Published Online: October 5, 2012
Published in Print: October 10, 2012, as Change at Top May Signal Shift for Pearson, Industry

Amid Shifting Landscape, Pearson Changes Leadership

Transition comes as publisher moves from print to digital

In what may be a sign of the ongoing changes to the educational publishing industry, the global learning company Pearson announced this week that its chief executive officer, Marjorie Scardino, will step down at the end of the year—the third major personnel change at an educational publisher in the past 13 months.

John Fallon, 50, the chief executive of Pearson's international education division since 2008, will take over as CEO on Jan. 1.

Ms. Scardino, 65, has been CEO at Pearson, based in London and New York City, since 1997, during a time of enormous change in both the industry and the company. Early in her tenure, Ms. Scardino sold off some of Pearson's entertainment and financial properties, and made major acquisitions, most notably Simon & Schuster's education publishing properties and National Computer Systems Inc., the leading test-scoring company in K-12 at the time.

Those moves, among others, helped Pearson's early transition from a publisher only to a digital learning company. They also contributed to the publishing industry's consolidation, in which major corporations provide most of the instructional materials and assessments seen in schools and have expanded their reach to technology and school management.

At about $4.2 billion in annual revenue, North American education is Pearson's largest business, accounting for the largest chunk of its roughly $9.5 billion in overall revenue for 2011, but it's been stagnant over the past few years. Pearson owes that stagnation in K-12 education to a stall in the adoption of instructional materials ahead of the Common Core State Standards and the squeeze on school budgets because of the recession.

Global Moves

Ms. Scardino is one of the few women and few Americans leading a large international corporation. Of Ms. Scardino's tenure atop an education publishing business in flux, David Anderson, a lobbyist and consultant for education companies, including Pearson's competitors, said: "I don't see another precedent for it."

Marjorie Scardino, has led the company since 1997, at a time of transition in the education publishing industry.

In a video interview posted by Pearson along with the announcement, the company's board chairman, Glen Moreno, said Ms. Scardino had mentioned she might leave the company earlier this year. Former executives at the company said that speculation about her departure went further back. Mr. Fallon joined Pearson the same year as Ms. Scardino, but will bring a significantly different background to the CEO position.

Ms. Scardino's roots are in publishing; the Texarkana, Texas, native came to Pearson after serving as CEO of the Economist Group and as publisher of a newspaper in Georgia. Mr. Fallon, who is British, began at Pearson in 1997 as director of communications and eventually became head of its international education division, first focusing on publishing and then on assessment, technology, and Pearson's growing businesses in such emerging markets as China, India, and the Middle East.

Pearson earned $2.3 billion in international education revenue last year, 15 percent more than in 2010 and nearly double its international revenue in 2007. In July, Pearson acquired GlobalEnglish, a multinational company that provides digital English-language instruction for business people. Last year, it acquired the Global Education and Technology Group, a China-based company that provides English-language test preparation, and purchased a controlling stake in TutorVista, an education company that manages schools in India.

John Fallon if focused on assessment, technology, and Pearson's emerging markets, such as China.

Pearson and its subsidiaries now operate English-language-learning centers in China, manage schools in Brazil, run an online university in Mexico, and invest in private schools in Ghana. International education revenue this year is expected to exceed last year's mark.

"They are fully embracing the globalization of education," said Lee Wilson, the board president of the Association of Educational Publishers, in Washington, and a former regional vice president at Pearson from 2003 to 2006. "It's not that big a piece of the portfolio, but it's clear that's where the growth is coming from."

In an interview from England, Mr. Fallon said he would like to continue the vision set forth by Ms. Scardino and other top Pearson executives he's worked with over the years. But he said he would spend time in the coming months "getting to know the North American business much better" and meeting with customers and policymakers. Despite his background in international education and the globalizing education landscape, Mr. Fallon said his appointment did not mean Pearson would deprive its U.S. business of attention or resources.

"I wouldn't underestimate the continuing importance of local culture" in U.S. education, Mr. Fallon said. But still, there is "increasing recognition that the challenges faced are shared by others around the world."

Company Eyed Warily

One of Mr. Fallon's challenges is replicating the charisma of Ms. Scardino, the public face of the company and a major presence in the United States, said Frank Catalano, an education consultant who worked as a senior vice president of marketing for Pearson from 2004 to 2008. Mr. Fallon is less known within the U.S. education market, where there is a wariness of Pearson's growing influence in education, Mr. Catalano said.

Earlier this year, the company caught flak for investing in Startup Weekend EDU, a nonprofit organization that supports local education entrepreneurship in eight U.S. cities, and Pearson faces, more generally, concern about its reach into almost every corner of the education market.

"Pearson right now is getting a bad rap, whether deserved or undeserved, for coming in, like IBM and Microsoft once did [in technology], and owning the digital education and startup ecosystem," Mr. Catalano said. "Marjorie was a humanizing counterbalance to that."

New York state's attorney general is investigating whether the company's nonprofit arm, the Pearson Foundation, improperly paid for education officials' trips abroad to influence statewide contracts. And in an embarrassing episode, Pearson recently came under fire for publishing a nonsensical question about a pineapple on statewide assessments.

Some educators and academics believe that no for-profit corporation should have as much influence over public education as Pearson does.

Mr. Fallon acknowledged there is work to be done assuaging some of those fears.

"Yes we are a profit-making enterprise, but the profits are a byproduct of doing something that's important and useful to society," he said.

An Industry in Transition

In recent years under Ms. Scardino, Pearson purchased the Baltimore-based virtual education provider Connections Academy and a New York City-based company, Schoolnet, that creates personalized education software. It has also partnered with Apple Inc. to provide digital textbooks. The company offers learning-management systems (SuccessNet and Online Learning Exchange), online gaming (Poptropica), an online grade book (PowerSchool), online assessment (MyLabs), and data analysis and consulting.

The transition from print to digital publishing has triggered an upheaval within the leadership of the industry's giants.

Related Blog

This year, McGraw-Hill, based in New York City, named Lloyd Waterhouse, a technology and education executive, the CEO of its education division, which it will spin off into an independent company at the end of year amid speculation it could be sold.

Houghton Mifflin Harcourt, based in Boston, welcomed new CEO Linda Zecher, a former executive at Microsoft, in September 2011, and recently emerged from a Chapter 11 bankruptcy filing. And, perhaps sensing an opportunity, the international media conglomerate News Corp. invested upwards of $70 million in Amplify, its new education business led by Joel I. Klein, the former chancellor of the New York City schools.

Those moves not only are technology-focused, but also signal an attempt to use that technology to move internationally, said Mr. Anderson, the consultant in Texas.

"It's definitely an indication that the old traditional, national boundaries aren't nearly significant as they once were," he said.

Vol. 32, Issue 07, Page 10

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