Capitalism and Schools Need Double-Entry Bookkeeping Logic

No less an authority than Max Weber famously said that for capitalism to function well, average people needed to understand the basics of double-entry bookkeeping. Today, very few people seem to grasp the fundamental notion that an accounting statement is basically an equation of credits and debits; that is, for every credit there must be a corresponding debit from somewhere.We find that even fewer in independent schools--faculty and parents alike--grasp the double-entry idea. In focus group after focus group we hear teachers and parents talk as if the rules of accountancy and finance are somehow suspended in the case of a school. Last week, in a city on the American West Coast, we heard groups of teachers and parents express a desire for top decile salaries and benefits with bottom quartile tuitions. When asked how this would be possible, both groups responded that the board could "just find the money somewhere."To be fair to the teachers and parents, the education industry has so well insulated constituents from the realities of economic life that few teachers or parents realize how much cash flow it takes to operate the average school. All they know is that each tuition seems like a pile of money that becomes a really large pile when multiplied by the number of students in the school.But it takes a really large pile of cash to operate the average private, independent school--more and more every year. None of us has a money-printing machine in the back room. The median endowment of a day school is insufficient to provide much relief. Maybe it is time for school leaders to use every opportunity from the bully pulpit of headship or chairship to teach the basics of accountancy.