
Activity
Industries
Annual productivity
improvement averages
Productivity stagnant
Theater, Heath care,
Legal Services, Fine
Dining, Education
Labor intense
Hands-on commitment
Personal attention
Independent schools:
0%
Productivity enhancing
Manufacturing,
Technology, rest of
economy
Automated production
Economies of scale
Consistency
US economy:
2%
General inflation
Market wage increases
3%
5%
3%
5%
Characteristics
16
Cost Disease Model
Activity
Industries
Characteristics
Annual productivity
improvement averages
General inflation
Market wage increases
Less: productivity
improvement
Price increases required
Productivity stagnant
Theater, Heath care,
Legal Services, Fine
Dining, Education
Labor intense
Hands-on commitment
Personal attention
Independent schools:
0%
Productivity enhancing
Manufacturing,
Technology, rest of
economy
Automated production
Economies of scale
Consistency
US economy:
2%
3%
5%
0%
3%
5%
-2%
5%
3%
17
Education Expenditure per Student
18
Health Care vs. CPI
19
Hypothetical Changes in Spending
20
Inherent Efficiency Obstacles
 Howard Bowen1
– Excellent education replaces profit motive
– Only limit to spending on education is
amount of money available
– Schools will spend everything they get
11940’s
U.S. Department of Commerce, Chief economist for the U.S. House Ways
and Means and Senate Finance committees; 1964 named president University of
Iowa
21
Expense per Student
(thousands)
Enrollment vs Total Expense:Student
$70
$60
$50
$40
$30
$20
$10
$-
500
1,000
Enrollment
1,500
2,000
22
Financial Efficiency?
 Expensive policies and practices
– Need blind admissions; need-based
financial aid
– “Only industry where competition
increases price” Sidwell Friends Trustee
 Resistance to “business” concepts
– Expectation of language: Non-profit
– Creeping incrementalism
23
How do you feel?
 Current financial model and
practices are:
–Financially sustainable
–Need to change
–Don’t know
24
Your Challenges
What changes do you want to
make?
What are the barriers to
change?
25
“It's easier to change the
course of history than a
history course.” Salza
26
Your Responses
Student Teacher Ratios
 Impact of change
 SAIS Statistics
27
Other Challenges
 Sacred cows
 Administrative efficiency
 Shrinking applicant pool
28
Success Factors
 Desire
 Team skills
– Analytical
– Synthesis
– Creativity
– Objectivity
 Realistic time commitments
 Commitment to finding truth
 Radical acceptance
29
Collective Efficacy
 Belief held by members of a group that they each
have the power through collective efforts to
achieve shared goals
– Success is expected
– Resilience is encouraged among and between
members
 Research has linked collective efficacy to student
achievement, crime reduction in neighborhoods,
etc. (Bandura 1993; Goodard, Hoy, & Wolfolk Hoy
2000)
30
Closing Suggestion
31