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ONLINE SPECIAL REPORT July 22, 1999

Business and Education: Learning to Work Together
Faced with the clear need for better-educated Americans, both sides are overcoming old obstacles and looking for common solutions

Teachers who visit the Science Learning Network (www.sln.org) can pick up something they can really use: lesson plans for teaching classes on pH factor (a measure of acidity), in English, Japanese, or Chinese. Also at the site, students can visit online exhibits on the Millennium Bug, on the oceans, and on air travel, prepared by science museums around the country. It all sounds pretty normal, except for one thing: The key partner that made it all possible is a corporation -- computer services company Unisys Corp.

"We saw a nice connection between our business focus, emerging Web technology, and science education," says David Curry, Unisys' vice-president for public affairs. Part of the company's goal is to "somewhere downstream" encourage more students to become budding computer engineers. "Because we are a high-technology company," Curry acknowledges, "we depend on schools to turn out new generations of people who are well grounded in science and technology."

Education, always the foundation of America's economic might, is becoming a make-or-break issue for business. As the labor market tightens, rising demand for skilled workers is giving corporations strong incentives to help ensure that schools produce the kind of workers they need. In corporate-speak, the U.S. has become a "knowledge-based" economy that depends on "knowledge workers." As a result, companies are willing to spend more on education and training-related initiatives than ever before.

 


The number of high-tech degrees conferred by U.S. colleges fell by 5% from 1990 to 1996
 

Such activity is most frenetic in high tech. A report released in April by the American Electronics Assn., a trade group, found that the number of high-tech degrees conferred by U.S. colleges fell by 5% from 1990 to 1996, even as demand for high-tech workers grew. It noted that U.S. students are taking more math and science courses than they did in the early 1980s, but it also quoted a 1996 study that ranked U.S. high schoolers 19th in math and 16th in science on a list of 21 countries.

Why worry? "While the relationship between business and education is seen as indirect by some, the quality of education and training in society has a major influence on the ability of business to compete," says Roger Porter, a professor of business and government at Harvard University, which has sponsored a conference on business and education in each of the past two years.

SEA CHANGE. In many ways, business efforts to reach out to schools is an old story. The new wrinkle -- actually a sea change -- is the extent to which the educational establishment is embracing business. Largely excluded from past education debates (except when trade schools were involved) on the theory that they might not have students' best interests at heart, business leaders are now playing key roles in education reform.

Many academics and school reformers are trying to figure out how to apply business principles to schools to improve the quality of education. "Public education isn't producing the students it should be," says Dave DeSchryver, senior policy analyst at the Center for Education Reform, a Washington (D.C.)-based advocacy group that supports charter schools, publicly funded schools that are held accountable for achievement in exchange for exemption from bureaucratic regulations and union contracts. "There should be some basic Business 101 practices, such as emphasizing results and accountability, that haven't been in place."

Educators are no longer afraid that business will turn students into factory workers, since factory workers aren't what's needed, adds DeSchryver. Now the goals of business and education are aligned in that both are seeking to produce or hire well-educated students who can make decisions independently, work in teams, and make good use of new technology.

 


One proposal: Give Baldrige "total quality" awards to public school systems
 

More testing and measurement of student and teacher achievement is one business practice that's all the rage in education now. Many states are establishing new testing requirements and standards for both teachers and students. The National Alliance of Business is currently advocating giving Baldrige "total quality" awards -- usually reserved for corporations -- to public school systems as a way to reward those that set goals and measure progress.

NOT ENOUGH TEACHERS. School systems are also looking to business for help in improving hiring systems and professional standards as they face an impending teacher shortage. The U.S. Education Dept. estimates that schools will need to hire 2 million more teachers in the next decade -- a huge increase given that there were 3.1 million elementary and secondary school teachers in the U.S. in 1998. That shortage is already apparent in large urban districts, the American Federation of Teachers says.

Increasing competition is another business idea that's transforming education. The idea of giving parents more choice, for instance, is behind movements to create charter schools or offer parents vouchers for sending their kids to private schools. The truth is that not all public schools are in crisis, but many large urban systems are. The demands of parents in places like New York, Chicago, Miami, and Los Angeles for both better schools and wider choice is putting pressure behind the push for vouchers and charter schools.

Indeed, business leaders have gotten behind these programs in a big way. Ted Forstmann, founder of investment firm Forstmann Little & Co., and John Walton, a director at Wal-Mart Stores, recently gave $50 million each to a scholarship fund that plans to give private-school vouchers to 50,000 poor children. Businesses are increasing their giving to education dramatically, says Robert T. Jones, president of the National Alliance of Business, a Washington-based business group focused on improving education. Donald Fisher, chairman of The Gap, has given $25 million to cover the costs of opening more for-profit Edison Project schools in California.

"We're long past the days of adopt-a-school programs and sending equipment," says Jones. "Now business is involved on a systemic basis." On July 1, Edward B. Rust Jr., Chairman and CEO of State Farm Insurance and chairman of the NAB, testified before the U.S. House of Representatives on the Elementary & Secondary Education Act -- the first time business has commented on that law, claims Jones. "Has business involvement and support and influence on schools gone up?" he asks rhetorically. "The answer is, you bet."

CAN'T FAIL. Meantime, for ordinary folks, the connection between education and success at work has never been more apparent. Twenty years ago, when the economy was more tied to manufacturing, nonskilled workers could find plenty of high-wage jobs. Now, it's hard to succeed in life if you fail at school. The pay gap between employees with college degrees and those without is widening. In 1980, workers with advanced degrees earned an average of 50% more than those with only high school degrees. Today, that gap is up to 111%, according to figures from Merrill Lynch. Inflation-adjusted wages for a 30-year-old male with only a high school degree are less than two-thirds what they were in the 1970s. Yet only about 20% of adults in the U.S. have a bachelor's degree or better. The clear link between education and salary has made parents and adult students willing to spend more on education than they have been willing to in the past.

To entrepreneurs and investors, all this demand for more and better education adds up to a business opportunity. Michael Moe, Director of Global Growth Research at Merrill Lynch, estimates that total spending in the U.S. on education and training is $740 billion. "When you look at a big market and see big problems, there is an opportunity for the private sector to come in and provide solutions," says Keith Gay, a partner at Thomas Weisel Partners.

 


Entrepreneurs are finding ways to profit from the demand for better schooling
 

Investors often compare the education market today with the health-care industry in the 1970s. Then, critics questioned not only whether it was possible to make money in health care but whether it was ethical. The health field, low-tech at the time, lacked professional management and made up only 3% of U.S. capital markets. Today health care is one of the top-performing sectors in the stock market and makes up 14% of U.S. capital markets, says Moe. "There is a radical change in the way education is being viewed," he says. "There is a shift toward openness and innovation, and Wall Street is providing the catalyst."

Entrepreneurs have recently come up with ways to profit from the public's willingness to pay for educating their children and from business' desire to train workers, often using the Internet as a vehicle. "I think that the Internet has changed the dynamics of most markets, including the education and career markets," says George J. Still Jr., managing partner at Norwest Venture Partners, a billion-dollar fund that focuses on technology businesses. "It has permitted some paradigm shifts to occur that have created new business models that really weren't feasible in the past."

DEEP FEARS For-profit elementary and secondary-school management companies, such as the Edison Project and Advantage schools, find themselves at the controversial point where business and education meet. These schools are often funded by charters that allow them to operate outside the regular public school system while still getting funding from taxpayer dollars.

"I think it is very legitimate for business to consider whether this is an industry it wants to enter," says Henry M. Levin, who is launching the National Center for the Study of Privatization in Education this fall at Columbia University's Teacher's College. He says there's too little research available to draw any conclusions about how charter schools are working so far. And he adds that some people fear that the spread of charter schools and vouchers could lead to more division along religion, language, and political lines. Teachers unions are also opposed to these programs, partly because for-profit schools are considered likely to use teachers as part-time workers, making it harder for unions to organize, he says.

Opposition is still strong to business interests having a heavy hand in education. Going back to the start of the Industrial Age, there is deep-seated fear that public schools will become facilities mainly for training our children to be well-disciplined drones while the elite send their kids to private schools that prepare them for the professions.

The bottom line, however, is that America's educational system is facing increasing pressures, including troubled urban schools, a coming teacher shortage, and low U.S. rankings internationally in math and science. Educators and politicians suddenly have little choice but to be open to new ideas -- even those put forward by business interests.

By Amey Stone in New York

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