Would You Buy An Education From This Man?
Jack Clegg has run companies that make everything from trash compactors to auto parts. Now, he's tapping dissatisfaction with public education to build a nationwide chain of for-profit schools.
About 20 miles outside Philadelphia, in the woodsy suburb of West Chester, is a small private school called Chesterbrook Academy. The name evokes an image of ivy-covered walls, musty classrooms, and dimly lit corridors. But Chesterbrook is a brand-new school with an old-money name. Open since last summer, the K-8 school serves about 85 students, but there's room for another 200. Suspended above the one-story red-brick and stucco building is a large hot-air balloon, the kind you might see at a used-car dealership. Designed to grab the attention of passing motorists, the floating billboard is emblazoned with the school's crest and the words NOW ENROLLING.
You can bet your riding crop that elite private schools like Exeter and Andover would never resort to such crass commercialism. For one thing, they don't need to. But Chesterbrook Academy has a product to sell-and the product is itself. One of a chain of schools owned by a company called Nobel Learning Communities, Chesterbrook is a moneymaking endeavor, pure and simple. And if enough students don't sign up for the company to turn a profit, then the school won't be around for very long.
Nobel, based in Media, another Philadelphia suburb, is little known to the public. Its chairman, president, and chief executive officer, A.J. "Jack" Clegg, is a scrappy corporate turnaround specialist who once owned a successful printing company. He's the polar opposite of Christopher Whittle, the polished founder of the Edison Project, perhaps the best-known experiment in for-profit K-12 education. Whittle once pledged to open 1,000 new, profit-making schools for 2 million students by the year 2010. But while Whittle was talking the talk, Clegg was walking the walk. Edison has scaled back its ambitious plan to create for-profit schools and instead now manages 51 schools for various districts and states. Nobel, by contrast, currently owns 138 schools--99 preschools and 39 elementary and middle schools--serving about 23,000 students in 13 states, making it one of the largest operators of for-profit private schools in the country.
The schools, all of which are located in suburban areas, operate under 30 different names--Chesterbrook Academy and Merryhill Country School, among others--but the basic formula is the same. Classes are small, with an average of 17 students per teacher. Schools are open 12 hours a day, 12 months a year, to accommodate the busy lives of working parents. And the curriculum is rigorous, with an emphasis on core academic subjects; Nobel students, the company claims, perform at least one grade level above national norms in reading and mathematics. Tuition is relatively low--approximately $5,500 a year per student, or about half what many elite private schools charge. And there are no entrance exams; Nobel schools are open to whoever can pay the tuition.
Critics dismiss them as "McSchools," cookie-cutter institutions where profits come before pupils. The National Association of Independent Schools, whose membership includes many of the country's most elite private schools, won't let Nobel join the club because of the company's for-profit status. Indeed, the whole notion of making money off the education of children troubles some educators. "We're very concerned about the growing number of for-profit companies that are trying to tap into what they see as an 'untapped' market: K-12 education," says Nancy Van Meter, who tracks school privatization issues for the American Federation of Teachers. "They see a huge potential to reap enormous profits. But in a capitalist economy, what you have is a culture that breeds both winners and losers. We're concerned that children could end up being the losers."
But Clegg is determined to prove his critics wrong. He makes no apologies for running schools for financial gain. He also likes to point out that nonprofit private schools are also in the business of making money. "It's just that they do it through tuition, fees, silent auctions, and building funds," he says. "Being for-profit is just a means of getting the capital to continue to do what you're doing without going to the parents all the time." He adds: "People unfortunately have a tendency to believe that if somebody else is doing something differently, their motives are also different. But our motives are not different. We really care about the kids."
Nobel competes with the nonprofits and the parochials, to be sure, but its chief competition is the public schools. Its market: middle-class suburban parents who are dissatisfied with the public schools and have the means to choose an alternative. Clegg sees himself as a latter-day Henry Ford, making private schools accessible to middle-class Americans the way Ford made automobiles accessible to average American wage-earners. He seems to have the right idea at the right time. Nationally, enrollment in private schools is up 7 percent over the last 12 years.
Clegg has big plans for his company. He foresees a "community"--please don't call it a chain--of Nobel schools scattered across the country. This year, the company will open new schools in New Jersey, Northern Virginia, and Illinois. Colorado, Texas, and Georgia are on the horizon. The growth strategy is simple: Open a preschool or two or three, and then, as parents develop a loyalty to the Nobel name and program, add a centrally located elementary and middle school.
Clegg has proved that his formula can work in the suburbs. What he wants to do now is open his schools in urban areas. "Our mission won't be complete until we're in the inner city," he says, sounding more like a reformer than a businessman. To test the waters--and, perhaps, to get a foothold--Clegg recently applied to open a Nobel-style charter school in a poor Philadelphia neighborhood. "We've stayed away from charters because of the politics," he says, "but we feel that we've really got to show the world that we can educate the children in the inner cities."
It's a bold step. Other companies have tried and failed, most notably the Tesseract Group, formerly known as Education Alternatives Inc., which lost major public school management contracts in Baltimore, Florida's Dade County, and Hartford, Connecticut. But Clegg is optimistic. "We'll make it work," he says. "We'll work through the kinks, see what the political problems are, and make sure the children are successful. Because we want to maintain a good reputation and not get a bad rap like some of the others who have dived into this area."
Nobel Learning Communities has its headquarters in Building II of the Rose Tree Corporate Center, a nondescript office complex that overlooks a busy highway and a cemetery. It's an appropriately austere setting for a company that prides itself on keeping administrative costs low. Indeed, Nobel has only 35 full-time employees in its Media office, including a "chief education officer," plus another 20 or so "district principals" who oversee clusters of schools.
"That's not a lot of people for 138 schools," Clegg says proudly from behind a small round table in his corner office. A compact man with close-set eyes and a full head of brown hair dusted with gray, he's dressed in typical corporate attire: gray pinstripe suit, blue dress shirt, gold Rolex. But he's also wearing a colorful Save the Children necktie. The message is clear: I may be a businessman, but I'm not a heartless number-cruncher.
Clegg, 58, is an unlikely private school headmaster. He first started working at the age of 12, when his father deserted the family. "We learned to strive for ourselves," he says. "You come out of something like that motivated to get ahead in life." Clegg attended public schools but paid his way through eight years of night school at Philadelphia's private Drexel University, becoming the first member of his family to graduate from college. Later, after he had already gone to work for a copier firm, he attended business school--again, at night--at Northeastern University in Boston. Though he didn't graduate, he went on to run 21 companies in 17 different industries, including makers of auto parts and trash compactors.
When Clegg was still in his 30s, he and John Frock, now Nobel's executive vice president, bought a printing company, which they eventually sold after an English firm "made an offer we couldn't refuse." Clegg went on to establish a reputation for turning around financially troubled companies.
Rocking Horse Childcare Centers of America, founded in 1984, was one of them. For eight years, the company struggled to stay afloat. By 1992, its stock had plummeted, and it was $25 million in debt. It had, in the jargon of Wall Street, a "negative net worth." The Pennsylvania Merchant Group, an investment firm whose clients held much of the stock, hired Clegg to work his magic.
"I looked at the books," Clegg says, "and basically the company was doing fine at the school-operating level. The profit margins were about 20 percent, which is very decent. It was all being lost from there on down, at the administrative side of the business. So I told them I thought something probably could be done."
Clegg's plan was to fix the company and then move on. "This was supposed to be a short-term venture for me," he says. "You know, turn it around, make some money, and leave." But something happened along the way. "I got sucked in."
What happened was this: Clegg flew out to Sacramento, California, to tour the Merryhill Country Schools, part of the company's holdings. He visited a preschool where kids were using computers to learn Spanish. And he went to an elementary school where, he says, "the students--whites, Hispanics, African Americans, and Asians--had forgotten what color their skin was." The turnaround specialist began to rethink his business plan.
"I realized that we had something unique," Clegg says, "something that we could spread to other parts of the United States."
Returning to Media, Clegg met with the company's board of directors and told them, "Look, gentlemen, I think we ought to change the whole strategy of this company. I think we ought to go for the educational components." And that's what he proceeded to do.
First, he changed the name of the company to Nobel Learning Dynamics. (His son's girlfriend came up with Nobel, as in the Nobel Prize.) He sold off some of the less-profitable childcare centers and began making plans to acquire existing schools and build new ones. Merryhill's curriculum would be used in all the company's schools. Preschools would be clustered around a combined elementary and middle school so satisfied parents could keep their children in a Nobel school through 8th grade. (Clegg has decided to stay away from high schools, at least for now. "Some day, we may have to," he says. "But it's much more difficult to make money from them because of staffing and facility costs.")
The strategy worked. In just five years, Nobel Learning Communities--Clegg changed the name again recently--has grown from 66 schools to 138, and annual revenues have jumped from $33 million to $81 million. Since Clegg came on board, the company has posted profits every year except 1997, when it lost $800,000, due mostly to the poor performance of nine Nobel schools--now up for sale--in the Indianapolis area and a childcare center in Maine. In mid-January, Nobel's stock was trading at about $5 a share.
"What I've found," Clegg says, "is that good business techniques work no matter what the product is. It just so happens that this product, education, has a lot of altruistic benefits along with the opportunistic benefits."
Which is why the CEO-turned-headmaster intends to stick around for a while. "You can't go back to building widgets after you've gotten into the business of educating children," he says.
I n a well-appointed classroom at Chesterbrook Academy--the one in West Chester, that is--11 kindergartners are gathered at the feet of their teacher, Holli Cialini. "Today is Monday," she says. "What was yesterday?" Arms reach for the ceiling.
"Sunday!" exclaims one enthusiastic boy.
"Good," says the teacher. "What will tomorrow be?"
"Tuesday," offers another boy.
The children--six boys and five girls--are all wearing Nobel-sanctioned uniforms: khaki pants, white shirts, and green ties for the boys, green plaid jumpers for the girls.
On the surface at least, Cialini's kindergarten classroom is not much different from what you might find in just about any other suburban school. In Pennsylvania, however, most public schools offer only half-day kindergarten programs; at Chesterbrook, it runs all day. Further, a public school teacher might have upward of 25 children in his or her class; at Chesterbrook, the limit is 15-- period. And the school itself will never have more than 280 students, from kindergarten all the way through 8th grade.
"The size of our classes is what distinguishes us from the public schools," says district principal Daphne Hager, who oversees several Nobel schools in the Philadelphia suburbs. "That's one of our sales features."
It's a selling point for teachers, as well. Second grade teacher Dana Brown used to work in a nearby public school, where she was responsible for 50 kindergartners--25 in the morning, 25 in the afternoon. "That's too many," she says. "Students are constantly fighting for your attention in a class of 25. But here, you can get to everybody." At the moment, Brown has just six children in her class, but that number will grow as more students enroll at the school. "I've found my niche here. I feel truly appreciated by the students. At the end of the day, I feel as if I've accomplished something."
For the luxury of having a smaller number of students, Brown took a cut in salary--something she was more than willing to do. Her husband teaches at a nearby public school, so she could afford to make less. "If I were by myself," she says, "it might have been a little harder to take a pay cut."
Nobel hires state-certified teachers, but they are non-union and therefore earn less on average than their public school counterparts. They also tend to work longer hours. On the other hand, they get to work in clean, safe schools guaranteed to be filled with highly motivated kids. They also get a substantial tuition discount if they send their own children to a Nobel school. "What you have is an environment in which people like to come to work," Clegg says.
Not that the company is immune from the laws of supply and demand. Two years ago, California legislators passed an initiative to decrease the number of students in K-3 classrooms. The move created a hot market for teachers, and some of those at Nobel's Merryhill schools defected to the state's public schools, taking a number of students with them. The company was forced to increase salaries to attract replacement teachers and to retain those who chose not to leave.
One thing Nobel's schools don't have is a lot of front-office administrators and support staff. In fact, most of them have only two: a principal and an "education director" (read: assistant principal). At Chesterbrook, Kim Revak serves as the latter. She sits behind a counter just inside the school's main entrance, answering the phone and monitoring the door, which remains locked during school hours. She also works closely with the teachers on curricular matters. Meanwhile, the school's cheerful acting principal, Bonnie Lytle, works nearby from a small, unassuming office, which contains the school's only copying machine. (Chesterbrook's new principal took over in January.)
It's all part of Nobel's lean-and-mean corporate strategy. "We operate at about 40 percent of the administrative costs of the public schools," Clegg says. The catch is that Nobel's administrators must perform some duties that they might not have to do at other schools. For example, every morning at 11 o'clock, Lytle drives her Jeep Grand Cherokee to a nearby public school, where she picks up hot lunches for the students. (Nobel has a contract with the school.) When she returns to Chesterbrook, she unloads the food--today, hot dogs and baked beans--onto a cart and takes it to the school's gymnasium, where she and Revak serve it up to the hungry children. When's the last time you saw a public school principal serving lunch?
"Our administrators must wear many hats," says Nobel's Hager.
The company also saves money by contracting out for cleaning services. For maintenance work, the company employs a traveling handyman who is responsible for several Nobel schools. The schools themselves are all built to similar design specifications. Nobel pays for construction and then sells the building to a developer, who leases it back to Nobel. That frees up capital that can be used to build even more schools. "If we tie up all our money in bricks and mortar," Clegg says, "we can't continue to do what we're doing. We don't want to be a real estate company."
Despite such thrifty measures, there's nothing cheap about Nobel's schools--at least for now. "Our teachers never have to spend their own money on supplies," Clegg says. At Chesterbrook, every classroom has two computers, and there's a separate lab with six more machines. A small library contains hundreds of books, though no librarian. Outside, there's a beautiful athletic field, maintained by a private lawn-service firm.
"They don't waste money here," says Diane Gilbert, whose two children--Alex, a kindergartner, and Megan, a 6th grader--both attend Chesterbrook. "I can't get over how many computers this school has. When you first come to school here, you don't have to supply anything, not even pencils. Everything is provided, and everything is of the highest quality. No expense is spared."
Gilbert and her husband, Steven, moved from Memphis, Tennessee, to West Chester about a year ago. In Memphis, Megan had been enrolled in a private Montessori program, but she wanted to try a public school, so in West Chester they enrolled her at their neighborhood elementary school. "It was abysmal," Gilbert says. "Megan was having a hard time making the transition. She was falling behind. So we said, 'You need to talk to your teacher.' And she said, 'Well, there's no time. There's never an opportunity to talk to her.' So I made an appointment to meet with her. She could see me for 15 minutes at 7:30 in the morning. That's the only time she had available.
"I said, 'My daughter tells me that the teachers aren't accessible, that there's no time to interface with them.' And the teacher looked me right in the eye and said, 'Well, yes, that's true. We really don't have time to deal with students on an individual basis.' So I thought, This is unacceptable."
The Gilberts considered several local parochial schools, and they looked closely at a private Friends school. "But the tuition was something like $12,000 or $13,000 a year," she says. "Then we heard about Chesterbrook, which offered the most incredible student-teacher ratio and an incredibly low tuition. So we enrolled Megan here. And she's doing really well. And Alex is working way above grade level. He's already adding and subtracting."
Is Gilbert bothered by the fact that Chesterbrook is a for-profit school? Not a chance. "I like corporate America," she says enthusiastically. "In fact, I think corporations are the answer to many of our problems." Schools like Chesterbrook, she believes, are the wave of the future.
Y ou can't talk to Jack Clegg for very long without hearing the V-word: vouchers. He freely admits that Nobel would benefit enormously from a voucher system, in which parents receive a chit worth several thousand dollars that could be spent at any private school. "If it comes," he says, "it's going to be a big plus for our company. Our schools will fill up very quickly. But we're not counting on that. It's not part of our overall growth strategy."
Vouchers, Clegg believes, won't happen until large numbers of minority parents get behind them. "I believe parents of children in the inner city have been fed a lot of bunk," he says. "They've been told that vouchers are for the rich, that they will help white kids in the suburbs more than they will help them. But that's not true. White kids in the suburbs can find the money to go to these schools"--private schools like Nobel's--"but the kids in the inner city don't have the choice."
Clegg is eager to prove that Nobel's formula can be just as effective in poor urban areas as it is in the suburbs. Several years ago, he sent a letter to Philadelphia Mayor Edward Rendell offering to establish a tuition-free, Nobel-style school in the inner city. He never got a response.
Now, Clegg is trying a different tack. He recently applied to the Philadelphia Board of Education to run a charter school next fall in Northeast Philadelphia. Nobel would manage the K-8 Philadelphia Academy Charter School for a nonprofit organization.
Meanwhile, Nobel will stick to familiar territory: the 'burbs. "We want to continue to grow at a reasonable rate with a quality product," Clegg says. "I mean, look--Ferrari doesn't make a lot of cars, but everybody knows it's a great car. We're not expensive like Ferrari; we hope to be a Ferrari in terms of the product we give you but sell it to you at a Volkswagen price. It's a hell of a challenge."
The company does extensive demographic studies before moving into a new area. "We have map after map after map that tell you the average income of an area, the average education of the parents, the growth rate--things like that," Clegg says. "And there's another factor, not one that you like to think about, but it's real. If you have a high number of non-English-speaking immigrants, it has a tendency to drive some of the other children into private schools. I don't think it's a bias so much as it is a fact that if you get a significant number of non-English-speaking children, it tends to bring down the level of education. And that's another problem that we've got to solve." Until that happens, however, Nobel will be there, building its schools.
Last year, Nobel acquired 80 percent of a Florida company called the Developmental Resource Center, which operates schools for learning-disabled children. Eventually, Clegg wants to open such schools near Nobel's other institutions.
Other expansion plans may hinge on the company's investors. The biggest likely player is Knowledge Universe, the privately held education empire being assembled by former Wall Street junk-bond financier Michael Milken, his brother, Lowell, and Lawrence Ellison, chairman of the Oracle Corp. The company owns 21 percent of Nobel's outstanding stock and may eventually acquire a majority stake, predicts John McLaughlin, president of the Education Industry Group and editor of the Education Industry Report. "They want a controlling interest," he says. "At least that fits their investment pattern. It seems logical that they'll buy more when they can." McLaughlin points out that Knowledge Universe recently purchased Children's Discovery Centers of America Inc., which operates 250 preschools and childcare centers throughout the United States. "It could make sense to blend the two companies into one," he says.
Clegg seems unconcerned about the rumors. "Could we be taken over someday?" he asks. "Possibly. Could we be taken over by somebody else and get a lot bigger? Possibly. But our intent is to keep moving forward and do what we're doing." Last year, he told Education Week, "I don't fear Knowledge Universe as long as they agree with our mission." McLaughlin guesses that Clegg would prefer to remain Nobel's top dog. "He has a real emotional investment in the company," McLaughlin says. "And he's got big plans in place."
H anging on a wall in the lobby of Chesterbrook Academy is an illustration titled "Mary's Little Lamb," by an artist named Will Moses. It shows a quaint 19th- century Pennsylvania farm village nestled among rolling hills. In the center of the scene is a red-brick schoolhouse, "School No. 3." Children are happily playing out front while their teacher--a woman, naturally--stands at the door, keeping watch over her charges. A young girl--Mary, presumably--leads a lamb by a rope.
It's a nostalgic image of an enduring American archetype: the one-room schoolhouse. Never mind that many schools these days are crowded places with chain-link fences and metal detectors. We still like to think of school as a sort of safe haven, an extension of the home, a place far removed from the ills of 20th-century America.
Jack Clegg understands this. His schools may cater to today's working parents, but what those parents want for their own children is the kind of school they remember: a place where classes are small, children are well-behaved, and teachers are warm and caring. According to the most recent Phi Delta Kappa/Gallup Poll of the Public's Attitudes Toward the Public Schools, 48 percent of Americans say their children are getting a worse education than they themselves received. Forty-one percent say the opposite is true.
"You have to step back and look at what went wrong with public schools and what we're doing differently," Clegg says. "Our teachers know the children, they know the parents, and the parents know the teachers. It's a different environment." He calls Nobel's learning centers "small neighborhood schools." Nobel's promotional literature states, "In an age of uncertainty about the public school system, we offer an alternative to parents and the local communities we serve."
"I went to public schools," Clegg says, "and I got a pretty good education. But things have changed. The world has changed."
So Nobel has found its niche. And if vouchers take hold, perhaps it will find another. But there won't be any niche at all, Clegg points out, if no one wants to buy what his company is selling. In the business of education, he says, reputation is what matters most. "[Nobel] parents are investing dollars beyond local school tax dollars to provide their son or daughter, their most important asset, with a better opportunity to succeed in life," Nobel's annual report notes. "Fail to deliver their expectations, and they will not be back. . . . [But] a successful school, a local community of schools, or a national community of schools that achieve such a level of quality can be a very significant profit and cash generator."
It's just that kind of talk about cold, hard cash that troubles some dyed-in-the-wool traditionalists. "There's an old belief that, at for-profit schools, the bottom line is profits, not kids," says Selby Holmberg, vice president of the National Association of Independent Schools. "Personally, I don't think that holds much water anymore." Still, several years ago, when the NAIS considered relaxing its rules to allow for-profit schools to join the organization, the membership committee rejected the idea. Among the reasons, according to Holmberg: "A for-profit school could be sold tomorrow, and then it would be a different place. Also, for-profit schools don't have the same level of accountability that nonprofits do."
Nonsense, says Clegg: "We're not just generating numbers here. We're doing something that's hopefully good for society. Just because we're making a profit doesn't mean we're not doing something good."
Vol. 10, Issue 05, Pages 26-31Published in Print: February 1, 1999, as Would You Buy An Education From This Man?