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The Crisis Has Come. Is Your Board On Board?

Written by: David Wolowitz

4/10/2020

When I wrote the article “A Crisis Is Coming. Is Your Board On Board?” in 2018, I was not envisioning a pandemic that would cause an economic crisis that severely impacted virtually every independent school. (Published in NBOA Net Assets, July 2018). Nonetheless, most of my recommendations at that time apply to this crisis. The article is available here: https://www.mclane.com/thought-leadership/a-crisis-is-coming-is-your-board-on-board.

This national economic crisis has put tremendous stress on school administrators all over the country. As the COVID-19 pandemic spread, events moved so quickly that administrators had to focus on immediate, short-term issues. Campuses had to be closed with little advance notice. Schools had to transition immediately to remote learning. The ability of so many independent schools to act so quickly is a testament to the extraordinary talents and commitment of their school leaders, faculty, and staff.  But they cannot rest; these are just the first steps in dealing with this crisis.

Independent schools are deeply worried about the potential impact of the economic fallout of the COVID-19 pandemic. No one knows with certainty how long campuses will be closed or how severe the economic damage will be. Schools continue to be faced with significant daily issues. After setting up remote learning, administrators shifted their focus to short-term economic concerns, such as paying faculty and staff and other operating costs. It is therefore not surprising that so many independent schools considered applying for federal economic assistance through programs authorized by the CARES Act such as the Payroll Protection Program (“PPP”) or the Economic Injury Disaster Loan (“EIDL”).  In evaluating whether to accept federal economic assistance, some independent school administrators wrestled with concerns that receiving such financial assistance could be considered “federal financial assistance” and thus trigger significant compliance obligations. See, for example, the article by my colleague, Susan Schorr, FFA and the SBA: Implications for Independent Schools Accepting Federal Financial Assistance (4/8/20).

There is no end in sight for these types of complex decisions. For the immediate future, school administrators will continue to be challenged by many other short-term issues. These challenges will be in addition to the day-to-day demands of running their schools under these difficult circumstances. To continue their daily operations, schools have to focus on these immediate issues. But, for schools to survive the likely impact of this economic crisis, they also need to begin immediately to focus on long-term strategies that will enable them to have the financial stability to weather this storm.

Administrators cannot, and should not, do this alone. The Board has the ultimate responsibility to set the strategic direction of the school and to protect the school’s finances.  A severe crisis is the time for the Board to step up and provide direction and support to the school’s administration and reassurance to the school community.

The administration likely already has a formal or de-facto crisis response team in place addressing immediate and on-going challenges. The Board should form a crisis response team too. Its role will be to focus on strategies to help ensure the long-term survival of the school. It should be comprised of people who have the skills to address the current and future challenges facing the school. It could be an existing board committee, but more likely it will be a special committee. It should be small enough to be nimble so that it can act quickly when guidance and support is needed by the administration. It should establish working procedures, including which decisions will need full board approval and how to keep the full board informed of important developments.

The Board Chair and the special committee should leverage the skills and experience of standing committees to help the board focus on key strategic issues relating to the sudden, severe economic downturn. No one knows the extent to which this economic crisis will adversely impact enrollment and fund-raising. Now is the time for boards to work with administrators to run various worst-case scenarios to determine possible strategies to maintain operations through these challenging times. Most school administrations will not have the capacity in terms of time and energy to manage the short-term challenges facing their schools and to also undertake meaningful long-term strategic planning without the help of the school’s board. For schools to get through this economic crisis, their boards must not only collaborate with the administration, they must also demonstrate leadership and reassurance to the school’s community of faculty, staff, students, parents, and alumni.  

Sadly, this economic crisis is likely to be so severe that some independent schools will ultimately not survive.  Others may suffer significant long-term economic harm. Simply to keep schools operating in this crisis, school administrations must focus their attention on maintaining operations and short-term crisis management. But, long-term survival requires immediate, complex, strategic planning. School administrators should not have to do this alone. Developing long-term strategy is the role of the board. Boards have a fiduciary responsibility to protect the finances of the school. To move forward, schools need to have not only an effective administrative crisis response team focusing on operations, but also an effective board team focused on various strategies to address the likely impact of the economic downturn. Both teams must be able to work supportively while staying in their appropriate lanes. Schools that have boards that can work collaboratively with their administration during these challenging times will increase the likelihood that they will successfully weather this economic storm.

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