Who is going to pay?

As the global economic crisis slides into another season, virtually every client we see is trying to figure out (a) what the new normal is going to look like, exactly, and (b) how, other than tuition or dues, they can generate revenue in today's market. Associations and schools alike have embraced the idea that continued "price" hikes in excess of inflation are most likely unsustainable, especially given the gloomy prospects for growth in most Western economies.

So, having settled on an at best uncertain new normal, we find governing boards turning to nontuition or nondues revenue as a way to attenuate price increases. Here's the problem: for the most, the idea itself is over-rated at best and illusory at worst. For schools, the reality is that absent a leverageable asset such as a performing arts venue or proximity to the ocean, few schools are in a position to generate more than small money from nontuition sources. Small money is better than no money, but it won't replace what could have been generated via tuition income.

For associations, the illusion is even more seductive: get vendors that work with schools to foot the bill for association services in exchange for access to the membership. OK, that will no doubt raise some serious cash, but what does anyone imagine the vendors will do with the extra costs? Most, if history is a guide, will merely find ways to pass along the extra fee to clients, thereby defeating the original ostensible purpose.

Standing pat is not the answer, either, as independent schools in the US face perhaps their first and most serious threat in the form of price resistance. Just don't fall for the delusion that someone else can be induced to pay for your program. An answer most likely lies in better leadership (pointing the way to more sustainable ratios and more realistic expectations of what a school can deliver) and better management (smarter use of human resources by calibrating variable teaching loads by subject). This is one thorny issue where the two--leadership and management--go hand in hand.

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