Keeping Pace With Educational Transformation: Evolving our Business Model

BY BOB NICHOLSON, CHIEF OPERATING OFFICER

The COVID-19 pandemic has highlighted that long-term disruptions can arrive with little notice. Independent schools both survive and thrive because they deliver exemplaryquality education; they excel by transforming the educational landscapes they occupy. Most often, this is done through the lens of the academic and co-curricular programs. However, it is clear the business models that govern schools must also shift from a static approach to a nimbler one, mirroring the transformation the educational “side of the house” is experiencing. As we prepare students for a rapidly evolving world that requires confident, driven, intellectually agile and empathetic citizens, our business strategy must also model these characteristics.

At the core of every school’s value proposition is a quality learning program, a sense of belonging and inclusion, and the quality of care and attention to developing well-rounded students. This value proposition is not the sum of costs; it also includes intangible benefits that help transform students into global citizens and, as such, must transcend the classroom and the building. Schools need to be valued for their educational and business networks, online presence, partnerships and flexibility. Tuition fee growth, when properly managed, can be a way to maintain the trust and support of our families. However, since independent schools draw from a smaller subset of the population, it cannot be the key to long-term sustainability. School leaders will need to reimagine how education is delivered and constantly seek efficiencies with every dollar spent.

Schools that relentlessly pursue all options and explore internal or external resources will achieve this objective. Resource allocation that is aligned with the strategic plan and in sync with the timing and amount of revenue streams, along with fluid and adaptable tuition models, can move us forward in powerful ways. Simply put, growth in enrollment numbers will not sustain the future on its own. Schools are near capacity; increasing floor space is not always practical and is, generally, cost-prohibitive. Evaluating enrollment levels goes hand in hand with reimagining the fixed classroom model to include hybrid options, the creation of online schools, and the expansion of programming beyond the schools’ walls and the traditional school day. While schools’ ability to diversify revenue has generally been limited to fundraising campaigns, facility rentals and summer camps, it is now imperative that new opportunities be developed and marketed not only to existing students but also to alumni and the broader community.

The pandemic has created a paradigm shift for cities and communities with respect to physical space. While working from home previously caused employers concern, it is now being encouraged and challenging businesses to rethink the role that office space plays. Independent schools have undergone a building spree during the past 10 years; however, moving forward, a more flexible approach to the use of existing space and future requirements needs to be implemented, including such possibilities as sharing with partners, incorporating smaller multiple locations or exploring outsourced options. Independent schools have the opportunity to become hubs to connect the broader community to their resources, such as design and innovation labs, libraries, fitness facilities and other collaborative spaces. The result will be to reposition themselves as essential community partners and not exclusive entities.

Faculty and staff form the core strength of schools, and investing in their development is critical to adapting quickly

to market disruptions. Labour costs represent at least 70 per cent of operating expenses, and schools must create more flexible models for how their professionals’ time is utilized. For example, schools can adapt salary structures and increase the use of sessional lecturers to best match market demand. Technology will enhance the educational experience through greater access to visiting experts; it will support faculty with tools such as artificial intelligence (AI) to reduce administrative tasks, allowing a greater focus on the most impactful aspects of their job – working with students. On March 13, 2020, we never could have imagined where we would be today. As we look forward, it is difficult to see the possibility of returning to a world we saw that day. We have succeeded by continuously reconceiving of what once was. Embracing change, seeking innovation and challenging the way we operate will become measures of success. Our business models must keep pace with the transformation of education. Then, and only then, will we continue to exceed the expectations of our students and their families.

Tim Zhang

HTS Parent As a Director of Due Diligence & Advisory, Tim leads a team that specializes in conducting operational due diligence at the Ontario Teachers’ Pension Plan (OTPP) Board.

How has the global pandemic accelerated transformation in your industry?

The global COVID-19 pandemic created extraordinary chaos and disruption to global financial markets and the investment industry.

First, governments and central banks around the world reacted quickly and forcefully to provide unprecedented monetary policies and stimulus to support the broader economy. Policy-makers explicitly expressed a willingness to remain accommodative for the foreseeable future. Such loose monetary policy has depressed yields and expected long-term returns on various asset classes. As a result, investors will have to work harder and look beyond traditional asset classes and regions for additional returns.

Second, COVID-19 has contributed to a shift from focusing on maximizing shareholder value to optimizing for a growing number of stakeholders and building businesses that are more resilient in the face of greater uncertainty. In the past, business executives were rewarded for cutting costs through streamlining supply chains and outsourcing to lower-cost jurisdictions. We will likely see businesses become more comfortable with increasing costs through building greater redundancy in the supply chain and human capital. Therefore, companies will have to search for new drivers for growth and value creation.

A similar logic can also be applied at a geopolitical level. Government policy shifts, populism and protectionism are likely to increase. COVID-19 exposed governments to their vulnerabilities in certain sectors, such as health care, technology and telecommunications, innovation and agriculture/livestock. Governments will most likely make policy changes to address this and ensure long-term security of their own countries. Such focus on resiliency at both business and government levels requires investment companies to grow in sophisticated and agile ways, so as to understand, anticipate and capture opportunities arising in this changing environment.

Third, the pandemic accelerated the need for businesses to digitize their operations and processes. For example, for consumerdriven businesses such as e-commerce, digital health care and remote education, the barriers had been broken and the shift to a virtual environment was significantly accelerated. The digitization of business operations also changed the way we work and collaborate. Business meetings are conducted virtually, instead of in person. Working-from-home or working-from-anywhere has been becoming a new normal. Such a trend is not expected to completely reverse itself in the post-pandemic world. This means investment companies will have to cope and adjust how they assess and monitor investment deals, engage with external business partners and maintain a healthy, motivated and productive hybrid workforce.

The world was changed by COVID-19 forever. But with human ingenuity, sympathy and compassion, we are changing it for the better.