Stepping into the role of a business manager or CFO within a school environment requires a comprehensive understanding of the institution's culture, financial practices, and operational dynamics. Although the transition from an external organization to any new role presents challenges, the distinct nature of school culture sets it apart from the corporate world. In our first article of this school year our Senior Consultant Mark Temperley delves into the intricacies of managing finances in educational institutions and provides valuable insights for incoming business managers to excel in their roles.
Understanding the culture of a school is paramount for any business manager or CFO entering the institution. While the importance of adapting to new organizational cultures applies universally, the school environment stands in stark contrast to commercial enterprises. Many schools operate as non-profit organizations, prioritizing mission delivery and enriching the educational experience over financial targets. This does not mean “no profit” at all, or the school would quickly run out of funds and declare bankruptcy. However, it does affect operations and decisions, where delivering the mission and enhancing the school experience takes precedence over making a financial return on the investment.
Divergent Focuses: Unlike private companies that prioritize profit maximization and shareholder value, schools center their efforts on delivering comprehensive academic and non-academic programs. This emphasis on holistic education underscores the distinct objectives of educational institutions compared to their profit-driven counterparts.
Collaboration Over Individualism: The notion of a "collegial" working culture characterizes many schools. This collaborative environment, akin to being part of an extended family, fosters a collective approach to decision-making and problem-solving, setting it apart from the individualistic tendencies and a "decide and announce culture" often found in commercial organizations.
Striking a Balance: Within non-profit schools, a common sentiment is that certain practices may become "too commercial." While money-making opportunities exist, the ethos of educational institutions focuses on mission alignment rather than financial gains. Unlike corporate settings, financial incentives tied to performance or bonuses are often absent, reflecting a different approach to compensation.
Navigating Committee Decision-Making: Incoming business managers accustomed to autonomy may encounter a shift in decision-making processes. Schools often rely on committees staffed by individuals with varying degrees of financial literacy, leading to a deliberate and sometimes slow-paced decision-making environment. Overcoming challenges in this realm is essential for effective school financial management. For incoming Business Managers who have been controllers or finance directors elsewhere a loss of autonomy should be expected. This slows down the pace of decision making; indeed, one school Finance Director describes it as “glacial” and needing a long lead time. For something that is needed in September it is necessary to plan to introduce it in the Finance Committee in January. A frequent response to suggestions is “what do other schools do?” to even seemingly obvious solutions, which necessitates either thorough research prior to meetings or a round of surveying other schools to present the results at the next committee meeting.
Prioritizing Professional Development: Professional development takes precedence in schools, particularly for teaching staff. Schools allocate budgets for individualized development and empower educators to attend conferences and training events. This approach differs from the corporate sector, where training is typically directed by HR or line managers.
The Role of Finance: While schools focus on their mission, the role of the business manager remains pivotal. Sound financial practices, oversight of procurement, and adherence to purchasing policies contribute to maintaining the institution's financial health. Effective budgeting and financial management ensure operational stability and prevent overspending. The Business Manager may be left as one of the few custodians of these important processes.
Budgeting, Forecasting, and Decision-Making: The basis for school pricing decisions and enrollment forecasting is often left in the hands of the Business Manager. Collaboration with the Finance Committee and Head of School is crucial for informed fee increase projections. The budgeting timetable varies from school to school, with salary allocation being a significant portion, often requiring understanding of step scales and academic advancements. New Business Managers are sometimes surprised that 60-75% of the school’s operating budget is for salaries and staff benefits, and relatively little on textbooks and school supplies (even more so as schools go digital). The majority of salaries is represented by the faculty salaries and one of the cultural aspects that incoming Business Managers have to adjust to is the use of pay scales. Coming from the commercial world where a pay increase depends on inflation and performance and is not automatic. The concept of a pay system that automatically rewards tenure and educational qualifications (a Master's degrees or Doctorate) may be a little of a culture shock.
Navigating Financial Reporting: Schools have their own needs in the structure and format of their financial reporting. Presenting financial information to committees or boards, sometimes lacking financial expertise, requires clarity and adaptability. Having well organized committee materials and streamlining financial reports to key statistics such as enrollment, tuition revenue, collections, and expenditure forecasts enhances communication and decision-making.
In the realm of school business management, acknowledging and adapting to the distinct culture and practices of educational institutions is vital. The dynamic interplay between financial responsibilities, collaborative decision-making, and professional development underscores the unique nature of school administration. By understanding these nuances and seeking support from established resources, incoming business managers can effectively navigate the complexities of their roles and contribute to the success of the schools they serve.
Transitioning into a new school environment, especially for those from other industries, can be isolating. While academic leadership often takes the forefront, business managers can access coaching and support programs, such as those offered by Sage Consultancy, to ease their integration, enhance their effectiveness and ultimately ensure their success.