Introit

Alive to the Possibilities

Readers know that I'm an adherent of Luke Johnson's column, "The Entrepreneur," in the Financial Times. Johnson has served admirably as chairman of the Royal Society of Arts (many of us are familiar with the RSAnimate videos on the internet).

This morning, as I was working my through a large pile of FTs from the past six weeks or so (not enough time to read them during the waning weeks of school, so they piled up on my desk!), I came across an article of Johnson's that I had quoted before on this blog; now, however, it makes sense to provide some of the highlights from the article in an effort to get us thinking about what entrepreneurship means and whether we truly value it within independent schools. Please read through the following selection of quotations, and, where the words "university" or "college" are used, substitute "independent schools," and you'll see why I feel compelled to share these words on Introit.

"Leave the ivory tower for a life of entreprise" (Financial Times, Wednesday, May 23, 2012)

• "A formal education for so many professions means an ordered sequence of steps. I accept that this is entirely necessary for many walks of life. But for entrepreneurship there is no syllabus, no degree. It is a journey in self-education."
• "The reason academics understand entrepreneurs so poorly is that they lead lives so removed from those of most professors. There is an amost complete disconnect between the intellectual class and business founders."
• "We don't know enough about the psychology and character of wealth creators, which makes it harder to frame policy so as to foster more of them."
• "Entrepreneurial instincts can be cultivated even in scholarly surroundings--the two should not be mutually exclusive."
• "But my sense is that too many of our higher educational establishments often fail to spot entrepreneurial talent. And if they do notice them, they have almost nothing to offer. Perhaps colleges are simply unsuited to guide such independent, unconventional minds."
• "Education and healthcare will be transformed in the coming years. Traditional classrooms and hospitals are not productive enough, and private sector technology and input can help this process. We need more entrepreneurs in medicine and learning."
• "All universities should be persuading entrepreneur alumni to mentor undergraduates. They should seek angel investors among their donors to back student ideas. Tutors should be encouraged to create spinout companies. And why not found incubators to nurture early-stage businesses?"
• "Educationalists should be alive to the possibilities."

Innovation Sabbatical

In the interests of promoting innovation within independent schools, I propose a new kind of sabbatical program: the Innovation Sabbatical.

Some basic parameters: the sabbatical would be three to six months, the school would pay a stipend to the person in question (faculty, staff, or administrator), and the requirement is that the person must share what s/he learned during the sabbatical at an all-school meeting, plus publish it in the alumni magazine (and any associated social media).

An added bonus would be if the innovation turns out to be a viable product or service. The school, as the originator of the stipend, would receive partial ownership in a company created to sell the product or service, and revenues could go into the endowment.

News Flash: Online Learning is Mainstream

Can we please stop talking about online learning as if it's something new?

At this point (April 2012), online learning is not innovative, as a concept. There might be inventive ways of handling teaching and learning via the digital medium, but we've long since passed the stage where we could label it "innovative." The first online class for higher education was offered over twenty years ago (University of Phoenix), and public schools began using online coursework around fifteen years ago.

Online learning is decidedly mainstream. It is a viable option, there are quality providers (and those that lack quality), and there are different methods involved with the classes.

Independent schools are still trying to determine whether to award credit for online courses, whether to allow online courses when the same face-to-face courses exist already, whether the quality is as good as what an independent school would expect normally within its walls, and so forth.

But it's not innovative any longer. Rather, it's a question of to what degree a school will assimilate online coursework into its repertoire of course offerings.

Therefore, when we look at the "growth curve" for online learning, we need to understand that this curve shows the degree to which online options are offered and taken; it is not showing any degree of innovation. This is an adoption curve, not an innovation curve.

From this point on, any "growth" in the online learning market place is akin to "growth" in a mature industry. Consider Coca-Cola, IBM, 3M, and so forth: they are still trying to grow, but their growth is incremental because many of their products are already mature. To be sure, they put much time and money into their R&D departments in order to innovate, and these products do produce growth, but the "growth" of their core products tends to occur as a result of adoption in new markets.

Online learning--a core product of the world of teaching and learning--has a place in independent schools. That should be self-evident by this point, and we should stop saying "Wow! Look at the shine on that!" everytime we hear someone talk about it. We will spend (waste?) the next three to five years figuring this out, then realize that we've been smitten so much by online learning that we've forgotten to pay attention to other innovations. Schools won't have money to invest in creating/seeking innovative products that enhance teaching and learning because we will have been so busy implementing "innovative" online learning...that is now entering its third decade of existence.

Third decade?! That sounds as if we're behind the curve. Not in front of it; not riding the crest of the wave. Behind.

The (Mis)Conception of Strategic Planning in Schools

Most schools have bad strategies. At least, that's what author Richard Rumelt would say. His recently-released volume, Good Strategy, Bad Strategy, incorporates multiple examples from organizations (including schools) that highlight the difference between good strategy work and bad strategy work. Rumelt has been engaged in strategy work for over thirty years, and is no-nonsense when it comes to pointing out "strategies" that really aren't strategies. His approach works: readers learn quickly how to spot bad strategy.

I read the tome fully twice, with the critical eye of an independent school person who has been engaged for several months in research on strategic planning in our schools, including an analysis of 50+ recent strategic plans from diverse independent schools. Rumelt's work is insightful, possessing a clarity rarely encountered when it comes to strategy work. My review of Rumelt's work, therefore, contains what I intend to be constructive criticism of strategy work in independent schools. At times, I may be rather blunt; such bluntness is intended only to underscore a point.

Strategy and Strategic Plans in Schools

From the use of "blue-sky objectives" (i.e. wishful thinking) to a permafrost of educational jargon to lists of 100+ "action steps", strategic plans in independent schools fail to be effectively strategic. It would be more accurate to describe them as "comprehensive to-do lists," with the occasional item that has true strategic implications.

In independent schools, "strategic plan" is an ersatz term for what would be otherwise clear nomenclature for other kinds of plans. For what it is worth, I offer my own nomenclature below:

1. improvement plan - how a school can improve in specific areas (fundraising, curriculum, etc.) that show some degree of deficiency, relative to "best practices"
2. evolution plan - how a school evolves in order to continue to meet its mission
3. community-building plan - how a school rallies its community in order to broaden a base of support for its day-to-day work in terms of meeting its mission; acts as an emulsifying agent
4. capital campaign plan (or: resources plan) - how a school can gain insight into the feasibility of conducting a capital campaign for bricks-and-mortar, endowment, etc. An early feasibility study, in disguise.

Each plan has its time and place within a school. In most cases, it is easy to make an argument that supports the fashioning of one of these plans; they are, after all, useful in terms of articulating where a school is, institutionally. Unfortunately, schools tend to blend/blur several of the aforementioned genres, calling the result a "strategic plan", reinforcing the (mis)conception that strategy is incredibly dense and complex. In fact, the use of the term "strategic plan" only obfuscates the reality that the various pieces are not linked in an efficacious manner.

A real strategic plan, for example, would not emulate template-based strategic planning, which is what the majority of schools appear to follow: outlining the process and people involved; restating the mission, philosophy, and history of the school; outlining some goals (sometimes mislabeled "strategies"); and listing (or referring to) many 'action steps' to follow. This template has produced a level of comfort over the years...and, I would argue, complacency.

Rumelt is, if anything, clear in what he says about strategy. Permit me to highlight the areas of importance, from his perspective, when it comes to separating bad strategy from good strategy.

Bad Strategy

Rumelt writes that "bad strategy is not simply the absence of good strategy. It grows out of specific misconceptions and leadership dysfunctions." He identifies four major hallmarks of bad strategy:

1. Fluff - "a form of gibberish masquerading as strategic concepts or arguments." In other words, people tend to use "big" words that are unnecessary and refer to esoteric concepts.
2. Failure to face the challenge - "when you cannot define the challenge, you cannot evaluate a strategy or improve it."
3. Mistaking goals for strategy - "many bad strategies are just statements of desire rather than plans for overcoming obstacles."
4. Bad strategic objectives - "objectives are bad when they fail to address critical issues or when they are impracticable."

For schools, bad strategic objectives often arise in the forms of slogans or superficial statements. One example would be, "We will work to identify areas of improvement in school communications." How is that a strategy? It sounds more akin to ongoing improvment work; to elevate it to the status of a "strategy" or "strategic objective" is giving it a status it doesn't merit.

Schools, as academic communites, are also prone to using "fluff" in their plans, given that "fluff has its origins in the academic world" (37). Rumelt insists that it "masquerades as expertise, thought, and analysis" (38). A classic example that we see in schools falls along such lines as:  "we are a school with strong, bright faculty members who instill a life-long love of learning." Fluff. No esoteric terms, to be sure, but what does this phrase really say? Answer: that "we're a school." A superficial restatement of the obvious. Mind you, there's nothing wrong with reminding ourselves that we love learning and that we wish to instill a love of learning in our community, but isn't that our mission? How is it strategic? Mission does not equal strategy.

A strategy, after all, is "a way through a difficulty, an approach to overcoming an obstacle, a response to a challenge" (41). The 50+ plans I've studied in detail, in large measure, rarely portray any strategy: they're not showing a clear way through a difficulty, presenting an approach to overcome some obstacle, or responding to a challenge. For example, many recent plans [post-2007] could be reduced to the formula of "increase enrollment [aka market share], control existing costs, and look for additional sources of revenue." There might be all kinds of "texture and detail" (41) in such plans, but the elephant in the room is ignored: 1) enrollment has fallen precipitously, 2) costs are out of control, and 3) additional revenue is needed to keep the doors open. Urgency and the necessity of correcting course is the elephant in the room, but anyone reading the plan won't see it because the plan doesn't mention it! As Rumelt notes, "If you fail to identify and analyze the obstacles, you don't have a strategy. Instead, you have either a stretch goal, a budget, or a list of things you wish would happen" (42-43).

Probably the greatest example of bad strategy in schools is mistaking goals for strategy. "We will be the school of choice in [name your city/market]." Or "We will delight our community with innovative curricula." Or again, "We will work to support the surrounding community." Or perhaps, "We will research ways to offer increased benefits to our faculty and staff." Is there a point of leverage here? "A strategy is like a lever that magnifies force." Yet, in the aforementioned examples, it is clearly absent. They are not bad things, per se, yet they're not strategies; rather, they are aspirational goals. An actual strategy might read, "We will increase faculty and staff salaries by 10% within two years by increasing Annual Giving by 5%, with the result of increased attraction and retention of faculty."

In other words, don't confuse performance goals with strategy. If schools would benefit from a resource plan (or a progress plan, evolution plan, etc.), then great! Just don't call it a strategic plan. What is more, a real strategic plan is episodic at best: opportunities, challenges, and changes don't occur like clockwork every three years, five years, seven years, or ten years. They occur when they occur, and that is when schools should formulate a strategic plan.

The hard thing for schools, though, is that we must choose, i.e. we must make choices, when focusing on a true strategic plan. By choosing on what to focus, we necessarily must choose to focus on one thing (or perhaps a few), setting aside other things. When we don't do this--when we focus on 10 things--or 25 things--or a to-do list of 130 things, the result is "amorphous strategy" (59). In schools, where we struggle to please many different groups for many different reasons, the notion that we should narrow ourselves runs contrary to our existence. It is perhaps paradoxical that our schools, whose existence is predicated on choice within the market, struggle to make choices themselves. In other words, the essential difficulty in creating strategy is choice.

Good Strategy

"Good strategy works by focusing energy and resources on one, or a very few, pivotal objectives whose accomplishment will lead to a cascade of favorable outcomes" (53). It is identified by what Rumelt calls a "kernel," which contains three elements:

1. diagnosis - "simplifies the overwhelming complexity of reality by identifying certain aspects of the situation as critical" (77)
2. guiding policy - "overall approach chosen to cope with or overcome the obstacles identified in the diagnosis" (77)
3. coherent actions - "designed to carry out the guiding policy [;] steps that are coordinated with one another to work together in accomplishing the guiding policy" (77)

Rumelt identifies the kernel as "the bare-bones center of a strategy [...]. It leaves out visions, hierarchies of goals and objectives, references to time span or scope, and ideas about adaptation and change. All of these are supporting players" (79).

A good strategic diagnosis can be of the most help in an overall strategic plan. Rumelt points out the following item, which we (educators) can appreciate: "For instance, we know from research that K-12 student performance is better explained by social class and culture than by expenditures per student or class size, but that knowledge does not lead to many useful policy prescriptions" (81). In other words, if a challenge is ill-defined in a diagnosis, then the strategy to deal with the challenge will not be effective.

The guiding policy is a very useful part of one's strategy because it allows for (even encourages) flexibility. Many folks assert that the lack of flexibility is a glaring fault line within a strategic plan -- and they're right. (That's because most plans aren't truly strategic in the first place, if that message hasn't come through yet...). It "channels action in certain directions without defining exactly what shall be done" (84). Such a policy defines "a method of grappling with the situation and ruling out a vast array of possible actions" (84). The problem with vision statements, by contrast, is that they don't spell out clearly how an ambition will be accomplished. As schools, we're big on vision statements; however, have we truly considered the "chatter" within a faculty (and even administration) about how hard it is to accomplish the vision? We tend to chalk it up to internal differences (or something else that poorly defines the real problem: a lack of strategy). Happily, though, "a guiding policy creates advantage by anticipating the actions and reactions of others, by reducing the complexity and ambiguity in the situation, by exploiting the leverage inherent in concentrating effort on a pivotal or decisive aspect of the situation, and by creating policies and actions that are coherent, each building on the other rather than canceling one another out" (85).

Strategy is about action--about doing something, so the kernel of a strategy "must contain action." What is notable is that the coherent action "does not need to point to all the actions that will be taken as events unfold, but there must be enough clarity about action to bring concepts down to earth" (87). These actions focus organizational energy. By focusing on the necessity of acting, schools can retain clarity about what is--and is not--important, and plans can be abbreviated to a more manageable size.

Wrapping It Up: Toward a Future of Strategy Work in Schools

The term "strategic" seems to refer frequently to decisions that are made by top management: boards, heads of school, and, sometimes, senior administrators. I submit that we over-use (abuse?) the term to mean top-level decision-making, and, as a result, the adjective has lost its clarity over time.

Policy and design, generated by strategy, impose coherence on a system; in our case, on schools. Strategic design, therefore, is an "engineering of fit among parts, specifying how actions and resources will be combined" (92). This design benefits from the specification of what Rumelt terms a proximate objective. This objective imposes power (clear, feasible, short-term, and resolving ambiguity) over the natural workings of a system, in order to obtain a desired result. It does not look far ahead; rather, it forces the institution to take a strong position and create options, not conjecture about the unknown, which point can be met by additional strategy work when it occurs.

Rumelt goes on to discuss the importance and relevance of power, leverage, hierarchies of objectives, and the issues with what he calls "chain-link systems" in the remainder of his tome. What he returns to, though, is the importance of design in strategy. I recommend enthusiastically the section on 'the arc of enterprise" (pp. 134-141), in which he discusses how long-successful incumbents tend to decline, and how to look at companies/institutions that invade market space, if one wishes to see effective, design-type strategy.

It is my belief that independent schools would benefit from moving toward design-type strategy, or what I would term strategic design, in order to better craft and integrate our actions and policies--in other words, to become truly strategic.

The next stage of research, I think, lies in exploring what design-type strategy might mean, by linking design-thinking with the corpus of research on which Rumelt draws so eloquently and convincingly. As he writes, "Good strategy is design, and design is about fitting various pieces together so they work as a coherent whole" (141). The threats to schools aren't necessarily "specific new products or competitive moves", but "changes that undermine the logic of [their] design[s]" (141).

About to Take a Leap

I am about to take a leap into the unknown... one is a road travelled before by many (and many who read this blog) and another is one tread by few.

Most of my life, in one way or another, has been spent in independent schools.  I grew up going to a wonderful, small, community-based independent middle school; and then went off to boarding school for high school.  After college, graduate school, and some work at the university level, I came back to independent schools seven years ago to teach.  For the last seven years, I have tread on a path familiar to those who have worked in independent schools since the 1950s and before: teacher, coach, advisor, club advisor, and administrator.  So, after a series of progressive moves within the school, it is not an uncommon path (but still a personal leap) that I am taking to become the head of a school.

What is uncommon is that I am leaving to head an online school.

Most independent school educators have the notion that online education is a lesser brand of education that what we do in independent schools.  It is impersonal, cold, cheap, shallow, thoughtless, computer-based, and easy.  Whereas, they argue, what we do in independent schools is personal, warm, elite, deep, thoughtful, relationship-based, and challenging.  The words that those in the independent school community use about online education and independent school education are almost always the exact opposite of each other.

Independent school educators point to articles, like this one from the New York Times http://www.nytimes.com/2011/04/06/education/06online.html?_r=2&pagewanted=1&src=tptw to document how online education is at best "not what we do" and at worst "ruining education in America."

And yet, online education is exploding in popularity.  Estimates from iNACOL, the international association for K-12 online learning, put the number of students taking online courses at the K-12 level at 1.5 million (http://www.inacol.org/research/docs/iNCL_NationalPrimerv22010-web.pdf).  A 2010 survey by Sloan-C, the higher education consortium for online learning, found that 5.6 million college students were taking courses online (http://sloanconsortium.org/publications/survey/class_differences).

Two years ago, a few independent school educators got together to ask: "With that many students taking courses, is online education really as bad as we think that it is?"  The short answer: well, yes, a lot of what is out there is not that great, but it does not seem to have to be that way.

The group of educators built a theory that the construct "online education" did not have to be in opposition to the construct "independent school" education.  They focused on what they knew, girls schools, and began to build an organization that became the Online School for Girls.  In many senses, the path that they took was a well tread path for starting an independent school: decide on a mission and guiding philosophy, create a guiding pedagogical approach, register as a non-profit organization, hire teachers, and build a space for learning.  What was a little different was that they worked at hyper speed: ideas in February and March; bring together group of schools and individuals to work on the project in April and May; register as non-profit in June; and open doors in September.

In September of that year, the Online School for Girls opened its virtual doors for two semester-long courses, with the backing of four schools.  Two years later, the School will begin the 2011-2012 year with seven year-long courses, eight semester-long courses, five summer courses, and five professional development courses.  At some point this summer, the School will have educated more than 500 students and teachers; by later next year, that number will likely be doubled.  And, there are now forty-seven schools that are a part of the Online School for Girls: http://www.onlineschoolforgirls.org/community/our-schools

Why such growth and success?  The Online School for Girls thinks that is is because it has succeeded in bringing together the best of "online education" and "independent school education," in the process forging an independent school vision for online and blended learning.

From "independent school education," the School brought a mission-based approach to education, absolutely incredible teachers, an emphasis on personal and connected relationships, and small classes.

From "online education," the School brought a flexible learning approach of asynchronous courses, a greater emphasis on accountability and transparency, and the ability to meet students where they are in better ways.

What the Online School for Girls has shown is that "online education" and "independent school education" do not have to be in conflict with each other, even if they certainly can be.

That is why even though the path is not well tread from working in an independent school to heading an online school, I am proud to make that leap.

Brad Rathgeber is about to become the Director of the Online School for Girls in Bethesda, Maryand.  He can be reached at: [email protected].  Follow him on Twitter at http://twitter.com/brad_rathgeber or follow the Online School for Girls at http://twitter.com/os4g

Mutualism and Education

Mutualism, as outlined by Kevin Kelly, is the concept that species depend on one another for their survival in at least one phase of their life (WTW, 311). He identifies three strands of "increasing mutualism" that comprise co-evolution:

(1) As life evolves, it becomes increasingly dependent on other life.

(2) As life evolves, nature creates more opportunities for dependencies between species.

(3) As life evolves, possibilities for cooperation between members of the same species increase.

Human life, as Kelly points out, "is immersed in all three mutualisms" (WTW, 312), and he goes on to compare what he terms "the technium", or the whole adaptive system of technology and culture, with human life. He sees it as a planetary-scale organism, whose "life" can be divided into stages of development, mirroring the development of biological organisms.

As such, the technium operates within the realm of mutualism as well, and, what is most important to understand, is that the third level of mutualism pointed out above represents the level of mutualism that humans have entered...and the activity associated with this level is accelerating, due to the interplay of two "organisms": man and technology.

"We are just starting our journey of increasing mutualism between the technium and ourselves. Mastering this commensalism, like adding with pen and paper, will take some education. The most visible aspect of the exotropic trend toward mutualism is the way in which the technium increases the sociability between humans. [...] For the next 10 to 20 years, the socializing aspects of the technium will be one of its major traits and a major event for our culture" (WTW, 314).

"Collaboration, which is not new, was once hard to do en masse. Cooperation, not new, was hard to scale into the millions. Sharing, as old as humans, is difficult to maintain among strangers. The extension of increasing mutualism from biology into the technium points to yet more sociability and mutualism to come" (WTW, 316).

If Kelly is right (not many folks doubt him, based on past predictions), then a major event for our culture--the culture of independent schools--over the next 10 to 20 years will be the socializing aspects of the technium; in other words, mutualism. That time frame may seem rather brief to many, yet it represents one generation of students following our curricula from PK through 12th grade, then a handful of years in post-secondary education (in most cases).

SOME QUESTIONS FOR SCHOOLS

• How might schools leverage this mutualism between man and machine?
• How might we better emphasize the importance of collaboration within our curricula?
• Would we need to rewrite vast sections of those curricula?
• How do we maintain human:human socialization, with the technium's rapid growth?
• How do schools handle these kinds of questions within extant frameworks? For example, is there a committee at your school that would charge itself with these questions? If not, what would such a group of thinkers look like, in terms of structure? Should there be structure?
• Will the ostrich approach (head in the sand) work, at this stage in the game? Could schools simply ignore the technium? Would such schools survive in the long run?
• Do we believe that "how we do school" (how we "teach" classes), as they exist today, is responding adequately to the degree of mutualism that Kelly describes? If not, how might we alter "how we do school"?
• Is anyone in your school even thinking about these things? Where would you start such conversations?

For more on the technium, I recommend What Technology Wants, Kelly's recently-released tome:

Disruptive Diploma

What would a disruptive diploma look like?

I recall having read an essay on what independent school graduates would be faced with in 2020, just over nine years from this writing. The author asserted that our graduates would have to acquire a Master's degree in order to be considered competent in their field, the implication being that a Bachelor's degree would no longer be sufficient.

What is the point, then, of a diploma, if it (apparently) is worth so little? Just as we have grade inflation in education, so too we have diploma (or degree) inflation. Why would a graduate have to earn a Master's degree as a minimum? How sad, since that view only underscores how much grade inflation has taken place in education. Grade inflation is leading (has led already, I would argue) to diploma inflation. Degrees are ubiquitous, which can be good or bad, depending on your perspective.

If we will grant even more of them, to the point of the Bachelor degree becoming less meaningful, how do we act to make them more meaningful? The answer must lie in some sort of disruption to the traditional, linear diploma/degree program. I wonder what that might be.

Commentary on Emerging Risks Survey: Part 3

Part 3: Blind Spots in Identifying and Assessing Emerging Risks

The survey underscores that businesses are struggling to identify and adequately assess emerging risks, even though they've made a point of being more transparent about risk. 62% of respondents rate their organization as ineffective or moderatly effective. What is more, the least effective practices occur in three specific and vital areas: operational planning, capital allocation, and strategic planning.

Executives feel overwhelmed. One chief risk officer noted, "We've cut down the frequency of our risk assessments because we end up with too many risks on our register and not enough time to do anything about them." (15)

One wonders how Heads of School at independent schools must feel. "Overwhelmed" certainly comes to mind, but there may be other adjectives that carry even deeper significance, given the current economic climate.

My guess is that most (but not all) independent schools, like these 650 businesses, are experiencing the least effective planning in the same three areas:

• operational planning: are we continuing to plan for school program in much the same way that we have for the past "x" years? Have we identified the risks associated with doing so, as well as the upside? (The "upside" may equal "stability of enrollment", rather than decreasing enrollment)
• capital allocation: when it comes time for the finance committee to discuss annual budget, how are we weighing risks when making our decisions? If your school has debt, what are you doing to anticipate higher interest rates in the future? Are you taking advantage of current rates to restructure your debt? In terms of funding normal operations, are there places where you can cut back, perhaps over the next three years? Conversely, are there initiatives that you feel ought to be funded because they could position the school to be stronger in the long term? How about faculty and staff salaries--have you been holding back on an increase for the past two years? How much longer can you continue to do that before they begin to look elsewhere, and, in so doing, increase your chances of negative word-of-mouth, which can be ten times more "effective" (in the negative sense) than positive word-of-mouth? Will you allocate your capital as you always have, just because it's comfortable, and because it delays having to take a stronger stance?
• strategic planning: if your school is in a weak position vis-a-vis capital, are you delaying any strategic planning because you don't have funds? Do you feel that this delay is going to help your strategy? I would argue that "delay is a strategy." What is more, it is most likely the wrong strategy. Schools need to be planning right now for what they're going to look like five years from now. Some may no longer exist; some will not change; some will be stronger. Where will you be?

Following are a few areas of interest to schools, in that businesses are not focusing much on them right now, which suggests (to me, at least) that schools are focusing on them less, as well:

• pandemics/infectious diseases (4.8% of the 650 businesses surveyed continue to focus on this area). Given the hype surrounding H1N1 last year and its potential deleterious effects on schools, can we afford to ignore the potentialities surrounding infectious disease? The liquidity crisis may be hitting us hard, but a pandemic may just be the nail in the coffin, so to speak, for schools. Has your school prepared a plan that allows you to continue school in the event of a pandemic or infectious disease? If not, when were you planning to prepare for that?
• aging populations in mature economies (2.2% of businesses continue to focus on this area). For many independent schools that find themselves in mature marketplaces, demographic trends are not favorable toward schools; at best, projections are flat over the next five to ten years. If your school needs to remain at current enrollment levels in order to sustain operations, what are you doing to ensure that your piece of the pie continues to be the same size? Have you considered alternate revenue streams? What do they look like, and are they significant enough to offset a potential decline?
• growing demands for sustainable and socially responsible business practices (2.2% of businesses continue to focus on this area). NAIS has been great with its focus on sustainability, but I wonder what percentage of independent schools continue to maintain that focus? Financial sustainability is certainly a priority, but my guess is that other forms of sustainability have taken a back seat in most schools. This specific category of business risk is a perfect umbrella for risks in school, I submit, because it covers the two areas mentioned above, as well as many others. If we center in on sustainable models, we can deal with pandemics and issues that accompany mature economies.

The biggest challenge for schools is likely the same as the biggest challenge for businesses: "recognizing that the future will not look like yesterday," as the head of internal audit in the manufactuing sector suggested.

Commentary on Emerging Risks Survey: Part 2

First, I would like to add a #5 to the list of independent school emerging risks that I identified in my last post:

5. Succession Planning. It may not be priority #1 at this very moment, but it ought to be listed among the top five, without a doubt. Even when all is well at a school in these uncertain times, the board and the head ought to be mindful of what succession looks like, whether in case of emergency (i.e., the head becomes incapacitated) or in case of departure (i.e., at end of contract period or for some other reason).

Part 2 of the analysis of the Global Emerging Risks Survey

As the report states, "the scale and impact of the financial crisis has prompted many organizations to focus more intently on increasing their capacity to detect and analyze emerging risks."

Some highlights:

• 90% of respondents reported some degree of increase in their focus on emerging risk, while 10% stated that they had no change in risk capability
• 64% increased their risk reporting to a senior manager, 36% did not
• 64% redesigned their risk identification process, 36% did not
• 54% increased their risk reporting to their Board of Directors, 46% did not

The question is, who is driving these initiatives to improve emerging risk management? In this survey, it varied according to industry:

• 48% of all respondents (all industries) cited their CEOs and Boards of Directors as the primary drivers
• 38% of financial services respondents cited their Chief Risk Officers as the primary driver
• 33% of manufacturing sector respondents cited their CFOs as the primary driver

Who is responsible for identifying and managing risk within our independent schools? I would guess that it's one of the following (in order of most frequent):

• Head of School
• CFO/Director of Finance
• Board of Trustees

In an ideal situation, the Board would have a risk committee which included the Head of School and the CFO, but I am wondering what percentage of boards in the independent school community have such a committee? I would guess a maximum of 25% of boards pursue risk diligently. Perhaps risk management is integrated in the audit committee or the finance committee, but, if so, one wonders whether it is discussed with any regularity at those meetings?

Please comment on this post if you feel that you have a risk committee model worth sharing, or if you feel that my guess-assessment (less than or equal to 25% of boards) is fair.

Commentary on Emerging Risks Survey: Part 1

This post is the first installment of several commentaries on the recently-released 2010 Global Emerging Risks Survey ("Steering the Course, Seizing the Opportunity"), undertaken by Oliver Wyman and the Financial Times. Although the GERS focuses on large corporations, much of what is discussed has some degree of application to independent schools. Over the course of my next few posts, I will highlight and comment on those areas that, I believe, do apply to schools in some way.

Part 1 - Perceived Global Emerging Risks

Looking at the next 18 to 36 months, survey respondents (650 of them!) cited the following five areas as posing the greatest risk (in order):

1. global recession
2. regulation policy risk
3. liquidity/credit crunch
4. financial market volatility
5. commodity price volatility

There is variation within each category, as each industry responded somewhat differently to each perceived risk. For example, manufacturing and transportation consider global recession to be their greatest risk, whereas life sciences consider regulatory risks to be more important.

Non-profits make up 1% or less of the executives surveyed. "Executives," by the way, is a broad term that encompasses such diverse roles as CEO, CFO, COO, CIO, heads of business units, chief risk officers, supply chain logistics managers, and more.

Given the low percentage of non-profit executives, I'm going to tease out some perspectives on the aforementioned perceived emerging risks, as independent schools might see them. My proposed order is as follows:

1. global recession - there is little doubt that independent schools, as a group, fear another global recession. We're still dealing with the aftermath of the 2008-09 recession, which, for many schools, seems to be continuing, as evidenced by enrollment challenges, personnel reductions, benefit "holding patterns," and the like.
2. liquidity/credit crunch + financial market volatility - I don't think that schools can separate these two categories; they truly go hand-in-hand for us. There is the issue of our own liquidity (cash flow from day to day, payroll periods, etc.), but there is the added twist of liquidity for our tuition-paying families, especially those who are involved with small businesses, many of which are experiencing significant liquidity issues. Relatedly, when financial markets are volatile, they affect family liquidity, especially when investments are used to help pay tuition. As a third layer, how our school finances are managed can be affected by the interplay of these two areas: consider endowment draw, for example, or managed cash flow by a full-service institutional manager.
3. educational policy risk/regulation policy risk - although we do not rely (traditionally) on state or federal government assistance, meaning that it is unlikely that we, as entities, will be regulated, we should take seriously any educational policy initiatives promoted by our state governments or federal governments, insofar as they benefit (in some sense) our public/charter school competition. Additionally, have we been enjoying--either directly or indirectly--some subsidy over the course of many years, one which may now be taken away as state governments in particular look to trim state budgets?
4. commodity price volatility - this category may seem an unlikely risk indicator for independent schools, but consider the prices that families pay for energy, in its various forms. If families are going to pay higher prices for energy, that may impact the amount they're willing to pay for tuition. From an endowment standpoint, schools might wish to take advantage of some of this volatility by means of allocating a fixed percentage of the endowment portfolio to commodities. If we end up in a highly inflationary environment, some degree of exposure to commodities will stand to benefit the endowment.