Leading Your School In Uncertain Economic Times: Practical Suggestions

Many experts predict that we are headed for a recession. A recession in and of itself is not particularly worrisome. Like breathing, expansions and retractions in the economy are normal and keep the economy healthy and vibrant over the long-term.

What is of concern is that this recession may be deep and long. According to the Wall Street Journal:

The bailout plan was needed but more needs to be done to fix things, and we're not even sure a rate cut will be enough," a trader at GFT Global Markets says. To many Wall Street veterans, a painful, long recession unlike anything the U.S. has suffered in decades seems increasingly likely. (WSJ: Today's Markets, Oct. 6, 2008)

Given the turmoil on Wall Street and words like "crisis", "recession", "bank failure" and "depression" circulating in the media, it is not surprising that consumers have dramatically cut back on spending, The New York Times reports that:

Cowed by the financial crisis, American consumers are pulling back on their spending, all but guaranteeing that the economic situation will get worse before it gets better ... But in recent weeks, as the financial crisis reverberated from Wall Street to Washington, consumers appear to have cut back sharply ... Recent figures from companies, and interviews across the country, show that automobile sales are plummeting, airline traffic is dropping, restaurant chains are struggling to fill tables, customers are sparse in stores. Graph from the WSJ Business Section, Oct. 6, 2008-click on the graph to go to the article.

Whether the predictions of gloom and doom come true or not, it seems clear that we are in an extended economic slowdown, which may affect many of our schools. As school leaders, it is our responsibility to assess the situation and then to provide prayerful, faithful, and steady leadership.

My good friend Zach Clark, Westminster Christian School (St. Louis), put it this way:

1. We should have an attitude of gratefulness for the strengths we have as a Christian school like increased enrollment and strong budgets, freedom to make changes, talented staff, etc.
2. Be steady during this time when everyone is looking for a reaction. Be realistic but confident in our ability to act.
3. Be sure that our focus is on keeping our attitudes positive, and encourage each other to stir each other up to love and good deeds.
4. Look for opportunities to be effective and efficient NOW.
5. Become an expert in engaging and developing others, especially volunteers to improve our stewardship of resources and human resources.
6. This is an opportunity to turn people’s focus to the substance of our work. To not only allow, but also enable others to determine the value of a Christian education.
7. Wait and watch what the Lord will do, trusting in His faithfulness.

Preparing Our Students and Our Schools

So how do we prepare our schools for economic turndown, or even a possible prolonged recession? The role of the leader is not to react but to respond prayerfully and strategically. If the economy spirals into a long recession it will affect our families and in turn, our schools.

I offer the following series of possible contingent responses for your prayerful consideration if, as seems inevitable, there is a sharp economic downturn. Obviously, every school and local market is different, but perhaps one of these suggestions will be helpful.

1. Pray faithfully for your families and for your school ministry. As I indicated in a previous post, I do not encourage prayer because it is the expected thing to say or because it is the politically correct preamble to a real solution. I say pray because in the final analysis it is the Lord who grants wisdom and who will provide for our needs. Remember, your school ministry is the Lord's!

2. I refer you to my article Economic Crisis, Globalization, our Students, and our Mission (Era of U.S. financial dominance at an end: Germany) on possible ways to prepare your students for an economic downturn.

3. As much as possible, move toward zero-based budgeting or at least look at your budget from that perspective. Investopedia defines zero-based budgeting is "a method of budgeting in which all expenses must be justified for each new period. Zero-based budgeting starts from a "zero base" and every function within an organization is analyzed for its needs and costs."

This contrasts from the usual method of simply adding a percentage increase to existing budget categories or departments. This requires a strategic approach to school leadership. For more information, see my previous post: Are You Spread Too Thin? How to Thrive and Not Merely Survive as a Christian School.

4. Smaller schools need to assess the number of students per class to ensure that each class is at break-even on a contiguous basis. Depending on the school's expenses and tuition levels, break-even is usually 16-18 students/full-time teacher. If you have classes that are not at break-even you have built financial losses into the school's budget, which is never a good practice but is particularly problematic in during an economic downturn.

If you are losing money in any class consider how you can consolidate classes. For example, if you have two third grade classes, both of which are not at break-even, consider combining them and then hiring a full-time teacher and a full-time academic aide (and laying off the other teacher or making him/her the academic aide but at a lower salary (I know this is hard, but it may be the right thing to do).

Doing so will permit a larger financially viable class without sacrificing academic quality while reducing cost IF the teacher and academic aide are experienced and very effective. Obviously, this could present some PR issues so great prudence must be exercised. But if you have classes of say 13 each, combining them into a single class of 26 with a teacher and academic aide will cut cost without negatively affecting academic quality.

5. Increase financial aid. This is, of course, easier said than done, but increasing financial aid may be essential. There are several ways to increase financial aid; 1) allocate/earmark a certain dollar amount from tuition specifically for financial aid. For example, $50/student x's 300 students produces $15,000 in additional financial aid. 2) Approach parents with financial resources to contribute specifically to the financial aid fund. 3) If your school is a church ministry, ask the church in contribute (or increase contributions) for financial aid.

6. Stay on top of your accounts receivables. This is one of those areas that is hard but ESSENTIAL. Do not allow parents to keep their children in the school if they are not keeping their accounts current. I would not, however, dismiss a student mid-year if avoidable as this can be harmful to the student. However, re-enrollment should not be extended unless and until accounts are current. If the family has a history of slow payment, require at least a half-year of paid tuition before permitting re-enrollment.

Be patient, understanding, and creative in working with parents. "Do unto them as you would have them do to you." This does not mean that you are obligated to provide them a free education. You have no ethical obligation to do so. Doing so jeopardizes the long-term viability of your school (which is poor stewardship) and is unethical because tuition paying parents are subsidizing the non-paying parents. Schools are not banks.

7. Think of ways to expand your market. For example, consider running a bus to "outlying" neighborhoods to increase enrollment. Keep in mind that you need parents with the financial means to pay tuition so target neighborhoods accordingly.

8. Work on your retention rates! It is far easier to keep students than to recruit new ones. The key to retention is value, which is a function of price and quality.

Remember, if your community (market place) is blessed with a large number of high quality public and private schools, parents have a smorgasbord of quality educational options.

If parents perceive the local public schools to be safe, high quality learning environments, they are more likely to consider enrollment in the Christian school to be a discretionary “luxury” purchase. THIS IS PARTICULARLY TRUE DURING AN ECONOMIC DOWNTURN!

Only the most diehard adherents to a Christian philosophy of education will consider enrollment in the Christian school a necessity. We can make all of the theological and philosophical arguments about why Christian parents should have their children in a Christian school but this will affect the decision-making of only a small group of Christian parents.

The Archdiocese of Chicago provides a compelling example of this principle. Faced with declining enrollments and a school deficit of $20 million, the Archdiocese commissioned a study to determine how to boost school enrollment. Boffetti (n.d.) reports that researchers discovered that:

Struggling schools, at the very least, needed to fill every available seat with tuition-paying students. Surprisingly, many inner-city parents, both Catholic and non-Catholic alike, did not know that Catholic education would only cost them $1,000 a year, with the diocese picking up the rest of the tab. When they learned the facts, many said they would eagerly pay to get their children out of the awful and dangerous public schools they were in.

Suburban parents were more sanguine. Parents who believed in the importance of Catholic education already sent their children to Catholic schools. The rest of the parents did not think it would be worth the added expense because they felt that their suburban public school system was at least equal to, if not better than, the Catholic schools in terms of academics and amenities [emphasis added]. In other words, the “Catholic” in Catholic education was not worth an extra $1,000 per year to them. (pp. 7-8)

Increase the value of your school by improving quality (teachers are most important here), adding high-impact courses/programs, leveraging technology, reducing costs, and moderating tuition increases.

9. Consider merging with other Christian schools. This poses theological and philosophical challenges. However, merging Christian schools can reflect very wise stewardship through economies of scale, the ability to pay higher salaries, cutting costs, consolidating programs, and building larger fine-arts and sports programs, to name a few. Unless there are mutually exclusive theological and philosophical principles at stake, it makes little sense to have several small, struggling schools within a few miles of each other, particularly in a harsh economic environment.

Before considering a merger, keep the following in mind:

• You may need to create a transportation system. Convenience and cost (given current gas prices) are two high values for parents. If one school merges with another, one school will lose some students. This loss can be reduced by providing a transportation service for parents whose school closed.
• Emphasize the advantages the merger will create for students.
• Differences in preferences can be overcome and the schools can merge. However, fundamentally incompatible differences in theology or philosophy cannot and should not be compromised (e.g. a protestant school combining with a catholic school would reflect an unbiblical compromise, or the proposed merger of a fundamentalist school with a school committed to a reformed theology would be inherently incompatible theologically, culturally, and practically). Be careful to distinguish between policy and pedagogical preferences and fundamental theological differences. They are not the same but are often confused. The challenge is to determine what is preference versus what are genuine theological and philosophical differences and core tenets.
• One school must take over the other--a house divided cannot stand. One school board and administration must be taken over by the other. Seldom should board members or administrators be absorbed into the new school. More often than not this will be a recipe for conflict and failure. However, the personnel (support staff and teachers) of the school that is being merged/absorbed by another should be carefully interviewed and given priority for hiring provided they meet the absorbing school's standards. This is fair and just but the absorbing school is not ethically obligated to hire the staff of the merged school. Likewise, where there are redundancies in staff resulting from the merger, and there will be, only the best staff of either school should be retained. This seems harsh, I know, especially for Christian leaders. However, as leaders it is our responsibility to staff our schools with the best available personnel, which may mean in a merger that some staff from either school may be let go. If so, generous and fair severance packages should be provided and good staff who are laid off due to redundancies should be rehired if positions become available.
• Pride must be crucified! There is great pride of "ownership" by the leadership and founders of any organization, including Christian schools. However, our schools belong to the Lord--not to us! It is His glory and His kingdom that matters--not the sweat equity that we have invested in the schools we lead. Since the schools we lead belong to the Lord there should be no pride of "ownership" and no shame if one school must be merged with another. The merger may simply reflect faithfulness and wise stewardship for God's glory and the advancement of His kingdom. Pride should never prevent two weak struggling schools from combining if doing so ultimately benefits students by creating a stronger and more stable Christian school.

10. If you are a Covenantal school (a school that only enrolls children born to at least one confessing parent (1 Cor. 7:14), consider enrolling the children of non-believers. If the school's founding charter or theology/philosophy is covenantal, this will be controversial for leadership and for some parents. More so if your school is sponsored by a church, in which case approval by church leadership will probably be required.

I started out in Christian education as an ardent advocate for the covenantal model of Christian schooling but I have modified my position based upon theological considerations and personal experience (I have been founder and head of a covenantal school (Covenant Day School) and head of two non-covenantal schools, including my current school, Briarwood Christian School.

Great prudence and much prayer must accompany any discussion of this decision. The goal is to clearly discern the Lord's will in this matter. He has called some school ministries to serve only the Covenant community. Other school leaders and churches believe the Lord has called them to minister to BOTH the believing and non-believing communities. It could be that the Lord will direct you to change your ministry focus. Only prayer, study of God's word, and wise counsel will help you discern His will in this critically important matter.

Here are some things to consider as you prayerfully ponder this possibility.

(NOTE: This blog article is already too long so I cannot go into all of the details of why I suggest this possibility. If you have questions please contact me directly and I will be happy to speak with you.)

• I believe the decision as to whether the school is Covenantal or non-covenantal is a matter of Christian liberty. There is room for disagreement here based on the leadership's sense of God's calling, but I believe either model can be biblical, can advance the kingdom, and can glorify our Lord.
• I have been surprised to find that when a school is well-run with good leadership that there are no more problems in the non-covenantal school than in the covenantal school. This was counter intuitive to me until I gave this more thought. The short version of my thinking is this: non-believing parents who choose to send their children to a Christian school tend, by common grace, to share the same high standards for external behavior and academic achievement as many Christians (provided the school does not have a reputation as a reform [small r] school for troubled students). I find many Christians, on the other hand, to be antinomians (at least when it comes to their children) who, when confronted with a disciplinary matter, respond "I thought this was a Christian school--where is the grace!" Translation, grace means "no or only mild discipline, at least for my children."
• The admissions process is essential for ensuring a healthy school culture. I have found that having a "pooled" admissions process for grades 7-12, in which NEW prospective students are enrolled ONLY after they have interviewed with an admissions committee, is a very effective way to protect the school because only students who are deemed as good fits are enrolled. Frankly, sometimes the children of non-believers can be better fits then the children of some believers.
• The school must have strong caring school leaders who wisely and consistently enforce policies. When this is the case, I have found that enrolling the children of non-believes creates no more problems than those found in covenantal schools. On the other hand, when the school does not have good policies or when leadership fails to wisely and consistently enforce them, there will be problems resulting in an unhealthy school culture in both covenantal and non-covenantal schools.
• As a practical matter, the non-covenantal model greatly expands the school's marketplace. This has several advantages including larger enrollments and stronger finances. Under wise leadership, this translates into higher teacher salaries, improved instruction, expanded and higher quality programs, higher retention rates, and financial stability. This in and of itself is NOT sufficient reason to move from a covenantal to a non-covenantal model but if school/church leadership believe that either model, when done properly, can be biblical and that the Lord is leading them in that direction, then this model offers significant practical and financial advantages.

We may be facing difficult years ahead. Now is the time to prayerfully plan ahead. How are you going to position your school to not only survive, but thrive in uncertain times?

One of my favorite verses refers to King David's leadership:

For David, after he had served the purpose of God in his own generation... (Act 13:36, ESV)

We are called to serve the purpose of God in our generation, which includes providing godly, biblically informed, steady, and strong leadership for our schools during times of uncertainty. May the Lord grant us the grace to be beacons of light and steadfastness for our brothers and sisters and before a frantic and watching world.

Technorati Tags: Recession,depression,Christian school,economic,economic crisis,Wall Street,Main Street,Merger,Covenantal,non-convenantal,enrollment,zero-based,faithfulness,admissions,leadership,stewardship,salary,salaries,leverage