Democracy Prep, takeover artist
Democracy Prep is expanding in a novel way next school year ? by taking over a failing charter school at its authorizer's behest. SUNY was set to deny Harlem Day Charter School's charter but instead asked for proposals to turn the school around. Democracy Prep stepped up.
It's a huge risk. By and large, turnarounds are unsuccessful. For Democracy Prep, which had the city's highest progress report score for a middle school last year, this would be its first attempt at a turnaround. In New York City, the Bloomberg administration has relied largely on shutting failing schools down and re-starting from scratch, a method that critics say disperses the neediest children and destabilizes communities. Under Mr. Lambert's plan, the students stay put, and the management and board are wiped out.
It's great to see "acquisitions" like this one. Democracy Prep is a solid performer, and this gives them a new school complete with kids, parent and community recognition, and some momentum. Clearly it comes with challenges as well, however, with more than 40% of their kids being held back to repeat a grade. The question this raises for me is, why do we wait to talk about these kinds of takeovers until a school is failing?
Entrepreneurs, charter school founders among them, start businesses for many reasons. Not all of them are great long-term managers. Instead, what the most successful of them have is a keen sense of the needs of customers and stakeholders and the ability to manage through the very risky and tumultuous startup period. Many young businesses eventually attract venture capital that comes with help in managing further growth or get bought out by strategic investors, larger companies that grow their product selection or markets by acquiring smaller firms. Charter schools rarely have an "out" like this. They either grow into networks, fail, or limp along as mom and pops.
The charter sector could do with more "strategic investor"-style CMOs that develop serious expertise in managing adolescent schools. Let schools get some momentum and prove they can achieve some early academic results and secure community buy-in. Then the "takeover artist" CMO would come in, shore up the school's financial and operational house if necessary (we know many charters struggle with this), contribute management expertise, and add them to their portfolio via a non-profit acquisition or management agreement.
Such a strategy would help a broad range of stakeholders. School founders would have an exit strategy; even if they intend to continue running the school (and should, if they're good at it), they could offload some of the management burden. Cities and portfolio districts could gain some confidence that the improvements their startup schools make are sustainable. CMOs would have a new route to achieving scale. Most importantly, the charter movement would be investing in taking schools from good to better rather than waiting until failure is imminent to bring a larger charter network into the picture.
? Chris Tessone
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About the Editor
Bernard Lee Schwartz Policy Fellow
Chris Tessone was a Bernard Lee Schwartz Policy Fellow and the Director of Finance of the Thomas B. Fordham Institute. He has strong interests in governance and education finance, especially teacher compensation and school facilities finance.
May 16, 2013