Seeking a Competitive Advantage

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First grade teacher Jill Kams runs a group of four pupils through a math lesson at Abby Kelley Foster Regional Charter School.

"Are we all in learner position?" the 24-year-old asks the children, all clad in burgundy tops tucked into khaki bottoms and seated in a row of chairs facing her. Immediately, they stop fidgeting, straighten up, and clasp their hands in their laps on top of their workbooks. Meanwhile, their 26 classmates work with an aide in groups or independently at their desks.

About This Series
Part 1:
"Ka-Ching! Businesses Cashing in on Learning,"
Nov. 24, 1999.
An overview of the new "education industry"
Part 2:
"Entrepreneurs Hoping To Do Good, Make Money,"
Dec. 1, 1999.
The industry's players: from M.B.A.s and CEOs to teachers turned entrepreneurs
Part 3: Dec. 8, 1999.
Inside a public school that's run for profit
Part 4: Dec. 15, 1999.
The bottom line: Is this trend good for students?
Funding for this series is provided in part by the Ford Foundation, which helps underwrite coverage of the changing definition of public schooling.

"Touch space C. What's 50 plus one?" Ms. Kams asks her group, as small fingers locate the problem in their workbooks. "Get ready."

She snaps her fingers. In unison, the students shout: "51."

Scenes like this one are common not only at Abby Kelley, as the school is usually called, but also at charter schools in Phoenix; Rocky Mount, N.C.; Kalamazoo, Mich.; and the 12 other cities where Advantage Schools Inc. is selling its own highly structured brand of education.

Advantage is one of the largest of the dozen or so education management organizations, or EMOs, that run public schools—most of them charter schools—for profit. Together, they manage about 10 percent of the nation's nearly 1,700 charter schools.

Here in Worcester, an industrial city 40 miles from Boston, Advantage does almost everything for Abby Kelley that the 26,000-student district does for its regular public schools: It negotiated the renovation of the old mill that houses the K-6 charter school. It prepared the school's curriculum. It recruited, hired, and trained the teachers and administrators, got the buses running, and had the Salisbury steak and pear cups delivered for school lunches.

But unlike the district, the Boston-based company is trying to do all those things while making a tidy profit for its owners and investors. And that has some people nervous.

Of all the areas in which the private sector is expanding into education, none is more controversial than the for-profit management of public schools. Such arrangements raise a host of prickly questions: How does the profit motive square with the mission of educating children? How "public" can such schools be if they're run by private companies? And just what's different when a private company runs a public school?

A visit to Abby Kelley offers some insight into those questions and, perhaps, a new way of looking at school itself.

Creating a Culture

Many of the ways in which Abby Kelley differs from the district-run schools in Worcester stem from the fact that it's a charter school.

As at any charter school, whether run by a for-profit company or not, teachers and students are not assigned to Abby Kelley; they choose to be here. The school receives taxpayer dollars but is largely free of the regulations by which most other public schools are bound and operates independently of the local district and teachers' union; in exchange for that autonomy, it has to meet certain performance goals or risk being shut down.

And it is overseen by a nonprofit board of trustees composed of community members. In Abby Kelley's case, the trustees hired Advantage to help them apply to the state board of education for the school's charter, get the school up and running, and manage its day-to-day operations.

But while many similarities exist between for-profit and nonprofit charter schools, EMOs clearly set a distinct tone and culture for their campuses. That may be particularly true for Advantage, whose stated aim is nothing less than to transform urban public education.

"The revolution in urban education has begun," an Advantage teacher-recruitment brochure proclaims. "Advantage is more than a company, it's a movement. Join our team and help save the next generation of urban youth."

Too many city schools hold low expectations for poor and minority students and fail to provide a suitable learning environment, says Steven F. Wilson, Advantage's founder and chief executive officer. Advantage schools, by contrast, expect students to complete the "typical" high school curriculum by 10th grade, then spend their last two years in an International Baccalaureate program or an intensive career-based path.

"These parents crave a school setting that is orderly and safe and focused and on task," Mr. Wilson said. "And that's the brand we endeavor to provide them with."

The for-profit model was the best way for company founders to create that brand, he added, because it enabled Advantage to attract millions of dollars in private capital and grow the business quickly. And it supports the kind of culture he believes will produce the best possible school.

"Everyone here is focused on trying to attain quality and efficiency," Mr. Wilson said. "I don't see tension between those two ideas. If parents don't get quality from us, they'll leave.

"The for-profit culture sets the whole framework for this," he continued. "People work hard. It's a business, and people are constantly reflecting on whether what we're doing is efficient and necessary to achieve our results."

Corporate Central Office

So far, Advantage is for-profit only in theory. The 16-school chain has lost money each year since it opened its first two schools in 1997. But Mr. Wilson estimates it could break even with 10 more schools, a goal that could be realized as soon as next school year.

Because it's privately held, Advantage doesn't have to divulge any details about its business plan. But its basic strategy is no secret: Grow enough schools—and large enough schools—to create economies of scale, and eliminate administrative waste.

The company chooses to run schools in states that it considers to have the strongest charter school laws, those that grant the most autonomy and provide relatively high per-student aid. Then it looks for cities with strong parent demand and enough people to support a 500-student elementary school. (The highest grade of any existing Advantage school is 7th. The company's schools open as K-5 and add one grade each year through 12th.)

Worcester, the state's second-largest city, fit the bill. It already had one charter school—run by the for-profit Edison Schools Inc.—but the waiting list was long. What's more, average per-pupil aid at Abby Kelley is a healthy $7,000.

Typically, under the management contracts that Advantage signs with local charter boards, 78 percent of a school's revenue from per-pupil aid is managed at the school level. Advantage retains 15 percent of the revenue for services provided or overseen by the firm's central office, and charges a flat management fee of 7 percent. But the company also covers any school-level deficits, which sometimes means Advantage doesn't get paid at all, Mr. Wilson said.

The first place Advantage looks for savings is in administration.

"On a bad day, urban school systems operate more as an employment system and compliance machine than an educational system," Mr. Wilson maintained.

Advantage's "central office" is corporate headquarters in Boston, where 66 of the company's 900 employees work. A key part of Advantage's plan for profitability is keeping that central office lean, even as the company adds more schools.

School directors, whom Mr. Wilson calls the school's "CEOs," report through one of two regional directors to company headquarters. They are responsible for implementing the Advantage model and meeting their schools' academic and financial targets, such as keeping their schools full.

Doris Schroeder, Abby Kelley's director, says she answers both to Advantage and to the local board that holds the school's charter.

"My first priority is delivering services well,'' said the former private school principal and public school teacher. "I can't have empty seats. And I will if I let the education system suffer because of economics."

Focused Approach

At the school level, Advantage saves by replicating much the same academic model—what it calls a classical liberal arts education—in each of its schools.

While each school in the national chain has its own local flavor (Abby Kelley, for example, teaches Latin as a foreign language instead of Spanish, the choice at most Advantage schools), all offer an extended school day and year, running from 8 a.m. to 3:30 p.m. on a 200-day academic calendar.

Each Advantage school also starts foreign-language classes in the elementary grades, offers character education, teaches every pupil in grades 3-5 to play the recorder, and expects all students to wear uniforms and abide by the company's 27-page "Code of Civility."

Advantage schools don't have a lot of separate, and costly, programs. Students with disabilities and students who speak a language other than English, for example, are usually educated in the regular classroom with specialized help given as needed or required by law, Mr. Wilson said.

The curriculum is a combination of commercially available materials and proprietary materials the company has developed.

In the elementary grades, the Advantage model largely relies on Direct Instruction, an academic program created in the late 1960s that requires teachers to adhere to scripted, carefully sequenced lessons in reading, language, and mathematics. The company plans to offer more seminar-style courses and independent study in the middle and upper grades, but Mr. Wilson said there wouldn't be nearly as many electives as in a traditional comprehensive high school.

"We implement our program unabashedly," he said. "We're looking for people who want to purchase and see implemented in their community the Advantage design. You either like the design or you don't."

Advantage operates mostly in states where charter school employees are not represented by the local teachers' union or covered under a district contract, so they aren't subject to outside rules on seniority, tenure, or salaries. Instead of a fixed step-ladder pay scale, salaries are based on what the local market will bear. Teachers sign one-year contracts with performance-based raises. They also become part owners of the company through stock options. (The company's board is looking at taking the company public.)

"That's where these companies have an edge—they pick, evaluate, reward, and fire based on their own guidelines," said Peter W. Cookson Jr., the director of the Center for Educational Outreach and Innovation at Teachers College, Columbia University. That enables companies to tap a labor force that is not only energetic, enthusiastic, and adaptable, but less expensive, he said.

At Abby Kelley last school year, 13 of the 24 teachers were novices, and seven had one to two years' experience. Worcester district officials say their average teacher has 14 years' experience. Abby Kelley's salaries are higher than the district's for novice teachers. But while the district's union pay scale goes to $53,700, the highest teacher salary at the charter school to date is $48,000, Ms. Schroeder says.

Quality Control

The company's lean approach is on clear view at Abby Kelley. Tucked into an industrial swath on the edge of town, the brick mill-turned-school looks and feels very much like what you'd find in a traditional, orderly, well-maintained public school. It's what's not there that's different.

There is no costly cafeteria to staff and take up space that otherwise could be used for more students and more classrooms. The school's 636 students eat at their desks with their teachers. Prepared meals, from the same food-service provider Advantage uses for nearly all its schools, are delivered weekly to a small kitchen for storage and reheating.

Instead of a separate gym and auditorium, there's a multipurpose room. Advantage provided seed money for a basic playground, which parents supplemented with the proceeds of fund-raising activities. The school also uses a nearby city park for field space.

The school has a full-time nurse, but no guidance counselor or school psychologist; it contracts for the latter services on an as-needed basis.

"Our academic operations and design are efficient. We can narrow our goals and tighten the academic focus," Mr. Wilson said.

Added Advantage's chief education officer, Theodor Rebarber: "This doesn't work if it's only smart on the education side or if it's only smart on the business side. It must be both."

Direct Instruction serves that purpose by producing results that are easily quantifiable and trackable, Mr. Rebarber said. Students, who are placed in groups based on their ability, must demonstrate mastery of skills and concepts on short end-of-lesson tests to move on to the next lesson. That allows teachers to track the daily progress of individual pupils, and lets Advantage chart weekly student gains against expected benchmarks.

"That's what parents want—results," Mr. Rebarber said. "And we're huge believers in quality control.''

A key person in the company's quality-control effort is curriculum-implementation specialist Jane-Rose Gregoire. Essentially a coach, Ms. Gregoire helps teachers in Advantage's two Massachusetts schools hone their skills and accurately implement the school model. She and Abby Kelley's full-time professional-development coordinator wade through weekly academic-progress reports (copies of which go to Boston) to see which teachers are moving too slowly, which students need extra help, and which lessons are presenting the most problems.

Advantage teachers know they will have observers in their rooms on a steady basis, Ms. Gregoire said. And if that rubs them the wrong way, she said, they usually don't last long.

"It's not Big Brother. It's supportive supervision," Ms. Gregoire said. "They know you can't just shut your door and do your own thing here without someone finding out pretty fast."

'A School, Not a Business'

In the classroom, there are small but explicit reminders of Advantage's presence. Shades of plum, yellow, and turquoise—the same hues in the Advantage logo—cover some walls. The company's name shows up on materials such as the songbook used in music class and the Advantage computer program that teachers use to send attendance and other data to the corporate office.

But generally, teachers at Abby Kelley say, they don't think about the fact that their school is run by a private, for-profit company. Most say they've never been to the Boston corporate office. Advantage signs their paychecks, but they view their bosses as Ms. Schroeder and other school-level leaders.

They also say they don't see the company cutting corners that affect education and what they do in their classrooms every day.

"To me, the school is a school, not a business," said 2nd grade teacher Joy Collins, 26, a Worcester native who has worked at Abby Kelley since it opened. "My connections are local and to this school, not so much Advantage. I recognize that I'm part of a company, part of Advantage. And I know I'm accountable to them, but I feel closest and most accountable to this school."

Where teachers say they do feel the company's impact is in the level of professionalism, curricular focus, and consistency.

"Here, I get to do what I feel really works," said Donna Finn, 49, a 6th grade teacher who spent six years in the Worcester district.

"If someone in the district wasn't pulling their weight, they really got away with it," she said. "Here, we know it will come to someone's attention and be remedied."

The company's stock options are a nice incentive, said Lynn Heil, a 5th grade teacher who joined Abby Kelley this fall after working as a public school substitute teacher for two years. But she took the job for a slew of other reasons, she said.

"The culture does feel more corporate here," said Ms. Heil, 31. "And I like it that way."

Customer Service

Some Abby Kelley parents say the fact that a private company runs the charter school helped clinch their decision to enroll their children in the first place. Others say they didn't think much about it. And others, like Elisabeth Sanders, initially were a bit leery of the notion of a for-profit company running a public school.

"There wasn't much public information out there on Advantage other than what we were given and told," said Ms. Sanders, 34, a mother of two Abby Kelley students. "I know profit is the bottom line. But I've been very happy with my kids' education."

Lynda Gemme, 35, went to Advantage's first parent meeting at the Holiday Inn here last April and signed up her two daughters that night. Abby Kelley now has a long student waiting list.

"I liked the way everything at the meeting was organized. It was very impressive and very professional," recalled Ms. Gemme, who does the books for her husband's contracting business.

Ms. Gemme wasn't totally unhappy with her local school district, located near Worcester, but she liked Advantage's pledge that bad teachers would be let go. And she saw the company backing as a quality assurance.

"I think there's a lot of waste in the public schools," she said. "A corporation is going to run it wisely because they need a profit. A business doesn't run to lose money or customers—that's the bottom line. And I do feel more like a customer here. There's just a lot more communication going on, and I feel like my voice matters more here."

Parents receive monthly progress reports on their children's academic performance. Every classroom has a telephone, and Advantage encourages teachers to use it, not only when there's a problem, but also to maintain positive contact with every parent at least once a month. Raises are based in part on how well teachers communicate with parents.

"We're about excellent customer service," said Jana Reed, whose job as the director of student recruitment at the corporate office doesn't exist in a typical school district. "We start that relationship with our parents from the very beginning. They're our partners."

'The True Public Schools'

Not all of Advantage's customers have come away satisfied.

Worcester district officials say roughly 60 students transferred to the school system from Abby Kelley since the charter school opened in 1998. They say students have returned at a faster clip from the city's Edison charter school, which opened in 1996.

"Kids with behavioral issues seem to come back much more quickly," said Ruth Gadbois, the district's special education director. "These EMO schools seem to have a basic flaw. They come in and set up the schools and have the vision of what the school looks like, and you either fit or you don't."

Many of those who don't fit— or aren't attracted to the school in the first place—seem to be students who are difficult or costly to educate, contends Worcester Superintendent James A. Caradonio, an outspoken critic of company-run schools.

Mr. Caradonio pointed out that the Advantage-run school has no students who are limited-English-proficient, while the district counts 7 percent of its population as LEP and runs bilingual programs. The district also serves a higher share of students with disabilities and nearly twice the share of poor students as Abby Kelley does, he added. (As a regional charter school, Abby Kelley draws children not just from the city of Worcester, but also several surrounding towns, many of which are better off financially than the urban center.)

The district and the for-profit charter schools in town are competing on an uneven playing field, the superintendent maintains.

"They can purchase differently, their personnel policies are different, and they don't have the same oversight from the public that our schools do," Mr. Caradonio said. Abby Kelley has no locally elected school board, he noted, and even the state school board members who ultimately oversee the school are appointed by the governor, not elected.

"We're the true public schools," he said.

Academically, meanwhile, what Advantage is offering in Worcester is far from the company's pledge of a "revolution" in urban education, Mr. Caradonio said. "I haven't seen it yet, not in my neighborhood."

Though Abby Kelley officials and parents say their students are making impressive academic gains, state assessment officials say it's too early to judge how well the school is doing and how it stacks up against local school systems.

For his part, Mr. Wilson said the Advantage model "fits" and serves all children, including those considered the most challenging to educate. Parents whose children have not fared well in the traditional system, he said, are among the "most vigorous choosers."

Mr. Wilson said schools like Abby Kelley will likely have lower percentages of special education students than traditional school systems, because the latter are often too quick to categorize struggling students that way. Many parents, he added, were attracted to Advantage schools precisely because the company offers an inclusive, early-intervention model, rather than "separate programs that segregate children and consign them to low remedial expectations."

One possible explanation for the absence of LEP students at Abby Kelley is that Advantage last year didn't advertise the school in Spanish or other languages, as it has done elsewhere. Mr. Wilson noted that Advantage schools in other cities enroll high proportions of LEP students, and said the company would make a point of reaching out to LEP students in Worcester in the future.

"There will always be parents who don't like what we're doing. We hope to minimize it," Mr. Wilson said. "We don't claim to have everything right. We'll have to make constant adjustments to determine which pieces work very well and which need to be fixed."

"I'm quite confident that we won't fail," he added. "We're in this for the long term."

Vol. 19, Issue 15, Pages 1, 12-14

Published in Print: December 8, 1999, as Seeking a Competitive Advantage
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