The BMO Back to School Education Conference was held on Thursday, September 15, and there was a ton of information. With three concurrent presentations, it wasn’t possible to follow everything, but here is a distillation of some of the points made by the CEOs running leading publishers, charter schools, and for-profit colleges.
General Observations from Farimah Schuerman
The conference expanded its program this year to include more general and informational panels. As usual, Higher Ed had the lead role, but not as much as in past years, and with a much sharper and defensive tone. The For-Profit Higher Ed sector has been under a lot of pressure, with some organizations seeing declining enrollments, and facing increased scrutiny from Congress, the Dept of Education, the press, and the states. In Postsecondary, the core technology segments (LMS, SIS, course tools) are pretty mature, and newcomers aspire to be absorbed.
Image by York College of PA via Flickr
There seemed to be a lot more Private Equity activity than Venture Capital, and there seemed to be a number of folks managing private wealth (possible Angel Investors) who were investigating but not yet investing. Of course, these may reflect more the people we know and work with, since we gleaned this information from our conversations.
There was more interest in K12 than in the past. The acquisitions from Pearson and News Corp seemed to have spurred some real interest, and possible transactions involving McGraw-Hill wove their way into conversations.
There is lots of room for innovative, specialized applications. Textbooks and instructional materials are in upheaval still, with rental, online, and freemium instructional materials vying for market share, and new online channels competing against the existing sales forces.
A few companies talked about their success this year, in that they maintained revenue levels. This leads one to believe that not slipping is cause for pride in this difficult market. Companies seem to be looking for new positioning and expanding their market niche in order to access other revenue opportunities and not give up ground.
Difficult economic conditions call for creativity (which is both true and a blatant self plug for Academic Business Advisors).
Ronald Klausner, CEO, Cambium Learning
Education is a $4.6 Billion industry. The current twin concerns are to reduce costs and increase effectiveness. With teachers accounting for half of all spending, districts and states are looking for tools to reduce the number of teachers and make the surviving teachers more effective. In addition, there is going to be a big shortage of teachers, with 1/3 of all new teachers leaving the profession in their first three years, and 1/3 of existing teachers expecting to retire in the next five years.
Special education accounts for ¼ of all spending, with 1/8 of the students; it’s the area where schools have the most latitude to spend. About 2/3 of all districts have either already deployed or are in the process of implementing RTI (Response to Intervention) programs.
Cambium Learning itself is a $200M company with 140 sales reps. Their strategy for new products is a combination of acquisitions and looking for academics who have had success with specific student populations, and then to productize and monetize those practices.
Kevin Modany, Chairman, ITT Educational Services
We need to better define the outcomes we want from education. Reducing dropouts or student default rates are not outcomes. Do we want schools to increase employment, increase salaries, get students started on good careers? Then we need to measure those outcomes and adjust our practices.
Folks with skills get the jobs, and we need to get the story out about how for-profit schools are giving kids skills to help them get meaningful employment.
Richard Barth, CEO, KIPP Foundation
Two lessons learned: 1) once parents see that their kids can learn more, they will demand more from both the charters and the public schools, 2) you can’t just come up with a good system and expect it to work, you need to work to continuously improve it based on student outcomes and feedback.
The margin for error in a for-profit is tiny; for-profit schools are held to a different standard from non-profit or public schools. One reason is that the reporting on education is not good, usually the education reporter is a starter position, and another is that you get more readership with a story bashing for-profit education than one showing good things happening. There is a strong recognition that charter schools provide a way to move the needle for all schools.
We need to have a national assessment. Absent a national test, where you are educated will determine what you know, and will perpetuate inequalities. We know that a Kipp child education in Louisiana learns what one in NYC learns. But when you look at state test scores, even though a public school student in Louisiana may pass that state test, he or she cannot hold a candle to one who passes the NY State test.
Michael Connelly, CEO, Mosaica Education
Not a single parent has ever raised the issue with him about whether his schools were for-profit or not. The question of for-profit or public seem more a concern for unions and politicians.
Andrew Fitzmaurice, CEO, Nord Anglia Education
Parents aren’t as concerned about whether you are for-profit or not, they are more concerned about getting the best possible outcome for their particular child.
Private pay, premium schools is a lot easier environment than government pay or charter, there are fewer regulations. They can do things like have classes in Warsaw working with classrooms in North America or the Middle East working together, which would be more difficult if they had to meet very specific standards.
There are still restrictions. In China, every student has to have 5 hours of Mandarin a week. In Abu Dhabi, every student needs to take 5 hours of Islamic studies a week. Some parents don’t seem to understand that you need to follow local laws.
Chris Whittle, CEO, Avenues
Over regulation can really impede education. For example, certain countries do not allow nationals to attend foreign owned schools, even though they have a shortage of schools.
It takes about three years to start a school from scratch.
Mac Gamse, CEO, Meritas
All schools have to use technology. Technology can personalize the education for our kids, and it can reduce the administrative tasks of teachers so they can spend more time and effort teaching. We have a unit on uses of water, where we have students in Manhatten, Montreal, and the deserts of Mexico providing completely different insights into water management.
Mark Dreyfus, President, ECPI University
With the new for-profit regulations, schools are starting to realize that they can no longer grow by increasing tuition. Tuition is going to have to follow the types of jobs you are training for, and there will be a reward for the schools who can deliver jobs effectively and efficiently.
For example, we will still provide some soft skills where they are needed to complete a degree, but we won’t be able to offer anything that is not needed.
Our management is focused on installing local controls, instead of thinking about improving instruction.
Tim Foster, Executive Chairman, Concorde Career Colleges
The new for-profit regulations is going to put a lot more cost discipline into the sector.
These particular regulations are not particularly onerous, but the fact that there is now a thermometer that has been installed means that the metrics can be changed by a strike of a pen. That’s a good amount of uncertainty and hinders our ability to plan.
Duncan Anderson, CEO, Education Affiliates
The regulations, because they are going to focus schools on costs and very specific measurable outcomes, are going to have the unintended consequence of driving less education. If something is not necessary for a degree or a job, it’s going to be eliminated.
A positive by-product is that we are getting a lot better at our processes. We audit every single placement, we record every conversation and review them daily. But it still keeps you up at night knowing that there are 400 people talking to students every day, and you don’t fully know that every one is in compliance.