Target efficient support services

Bursarnet.com’s founder Tim Groves pinpoints the significant KPIs across the school campus to show how major savings could be made

The cost of the teaching payroll is obviously the largest expense item in any school. However, the cost of support services will typically vary between 30% (day) to 50% (full boarding) of total costs. Thus, as schools face a considerably more hostile operating environment, it makes sense to ensure the support expenditure is delivering value-for-money. It is also the case that it’s difficult to have a conversation about the efficiency of teaching costs with the head and academic staff without having first nailed the issue of the support spend, and being able to prove it.

Since 2018, I’ve been carrying out a granular benchmarking exercise across the independent school sector, focusing on the material support cost lines, and communicating the results by means of 30 different key performance indicators. Having now assessed more than 130 schools, the pool of data is extensive and sufficient in volume to be able to form conclusions on the differences between the best and worst performers across the major KPIs. The purpose of this article is to focus on several of those KPIs which have a material impact on the bottom line.

“Compound interest is the eighth wonder of the world. He who understands it, earns it... he who doesn't... pays it.” As will be shown below, the cost efficiency across schools varies massively (sometimes by several hundred percent) and you might wonder how that can be. Given that most independent schools have been in existence for decades, and often centuries, it follows that their operating model (and its consequent costs) is one which has evolved cumulatively over a long period of time. As per Figure 1, a school which allows a 1% increase in costs every year for 30 years sees its cost base increase by just 34%, whereas a school which allows a 5% increase every year sees its cost base increase by 330%, such is the compounding impact of different cost environments.

I will now focus on some of the key KPIs which serve to demonstrate the differing performances between those schools already operating leanly, and those where opportunities exist to operate more efficiently.

Space per pupil: This KPI is simply the total square metres of the school-built estate divided by the number of pupils on site. Given how few schools actually know their m2 statistic, this space metric does not appear to be one in common use, and yet the efficiency of how schools use their campus has an obvious impact on the costs per pupil (and thus the fees per pupil required to finance this). Taking the example of day-only schools, most schools fall between 15 and 20m2 per pupil. So the most efficient schools are using two-thirds of the space of the least efficient, and thus those costs which are impacted by the amount of campus space (energy, cleaning, maintenance, insurance, business rates) will weigh more heavily on schools with more generous space ‘allocations’ per pupil.

First Things First

Before diving into the detailed KPIs, it would be useful to make an observation on the compounding effect of different cost increases over time. It was Albert Einstein who commented that:

Recommendation: What’s your space metric? Include this space consideration in future campus developments (are you improving it, maintaining it, or is it deteriorating?).

Energy Cost Per Pupil

The total cost of energy per pupil is obviously a function of the price you pay for your energy (pence/kWh), and the amount (volume of kWhs) you use.

Energy prices – The price paid is largely market-driven so you might think “surely we all pay more or less the same?”. And yet if we look at the energy price variability in the seven years pre-June 2021 (when energy markets started to increase dramatically as demand picked up post-Covid), Figure 2 demonstrates just how much the underlying wholesale energy pricing can vary, both within any given year, but also across the years (it doesn’t always go up).

Being savvy about when you renew, and how long you commit for, can pay big dividends. In my benchmarked schools, the best performers are undoubtedly those that approach energy buying strategically, and this means that energy decisions are personally dealt with by the bursar/chief operating officer (not delegated to junior finance or estates staff), and such decisions are carefully planned for long in advance (not just when the old contract expires). A key strategic consideration in energy buying is also the choice of advisor. Unfortunately, the independent school sector is dominated by energy brokers that are paid recurring commissions by your energy suppliers on every kWh you consume, but unseen and normally unauthorised by you. I believe this is a potential conflict of interest – the higher the price, the longer the contract, the more the broker earns. This may explain why I have found schools taking out inexplicably long contracts at moments of high market pricing.

Recommendation: Do you know how your energy advisor is being paid? If you’re not paying them, your supplier is! Find a strategic advisor prepared to work on a direct charging model, with zero commissions. Work with them on a longterm energy procurement plan. Diarise when your energy contracts renew, and start renewal planning 12 months ahead.

Energy volumes (usage) – The benchmarking process allows me to collect the energy volumes used by participating schools and thereby calculate the carbon footprint per pupil. The results for the pure ‘all-years’ day schools (no boarders) is shown in Figure 3. It can be seen that the average of the first quartile performers (0.13 tons per pupil per annum) is so much more efficient than those in the fourth quartile (0.30) – that is, the least efficient are using 2.3 times more energy than their most efficient peers. Ordinarily this will translate into a correspondingly higher energy bill.

Clearly, those in the first quartile will probably be those with less space per pupil to both heat and light, but it’s not just down to space. Neither can this performance be explained by old versus modern campuses – all these large day schools have a mixture of old historic buildings, with more recent additions. The data simply shows that those schools which have sensibly addressed their energy usage over the long term have progressively become more energy-efficient.