Thriving with a Chronic Condition

**Jeffrey Shields, FASAE, CAE**
NBOA President and CEO

William Baumol was a renowned economist who in 1965 developed data to explain why costs in labor-intensive industries — such as education and health care — rise faster than costs in industries such as manufacturing and agriculture, where technology has greatly increased productivity. At independent schools, “Baumol’s cost disease” plays out primarily in rising compensation costs for faculty who teach a limited number of students or classes. Baumol died May 4 at the age of 95, but his legacy persists as a chronic condition, and potentially a permanent reality, that affects the business model of nearly every independent school.

Independent school leaders sometimes feel as if we are operating in unprecedented times, amid challenges more daunting than any faced by leaders before us. With regard to the competitive market of preK-12, this may be true. However, it continues to frustrate school leaders that our operational costs are immune to so many of the technological advances that have advanced productivity and kept costs low in other sectors. And it can be difficult to defend this reality year after year after year to our families. But we must harness our best thinking to limit the impact or symptoms of Baumol’s disease so that they do not become barriers to our ability to serve future generations of students.

Instead, we must continue to address — and eventually reconcile — legitimate concerns with regard to our business model. For instance:

How can we keep class sizes small and provide access to the most diverse population of students?
How can we maintain world-class facilities as differentiators in markets with numerous options?
Where can we eliminate expenses without eroding our educational mission?

As we pay tribute to William Baumol, I’d like to frame his passing as a reminder that the issues we are grappling with are systemic. As independent school leaders, we are caretakers of something special and important, but the challenges articulated by Baumol preceded us by decades and will likely outlive us all. It is our generation’s duty to innovate our way through them.