The Benefits of Mergers
As we head into an increasingly challenging time for the UK Prep School sector, this archive article from 2012 is a relevant and timely reminder of the benefits of prep school mergers.
Parents love small prep schools. Parents sending their child to an independent school for the first time want their child's school to be a 'home-from-home'.
They want the school to be local so they are not spending hours each day on the school run, and where the school provides a focus for wider community activities and life. They don't want their son or daughter to be lost in a large school, instead they often choose a school where they know that their child is valued as an individual and known to all the staff. These are some of the reasons why small prep schools continue to compete successfully against larger preps, which perhaps have superior facilities.
The challenges facing small free-standing prep schools:
Times are increasingly tough for the small free-standing prep school. The challenges fall into four areas.
Firstly, the regulatory burden on the independent sector means that it is increasingly difficult for the senior management team of a small school to ensure that their school is fully compliant, without needing specialist support.
The second challenge is the 'Micawber Principle'. It is often the case with small preparatory schools that the surplus is represented by a relatively small number of pupils; a small swing of as few as five to ten pupils could wipe out the whole surplus and put a school into deficit.
A related, third problem, is that small prep schools do not have the purchasing power to enjoy the benefits of economies of scale enjoyed by their larger cousins.
Finally, there is the 'poverty trap'. It is unlikely that a small prep school which is generating a surplus of, say, £100k-£150k per annum is going to manage to complete a significant capital project. Banks are reticent to lend significant sums of money to small schools because the gearing required would be too great. Small schools are therefore caught - they cannot invest in the significant capital spend that will enable them to increase the numbers to move to the next level and to service the loans. Inevitably, therefore, they fall further and further behind their rivals, until they eventually become uncompetitive and fail.
But it is not all doom and gloom!
It is very important that small prep schools survive as they give parents a distinct choice. Parental choice is one of the key drivers for ever higher standards in our sector. One of the reasons that our schools are amongst the best in the world is because they operate in a competitive environment - there are no Government bailouts or subsidies for our sector - we either provide what parents want, or we go to the wall. One way in which small prep schools can respond to the regulatory and financial pressures of this recession is to collaborate with other schools. There is a spectrum of ways in which a small, free-standing prep school might work with others ranging from sharing resources with a local school to a full merger.
It is easy to see the advantages of collaboration and merger simply in business terms - sometimes they are an important lifeline - but there is so much more to be gained for all concerned. Collaboration and merger give real scope to raise the bar, to give greater support to teachers and to improve the range of educational opportunities available for pupils. We are fortunate to be able to draw on our experience as two Heads who have been able to work together to achieve a mutually beneficial solution. Ours is not a model that will suit all schools but, in a changing world, shows what can be achieved.
A case study; Heatherton House School’s merger with the Berkhamsted Schools Group
Heatherton is a single-form entry prep school of 150 girls from age 3 to 11. Girls go on either to the Buckinghamshire grammar schools or principally to one of six senior independent schools in the area. Heatherton had a turnover of £1.4m and was generating a modest operating surplus. Academic success was strong, as was its local reputation, but all of the challenges facing a free-standing prep school outlined above applied. The Governors realised that their financial position was increasingly precarious and that there was little scope to develop facilities and educational opportunities for the girls in a timely way to meet the increasing aspirations of parents.
A year ago, Heatherton joined the Berkhamsted Schools Group. Berkhamsted is a 'diamond school' with 430 pupils in its co-ed prep, feeding separate 11-16 boys' and girls' schools, coming back together for a co-educational Sixth Form. Berkhamsted School has considerable financial strength and generates annual surpluses in excess of £1.5m.
At first sight, it seemed an odd collaboration. Heatherton is six miles from Berkhamsted and traditionally sent on average only one or two girls a year to the school. There were closer alternatives, but the Heatherton Governors rejected the idea of a merger with the local boys' prep school, because they feared it would result in a restructure that would consolidate the sites and see the end to single-sex girls' education, to which they were committed.
Whilst other big-name schools have committed resources to opening franchise schools overseas, Berkhamsted School decided instead to evolve into the Berkhamsted Schools Group and to look to bring small local prep schools into the Group as satellites. A satellite prep retains its own distinctive ethos, market niche and branding and continues to be run by the existing senior management team. however, its governance and some of its support functions are run centrally, thus benefitting from economies of scale and centralised policies and procedures, which ease the financial and regulatory burden.
Winning Hearts and Minds:
When a small. free-standing prep school merges with a much larger school or Group. the greatest challenge is winning over 'hearts and minds’.
The first challenge is the Governors. The Governors of a small free-standing prep school (or indeed the owners in the case ot a proprietorial school) are in all likelihood all too aware of their predicament and often feel the weight of history. They are bound by the tradition that they received, and have a duty, within what is possible, to ensure that the school is passed on to them successors in good shape. Inevitably some will see merger as a failure on their part; others will take the pragmatic view that it is the only way to see the school move forward. The danger here is that all too often they can hesitate and not seize the moment before them. The governors of the Group or larger school have a different agenda. They will need to be satisfied that the expansion of the Group will not impact on the 'core' operation. Their concerns are likely to be in terms of whether or not the 'satellite school' will be a short or long-term financial burden, and if it is going to prove too much of a distraction for key members of the senior management and support teams. The most fundamental question for the governors of the larger school is: do the long-term benefits outweigh the short-term effort?
The next group to be considered are the staff. The Head-teacher, the Bursar and the senior team will be most affected by the changes and potentially the most anxious. That said all staff will be concerned about their jobs and career development and all will need reassurance.
'It is easy to see the advantages of collaboration and merger simply in business terms ... but there is so much more to be gained …
Finally, but in many ways the most important group to consider, are the parents. Parents view schools through the filter of their child. A parent's first reaction to the news of a merger is to ask, 'How is this going to affect my child?' and then, How is it going to affect me?' Parents quite understands ably want incredibly detailed information. In our experience, this ranges from - 'Will the school uniform or sports kit change?' to ‘Will the fees go up?’. It is vital that the schools know and communicate the answers to all of these questions at the earliest possible stage to avoid misunderstandings.
The most problematic mergers are ones that involve restructure, for this means change. Even when there is no change, securing the support of parents is vital.
Key in all discussions is developing trust and good communication. The role of the Head of the prep school is fundamental as they were entrusted to run the school by the Governors, and he or she is the leader of the staff and the race of the school who is trusted by parents and staff alike.
Time, energy and a passion to develop an educational structure for the long-term benefit of generations of children to come empowered all concerned, in the case of Heatherton. However, the need for timely, open communication has proved to be the key to success as our new partnership evolved, together with a great deal of goodwill by everyone involved.
As well as the clear business advantages of our merger, there are also a significant number of areas where it has been possible to raise standards and widen the opportunities both for teachers and, most importantly, for pupils. Key to this lay in the willing ness of the Heatherton and Berkhamsted Prep Headteachers and staff to work closely together. Old rivalries were discarded and the two schools worked together for the good of the pupils in both schools. The result is that in the first year of Heatherton being part of the Group, there were a number of joint curriculum days, music and drama workshops, joint talks and school trips, including a number of Heatherton girls joining the Berkhamsted Prep Ski Trip, an opportunity that would never had been possible as a small free-standing prep school.
Heatherton now have access to central Group facilities, such as using the 550-seat theatre, the Sports Hall and the Swimming Pool. For staff, it has also meant that the Heatherton teachers have become part of an established network who can meet regularly to share ideas and do common INSET.
They are no longer working in isolation. but have a network of colleagues with whom to bounce ideas around.
One year on, and our small school has gained enormously from the 'big school' resources. Yet the need for regular updates to parents and staff alike remains vital and no one should underestimate the importance of ensuring such a two-way information stream. The recession continues to bite and man small schools anxiously consider their shrinking margins.
With careful planning however, and a governing board who are willing to explore wider options and in turn have the wisdom to drive through such an initiative, then the opportunities exist for schools to reorganise and redefine how they wish to operate in the years to come.
This article was written by Mark Steed, then Principal of the Berkhamsted Schools Group, and Peter Rushforth, then Head of Heatherton House School. It was originally published in the Autumn edition of 2012 Attain magazine (Issue 12 Volume 7)