Versus % Change in Enrollment 2

ISM CONSULTING

Presented by: Terry L Moore, Sr. Strategic Planning Retreat Executive Consultant

Contact Websites

facebook.com/ismfanpage Office:302.646.4944 Twitter.com/isminc youtube.com/indschmgt

About ISM Founded in 1975 Serves independent schools exclusively Presenter 8778 clients Terry L. Moore United States and 31 foreign countries

Primarily a research firm Consultations, publications, workshops, and online learning Insurance Consortium

Creating A Strategic Plan

3-6 plan to guide the overall direction of the school

3-6 financial plan with estimates to assure the strategic plan is executable

ISM Method

1. Educate the Board about what really matters.

2. Review important data to help you understand where the school is vis-à-vis other independent schools.

3. Brainstorm the ideal school in 5 years

Price Ceiling Versus No Price Ceiling

3 PI School Taxonomies

Price Product Process

Characteristic Price Product Process

Student/Fclty 16:1 10:1 8:1 Ratio Student/Stf 11.7:1 5.8:1 5.1 -1 Ratio Tuition $7,000 $20,000 $25,000

Faculty 44 70 88

Admin/Staff 16 50 50

Key Outcomes – High Performing/High Perceived Value Schools

Board – highly functioning committee structure, non- operational, highly respected

Parent Satisfaction – key determiner to “word on the street”

Student Experience – Key component of parent satisfaction long term and gives us a clear picture of the students’ experience

Faculty Culture – key predictor of high performing, highly engaged and satisfied students

ISM CONSULTING

What Is Going on Out There?

In January 2009, ISM conducted the largest survey ever completed of currently enrolled independent school students. The purpose– to investigate enrollment trends and confirm (or not) the reasons families choose independent schools.

ISM National Parent Survey

Will your child(ren) continue in his/her present school until its last grade?

84% will or probably will stay 9% not sure 8% probably will not or will not stay

ISM National Parent Survey

When asked about the perceived value of the education their child(ren) is receiving

85% excellent or good 11% average 2% below average or poor

ISM National Parent Survey

When asked to indicate “ the level of importance” of the factors in their enrollment decision, the top five responses were: Safety of my child 4.71 Faculty care & concern 4.69 Character education 4.63 Faculty expertise 4.55 Academic rigor 4.50

ISM National Parent Survey

Those who responded average, below average, or poor were asked to cite what areas of their school needed improvement. Academic rigor 40% Top responses: Some faculty’s subject expertise 26% Some faculty’s care & concern 13%

Understanding Our Clients

Family Income % of Families Reporting Under $40,0000 3.23% $40,001 - $75,000 9.24% $75,001 - $125,000 20.74% $125,001 - $175,000 14.57% $175,001 - $225,000 11.99% $225,001 - $275,000 7.97% $275,001 - $325,000 6.29% $325,001 - $375,000 4.67% $375,001 - $425,000 3.72% $425,001 or greater 17.57%

Price Elasticity Model

ISM: hypothesis development, data collection, sent out survey to ISM database MS team: project oversight, hypothesis development, statistical analysis, and interpretation MS team qualifications Four team members worked on this including: Managing director: MBA/MPA/BS with focus in Applied Statistics from Yale, Harvard, and Kellogg (Northwestern); McKinsey & Co Director of Analytics: U of Chicago and Ph.D. program at Columbia in Economics and Education Senior Analyst: Wharton School, Mercer Consulting, Expedia.com (focus on price sensitivity) Independent validation: Mosteller Statistician of the Year, American Statistical Association (elite group of master statisticians)

40% price schools ($11,100 break point)

60% product/process schools

Full responses: 138 schools yielding 600 observations

Enrollment change Tuition Whole school Raw $ change (example: $10k$11k By division versus $20k$21k) Entry point % change (10% versus 5%) New students Years Attrition 2005-10 % change Non-recession years (2005-08) Raw student change Recession years (2008-current) Students per grade (normalizing factor) Individual year changes (e.g., 2008-09)

Accounted for environmental factors outside of school control affecting enrollment Las Vegas – significant losses in real estate values Texas – recession had little impact

The following controls were added into the model to determine whether each variable makes a unique contribution to the changes in enrollment %. Geographic — Region of the country — Metropolitan area — Urban/suburban/rural Economic indicators — Average income for each school’s ZIP code — Changes in median housing values School characteristics — % of students on financial aid — Price/product/process schools — Religious affiliation

1. Whole school: $ change in tuition versus % change in enrollment 2. Elementary school: $ change in tuition versus % change in enrollment 3. Middle school: $ change in tuition versus % change in enrollment 4. High school: $ change in tuition versus % change in enrollment 5. Whole school: $ change in tuition versus # change in enrollment Time series regressions6. Whole school: % change in tuition versus % change in enrollment 7. Price schools: $ change in tuition versus % change in enrollment 8. Non-price schools: $ change in tuition versus % change in enrollment 9. Whole school: $ change in tuition versus % change in entry grade enrollment 10. Whole school: $ change in tuition versus % change in new student enrollment 11. Whole school: $ change in tuition versus % change in attrited students 12. Whole school: % change in tuition (six-year CAGR) versus % change in Linear regressions enrollment (six-year CAGR) 13-17. (Yearly regressions) Whole school: $ change in tuition versus % change in enrollment Residuals were examined to ensure model accuracy for all regressions

No relationship between tuition change and enrollment!

$ Change in Tuition Versus % Change in Enrollment

Lower school 2005-2010

$ Change in Tuition Versus % Change in Enrollment

2005-2010 Middle School

2005-2010 Upper School

Key Findings

There is no relationship between changes in tuition and changes in enrollment (across all divisions, years, types, EVERYTHING!), suggesting that enrollment is more responsive to perceived value than to price

Changes in tuition do not impact entry grade enrollment, new student enrollment, or attrition.

Individual year regressions show no relationship between changes in tuition and changes in enrollment, indicating that price sensitivity has not changed during the recession.

THEREFORE: Tuition decisions by Boards are totally idiosyncratic.

3 Levers of Financial Equilibrium

1. Compensation 2. Hard Income 3. Student Staff Ratio

3 Levers of Financial Equilibrium

High Compensation + Small Class Size + Low Tuition = Insolvency

High Compensation + Small Class Size + High Tuition = Solvency

Low Compensation + Small Class Size + Low Tuition = Solvency

Mission Portrait of Characteristics of Statement the Graduate Professional Excellence

Strategic Plan/Strategic Financial Plan

Board

Management Team

Faculty

17-22 Profiled Members Meetings always occur because 3 year terms (w possibility of 2nd a decision must be made (vote or term) consensus) 60/40 current parents/non Self Evaluates parents Highly functioning Committee Structure

Trusteeship’s Components

Strategic Planning Major Gift Cultivation Develop fiscal support of the Strategic Plan Support and evaluation of the Head

Board Structure

Executive Committee Committee on Trustees Head Support and Evaluation Finance Committee Development Committee Audit Committee

1. Substantial cash reserves

2. Strategic plan / strategic financial plan

3. Executive leadership

4. Hard-income driven

5. Profiled Board

6. Board leadership

Growth-oriented faculty culture

• Budgeted support for faculty professional development

Trustee education

SECOND TIER

Board/operations differentiation

Consistent donor cultivation

Development office management

SECOND TIER

Faculty salaries

Employee benefits

Quality of facility

SECOND TIER

Master property/facilities plan

Internal marketing

• Enrollment demand in excess of supply

Contact Websites

[email protected] isminc.com

facebook.com/ismfanpage Office:302.646.4944 Twitter.com/isminc youtube.com/indschmgt

About ISM Founded in 1975 Serves independent schools exclusively Presenter 3,700 clients Terry L. Moore United States and 31 foreign countries

Primarily a research firm Consultations, publications, workshops, and online learning Insurance Consortium