01/23/2013 02:56 pm ET Updated Mar 25, 2013

Minding the Gap With Richard Soghoian

Chris Atamian's Book of the Month: Richard Soghoian's Mind the Gap!

I just finished a short, fascinating book written by Richard Soghoian called Mind the Gap which carries the rather lengthy but illustrative subtitle: "An Insider's Irreverent Look at Private School Finances and Management-with a Lesson for Government and Industry, Too!" I don't usually read books on management because they tend to be repetitive and either state the obvious or go into schemes so unrelated to the real world that you wonder why they aren't listed as fiction. Soghoian, however, is the highly respected Headmaster at Columbia Grammar and Prep School (CGPS), an institution which he more or less single-handedly pulled out of near receivership and returned to its former glory. For those not familiar with the New York prep school scene, CGPS was founded in 1764 by King's College (today's Columbia University) and for some two hundred years operated as one of the city's most storied educational institutions. Over the centuries it graduated thousands of businesspeople, lawyers, academics, artists and writers, including a Nobel laureate (Murray Gell-Mann), Time-Warner CEO Steve Ross, lyricist Lorenz Hart, writer Herman Melville and more recently actresses such as Ally Sheedy and Sarah Michelle Gellar of Buffy the Vampire Slayer fame.

By the 1980s however, when Soghoian took over CGPS after running a small college upstate, the school had -- like much of the neighborhood surrounding it -- devolved into a third-rate type of place with poor facilities and a questionable student body. When I was in grammar school elsewhere in the city, I remember CGPS as a very bohemian place with a strong faculty, but also one where you enrolled if you couldn't hack it at a more rigorous school. Graduates attended mostly small liberal arts colleges not because these were excellent schools -- which many of them were -- but because they couldn't get into Ivy League universities and other comparable institutions across the country. The walls of the school were a'tumbling, metaphorically and figuratively.

Thanks to a sharp eye for business, some lucrative real estate deals and a tried and true philosophy of management, Soghoian achieved remarkable success over a thirty year span: he increased enrollment from 479 to 1251; added eight modern or modernized new buildings to a physical plant now valued at over $200 Million and turned CPGS into a player once again. The school's SAT's scores now exceed 650 on each section and its graduates head off to even the most selective colleges in increasing numbers. Faculty has increased in number from 75 to 302 and CGPS boasts the highest starting salaries for incoming teachers of any independent school in New York City.

Soghoian seems to almost operate in black magic at times, but his formula for success is really quite simple: he avoids any and all forms of deficit spending and he keeps his administration (and attendant administrative costs) as lean as possible. He runs his school on tuition payments alone and any fund raising drives are used only in order to add new facilities such as gyms, swimming pools and auditoriums: he calls this type of management and thinking "future oriented." In an attitude decidedly at odds with most other independent school heads, Soghoian shuns Annual Funds, which he views as marginally ethical and barely legal, as (according to him) they basically exchange tax-free donations for goods and services -- which is officially against the IRS code.

This last argument may seem iffy to some, but his criticism of endowments on the other hand is in fact an unfortunate reality. As even Harvard's CFO will tell you, over time endowments are never large enough. This hit home with me, as I served for a few years on the board of an institute affiliated with a major university in New York City with several endowed funds. One of these endowed funds was made in the 1960s for the then-astronomical sum of $1 million -- when I was on the board of this institute in the early 2000s, it stood at approximately $1.8 million, having weathered the vicissitudes of economics and many a market downturn. In the 1960s at 4 percent (generous on my part) the endowment would have yielded $40,000, enough to cover a professor's salary at the time as well as a few added administrative expenses. For argument's sake today, using the same theoretical percentage return, the endowment with accrued interest would yield about $72,000, far short of the $120,000 or so needed by current standards in order to pay the same professor a competitive salary. This is true of almost all endowments. As time goes by, more funds must be added to it in order to keep pace, no matter how large it is: as Soghoain puts it, endowments are literally financial black holes. As for Annual Funds, he is quick to point out that schools are often less than forthcoming in their campaigns: multiply the famous "tuition-cost gap" they quote by the number of students in a given school and you will see that the annual fund almost never suffices to fill the gap in question (This "gap" represents the stated cost of actually educating a child with all the frills of private schooling minus the tuition money parents pay. At some schools, this gap can exceed $10,000 per student, a remarkable figure.)

To be fair to the many other diligent and more than competent Headmasters operating other prep schools (and public schools) in New York and beyond, some of the accusations that Soghoian levels at them seem a bit excessive, and although he certainly deserves much encomium for having saved one of Gotham's educational jewels, his share of boasting and accusatory barbs do begin to grate at times. I would assume, never having been a Head of School but having served on several boards, that there are many different ways and methodologies for running a school, just as there are different approaches to running a successful business. Other institutions such as Brearley, Collegiate, Horace Mann and a few dozen others in New York City may or may not run on Soghoian's perhaps justifiably reviled deficit spending, but they are certainly more than remarkably successful in their own right. In the end however, I would bet that anyone who takes the time to read Mind the Gap, whether they work in pubic or private schools, business or government (or just out of general interest) will probably walk away with at least a few valid and applicable pointers or reminders that will one day save them a pretty penny. And that is more than most management books can claim, on even the best of days.