In Search of School Efficiency
As we face a future redistribution of funding between schools, on top of cost pressures and increasing expectations of improving standards, it becomes more and more important to achieve better value from the resources allocated. We all know this, but how do you actually do it?
Our last blog ‘Value for Money Education’ suggested a series of specific questions you can ask yourself, to check if you are allocating your resources well. We are now going to develop this theme further, breaking down what value for money means, and analysing some practical tools the DfE provides to support you, in its School Financial Health and Efficiency programme.
Essentially, the government is forcing schools to make efficiencies by reducing funding. Even static funding represents a reduction in real terms when costs are increasing. The DfE believes the variation in expenditure per pupil between apparently similar schools is unacceptable. If funding levels are going to be evened out, they need to know that it is possible for high spending schools to achieve savings.
However, Ministers are concerned that outcomes might deteriorate as funding is withdrawn from some schools. They are right to be concerned; you can achieve efficiencies, but if you don’t pay attention to how effective your new approach is, there could be unexpected consequences.
Every school will start this journey from a different point: high or low funding per pupil, stable or fluctuating rolls, steady staffing or recruitment problems, surplus balances or a deficit, high or low attainment, different levels of progress, and varying achievements by disadvantaged groups.
You don’t yet know whether your school is likely to gain or lose from the National Funding Formula, but regardless of this, everyone is expected to use taxpayers’ money well. It is clear that DfE intends to keep an eye on school spending and put pressure on schools where they believe insufficient effort is being made to achieve savings. Civil servants recognise that school autonomy prevents them from being prescriptive about what action should be taken, so all they can do is encourage sector-led improvement.
DfE has made a valiant attempt to provide some support, in their School Financial Health and Efficiency collection of information, guidance and tools. This can be found at https://www.gov.uk/government/collections/schools-financial-health-and-efficiency. There are guidance documents, videos, case studies and links to specific tools which schools can use to help identify how efficient they are and seek ways of improving.
Before we take a look at some of the tools, let’s step back and think about whether the DfE interpretation of efficiency is valid. While this is the prime focus of the DfE’s approach, efficiency is only one of the so-called ‘Three Es’ of best value, now more usually referred to as value for money (VFM). The other two are economy and effectiveness.
What is value for money and how does efficiency fit into it?
Overall, value for money is usually defined as ensuring the best possible outcomes are achieved for a given amount of money spent. A common approach to VFM is pictured below.
Economy is purely about the amount of money spent in order to create inputs, for example: the budget set aside to achieve a number of teaching staff in a school, what it costs to run your buildings, or the cost of educational resources. It is more concerned with how cheaply you can buy things, rather than what is achieved with them. The economy stage is all about the amount of money that goes towards your staffing plan, procurement strategy and individual contracts for resources or services including cleaning, catering and so on.
Efficiency is about how much output you get by using the inputs – what you do (the activities in your school) and who you reach (the different groups of pupils). Outputs are those results which are achieved immediately after implementing an activity. It is about how many pupils you teach with a given number of staff, how many children get to go on educational visits, and how many pupils are entered for examinations from the exam fees budget. As well as quantitative measures, there can be qualitative aspects – the quality of teaching, an experienced specialist teacher for a specific area of the curriculum, or how long books and pens last.
Outputs are not the benefits or changes you achieve for your pupils; they are the interventions you make to bring about those achievements. You can be efficient without being effective. Outputs are not the same as outcomes. The efficiency stage is all about achieving your curriculum plan to deliver education, and how you structure your school’s operations to maximise your pupils’ entitlement to learning.
Effectiveness is where outcomes become important. Outcomes represent the difference that the outputs have made, e.g. whether children succeed in their tests and examinations, whether children with EAL learn to speak English fluently so they can communicate effectively with their peers and with adults in order to learn, and whether pupils grow into confident adults, able to manage their own behaviour and take advantage of all the opportunities life presents. The effectiveness stage is about your school improvement plan, and about what the pupils actually achieve with the teaching and guidance they have been given.
Every school knows that outcomes are so much more than a set of exam results demonstrating knowledge – they are about attitudes, skills, aspirations, motivations, and behaviours. Over a longer period, they are about building capability in decision making, social action, being a good citizen, and economic independence as an adult. All of these are integral components of daily teaching and pastoral guidance, but many of them don’t come to fruition until some time after the output (e.g. the teaching and pastoral guidance) is received. Of course, it’s possible to see both positive and negative outcomes.
How does this relate to DfE’s advice?
As we’ve said before, to achieve value for money across the whole system, the budget needs to be linked to the plans at each stage of the above model – to the staffing plan, curriculum plan, and school improvement plan (which should of course be costed). We explain more about this in some of our other blog posts and in our eBook ‘A Helping Hand to Secure a Sustainable Budget’. Overall success relies on a blend of economy, efficiency and effectiveness.
In its guidance for the efficiency metric (which we will look at shortly), DfE says ‘Efficiency is generally defined as the rate at which organisations turn inputs (financial and other resources) into outputs or outcomes. An organisation can become more efficient by producing more outputs with the same level of input; producing the same output with fewer inputs; or by a combination of both.’ There is a slight slip here in equating outputs with outcomes.
The problem really starts when DfE goes on to say ‘The Department has defined school efficiency as the progress made by pupils in a school (measured by value added attainment) relative to the level of income the school receives per pupil.’ In our view, value added is not an output; it’s one of a number of outcomes that pupils should achieve from their education. Efficiency does not guarantee effectiveness so it can’t ensure good outcomes – in fact it could put them at risk. One of our favourite observations is that you can do the wrong things incredibly well!
By conflating outputs and outcomes, we risk missing an important stage: assessing whether all children are receiving the attention and resources they need to give them the best possible chance of success.
Here is where the crucial issue of the attainment gap for various groups and the search for equality of opportunity can be addressed. As an example, money allocated to your Pupil Premium budget (cost) delivers staff and resources (input) to provide extra support and activities to targeted groups – e.g. extra-curricular sessions or additional 1:1 time (outputs). The pupils who benefit from the activities will hopefully achieve an improvement in attainment (outcomes). But these pupils should be considered in every aspect of your spending, not just Pupil Premium.
If you were looking at efficiency in its purest sense, you would consider whether your staffing and management structure, including TLRs and other allowances, are best serving the needs of all your pupils. Do you have the right balance of academic support and pastoral care? Are the resources purchased – whether staff, books or equipment – capable of being used by all pupils to improve their understanding and learning, or are some pupils not getting the support they need?
Once you understand whether you are achieving fair and appropriate activities/outputs from the input of resources (in the widest sense), you can move on to consider effectiveness. Are your members of staff working at their optimal level – not in terms of the number of hours, but in terms of the impact their time and techniques are having on outcomes for pupils? This is where you are more likely to focus on the qualitative aspects of the outputs as you try to convert them to positive outcomes. Never has ‘work smarter’ been a more appropriate aim – it is crucial to staff retention, workload and well-being.
If you need to improve your efficiency, you will be trying to identify areas for savings that have the least adverse impact on outcomes, otherwise you could damage your effectiveness. This is the crucial bit of planning, linking efficiency and effectiveness (inputs, outputs and outcomes) on the basis of an understanding of what works. Our last blog ‘Value for Money Education’ gave some practical tips through a series of questions you can ask yourself. But the DfE has also provided tools and resources to help with the efficiency element of VFM.
So let’s look at a few of the DfE’s programme elements and see how they can be used and improved upon.
DfE’s School Financial Health and Efficiency programme
There are some helpful aspects to the DfE advice and guidance package, but some elements are overly simplistic. On occasions education is presented as if it were a commercial product, where replicating practice from elsewhere will guarantee automatic success.
The DfE has examined patterns of spending in schools which faced the largest budget reductions between 2010 and 2014. They found that these schools tended to reduce spending on teaching and supply staff, which could have an adverse impact on standards. There were fewer cuts in educational support staff and non-staff expenditure. Clearly DfE wants to see a shift towards savings in these latter two areas, but haven’t considered their contribution towards standards.
If you look at the distribution of spending in schools, it is not hard to understand why this pattern of reductions might have happened: the scope for savings relates to the size of the budgets. In the 2013/14 financial year, schools spent 77% of their gross expenditure on staffing:
- 50% on teaching staff, including directly employed supply (1%) and agency supply (2%)
- 16% on education support staff
- 11% on other staff such as admin, premises and catering staff.
A further 6% was incurred on building running costs. Of the remaining 17%, only 8% relates to education resources and ICT (including bought-in professional curriculum services). It seems unlikely that schools will achieve the scale of savings that will be required by only focusing on cutting smaller areas of their budgets.
Let’s look now at some aspects of the DfE’s School Financial Health and Efficiency programme.
The use of case studies is helpful in providing examples of where schools have tackled a problem and seen positive results. DfE’s examples include:
- strategic financial planning
- staffing and timetabling
- procurement and back office efficiency savings
- skills and tools for managing finances effectively
- improving financial efficiency with curriculum planning.
They can be found at https://www.gov.uk/government/collections/schools-financial-efficiency-case-studies.
But even where two schools have an identical set of characteristics, it is unlikely that they work in exactly the same way. The simple suggestion of taking a solution and dropping it into another school is not guaranteed to work, though it may do if the problem is identical and the solution fits the ethos of the school and the characteristics of its pupils.
Careful consideration of the problem and the solution is therefore needed before tailoring the suggestions to suit your situation. Sector-led support also needs capacity and trust. School autonomy, scrutiny over performance and the money attached to pupils all mean that the reality of competition between schools can sometimes make collaboration more difficult than it should be.
Efficiency metric tool
The efficiency metric is a classic example of over-simplification, a blunt tool for making judgements about efficiency. As we’ve said earlier, it interprets value added as an output rather than an outcome. But there are also some practical issues.
The metric consists of two graphs for every school in the country, enabling you to compare performance with a group of 50 similar schools. The first graph relates to a progress score and the second is for the level of per pupil funding. To have above average relative efficiency, you need to be further ahead in the value added distribution than in the funding distribution. Each school in the group is allocated to a decile: 1 is the most efficient and 10 the least efficient.
You can take a look at the metric at https://www.gov.uk/government/publications/schools-financial-efficiency-metric-tool.
The efficiency neighbours are selected solely on the basis of SEN and Ever 6 FSM eligibility. Organisational type is taken into account; if a school has a sixth form, the group of 50 similar schools will all have sixth forms. Yet there are many more aspects that affect spending and outcomes than just SEN and FSM eligibility:
- Size of school can be a key determinant of costs, especially for small and rural schools with much higher fixed costs as a proportion of their total income.
- EAL can be significant in some schools, but the mix of pupils will affect the need for support. Some EAL pupils are fluent in English, whereas others have very poor levels of the language, e.g. because it is not spoken at home or they are new arrivals.
- Pupil mobility can have a huge impact in some areas; there can be two schools with similar levels of deprivation, but one with a stable roll will have lower costs than one which has a constant flow of in-year admissions. Despite this, the National Funding Formula proposes the abolition of the pupil mobility factor.
A major flaw in the metric’s methodology is the sole use of per pupil funding to judge inputs. The metric assumes a school spends exactly what it is given.
It is perfectly possible for a school to be judged as highly efficient on the basis of low per pupil funding and good progress, while having a significant deficit. Such a school may have built its success on unaffordable staffing and class sizes. It will need to tackle the deficit through a recovery plan, which could involve staffing reductions. This poses a risk of standards declining.
In contrast, a school could be stockpiling balances with no clear plans to spend them, which is not a good use of resources either. Pupils will not be receiving their entitlement to the funding that is provided, and their progress could be even better if the funding was used wisely.
None of this is obvious from the metric and a good deal of searching may be needed to find out the information. I worked on a sample of fifty supposedly comparable schools for one secondary school with a sixth form, and the range of data was significant:
- % of pupils with SEN: between 9% and 20%
- % Ever 6 FSM: between 45% and 84%
- Rolls: between 507 and 1468
- EAL pupils: between 0.5% and 92.8%
- Balance b/f: between a deficit of £503k and a surplus of £3.5m
- Balance as a % of budget: between -8.8% (deficit) and +40% (surplus)
The funding data does not take into account any non-government funding such as donations from parents or self-generated income from commercial activities. This can make a significant difference to the school’s ability to spend, particularly in more affluent areas. The actual inputs might be much higher than they appear from the metric, which if taken into account might give the school a worse efficiency score.
Timeliness is a significant problem. The funding information in the current tool dated January 2016 relates to 2013/14 (financial year for LA schools/academic year for academies); progress data is for the academic year 2013/14 and pupil FTE data is from the January 2014 census.
The above shortcomings mean the metric is ineffective – it could provide insufficient contextual information for valid comparisons at best and give a false judgement at worst. In our view, you will be better served by using financial benchmarking data.
The DfE has provided a benchmarking report card for every school. This is an attempt to draw attention to the subject of financial benchmarking, because the online sites have not had particularly high use by schools.
The report card is a summary document which pulls out some specific items from the full suite of financial benchmarking data for your school and compares these with five similar schools based on deprivation and SEN indicators. Readers who are not in schools can download a sample report card at https://www.gov.uk/guidance/schools-financial-efficiency-financial-benchmarking.
As an exercise in drawing attention to the principles of financial benchmarking and encouraging interest in the approach, the benchmarking report card is helpful. However, you will probably want to undertake your own analysis from the full set of data. The best approach is to look at the overview and then drill down to explore specific indicators.
There are two separate online sites for the detailed financial benchmarking data: one for LA maintained schools at https://www.education.gov.uk/sfb/login.aspx and one for academies at https://www.education.gov.uk/afb/SchoolHomePage.aspx. These are no longer password protected, but to search for a school you need the LA number and school identifier; these can be found from the EduBase website at http://www.education.gov.uk/edubase/home.xhtml.
As with the metric, there is an issue of timeliness, although at present the financial benchmarking sites are more up to date, with data from 2014/15.
Financial benchmarking is a very useful tool, but it should be used with an open mind-set. It is all too easy to approach it in a defensive frame of mind, trying to justify high expenditure with reference to particular local difficulties, or claiming that other schools are not comparable with your own. If you investigate high areas of spending, and talk to other schools that are spending less and getting better outcomes, you might be able to identify areas for further exploration. These could bear fruit in terms of finding opportunities to improve efficiency.
As an example, we have known an instance of a school suddenly realising from their benchmarking data that their spend on water rates was unusually high. When this was investigated, they discovered an underground leak was the cause of their high consumption. They were literally seeing their money go down the drain!
It can be tricky choosing ranges for the comparison criteria to identify similar schools; if they are too narrow or if you select too many criteria, it will not produce enough schools. At least three are needed to access the tool, and more to get effective comparisons. There is a video demonstrating how to use the tool at https://www.gov.uk/guidance/schools-financial-efficiency-financial-benchmarking.
DfE encourages schools to make contact with others in their group to discuss specific areas where they are getting better outcomes for lower spending. Be aware that the timing of data might mean things have changed. Note that the ‘efficiency neighbours’ within the financial benchmarking websites are different to those used within the School Efficiency Metric tool.
But whether you choose to contact other schools or not, the real value in using the tool is in raising awareness among staff and governors about areas where you have high or low spending, identifying the reasons and taking advantage of opportunities to generate savings while maintaining or improving standards and outcomes for pupils.
Using the available support
In this blog, we have highlighted some but not all of the tools and guidance available on the DfE’s School Financial Health and Efficiency website. There are others, such as procurement guidance, support for completing the Schools Financial Value Standard (SFVS), and a video by Sam Ellis (formerly ASCL funding specialist) on how to calculate an affordable teaching staff budget as part of your strategic financial planning. Sam contributed chapters on this subject to our eBook ‘A Helping Hand to Secure a Sustainable Budget’.
The DfE has also produced a supplier directory for schools to commission external financial health checks. The information includes a helpful document outlining a three-level structure of checks. These can be found at https://www.gov.uk/government/publications/schools-financial-health-checks-supplier-directory.
While we have identified some shortcomings in the tools provided, the overall package of support and guidance does help to raise awareness of the importance of efficiency and value for money. We would encourage you to make use of the information, selecting and tailoring the most relevant tools and guidance to your local circumstances. This may give you a new perspective on how to handle cost pressures and potential funding reductions in a way that protects outcomes for your pupils.
If you would like us to look in more depth at any specific areas in future blogs, please leave a comment.