Profit Versus Non-profit Schools

Part 6 of GSE’s “What We Believe” Series:

A risky topic maybe? The pros and cons of Profit versus Non-profit schools often conjure debates that reflect ideological generalisations about our most precious institutions. It is almost unforgivable to some that we mix commercial interests with one of society’s most noble professions. Profit versus Non-profit schools is a debate we need to have and something we need to understand.

Parents can sometimes be concerned about where the owners of for-profit schools interests are. They want their children to get the very best education and for them to be safe and secure. They fear that decisions might be made in the interests of profit over education.

I acknowledge that there are some for-profit schools who are overly focussed on profit without a clear understanding of what is required to achieve education quality. Business people who do not engage experts in education can turn a school into a commercial operation. However, to be fair I can also share countless examples of schools with a poor business model or leadership that did not manage finance and resources very well. If a school only focusses on quality education and is not strategic in its use of funds and resources it can quickly find itself in financial peril. There needs to be a balance. The mission to be a great school is only alive with the support of financial means. When we consider profit versus non-profit schools we need to analyse all features. For all models, financial gains are only made if a clear mission drives performance and it is achieved.

“Without money there is no mission. Without mission there is no money.”

Greg Parry

Eton College is one of the worlds most famous non-profit schools but is is also a very successful business. It has 1,300 pupils who pay fees amounting to circa £50.90 million p.a. Additionally, Eton has a significant property and investment portfolio of nearly £300 million, both of which produce an income. (Source: 2018 Financial Report) Many other prestigious schools of note, although non-profit, also have strong business plans, substantial income and reserves. It would be naive to claim a generalisation that one model is always better than another.

Eton is of course an atypical example but every nonprofit’s board is responsible for their school’s future. In these very challenging and uncertain times, that responsibility can be very challenging. With so much about future funding and enrolments unclear, every chance to bring in new resources is extremely attractive. Many UK and US schools target enrolments from overseas. They know that the market is much larger and demand high from wealthy families in China and other locations. But this too can be sensitive as Boards face pressure on whether this strategy is weighted too heavily on just increasing revenue.

The truth is, well managed schools of all types attend to business as well as educational interests. They can very much be aligned.

Education is an industry and through its institutions it delivers a valuable product or service.

The outcome of a high quality education is young people who are successful. When students graduate they will have the skills and abilities to succeed, encompassing knowledge, academic skills as well as a whole range of social, emotional and other skills that make them well-rounded individuals. Let’s also not forget about grades, in the form of a certificate and qualification that can be used to access the students next step, be it further study or a job through the resume it supports.

Whether a school is a non-profit, charity status or the school is a for-profit entity, the vision and mission should be the same. The school succeeds or fails based on the quality of its outcomes. Happy and successful children, satisfied and appreciative parents, based on all manner of criteria, will measure the success of the school.

Balance is Important in Profit versus Non-profit Schools

Strong and effective school management must be matched with a strong and effective business plan and financial management. When we care so much about how precious educational institutions are for our children and their learning we must also prioritise the financial health of our schools. Great schools are not only reliant on good teachers in classrooms. In fact great teachers can only be employed and have a satisfying profession if they are well resourced and the school’s future is financially secure.

But where is the balance?

We know that staff retention is a key signpost for a healthy school. Through some recent research conducted by Phil Yates in the UAE teachers cited their key reasons for leaving as:

1. School Leadership
2. The School Operating as a Business
3. Salary and Living Benefits

To be fair however, all and any of the above can reflect both profit and non-profit schools. Some non-profit schools are so aggressive with fundraising that parents become very disenchanted with the frequency that their hands are reaching deeply in pockets. There are charity based schools that pay teachers a minimal salary with the rationale that their mission is focussed on a greater good. What seems universal however is “Leadership.” All types of schools need someone at the helm to pull things together and lead long term into the future.

What is GSE’s Experience with Profit versus Non-profit Schools?

For profit schools must have a strong leadership team but what can sometimes be confusing is “Who is in charge?” Is it the Head of School or the owner? It is essential that education quality is the key focus of school operations. Our simple test of this is to ask what the decision making process is for a school head to spend $100, or maybe $1000. Within reason, can they purchase resources, within a budget, based on their own decision about what is important? We don’t expect school heads to have complete autonomy but there should be a clear process that allows them to make decisions aligned to the school mission. Processes and systems must be more important than positional power.

“Decision making should not be about positional power. The right people need to be at the table to make the most informed and effective decisions, no matter who that is. We don’t need to be right. We need to make the right decisions.”

Greg Parry, CEO GSE

What makes the most effective leadership team? The profile required for international school leadership is very different to the standard profile required of heads of school in home countries. The position requires an understanding of cultural difference, the ability to navigate unique demographics and cultural norms. It requires superior expertise in regard to curriculum and pedagogy but also on financial matters. Few leaders have the complete profile, hence international school boards search long and hard for good leadership.

Investors and boards in the education industry also find challenges given the unique characteristics of schools. To generalise, business people most often are not education experts and educators are not always financial experts. When you add additional layers of cultural difference the circumstances are very unique. At GSE, our team balances all sides but that has taken decades of experience as well as bringing together a wide range of expertise. If the school feels the strain of financial, cultural and education stressors then everyone suffers. There must be a balance of expertise across all key areas.

Strategic Planning

Comprehensive market research, business planning and financial modelling are essential for all schools. There must be a plan, into the future, that helps balance all priorities. New schools take a few years (3-5 on average) to achieve a balanced financial position. We recommend the creation of a 10 year financial plan so that school leaders are planning strategically. Money needs to be invested in the right places and the right resources need to be in place. Budget adjustments must be made with an understanding of the implications and consequences of every decision.

Schools from the UK, USA, Australia, Canada and other locations regularly contact GSE and ask for support in franchising their schools overseas. GSE represents and operates schools as we have extensive experience operating in unique locations. We understand all sides of education and business modelling. Financial modelling in unique locations requires management to be sensitive and responsive. Budget priorities are similar but different.

Education management in schools is not just one person. It requires a balanced team. International school leadership teams always make the most difference when the business managers and educators work together, effectively and in alignment. In our experience the team must comprise of educational experts, financial experts and leaders who understand local culture, norms and expectations.

Schools operate best, whether for profit or non-profit, when all cogs are spinning freely and vision and mission is aligned.

CEO and Education Expert Greg Parry

Internationally renowned for his expertise in education leadership, Greg Parry’s vast experience includes leadership of projects for edu-cation institutions throughout Australia, the Middle East, the United States, India, Indonesia, Malaysia and China. Recognised for his numerous contributions in the education arena, Greg has received the Ministers Award for Excellence in School Leadership based on improvements in school performance and a range of successful principal training and leadership development programs, as well as the School of Excellence Award for Industry/School Partnerships and the School of Excellence Award for Technology Innovation. His company GSE (Global Services in Education) has been recognised as having the Best Global Brand in International Education in 2015 and 2016.

Considered one of the premier experts in his profession, Greg has trained teachers and principals throughout the world in areas such as critical thinking, language development and leadership. His expertise in school start up projects, leadership and curriculum development, has made him a sought after authority in these disciplines.

www.gsineducation.com

Global Services in Education set up and operate schools in all parts of the world. Governed by a philosophy of global citizenship, every member of the GSE team shares a passion to help shape international education and student achievement through inspiration and collaboration.
Our goal is to meet the highest objectives of every school, teacher, student and parent, with an unwavering dedication to quality education, shared ideals and intercultural perspectives.