Your Board has developed a strategic plan. Congratulations! However, without a corresponding strategic financial plan, your strategic plan is likely little more than a “wish list.”
You must have a quantitative expression of the words and phrases that constitute your strategic plan—you must attach a financial structure to support the plan.
The strategic financial plan deals with funding the elements relating to your school’s ability to hold its competitive niche in your marketplace and maintain sustainability. Without the financial data provided by a strategic financial plan, your Board can expect to face some or all of the following difficulties.
- The annual tuition-setting exercise may be nothing more than a painful—and often counter-strategic—debate about “how much of an increase parents can tolerate.” The debate is usually conducted by some of those same parents. The answer is invariably “not much.”
- The upward gradient for faculty-staff compensation packages often becomes uncoupled from the tuition and hard-income package’s upward gradient. Decisions on the compensation package are consequently shaped via debate, framed in language such as, “How much do teachers need?” Because most teachers are underpaid, the answer is invariably “a lot.”
- The difficulty of managing and predicting enrollment and tuition revenue is often obscured by wishful “predictions” of enrollment increases. As a result, the projected “balanced budget” is based on enrollment-and-revenue assumptions that are not appropriately conservative (a term nearly synonymous with “strategic”).
- The strategically crucial issue of building and maintaining adequate levels of unrestricted and plant reserves, and of continuous attention to their full funding, often becomes lost in the confusion of asking the wrong questions in the wrong—nonstrategic—contexts of financially stretched parents, under-compensated teachers, and enrollment-management wishful thinking.
- Nowhere in the annual budget-building process are the operative questions addressed. Where are we taking the school long-term, and how will it be solvent when we arrive? Or, perhaps better, how will the school arrive at its desired goal without a strategic solvency framework within which to move?
- Perhaps your school has undergone an accreditation visit in recent years. Absent a strong strategic financial plan, movement toward the visiting team’s programmatic (and other) recommendations may be undertaken with little appreciation for the operations-finance implications of executing those recommendations.
- Your school may not “charge what it costs” to operate (i.e., cover 100% or nearly 100% of the operations expense with unsolicited “hard income”). Your school will likely drift toward an ever-increasing dependence on annual giving and other noncapital “soft income” to balance its operations budget.
A strong strategic financial plan, tied explicitly with your strategic plan, allows all Board members, financially savvy or not, to ground themselves in the critical numbers they must grasp concerning the school’s financial life.
Charge your Finance Committee and, especially, your Committee of Trustees with providing frequent review sessions in your regular Board meetings. Every Trustee must stay current on the uses and implications of the strategic financial plan.
Additional ISM resources:
The Source for Trustees Vol. 15 No. 1 Five Strategic Planning Detours You Must Avoid
The Source for School Heads Vol. 16 No. 5 How to Announce a New Strategic Financial Plan
Additional ISM resources for members:
I&P Vol. 40 No. 8 The Strategic Financial Plan: A Checklist for Trustees
I&P Vol. 40 No. 8 Your Strategic Financial Plan: Hard Income P&L
I&P Vol. 37 No. 8 Strategic Financial Planning and Your School’s Budget: Companion Documents
