• Russell Cooke

Prevention or Cure - The case for a school-wide health check

Subjecting your school to a finance and operations health check may sound as daunting

as undergoing a physical examination by a doctor. As the world starts to emerge from its own health issues, our Managing Consultant Russell Cooke explains that it can be transformative if recommendations are acted upon.


Motivations for undertaking business health check are almost as numerous as online mindfulness seminars and are not always purely commercial. While the broad purpose of the exercise is to identify areas where the schools can be more efficient, it is not uncommon for requests to arise out of a change in key personnel or the circumstances of the school.

Once the objectives have been determined, the next step is a fact-finding process to establish the current position. Ideally we would want to be able to look at two or three years of financial or operating information, but more information can improve the process. It is also important to interview widely to determine concerns as only then can we understand what is needed and where priorities lie.

Schools may fixate on specific data and ratios, rather than looking at the big picture and remembering that, in order to facilitate growth or change, costs will increase in the

short term and it may take a while to see a return on investment. On the flip side it’s fair to say that expanding schools underestimate the significant ‘sickness’ that may come with growing too rapidly. Enrolment growth is sometimes wrongly seen as a positive as long as the money is coming in. Don't stretch your human resources too far.

A School Board may sometimes require their school to undertake a health check if there is a general lack of understanding of what the year-end accounts actually show. Even if a school is generating a surplus it may still be challenging to understand where the cash has gone or if the reserves are adequate for the future of the school.

Along with analysis of the numbers and the information gathered a health check culminates in a presentation of the financial/operating assessment and an action plan of what the school needs to do to achieve its objectives. Schools often overlook

regular key performance indicator monitoring, especially cash surpluses, maintenance costs, Capex and loan repayments.

A new Head of School head often requests a health check on a school which they have just joined. They may have already done some due diligence on the school before taking up their appointment, however, they are looking for a deeper commercial, HR and operating review. Requests from a Head of School may be prompted by concerns about the efficacy of certain staff.

The results of a business health check can come as a surprise, what may be perceived as a cash flow problem may actually be an issue with costs. Often if schools do not make consistent increases to their fee schedules they just aren't generating enough of a surplus.

There are some tried and tested metrics around tuition income and personnel costs, but what schools sometimes forget is that underneath there are other costs and overheads. Whereas a commercial business would track such metrics as a liquidity ratio, it requires more analysis and understanding of school cash flows and costs to assess health issues.

Schools also overlook non-financial metrics, schools that don’t look enough at operational data, and when they do they don’t link it to costs, risk and cash.

Which indicators are measured during the health check – and over what timeframe – very much depends on the size of the school and where it is in its lifecycle.

​CASE STUDY: JOLLY GOOD SCHOOL Jolly Good School, is a not-for-profit School approaching its fourth anniversary. They decided to carry out a financial health check as they thought it was a good chance to take stock and see if there was anything they could be doing better. As a non-profit school, making money is not the primary objective. However, its leadership was keen to ensure it was operating as efficiently as possible. The health check led the school to look more closely at costs and examine how much they actually spent on basic running costs and banking expenses. There was also additional advice on how to set up and structure reserves. As a relatively new school they had never thought about projections for the school and future enrolment implications. The school also instigated a process of regular checks to ensure it is as healthy as possible.

Other Schools have asked consultants to perform some diligence over the financial and operating performance and controls. Consultants help to balance what are the short term issues that need to be addressed now and what needs to be done for the longer term to avoid issues. In an school that doesn’t have a full-time CFO/COO but perhaps a financial controller and a facilities maintenance manager, schools often see the need to seek assistance from an external consultant to undertake a health check as to whether some of the key controls and processes are in place and operating effectively.

There is value in the observations of who has understanding of school business and who has broader experience. These may not be financial and operational insights but

rather recommendations about the Finance Committee model and Agenda, quality of income, the strengths and weaknesses of the management team and – most

importantly – the culture of the school. The health check tends to draw out the underlying issues about leadership style, quality of workforce and general attitudes towards learning and teaching.

Consultants will more than likely duplicate recommendations that a good Finance or Operations Director would already have considered, so they may ask why these steps have not been taken and what organisational barriers there are to prevent change or improvement. Outside consultants have the advantage that they can help break down internal barriers.

At Sage Consultancy our health check services look at people and processes and the broader culture of the school as well as the numbers. We believe our many years of school wide experience enables us to help forward thinking school leaders improve their organisations.

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