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Trench Fighting

Former business leaders are trying to fix our troubled schools.

Back when Don Gaetz was running a health care company with annual revenues of $500 million, school buses were never an action item. But on a drizzly Friday this past August, the school superintendent of Okaloosa County, Fla., was preoccupied with a thunderstorm in the area and was planning to make sure the rain didn’t disrupt student transportation on the second day of the school year.

 

Gaetz oversees the instruction of about 30,000 students in 40 schools, working from a windowless office in an old school building-an unlikely setting for a businessman who co-founded Vitas Healthcare, the nation’s largest private hospice company, and used to have an office overlooking the Bay of Biscayne.  

 But Gaetz, whose involvement in public education began when he grew concerned about the district where his children went to school, offers a quick answer to why he sits in a superintendent’s chair rather than reclining in a hammock. “I became interested in what we could do to bring in business practices, not just to improve [school] finances but also academic achievement,” he says.

 

Gaetz is a member of an unusual group that he-and other peers in the business world-would like to see expanded: top executives who leave the private sector to try to fix the broken K-12 public schools dotting the U.S. map in large swathes, particularly in urban areas. It’s hardly an easy undertaking. “I don’t think there are many tougher jobs than being a superintendent or chief executive officer of a large public school system,” says Ken Kring, who has handled major searches for superintendents as a managing partner of Heidrick & Struggles, an executive search firm. “The multiple constituencies, the stakeholder base, the difficulty of resources, the performance gap and the challenges of meeting No Child Left Behind [the federal government's stringent public education law enacted in 2002] make for a pretty harsh setting.”

 

Still, CEOs and senior managers alike have joined retired military officers, top lawyers and even politicians in recent years to become what are known as “nontraditional superintendents.” That is, school officials who did not rise to their jobs through the ranks of public education. At any one time since the mid-1990s, there have been about a dozen such leaders, according to Bruce Hunter, associate executive director of the American Association of School Administrators, a professional organization. While that represents only a sliver of the 13,500 superintendents nationwide, their impact is outsized, because a number of them have led-and are leading-some of the country’s largest school systems.

In New York City, for example, Joel Klein, former chairman and CEO of Bertelsmann (and onetime antitrust czar at the U.S. Department of Justice), today serves in the slot known locally as schools chancellor. Since 2002, Paul Vallas, who earlier leapt from budget director of Chicago to that city’s widely praised schools chief, has headed Philadelphia’s school system. And Los Angeles is home to Superintendent Roy Romer, the former governor of Colorado.

 

If a group called the Broad Foundation has its way, there will be many more such transplants. Several years ago, the foundation, based in Los Angeles, was established by Edythe and Eli Broad-founder of both AIG Retirement Services (formerly SunAmerica) and KB Home-to improve public education, and it set out to push greater management expertise and leadership skills into the senior levels of K-12 school systems. The group’s Urban Superintendents Academy seeks to transform what it describes as “outstanding leaders” from the public, not-for-profit and business sector into outstanding school officials. A number of business people have been through the 10-month program.

 

The Academy graduated its first class of 23 in 2002, and already, Broad Fellows (as they are called) have parachuted into school systems. They obviously attempt to establish some business notions. In July, Broad Fellow Nate Levenson, a Harvard MBA and former CEO of North American Industries, a family-owned manufacturing company, became superintendent of Arlington, Mass. He wasted no time installing a well-known management technique: pay tied to results. At his request, his contract stipulates that his $135,000 annual salary be raised by 10 percent if students perform well-and cut 5 percent if they don’t. “It’s the best way to put my money where my mouth is,” he says.  

 

The executives-turned-education-leaders have a number of reasons for making the switch. Some believe that only an overhauled system of public schools can close the growing gap between the wealthy and the poor in the United States-a threat, they believe, to the fabric of American democracy. Others cite a desire to “give back,” a repayment to society for their own good fortune in their work lives. “I always attributed [a successful career] to the strength of my education in the early years, and many minorities just don’t get that start,” says Gasper Mir, co-founder of a Houston public accounting firm who took a top post in the Houston school system. 

 Finally, many are worried that third-rate schools will severely undercut the U.S. ability to compete in a global economy where the most promising businesses-and best-paying jobs-require more brain than brawn. “If you believe in capitalism and think it’s the right thing, and I do, you have to turn out workers who can produce in a capitalist society,” says Joseph Wise, a former Walt Disney executive and CEO of an educational technology company who now heads the largest school district in Delaware.

 

One of the most important attributes nontraditional superintendents bring to their jobs is an outsider’s perspective. “You are permitted to ask dumb questions that others aren’t permitted to ask,” says Joseph Olchefske, who was a managing director at securities firm Piper Jaffray before serving as CFO and then superintendent of the Seattle public school system from 1999 to 2003. Two of Olchefske’s “dumb questions” centered on what children were expected to learn, and how, exactly, that was made clear to teachers. The answers, he says, helped to lead to one of the achievements of which he is most proud-the development of academic standards for students and the expansion of training for teachers and principals.

 

One of the spurs to Gaetz’s interest in public education was his businessman’s curiosity about overhead at his children’s elementary school, namely how much it was paying for everything from floor wax to paper. It turned out that schools were required to order supplies from a school district warehouse-at prices higher than those at a number of local stores. “You had the classical problem of too much money being spent on inventory,” he says.

 

San Diego City Schools Superintendent Alan Bersin, once a senior partner in a Los Angeles law firm and later a U.S. attorney, says his legal background bore fruit when he was faced with a key financing issue. Bersin was told repeatedly that the school system could not spend money from the federal government’s major K-12 funding program, known as Title I, in ways that he thought necessary to back his reform efforts. His legal nose told him otherwise, and he had staffers examine the history and legal ins and outs of Title I back to its inception in the presidential administration of Lyndon Johnson. “It became very clear and very arguable that, in fact, spending funds in the way we wanted was completely consistent with the intention and purposes of Title I,” he says. One outcome, he asserts, is that “many stupid rules were justifiably broken.” Bersin served in San Diego for seven years and in July became education secretary for California Governor Arnold Schwarzeneggar.

 

Whatever their backgrounds, the nontraditional school officials have sought to introduce common areas of private business into their public workplaces. As CFO,  Olchefske oversaw Seattle’s path-breaking movement to a more market-driven school financing mechanism called “weighted student formula,” where funding follows children and provides incentives to schools to improve as they compete for those dollars.

 

Once he was elected superintendent in 2000, Gaetz maintained the cost-cutting zeal he had developed as a parent volunteer, redirecting $5 million in administrative overhead to the classroom. One of the most important features of his administration, he says, has been his insistence on the establishment of “the highest academic expectations in the state”-the educational equivalent, he says, of Vitas Healthcare becoming a successful business because of its emphasis on “the highest clinical standards.” Under Gaetz, the Okaloosa County schools took the step-unpopular with many parents-of eliminating all social promotions. At the same time, children who were held back were offered $2,000 tutoring vouchers for help to get back on track. Such changes are apparently having an effect. The vast majority of schools in a district that once was graded “C” by the state of Florida today are bringing home an “A.”

 

These kinds of achievements have not come without missteps. Levenson, accustomed to the rapid-fire world of corporate accomplishment, had to adjust his demands to a slower pace when he entered education as a kind of apprentice assistant superintendent in Harvard, Mass. Projects that he expected to take only weeks to complete took considerably longer, and not because of bureaucratic dilly-dallying-he learned that educators are extraordinarily busy people. Principals, whom he likens to district managers in business, often lack the basic administrative support that managers take for granted “because nobody funded a $6-an-hour, two-hour-a-day person for those functions,” Levenson says. 

 

Nontraditional school leaders encounter other surprises, too. Public schools are heavily covered by the local press, and the new school leaders are often startled by the fishbowl nature of their new jobs. Paula Dawning, superintendent, Benton Harbor, Mich., a Broad Fellow and former AT&T vice president, was used to a tight-lipped culture to prevent premature disclosure of information that could wreck multimillion-dollar deals. Today, everything from Dawning’s salary to much of her correspondence is open to view. 

 

The new school officials face frustrations, as well. Many say performance pay is sorely needed in public education, but that teachers’ unions and administrators’ ingrained culture make this a difficult innovation to push. For his part, Houston’s Mir believes that the teaching profession needs a clear career path, akin to that in his profession and in law. The “in-service” training most teachers currently receive is not nearly as intense as the kind of professional development young lawyers and CPAs routinely receive, he maintains. And the lack of a career path-a road to, say, a lead teacher’s post-pushes too many ambitious teachers into administrative jobs when the classroom is the place their talents most shine, Mir has concluded.

 While there are many parallels between schools and business, the comparison goes only so far. “Children are not interchangeable widgets, and teachers are people, too,” says Dawning. That means some common business practices must be discarded. A sales center can be shut down if business is bad, Dawning says, but not a classroom in mid-semester, even if enrollment drops and school funding falls short.

 

Whatever the difficulties of the job, former business leaders welcome peers from their previous lives to help turn schools around. “If you’ve done well in the business world and have a sense of community responsibility,” says Gaetz, “what better cause than your children’s schools?”

 

HEAD of the CLASS

A sampling of business leaders who’ve jumped into the educational fray:

Don Gaetz, co-founder of Vitas Healthcare, the nation’s largest private hospice company, is now school superintendent of Okaloosa County, Fla.

Nate Levenson, onetime CEO of North American Industries, a family-owned manufacturing company, is now superintendent of Arlington, Mass., public schools.

Gasper Mir, co-founder of a large, Houston public accounting firm, is

executive director for strategic partnerships in the Houston school district.

Joseph Wise, a former Walt Disney executive and CEO of an educational technology company, now heads the largest school district in Delaware.

Source: Chief Executive

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