Public Schools and the "Business Model"

This article is from the Wall Street Journal (link: http://www.opinionjournal.com/taste/?id=110010241) and was submitted by Karen Peikert. It is lengthy but worthwhile reading.


Another School Dropout
How long can someone with an M.B.A. last in an education bureaucracy?

BY NAOMI SCHAEFER RILEY
Friday, June 22, 2007 12:01 a.m.

When the kids in the Oakland public schools left for summer vacation last week, they did so oblivious to any staff changes at the district's offices. It's not really their concern, for instance, that Barak Ben-Gal, the budget director for the school system, recently decided to become Yahoo!'s director of corporate finance. But when people like Mr. Ben-Gal, who has a bachelor's degree in economics from Harvard and degrees in business and education from Stanford, spend three years trying to change the system and then give up, someone should notice. The people who run the operations and finances of public school districts are not visible the way that teachers are. But as with teachers, recruiting and retaining smart ones is an uphill battle.
After finishing at Stanford in 2004, Mr. Ben-Gal (full disclosure: I know him from college) was accepted into the Broad Residency in Urban Education. Funded by billionaire Eli Broad, the program takes people with J.D.s, M.B.A.s or degrees in public policy and at least four years of work experience and places them in inner-city school districts. When Mr. Ben-Gal started his residency, the Oakland Unified School District was bankrupt. It had been placed under state control, and his first role was as the special assistant to the state administrator. In the subsequent two years he was the executive officer of financial services and then finally the budget director for the whole district.

Today, thanks in some part to his efforts, the district is out of bankruptcy and several foundations have made large grants to Oakland. Now that he has left, though, Mr. Ben-Gal can offer his criticisms of the system. And they are worth understanding, particularly for two reasons.
First, an increasing number of school districts are hiring leaders from business backgrounds. Whether it's Joel Klein, the New York City schools chancellor who was once a corporate lawyer, or Joseph Olchefske, who left investment banking and eventually worked as the superintendent in Seattle for a few years, some businessmen find that running a multimillion- (or multibillion-) dollar school system has a certain appeal. But those thinking of this track should know what they're getting into.

Second, as standards-based education has become more prevalent thanks to No Child Left Behind, "some people may think that the problems in our schools are going to go away," says Frederick Hess, director of education policy studies at the American Enterprise Institute. In fact, he explains, all that information we're collecting about student achievement won't be helpful "if we can't figure out what specifically is improving student achievement and how much it costs." Even if administrators can get all that data, he adds, their hands are often tied.

So, for instance, Mr. Ben-Gal tells me that if a school has a surplus in its textbook fund and needs a new security officer, the money cannot be transferred. Indeed, in many cases, a district administrator won't even know how much money is available until it's too late. Mr. Ben-Gal explains that thanks to the timing of the state budget process, he would not find out about discretionary funds available for, say, a music teacher or a school counselor until halfway through that school year.

The lack of information is not just coming from above; it's coming from below. Principals often don't tell the district that they have a position to fill at their school until a few weeks before the school year begins. Why? According to the collective bargaining agreement, every teacher under contract has the right to work someplace in the school district. If a principal doesn't want a particular teacher, the district still owes him a job. A principal would rather start the year with no teacher in the classroom than take the one who has been cut from another school.

And the clerical union is like the teachers' one. Seniority, not competence, gets people promoted. Mr. Ben-Gal reports, "There were people in accounting [who] didn't know the difference between a debit and credit." And the administrators? As Mr. Hess explains, administrators are almost entirely former classroom educators. "There is nothing in their background that would lead you to believe they'd be good managers of teams of adults." Mr. Hess, who has done extensive studies of the way principals are trained, says that they are not getting any kind of education in these areas once they move out of the classroom, either.

Even if you can assemble a team of competent people (and somehow hold on to them without offering merit raises), Mr. Ben-Gal notes that you are still constrained in ways that would be unimaginable in the private sector. For instance, he compares the operations of his local school board with the board of a corporation. "Corporate boards look at big-picture governance. They ask, 'What are the major milestones our CEO should be achieving?' Board conversations are held behind closed doors because the board members are supposed to act as trusted advisers."

By contrast, the Oakland board, like most school committees, has all of its meetings televised. Every contract, no matter how minuscule, must be put to a vote. And every financial decision has to be put on hold while waiting for a monthly board meeting. As for its members acting as trusted advisers, Mr. Ben-Gal assures me that thanks to the public nature of its meetings, "the school board typically knows less than what the staff knows."

In principle, smart businessmen should want to enter this field. As Mr. Olchefske, the former Seattle superintendent, tells me: "These are fascinating, complex jobs. There are academic goals, financial goals, a lot of balls to juggle. The skills you develop are applicable in other environments."
Mr. Ben-Gal, at age 31, was overseeing the budget of an $850 million organization with 5,500 employees, $150 million in construction projects, security officers, mail carriers, nurses and bus drivers. The results-based budgeting system Mr. Ben-Gal helped institute became the subject of a case study at Berkeley's business school and spawned a case competition with seven other institutions to develop recommendations to help districts tackle similar issues. (New York and Chicago later consulted heavily with Oakland on their own budgeting reforms.) How was this news taken by Mr. Ben-Gal's colleagues? He tells me it was a "morale hit." People asked, "Why do we need to bring in outsiders to solve our problems?"

To this day, he remains amazed that the effort to "attract and draw more talent into the sector was not well received." When asked why he left, Mr. Ben-Gal cites various structural problems as well as a "lack of professional mentorship." He advises newcomers from the business arena to make sure they find a supervisor "who can make use of their skills. . . . Otherwise someone coming in might feel frustrated and underutilized."

Mr. Ben-Gal took a 50% pay cut when he came to the district. But he has no regrets about that. He says he didn't join for the money. And he didn't leave for it either.

Ms. Riley is The Wall Street Journal's deputy Taste editor.