"A child's learning is the funtion more of the characteristics of his classmates than those of the teacher." James Coleman, 1972

Wednesday, July 21, 2010

Expanding to Scale: Part II of the Series

Yesterday I asked readers to imagine a scenario where they had billions of dollars to give away and a keen interest in charter schools. We put the "charter schools: good or bad" debate to the side and looked at the options available for expanding charters: the EMO (for-profit), the CMO (nonprofit version of EMO), and the stand alone version.

Philanthropy largely went with option #2, the CMO approach. They dropped $500 million on CMO expansion between 1999 and 2009. The Gates Foundation also invested in the small schools model (breaking up large high schools into smaller learning environments), but the foundation largely abandoned that effort because it was not as successful as they wanted and didn't have the potential to impact more students. I'm not going to get into the debate of whether or not the small schools experiment was a success or failure - that's too big of a question and really deserves its own discussion (see, for example, the work of Mike Klonsky). And, like the charter debate, any simple "yes/no" answer neglects to investigate the immense gray area resting between the two overly simple answers.

We're going to continue the fantasy of having billions of dollars and an interest in education reform. We're going to continue leaving the charter debate on the side. And we're going to add one more stipulation: we don't just embrace charters, we want to expand them, and expand them quickly. This is partly what attracts us to the CMO model vs the stand alone model: one has the potential - if not the explicit mission - of replicating to scale, the other doesn't have much interest in expanding past their one school.

[Note: this isn't to say that pursuing the stand alone charter model couldn't impact the same number of students/schools. It'd require a different kind of investment: building up organizations - nonprofit or for-profit - that could do bookkeeping, facilities management, and all the other non-academic stuff associated with a school. Actually, it might include some academic stuff: materials acquisition, professional development programs, etc. CMOs typically try to do all of this, and often more, for their charters]

What does philanthropy have to show for their $500 million investment in CMOs? Have they created a structure that can expand to serve more students; prove successful academically (as defined by test scores and possibly a few other measures); and establish financial sustainability? Luckily for us, there are two reports that shed some light on the results of our half billion dollar investment.

The first report, released in late 2009, was published by EdSector. "Growing Pains" addressed some of the challenges and successes of CMOs - but there's more to this report than what appears in the published version. Turns out there was a lot of editing done before the report reached the public (sans the primary author's name). You can read the initial draft here and see for yourself what EdSector left (cut) out.

But a recent report sheds even more light on CMOs. The Center for Reinventing Public Education released an interim report about their multi-year study of CMOs. The project is funded by the Bill and Melinda Gates Foundation and the Walton Family Foundation through the NewSchools Venture Fund. You can read the interim report here. Their analysis doesn't comment on academic successes, it only focuses on the business aspects and policy implications. I'm going to give a fairly brief summary of their interim report and highlight some parts of it that readers may find interesting. CRPE is certainly a charter-friendly institution, so I'll skip the parts where they praise charters and stick to their concerns. Just keep this in mind: I'm not claiming to be giving you a balanced overview of the report. I'll leave out my own commentary as much as possible and let their words/statistics speak for themselves.

The CRPE report looked at 43 CMOs. The only ones included in their study were those operating more than 4 schools and those with non-profit designation since their inception. Of those 43 organizations, ten were selected for a more in-depth study, 20 schools run by CMOs were selected for collecting additional information, 86% (37) CMOs replied to a survey, 17 business plans were reviewed, and district personnel were interviewed to offer the district's perspective.

The authors note that only 12% of charter schools are run by management organizations. However, they're concentrated in six states (CA, TX, AZ, IL, and OH) and certain cities. A third of the CMOs in their study operated in CA.

CMOs face a number of challenges: political, operational, and academic. Political challenges revolve mostly around charter laws and relationships with local communities, including school districts. Operational challenges include teacher turnover (which is not always a negative), access to facilities, and achieving sustainability. And, although the report doesn't get into achievement details, there are some comments about the academic challenges: professional development, expanding into the high school years, and getting students ready for college-level work. This report largely focuses on the operational/financial challenges faced by CMOs.

CMOs hire teachers from the following pools of eligible candidates:
  1. 28.5% from traditional education programs
  2. 28.2 from local district schools
  3. 9.5% from other charter schools
  4. 9.1% are TFA alumni
  5. 5.6% are TFA corps members
  6. 4.8% from private/parochial schools
  7. 2.7% from Teaching Fellows or TNTP
  8. 9.8% from other sources
One of the major worries is a lack of personnel for expanding their schools. In particular, the report notes the long hours expected of teachers at "no excuses" schools:
Many have questioned whether CMO models demanding extraordinary efforts from teachers are sustainable. There are particularly concerns about the "No Excuses" model that relies heavily on young, energetic teachers who are willing to work long hours to provide intense remediation to students and do "whatever it takes" to help students achieve, including giving out their cell phone numbers and taking calls at any time of day.
But turnover isn't necessarily bad for CMOs, particularly if they're excising the worst teachers. Additionally:
To some degree, CMOs also rely on turnover to help stabilize overall salary costs. As principals told us, it would eventually break a school's budget if they kept most of their junior teachers and continued to giv them raises.
Despite the benefits of high turnover, CMOs still recognize it creates plenty of difficulties: "fragmented instructional programs, the loss of teaching expertise, ongoing hiring and training costs, workplace stress, and low morale." However, this does impact the possibility of expanding (remember: we're not excited about this idea if it cannot be brought "to scale"):
Some CMOs are comfortable with higher attrition, as they are able to rely on their name brand or regenerative staffing networks like Teach For America to attract large swaths of new candidates. However, almost all CMO leaders had reservations about human resource sustainability in the long term, especially in the face of expansion. A general consensus among most CMO leaders interviewed was that expansion and, in some cases, high turnover, was tapping out the local hiring markets, and that new sources of teacher and principal candidates were critical.
The report notes that not all schools faced turnover problems. Less prescriptive CMOs that recruited from the local labor pool had teachers working more traditional hours with lower turnover. One of these CMOs reported a 6% turnover rate, much lower than many other organizations relying on non-local help.

Pedagogical approches varied from CMO to CMO. In fact, this variance is pretty symptomatic of the sector. There are definite patterns (particularly among CMOs of the same size), but a lot of variance. As a general rule, however, the bigger CMOs were more prescriptive.

Although there's not much in the report about academics, this quote might interested readers. The Chief Academic Officer of one CMO had this to say:
You have spiraling curriculum, real-world experience, and then you have drill and kill, right? There's always this kind of left approach and right approach. We are on the right. The schools that produce the highest results are one of two kinds of schools: schools that are significantly leaning to the right or the schools that are selecting their population. We don't select our population.
But the most damning part of the report focuses on the financial sustainability of CMOs. Keep in mind the CMO was philanthropy's "big bet" on charter schools. They didn't go with creating an infrastructure that could support stand alone charter or services that would support community-driven, grassroots charters. Their "investment" (we're talking about venture philanthropy here) was $500 million in a structure that - hopefully - would be able to stand on its own somewhere down the line. A venture philanthropy model that requires endless input from the investors isn't a very good model. It's simply not sustainable in the long-run. Hell, even the Gates Foundation has a limited yearly budget.

The idea of going "to scale" is attractive to CMOs and CMO advocates for two reasons: expanding means you reach more students, and expansion means you can take advantages of economies of scale in order to reduce costs. Running ten schools, the idea goes, can make your back office more efficient than running five schools (the cost per school is lower). It works out fantastically on paper, but flops in practice. CMOs didn't take into consideration the diseconomies of scale that result from a growing institution: the need for more employees as you expand into different grade levels; new employees to support opening schools; expansion into new markets; and the need for quality control as the organization grows. Toss in the need to add data managers, communications experts, and people to keep the organization running smoothly across different geographical locations.

None of the 10 CMOs visited by CRPE have reached their own definition of financial sustainability. 65% of the business plans reviewed showed the CMO was not meeting their growth target. And, in fact, the bigger CMOs relied more heavily on philanthropic giving (16.3% of their budget) than mid sized (14%) or small (9.6%) CMOs. Their business plans relied on best-case scenarios. They'll face the same upcoming budget restrictions (or reductions) faced by traditional public schools and stand alone charters, and major philanthropies - while still well-endowed - may cut back on some of their giving. The financial picture, in other words, is not looking good.

I'll add that Duncan has suggested CMOs will be part of the "turnaround" strategy for improving the 5,000 lowest-performing schools in the nation. CMOs, however, have shown very little interest in taking over schools, and, even if they did have an interest, the CMOs surveyed in this study are projected to open only 336 schools by 2015.

This was philanthropy's $500 million bet. They've achieved a number of noteworthy CMOs that garner plenty of media attention. They'll likely have test scores that show dramatic successes, but even (some of) their own operators worry test scores are not enough. There's a high degree of turnover (which mirrors many inner city schools), and that will hinder expansion. Growth means becoming more bureaucratic, which runs counter to the movement's intentions. And we still don't have a system where schools do not have to rely on significant philanthropic support.

I'll conclude this three part series tomorrow with a look at how one CMO advocate with very strong ties to the philanthropic/reform community commented on this report. I'll also comment on how the CMO gamble by philanthropy impacted the charter movement, how federal policy will be shaped partly by the lack of financial success of CMOs, and how this fits into the standards/accountability movement. Congratulations if you managed to read this far.

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