There are countless stories of companies and organizations that have taken advantage of the latest crisis to boost the profitability and efficiency of their business. An analysis by the consulting firm Bain, using data from the 2008 recession, found that the best-performing organizations not only survived, but that their profits increased steadily throughout that period and continued to grow thereafter. However, when the difficulties came, those that went into “survival mode” (few had contingency plans), making deep cuts and reacting defensively, stagnated.
This same situation could be extrapolated to the current times we are living in and to educational centers, which are organizations and companies that are very sensitive to these economic crises. Expense Reduction Analysts would like to provide some tips that can help mitigate the impact of the situation that many schools are facing.
Be attentive to the signs. Most economic crises can be predicted in advance. However, many ignore these warning signs for too long, causing them to panic and batten down the hatches (too late) while trying to get the company out of dangerous waters. Signals such as the new historic low in the birth rate in the first half of the year in Spain or peak inflation rates (10.3%) in August cannot be ignored.
Have a plan and stick to it. Strategic decision making in a recession must balance the short term with the desired post-recession position. Those who emerged successfully radically transformed their operations, but this requires a solid and agile plan.
Cash is becoming increasingly important. Credit availability is limited, cash control and planning, e.g. for terminations or non-renewals, need more attention than ever.
Do not have too much centralized control. Interestingly, those with the most decentralized operations performed well, as they were quicker to respond to changing conditions and the needs of students and families.
Avoid taking on too much debt. Those with high levels of indebtedness are vulnerable as interest rates rise and less cash comes in to meet increasing repayments.
Say no to cutbacks and burnout. Cutting costs too much is a huge risk, recessions are relatively short-lived and being in the best position to ride the waves of growth requires a delicate balance, which is particularly important in key sectors such as education and healthcare.
Do not rely on a single answer. By focusing solely on cost reduction, all decisions are approached from the standpoint of cost optimization, rather than learning how to operate more efficiently. Trying to do the same with less results in lower quality services, with the consequent loss of customers.
Do not expect the best, and be patient. The worst place to be is to think that you can keep doing what you have always done.
Beware of staff reductions. The loss of employees is inevitable, but those that emerged stronger resorted less to downsizing and focused more on operational improvements to optimize costs.
It is time to review the school’s course. Achieve operational efficiency by examining all aspects, including what needs to be divested. The trick is that costs are kept low when demand returns, allowing profits to grow faster than those of competitors.
Leaders need courage. For those who do not dare to make acquisitions and investments, their schools will struggle to regain momentum.
Stay ahead of competitors and expand where others are cutting back. Develop new business opportunities by investing in R&D and marketing, as well as taking advantage of low prices to purchase property, facilities and equipment. This helps both during and after the recession, as it responds more quickly than rivals to increases in demand.
Finally, and by way of conclusion, it is essential to emphasize that all of the above is of no use if each educational center is not capable of identifying and taking advantage of the opportunities that arise. To achieve this, observation, anticipation, and collaboration are vital to ensure the school’s sustainability—both now and in the future. Are you ready? What is your plan?
Imma Foix Guerrero
Senior Partner
