Pearson CEO John Fallon Wants to Win America Over.
In my book, Common Core Dilemma–Who Owns Schools?, I have a chapter on London-based mega-company, Pearson. The chapter includes details from Pearson’s February 2014 earnings call, which shows Pearson’s plans to rake in the bucks from Common Core and associated testing as Pearson “embeds” itself into American education like a fat tick latches onto the skin of an unsuspecting yard dog.
How’s that for a mental picture?
On September 23, 2015, Washington Post education writer Valerie Strauss featured an excerpt from the Common Core Dilemma chapter on Pearson. Readers are able to view Strauss’ post on her blog, “The Answer Sheet,” by clicking here.
Since the time of its February 2014 earnings call, the rollout of Common Core and its associated assessments has not proceeded as smoothly (and therefore, has not translated as readily into profits) as Pearson thought it would. Such is immediately apparent in the struggling and shrinking of the Partnership for Assessment of Readiness for College and Careers (PARCC) consortium, one of two originally-federally-funded testing consortia that was supposed to provide Common Core-aligned tests to potentially 24 states and DC in 2011 (and perhaps more, if other states decided to join PARCC). By the time Pearson was awarded the PARCC contract in May 2014, PARCC still retained 16 states and DC.
In the months after that February 2014 earnings call, Pearson picked up the PARCC contract, then worth an estimated $240 million. It also had testing contracts in Texas (not a Common Core state) and New York.
Pearson just knew the Common Core testing profits were a-coming.
However, by July 2015, PARCC was down to 10 states and DC contracting with Pearson for PARCC tests, and Pearson had lost New York’s Common Core testing contract– worth $44 million over five years– to Minnesota-based Questar. Pearson also lost most of the Texas assessment contract– worth approximately $280 million– to ETS.
A word about Pearson and Texas: Pearson had been the testing vendor of Texas tests for three decades, dating back to the 1980s. The five-year contract to provide Texas assessments through 2015 brought $468 million into Pearson coffers. So, the fact that Texas did not adopt Common Core was of no particular concern to Pearson because they likely assumed the Texas assessment contract that they had had for decades was a given in the future.
Texas legislators tried to reduce testing in 2013 but were apparently prevented by America’s National School Board (tongue in cheek), the US Dept of Ed, which told Texas that if it enacted the state legislation to reduce testing, it could be held to the ridiculous No Child Left Behind (NCLB) stipulation of “100 percent proficiency in reading and math by 2014.”
So, the 2013 “Texas must assess” edict of America’s National School Board paid off (literally) for Pearson. And Pearson thought it would continue pay. Alas, the bulk of the four-year, $340 million contract for Texas assessments was given to ETS, with Pearson only retaining a $60 million slice for assessments for special needs and non-native students (presumably English language learners).
A $60 million consolation prize.
Add to the PARCC-New York-Texas assessment contract disappointments Pearson’s April 2015 loss of the California testing contract. (California was a Common Core state under the Smarter Balanced testing consortium after it left PARCC in 2011.) Yep, Pearson lost to Educational Testing Service (ETS), and this loss had Pearson crying “unfair” and threatening to sue California– though it seems Pearson decided not to. As noted in this April 21, 2015, EdWeek article:
Two of the biggest names in testing are locked in a dispute over one of the most coveted jewels in the K-12 market: the right to oversee a suite of assessments in California, a state with about one-eighth of the country’s students.
The state’s recent decision to award a tentative three-year, $240 million contract to the Educational Testing Service drew an angry response from a rival vendor, Pearson, which has accused reviewers of missteps that include sloppy scoring and improperly discarding records of their deliberations.
The California dispute is just the latest example of the legal and procedural scrapes playing out as state testing goes through a period of enormous change, shaped by such factors as the shift from print-based to online testing and the adoption of new assessments aligned with the Common Core State Standards. …
in the California dispute, the London- and New York City-based company describes itself as the aggrieved party, saying the process was slanted to favor the Lawrenceville, N.J.-based ETS, which is the incumbent test administrator in the state.
Pearson officials, whose bid for the work was $34 million cheaper than that of the ETS, declined to say whether they will sue to stop the award, but they have asked California officials to reconsider the ETS agreement, which is still under negotiation and is scheduled to go before the state board of education for final approval next month.
Ironically, even as Pearson was considering suing California officials over a $240 million testing contract, AIR was suing PARCC over alleged favoritism in awarding Pearson the four-year, $240 million contract for PARCC tests for Pearson’s having an edge for its 2012 PARCC-Smarter Balanced technology readiness tool contract. In July 2015, AIR lost its appeal in a New Mexico court and decided to let the matter rest. (New Mexico, originally a Smarter Balanced state, joined PARCC in August 2011 and became the state to contract with Pearson on behalf of all PARCC consortium states.)
Thus, by summer 2015, Pearson had faced a number of costly disappointments related to America’s Common Core, and especially related to Common Core testing, which drives the entire Common Core enterprise.
I was especially curious to see how Pearson CEO John Fallon would deliver such news to market analysts in July 2015.
The directly-cited information from Pearson’s July 2015 earnings call comes from this transcription by SeekingAlpha. I am allowed to directly cite up to 400 words from the document entitled, “Pearson’s (PSO) CEO John Fallon on Q2 2015 Results – Earnings Call Transcript, July 24, 2015.”
The speaker in these excerpts is Fallon:
…the policy debate around the new college and career readiness standards in the United States has been more uncertain and even more fractious than even we expected it to be.
As you know we’ve been at the forefront of helping states to develop assessments that measure these new standards. And, initially at least, the teacher evaluation that’s linked to these new standards is proving unpopular with teachers, primarily because they’re worried that they should be given more time to adjust to the higher expectations that are now being placed on them.
Fallon tells investors that he expects American teachers will get used to being evaluated using student test scores. They just need more time.
He also comments about parental resistance against overuse of standardized testing:
Some parents, as you may have seen in some of the press coverage are worrying that do they drive a culture of teaching to the test?
Fallon also notes the growing public outcry against “National School Board” federal overreach:
And, perhaps most significantly you seen state governors and local politicians concerned about federal overreach.
His “solution” (stay tuned) is a more concentrated PR push.
America just needs to trust Pearson.
As to Pearson’s assessment contract misfortunes, Fallon says that the loss of “a number of high profile testing contracts” should be weighed against the fact that Pearson holds 30 percent of the assessment, “only slightly lower than it was before we started the shift from No Child Left Behind to Common Core back in 2012.”
Though Fallon tries to be cool about it, the fact that Pearson’s percentage of the assessment market has dipped lower than it was three years ago is not what profit-driven Pearson wants.
Incidentally, Pearson chief financial officer (CFO) Robin Freestone was apparently downsized right out of his job in October 2014; the July 2015 earnings call was the last he was to participate in prior to his departure “to explore a range of other interests.”
Pearson cares about the loss of hundreds of millions in American assessment contracts.
Nevertheless, Fallon is comforted that the US Congress will continue its standardized-testing-centered focus in the proposed Elementary and secondary Education Act of 1965 (ESEA) reauthorization:
…Legislation passed last week (July 16, 2015) by the senate reaffirms a commitment to annual assessments as a means of promoting the quality in education, so we can expect annual assessment to continue to be an important part of the U.S. policy landscape…. The biggest contract we’ve lost in Texas is still largely paper based and we’ve announced plans… to halve our print based test processing facilities nationwide. …That work freezes up actually to take much more of a lead in developing the next generation of better, smarter digitally-led assessments which meet the understandable concerns of parents and teachers….
In order to “meet the concerns of American parents and teachers,” Fallon believes that Pearson just needs to make better tests.
Add to that the aforementioned push to promote and polish Pearson’s image so that the American public will just know Pearson wants what is good for “learners of all ages.”
As Fallon tells it, Pearson is only here to help:
…We talked about the fact, that education’s an issue that quite rightly …arouses strong opinions and feelings, we’ve seen that in the debate around testing in the United States…. …15 years after we made our first big moves into education, public awareness of Pearson as the world’s leading learning company is still relatively limited. … So we are now engaging much more publicly, working with parents and teachers, listening to employers, helping learners of all ages. The defining characteristics of Pearson, love of learning, deep desire to help people acquire the knowledge and skills to be successful in their careers, we know are widely shared around the world.
For us to win hearts and minds as we must, we have to ensure we tell that story more effectively. So you’ll start to see that work publicly as we build the Pearson brand much more proactively….
Fallon wants to build the Pearson brand, which will not solve the issue of public concern that Pearson exerts too much influence over American public education. Consider this excerpt from the Texas Tribune regarding Pearson’s loss of the Texas testing contract:
As the Legislature moved to reduce the state’s standardized testing program in response to widespread outcry from parents and school leaders in 2013, the state’s contract with Pearson became the focus of much criticism. Many lawmakers, including former Senate Education Committee Chairman and now Lt. Gov. Dan Patrick, R-Houston, attacked what they viewed as the company’s excessive influence in the policy-making process and called for greater scrutiny of testing contracts. [Emphasis added.]
America needs less of Pearson. A lot less.
I have exhausted my 400 words.
In closing, let me paraphrase one of the analyst questions for Fallon:
A Goldman-Sachs analyst asked if testing issues have tarnished Pearson’s brand, if perhaps Pearson should do something called “white labeling” in order to hide from the public that the test is a Pearson test by allowing another company to promote the test as its own.
Sneaky. But Fallon isn’t buying it because he clearly wants America to know how vast and looming Pearson is. In his response, Fallon narrowly focuses on building the Pearson brand. He thinks that is the solution to winning over American teachers, parents, and the greater public.
Clueless. But hoping for ever more money out of American education.