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I love that you profiled UP! It is definitely a unique value proposition in the education space and one that has been invaluable to rethinking how to turn around failing schools. I know the word limit makes it tough, but I would also love to read more. Human Capital and data are two critical features, but as you allude to there are so many components that make these schools work, which is part of what I found difficult in breaking down a school’s business and operating models. Definitely an interesting read and I look forward to continuing to watch them work! I will also just echo the talent comments and how important and hard talent recruitment becomes, especially outside of major cities like Boston. Thank you!

P.S. The first chart is small, but the x-axis is socio-economic status and shows two things: (1) generally speaking, there is a tight correlation between socio-economic status and student outcomes. That’s the reality. (2) Brooke defies those odds. At my last job where we did school turnaround (we worked with lowest right blue dots on the graph), we talked about schools in the “upper right” – high need students who highly outperform the state. Brooke is the exemplar of this – they are the highest performing school in teh state and serve high need students. It just demonstrates how amazing their work is.

Marie – great questions and this is, as you identified, one of those confusing questions.

A couple quick items:

In most states with widespread charter schools, they use a “per-pupil funding” model. This means that a combination of the state (states usually set something like a foundation) and local districts create a formula for how much money each child gets. Then, whichever school educates the child gets the dollars. There are enrollment counts, usually in October and March, and funding is dispersed. You can imagine how this would be hard, as is usually between $10-$15K per student, so if you are short 10 students you might have to fire 1-2 teachers. But, in most (but definitely not all) places, funding is increasingly following the student. Also, if a student has special needs, is an English Language Learner, or comes from a low socio-economic background, there are additional dollars (both state and federal) that go with that child to their school.

As far as equitable funding goes, that is a really tough question here and is answered state by state. A supreme court case in the 1970s eliminated a federal ruling on school funding as education is not actually a guaranteed right in our country. That case means that all the funding fights happen on an individual state level, which results in California having an “equitable” $7K per student and New Jersey with an “equitable” ~$17K per student because of the way rulings have happened. Oh, and performance varies incredibly within those two states. Finally, there are many cases where suburbs are supplemented with local property taxes as you said, although a lot of that happens in different ways than the fundamental school funding formulas. For example, it is a lot easier for a suburban town to pass a bond to build a new high school than it is for an urban school to even get a school properly hardwired – so you see it a lot more in infrastructure than in the instructional dollars.

Great question and welcome to the US – our history of localized educations makes everything very confusing. At the same time, results increasingly show that the funding level itself is not determinant of the outcomes. The issues in question here – business and operational strategy – wind up being much much more important characteristics. It is all about what you do with the dollars!

In the case of Brooke, the school has the same amount of funding as every other Boston public school plus a few philanthropic dollars. In 2013-14, Brooke had $24.4M in Operating Revenue plus an additional $2.1M in General Revenue, of which $800K was philanthropy – Generally speaking, the charter movement in Boston seeks to operate on those “operating revenues” – which are public taxpayer dollars – and uses the philanthropic dollars for supplemental programs. For example, Brooke gives some of their Associate Teachers (teachers in training) scholarships to help pay off college loans. Pretty cool.

Thanks for the questions and happy to follow-up!!

Hi Yao –

Thanks for the comment. I’d be happy to talk more with you about more comparisons, but the reason I chose Brooke is because they are the most focused and transparent about their strategy of focusing on great teaching. There are many reports (TNTP’s Greenhouse Schools report is an interesting one focusing more broadly on instruction: that compare other schools, and Brooke performs very well across the measures; however, in many schools you see such broader efforts to achieve similar missions that in many cases they cannot reach the efficacy of Brooke. Unfortunately, in too many cases, schools also just adopt a status quo operational model and don’t think about a “strategy” at all, they just use what has been done. This is part of what makes some of the work in charters and innovation schools special, as they think about the alignment between strategy and operations differently than the traditional, accepted system. And, in the US, our generally accepted system is generally accepted to not be working, so we absolutely need these innovations. I’d love to continue the conversation about more comparisons and potentially bring to light some of the even more different schools that rethink how children go through grades / subjects, the role of technology (brought up above by Brian, too – totally important)! and more. Thanks all!

Charles – great questions that point to a critical issue in education today. I’ve attempted to summarize a few thoughts below but am also happy to continue this conversation!
1. Value-Add: The point you make about students starting in all different places is absolutely an issue in education; however, we actually have a fairly rigorous solution. The 2001 No Child Left Behind Act (the first federal legislation that required accountability systems in every state) knowingly got this wrong, opting for simplicity over the best measure in order to get the legislation passed. Since that time, almost all states have gotten waivers to use a “value-add” measure. This means that each student’s performance is measured absolutely, but the evaluating measure is actually to compare that child’s performance to the performance of every other child who performed in the same way in the previous year. The resulting percentile measure reflects where the child fell in the spectrum of all of the children who began the year in the same place. As a result, we attribute this to the “value-added” to that child in that year. It also means that if a student begins really far below grade level and gains more than a year of learning in one year, teachers can be rewarded for this additional value added to the child even if the child doesn’t pass the absolute bar at the end of the year. Sorry, that wasn’t such a short explanation after all.
2. Formative vs. Summative: At the same time that we have developed a relatively rigorous measurement system, there are still two main flaws. First, outcome based measures are often unavailable in a timely matter, with scores coming out up to six months after tests are taken. Therefore, it is very hard to continuously improve as a school on that large of a time lag. We call these the summative measures in education. However, what I didn’t mention and you very astutely identify is the seeming lack of quantitative measures beyond the rubrics that in fact do exist in schools. We generally call these formative measures – those that help inform the teaching practice to ensure all students are making necessary gains. The emphasis of these formative assessments is usually on student learning, but they can also be used as more frequent feedback mechanisms for teachers. Formative assessments are usually developed at the school level, although there are some organizations that have grown to fill this need.
3. Finally, the use of student test data is still hotly contested in the education space. This is often hard for the business community to understand, as sectors need measurement. However, I would point to this as a major failure of leaders as change agents. Instituting quantitative measures of performance into a previously independent (lacking oversight) and pride-driven teaching force has just gone fairly terribly. Part of that is the role of tenure and job protection, as effort and efficacy had never previously been linked and this scared a lot o people. Part of that is the idea that teachers themselves don’t take the tests, students do. So some feel it is unfair to be judged in this indirect way. Lastly, part of that is just the resistance to change and fear of the unknown, that was not handled well. I absolutely support use of quantitative measures for teachers, but we are unfortunately seeing major obstacles in implementation, with many states even rolling back their commitments. It is a fascinating case study for change leadership (and its failures).

Thanks again for the thoughtful response and sorry for the length of the answer!

Charlie –

I second Kyla’s comment – many thanks to your fiancee, who must be an incredible educator! I’m honored that you both read the post and it rang true.

My response to the charter school enrollment question is mostly that a few bad incidents gave the entire field a bad name. I personally taught at a charter school in New Orleans that served 35% special needs students exactly because students and families had choices and opted into our school that served them so well. It actually put a huge strain on our operating model, but we innovated our entire school in order to ensure that we continued to provide high quality education for every child. However, we were not yet at the level of Brooke. Overwhelmingly, charters serve students with the exact same profiles as their traditional school counterparts. As Kyla mentions, yes there are times when a very specialized need (for example, students with visual impairments) might be best served in a school designed to meet their needs, but this has always been true as students with special needs have operated outside of traditional enrollment patterns in order to ensure that their needs can be met. I think it is unfair to hold charters to a different standard. At the same time, in cities where charters represent the majority of schools, it is all that much more important to build out centralized enrollment systems (examples exist in New Orleans, where I taught, and Denver) that eliminate this debate.

Thanks for the work and thought-provoking responses LaToya, Charlie, and Kyla!

On December 14, 2015, Chelsea commented on Second Cup – A slow death or a second-act of revival? :

You’ve painted a pretty clear picture in my book – it seems like their operational model absolutely undermines their business model. It’s shocking to me, given the clear lapses in execution, that they were able to grow to 325 stores (although lack of competitors likely helped). While the turnaround strategy seems interesting, it seems critical for Second Cup to directly address the lapses you’ve highlighted. It doesn’t feel like a redesigned store and slightly revamped product offering is going to be able to rectify the lack of training, inconsistent support, and poor product quality overall. Plus, I would be curious to hear whether you think the public turnaround is even capable of overcoming current public perception of the problems.

In contrast, I think you highlighted an interesting point above that I’m not sure they’re realizing in the turnaround model – the opportunity to capitalize on local sources and pride. To me, the big opportunity would be to try to take share from Starbucks (not Tim Hortons, which I believe is a lower price point anyway) as the “Canadian” alternative so that those with pride for Canada would choose Second Cup over the American competitor. It feels like they are trying to directly compete with Starbucks through their “emotional” connection to consumers, but can they really beat Starbucks at their own game?? Instead, I’d be curious to see market research on whether or not they would position themselves as the local alternative, or a higher-end Tim Hortons.

Thanks for highlighting an interesting struggle in an industry that definitely impacts my life!

On December 14, 2015, Chelsea commented on Goods Doing Good: Sustainable Luxury at Maiyet :

Selin – I’m jumping on the bandwagon here because I had also not heard of Maiyet and so appreciate your profile! Like the posts before, my immediate thoughts went to scale and managing the growth of the line. For that reason, the “factory” component was definitely interesting and I’d love to learn more about how Maiyet is pairing its training with its infrastructure investments (e.g., how is it choosing locations, what kind of “buy in” do artisans have to offer to become part of the program, and how/by whom are these sites being managed). This could certainly be an interesting business model to challenge the status-quo in a highly competitive industry that is often cited for such poor working conditions in unregulated markets. I hope that the profile of the company can rise in order to bring more attention to what is possible.

My other thought here is on the pairing of a for-profit and non-profit. Two quick thoughts come to mind: (1) How important is it to be in the ultra-luxury segment? (2) Why does Nest need to be a separate non-profit instead of one integrated organization? On the first point, I would just be curious to investigate how much the profit margin on some of the items, as Cynthia alludes to above, is the only way to make this model functional and therefore perhaps the very thing I hoped for in the first paragraph wouldn’t be possible. On the second, I think this comes back to an initial question Mitch asked us about the role of business vs. philanthropy or public sector. If Nest exists in order to receive and implement philanthropic dollars that could not otherwise flow into the for-profit Maiyet, then I definitely understand. If it is separate just to separate profits (and potentially losses in the non-profit), I would love to challenge that idea to hope that we could prove sustainable and fiscally responsible double bottom line companies are truly possible. It certainly seems like Maiyet has the possibility to do that.

Thank you for sharing, Selin!

On December 14, 2015, Chelsea commented on Dunkin’ Brands: The On-the-Go Cup of Joe :

Definitely interesting to think through the comparison of Dunkin Donuts to the often discussed Starbucks, and you’ve done a nice job highlighting the way in which the franchise model enables DD to align its models. I, too, am curious about product proliferation, as my impression has always been of DD as a simple and cost-effective option for coffee and/or donuts, as Adam discussed above.

On a different note, I wonder how brand loyalty plays into this equation. You speak to the importance of training and customer service providing a consistent quality for the consumer, but I was struck how loyal the DD customers were when I first moved to Boston. It is a point of pride in New England that DD feels like a “local” brand. For example, it was well known at my office that during one of the blizzards last year, Dunkin was the only place you could count on being open. There is something about that very simplicity, consistent service, and low cost that results in incredibly loyal customers as just another piece of evidence that the operating model aligns to the business model.