The subprime mortgage crisis in the United States reached a critical stage in September 2008, forcing the federal government to take measures to stave off a potential economic collapse by enacting the Emergency Economic Stabilization Act of 2008, a bailout of the U.S. financial system, on October 3, 2008. This situation in the U.S., linked with similar weaknesses in some other countries, has disrupted the global economy. The ramifications of the downturn may or may not be experienced for years--economists are far from agreement. As John Kenneth Galbraith said, "The only function of economic forecasting is to make astrology look respectable."

Jim Collins, in his book From Good to Great, quotes Winston Churchill: "There is no worse mistake in public leadership than to hold out false hopes soon to be swept away." The chapter this quotation prefaces is "Confront the Brutal Facts Yet Never Lose Faith." This is a great paradigm for your Board to consider when either hiring a new Head of School or evaluating the present Head.

In 1996, ISM identified 10 “ISM Stability Markers®” for use in strategic and long range planning. The Stability Markers, organized into a prioritized list, were derived from variables associated with a private-independent school’s capacity to sustain excellence. The top-ranked Stability Marker was, and remains, the Board’s self-definition. Boards viewing their mission as essentially “strategic” comprise the best indicator/predictor of institutional stability. These Boards focus on long-term financial viability, and are organized annually into “task units” (i.e., Board committees) formed to advance the school’s planning document. Boards viewing themselves as “current events/operations oversight” entities (the antithesis of the “strategic” Board) were associated with inability to sustain excellence.

The topic of organizational leadership proved to be a magnet for researchers and management theorists throughout the 20th century, and interest in the subject has continued to build in the 21st. In your role as School Head, you may have found yourself confused, overwhelmed, or both in the face of the sheer volume of ideas and concepts regarding leadership, not all of them compatible.

Borrowing originally from concepts advanced in the for-profit sector, ISM has for a decade taught a basic competitive-marketing truth: private-independent schools can compete on the basis of price, product or process, but not on the basis of all three at the same time. The implications of this truth for strategic planning would be hard to overstate. As you, the Board President, prepare for your next planning event, take responsibility for assisting your colleagues in working from a marketplace stance that fits your school’s actual competitive platform.

The ISM’s Stability Markers® are those variables that are associated most strongly with a private-independent school’s ability to sustain excellence in its student programs. ISM has noted in the past that “there is a specific relationship between the ISM Stability Markers and the approach to planning that you, as Board President or School Head, should consider. To help you determine the planning ‘avenue’ that best suits your school’s current status (based on the Stability Markers), ISM has developed a selfscoring process.”

The third iteration of the ISM Stability MarkersTM places hard income as one of the most important predictors of a school’s ability to deliver educational excellence over time. (It is No. 4 of a list of 18.) For private­independent schools, it should be fundamental to attempt to fund operating expenses (including debt service and depreciation) from hard income—the term ISM uses to group tuition revenues, other fee sources, and interest/investment income. Our research suggests that this is a frequent occurrence.

It has been no statistical fluke that in all three iterations of the ISM Stability Markers®, the No. 1 or No. 2 marker has been cash reserves. While this item is a formulaic mix of cash reserves, debt, and endowment, the practical piece of this is the cash reserve itself – an amount of money equal to 15% of the operations budget and 2% of the replacement of the school facility to a maximum of 20%. This is neither a quasi-endowment (i.e., restricted by the Board for its own purposes) nor the seed money for a real endowment. It is cash in the bank that can be accessed at a moment’s notice.

Most School Heads and administrators will face the task of terminating the employment of a faculty or staff member. While most faculty will not be terminated mid-year, there are circumstances in which this may occur. Although emotional aspects of a termination are often unavoidable, schools can help reduce their legal and financial risks by using a “separation agreement and general release.” There are, however, important considerations when crafting such documents.

While a mission statement is valuable, no matter how beautiful the wording, it is frequently inadequate. Over the years, ISM has found that private-independent school mission statements are seldom viewed as completely satisfactory by any constituent group, whether it be the faculty and staff, the administration, the parent body, alumni, or others with an interest in the school (e.g., prospective lead donors).