Bankrolling Educational Entrepreneurs

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One look at a line graph charting national trends in reading or mathematics proficiency since 1971 would show that American schools have made little progress over the past two decades, including the post-1983 "Nation at Risk" reform years. If those lines were an electrocardiogram, the doctor would try something aggressive.

But education's response has been to deny the evidence--"My school is different," "The tests measure the wrong things," "What can you expect given (choose one): (a) divorce; (b) TV; (c) my salary." While the public demands action, educators offer explanations. George Bush, Albert Shanker, and Chicago parents probably don't agree on much, but they do seem to agree that reform has not happened.

Business involvement in the schools, meanwhile, has gone in two directions, both welcome, but both short of system reform. In some companies, individuals have committed themselves--one-on-one--to working with specific groups of kids. Behind those lucky few, though, are another 10 to 20 million needy children. Rescuing survivors while the boat sinks is tough triage.

Other corporations are putting new sails on the same leaky hull, helping with staff development for a high school and all its feeder schools, for example, or rewriting a whole sector of the curriculum.

Public schools are already awash in projects, tiny tests in isolated places, parachuted onto schools in the belief that America's 2 million teachers are avid to replace their 1974 lesson plans with this season's pet rock. Reality is exactly the opposite. Schools use projects to vaccinate themselves against serious change. They accept a little bit in order to avoid the real thing.

Business partnerships today look depressingly similar to the foundation- and federally-supported projects of the 1960's. Schools eat projects for breakfast. If timid tinkering worked, the student-achievement line, as charted by the National Assessment of Educational Progress, would not be flat. There are reasons to try site-based management, voucher plans, and other proposed remedies, but these ideas do not strike to the heart of the problem: the motivations of school people.

In surveys, teachers tend to cite a love of children and the desire to perform a public service as reasons why they teach. We should be grateful for that, but we should also remember that altruism has not moved the system any more than pilot projects have. More committee meetings, flatter organization charts, and parent "choice" among look-alike schools insulated by union power against the tonic of failure have not and will not penetrate America's most thoroughly unionized workforce.

Teacher unions say their members are the source of improvement, and they may be right. But not without new incentives. The average teacher salary is now $31,278 and that changes only with seniority or accumulated graduate study--not with success in teaching (or its absence). Effective and ineffective teachers are all paid the same. Merit pay is a show-stopper for the National Education Association but there are other ways to reward hard work, risk, creativity, or, indeed, success in getting America's students to, say, world-class science performance by the year 2000. As one businessman, Reuben Mark of Colgate-Palmolive, phrases it: "Putting money on the line puts teeth into management's value statement."

Employee Stock Ownership Plans and an investment bank could be used to jump-start education's dead-center bureaucracy.

In Employee Stock Ownership Plans, workers become owners and have the additional motivation of reaping profit-benefits or loss-consequences. Could teachers and administrators "own" the public schools? Most analysts, and a lot of parents, claim they already do. Which is preferable? The ironic prospect that personal gain might better serve the public's interests or the comfortable reality of a failed institution that is at least public? Employee Stock Ownership Plans work best on a small scale and in desperate circumstances--conditions that describe a substantial fraction of public school buildings today.

In a modified version of the ESOP--an Educators' School Ownership Plan--how could teachers "own" the school and how might they be rewarded? First, it would not be necessary that they own the whole enterprise or that all their compensation be so determined. The important consideration would be that a real connection between performance and pay was established. Quarter-million-dollar grants for "improvement" projects are already commonplace. In RJR/Nabisco's "Next Century" program, grants twice that size are awarded, just for planning in a single school. A quarter of a million dollars (less than 10 percent of some elementary schools' annual budget for salaries and expenditures) could capitalize a modest incentive fund, with the yield paid out to participating teachers who: help more children achieve more goals; work to good effect with priority groups and topics; recruit more students into Calculus I; reduce their own absenteeism (and save substitute costs).

A dollar spent on productive teaching of the youngest and neediest students can return as much as $7, especially through reduced remedial-education costs. Some part of those savings could increase the incentive fund and the share value for educators'-school-ownership-plan teachers.

This is a gain-sharing plan and not far from what Mr. Shanker, president of the American Federation of Teachers, has proposed--a bonus of $15,000 to $30,000 payable to all teachers (and others) in a school that has had five years of sustained gains on "good assessment measures." Mr. Shanker would have the federal government establish a $500 million fund to "incentivize" school improvement. Under my suggested plan, school boards or business partnerships could redirect some of the school-improvement-project monies that now go so often to so little effect. The yield on a $1.5-million fund would pay $15,000 bonuses/dividends to a staff of 30 educators every several years.

For some, the idea of a school-based Employee Stock Ownership Plan might raise the specter of teachers' making money doing the wrong thing. The current system has no sanctions against poor performance. But the Educators' School Ownership Plan ought to do better. Gain-sharing plans begin with agreement on what a goal is, how it can be measured, and how individual or organizational contributions are to be recognized. The goal-setting would obviously allow adjustments for different circumstances. Targets should get set below the innocent enthusiasm that schools can "do it all," but above the conventional wisdom that now runs schools as benign warehouses adding little value to children from either the most or least privileged backgrounds.

Employee Stock Ownership Plans get labor to buy into their enterprise. Investment banks can do the same and add new capital. The theme of the NEA's current public-service advertising campaign is "Get Smart America: Invest in Education." But so far, public-school "investment" does not include:

  • Choices: put it here or there, your decision among alternatives;
  • Returns: a tangible pay-off, a dividend paid on schedule; or
  • Accountability: if the organization doesn't deliver, something happens, usually to management, sometimes to the whole enterprise.

In the private sector, people trade hard work and risk for bigger rewards. Who pushes the envelope of new knowledge harder? Biology teachers in Chelsea, Mass., or the biotechnology entrepreneurs on nearby Route 128? Educators have convinced their new business "partners" to stop being business when it comes to the public school. Schools continue to be risk-free (especially for teachers), one-size-fits-all, take-it-or-leave-it (if you can afford private tuition) enterprises.

An investment bank for education would pool venture capital for ideas that return private and public dividends. Both debt and equity would be available. People with better ideas than those now being used would have a new reason to find their way through the Bermuda Triangle of education research, development, and dissemination. The profit motive would augment, not replace altruism. Private money would lever what public funds have not--systemic innovation.

The availability of such a capital fund would attract two sorts of resources: school people with good ideas that can be refined and moved with market forces, and for-profit organizations that would move into the school market because of the lowered capital costs.

An example of this type of engagement might perhaps be found in the area of educational software. It is known, for example, that about 85 percent of at-risk students are visual learners. But schools do not act effectively on that knowledge because no one has developed breakthrough products that combine the power of MTV with the purpose of public schools. Software producers complain about the lack of hardware, and vice versa. Without a critical mass of "must have" software, schools do not buy equipment and are thus confirmed in their stolid indifference to anything but textbooks and "teacher talk" instruction.

The logjam could be broken, a lot of good could be done, and some money could be made by bankrolling educational entrepreneurs.

David T. Kearns, chairman of the board of Xerox, and the educational analyst Denis P. Doyle have proposed a federally financed and government-run "venture capital fund" advised by principals and teachers. But why government? Several years into both school reform and business partnerships, no American business has thought to add the expertise and entrepreneurial leverage that an investment bank, dedicated to education, would provide.

One way to think about the impact of such a new capability is to ask, what has improved public schooling more? The clouds of quarter-million-dollar grants made to nonprofit organizations for one-time, one-site demonstrations? Or, two guys named Jobs and Wozniak fooling around in a Cupertino, Calif., garage trying to bread-board a "home computer." The energy is there: to tap it, we must add entrepreneurial incentives.

Vol. 10, Issue 14, Pages 23, 32

Published in Print: December 5, 1990, as Bankrolling Educational Entrepreneurs
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