Consulting: Small Tweaks with Big Impacts
Prior to advising schools I was a risk manager for hedge funds, but in some ways I've found school finance to be more challenging. Not because of the financial modeling or predictive analytics of course, but because of the human factor. For example, it may not be that difficult for you to financially model a new plan to get a school back on a sustainable path, but it can be very difficult to get all the people to change in order to execute that plan.
The risk of making longer-term financial mistakes often rises when schools lose seasoned volunteers at the ends of their terms, or when key staff leave. This recurring risk, and loss of continuity can be mitigated, and your institutional financial wisdom preserved, by making a few small shifts in focus. The biggest impact can come from adopting a financial forecasting mindset, and making Collaborative Forecasting part of your School's DNA. This was the subject of my workshop at NAIS's 2019 national conference.
"Let systems run the business and people run the systems. People come and go but the systems remain constant" - Michael Gerber
- An intuitive financial forecasting model customized for your internal financials, a model that everyone trusts is accurate because best-practices were used to create it, test it, and update it.
- Training. All trustees and finance committee members can be trained to use or interpret the model's forecasts in a one hour session during their orientation. Training is more fun and sticky if done interactively by exploring "what if?" scenarios with the model to test how changes to your business model affect future financial performance. After looking at a dozen scenarios, even trainees with no previous financial experience gain an intuitive sense for what drives your school's financials, giving them the skills and confidence to contribute to generative discussions in the boardroom.
- Continuity. To avoid future errors, re-training, or loss of trust in the models or process, don't re-invent the wheel when volunteers turn over, or staff leave. Instead, "evolve" your models and financial policies in the finance committee, and have them "live" in your business office. The head of school should actively support this process by making sure new board chairs and treasurers understand that they should use and evolve your proven models and policies, and that their improvements will be preserved as well, allowing them to make a positive impact in perpetuity.
The goal of Collaborative Forecasting should be to maximize your mission goals with a minimum of financial risk. To continually target this ideal requires forecasting before each budget decision or significant financial event. In other words, use Collaborative Forecasting to both:
It's Not Simply About Getting a New Financial Model or Spreadsheet
While getting a new, intuitive financial model is a great first step toward improving your financial planning and budget decisions, without training and a determination to improve and systematize your processes, there is no guarantee that your financial planning will improve. Commitment from the Head, Business Office, Board and Finance Committee are essential for implementing such changes, and for making them stick.
Implementing process changes can be challenging since school cultures often resist change. Outside expertise can help with showing the long-term benefits, and with getting buy-in for change. For example:
- Some business office managers may think they lack the skills or time to be responsible for annually updating financial models. If they can enter an equation into Excel, then they will be able to do this easily, quickly, and errorlessly with a model built with best-practices and an hour or two of fun, collaborative training. And they will quickly start loving and relying on the insights it gives them.
- Some highly-experienced new treasurers may prefer to do things their way, and create and use their own models. However, without a commitment to financial oversight continuity, there's no guarantee that the next round of volunteers won't do the same thing and ignore the new treasurers' valuable models and insights. Instead, if treasurers focus their talents on evolving the school's models and policies, then their positive impact can endure long after they step down.
Some of the services and customized tools I can provide include:
- Overall risk assessment of your financials and business model, including comparative analysis with local peers
- Financial model's customized for your internal financials' format, making annual updates easy and error-free
- Financial model's built with best-practices, along with policies for using and updating them to reduce errors
- One hour training sessions for Treasurers, CFOs, or committees/Boards, which leverage financial models to forecast scenarios interactively, giving non-experts an intuitive understanding of the drivers of your financials (Zoom is a free option to do this remotely)
- Endowment policies review, and risk assessment relative to your school's goals.
- Monthly performance-to-budget dashboards, presented intuitively to make outliers jump out, which stimulates questions and helps to catch problems early.
- Financial Aid analysis and budget forecasting
- Intuitive peer comparison dashboards and customized DASL reports.
Depending of the state of your internal financials, I can typically build your intuitive financial model in collaboration with your business office in a couple days, and I can train your entire board or finance committee in an hour long remote session. In other words, the costs to make Collaborative Forecasting part of your school's DNA in perpetuity don't need to be high, especially when compared to the costs of NOT doing this!
About Wade Vagle: I started my career as a chemical engineer, then transitioned to derivatives trading and risk management, with an emphasis on model development and predictive analytics. I originally got involved with schools in 2012 when I helped my sons' school avoid the fate of their first school (which went under). I find there to be some overlap between risk managing schools
and hedge funds, like how important visualizing risk/reward is for getting group buy-in to do the right thing.
In my spare time I run a challenge-based STEM program using Scratch, Python and LEGO to interactively explore physics, engineering and robotics. Our robotics projects have been featured on the Discovery Channel, Rockets Are Cool, and Makezine, and I share curriculum and project ideas with other teachers/mentors on sites like Tufts' Lego Engineering, RoboHub, and our own DIYwalkers.
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