When Hurricane Katrina slammed into the Gulf Coast region of the United States in August 2005, it destroyed homes and lives. A paradoxical effect, however, is that the storm's aftermath created an opening in New Orleans for school leaders to consider anew the direction of a low-performing public school system—and to take action to improve it.
There has been much work to do, as Harvard Business School's Stacey Childress details in two case studies. According to Childress, "The New Orleans public school district was already in crisis before Katrina due to financial instability, political infighting, and allegations of corruption. The district was by far the lowest performing in the state, and nearly half of its 125 schools failed to meet their adequate yearly progress goals in 2004 as required by the federal No Child Left Behind Act." The flooding and overall destruction harmed all but 8 schools.
Since the storm, according to Childress, 80 schools have reopened. The surprise, however, is that about half of these are charter schools. (The remainder is traditional public schools.) No other large school district in the United States has such a high percentage of charter schools.
What was the appeal of charter schools in this sensitive environment? What opportunities do they present both for improving public education and utilizing best practices in entrepreneurship? Childress explains below.
Sarah Jane Gilbert: After Hurricane Katrina hit New Orleans, the disaster gave the city an opportunity to rebuild its low-performing public school system. What led you to do this research and teach case studies on this subject?
Stacey Childress: I developed and teach an MBA elective course at HBS called Entrepreneurship in Education Reform. The course is focused on the kinds of opportunities that education entrepreneurs are coalescing around. One of the sessions in the course is a thought experiment—if we could start from scratch, what kind of education system would we build? After Katrina, the New Orleans public schools faced a huge task, but they also had an exciting opportunity to start over, similar to our thought experiment. I wanted to follow their efforts, and specifically to see what entrepreneurial activity would spring up in the highly uncertain post-storm environment.
I wrote a context case right after Katrina, chronicling the condition of New Orleans education before the storm and the immediate actions taken by the city, state, and federal government: "Rebuilding the New Orleans Public Schools: Turning the Tide? (Abridged)." I've used it in my course for the past three years. Since then I have stayed in touch with many of the players on the ground there, and became interested in a start-up called New Schools for New Orleans (NSNO) through the work that our student teams have done every January since the storm as part of the HBS New Orleans Service Immersion. This year two of those students, Scott Benson and Sarah Tudryn, worked with me on a case about NSNO, "New Schools for New Orleans 2008," which I taught in my course this past spring.
Q: What are the differences between charter and traditional schools? Why were charter schools so attractive to New Orleans in its plans to rebuild the educational system?
A: Charter schools are public schools of choice that operate outside the governance and policies of their local school districts. In nearly all states, charter schools must be open to all students, just like traditional public schools. Families choose to enroll their children, and if more students are interested than seats available, the school is required to run a random lottery to fill the seats.
Charter schools receive public funding on a per pupil basis from federal, state, and local sources. The operating dollars are usually comparable to local school districts, but in most states charter schools do not receive capital allocations for building or leasing facilities, which represent significant start-up and recurring costs. They must either reduce what they spend on teaching and learning or secure private funding to make the rent. Most charter schools are organized as nonprofits, although there are a few for-profit charter school companies. The schools have their own boards of directors, and usually are not obligated to abide by any collective bargaining agreements that exist for teachers and principals in their local districts.
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Every charter school operates under a five-year performance contract with its authorizer (usually the state department of education or a university). The school is subject to the same state accountability systems as public schools, but a key difference is that if it fails to meet the benchmarks in its contract it can be shut down rather than renewed at the end of its five-year term. So while charter schools enjoy more autonomy than traditional schools, they are theoretically more accountable. I say "theoretically" because some states are more diligent than others about shutting down low-performing charter schools.
Before Katrina, the New Orleans school district was one of the most underperforming in the country, and only had about a month of cash on hand. The storm hit a few weeks into the school year, so after everyone had been paid for the days they had worked, the district was completely out of money and had to lay everyone off. As people started to return to the city, the schools needed to be reopened. Given the condition of the district, in November 2005 the state took over responsibility for the majority of schools, and created an opportunity for individuals to reopen schools as charters. A number of teachers and principals rose to the challenge.
Today around half of the 80 schools in New Orleans are charter schools. The rest are traditional public schools, most run by the state and a few by the local district. No other large district in the country has such a high percentage of charter schools.
Q: How does New Schools for New Orleans fit into the reform landscape in the city? What were some of the lessons from the case?
A: One of the benefits of being a charter school is the autonomy that school leaders have to hire teachers and create programs that are good fits for their students' learning needs. But being "on their own" can present real challenges as well. A number of important tasks, such as best practice sharing, teacher recruitment, and professional development, can increase in quality when networks of schools cooperate with each other. When school districts work well, they create these scale advantages; when they do not work well, they are cumbersome bureaucracies. Because of the number of independent charter schools in New Orleans, a market opportunity emerged for an organization that could help schools coordinate with each other and receive shared support services without creating the dysfunction of a large urban district.
“One of the benefits of being a charter school is the autonomy that school leaders have …. But being 'on their own' can present real challenges as well.”
Sarah Usdin says she founded NSNO "almost by accident" as she used her local and national education network to assist many charter school entrepreneurs who were launching schools right after the storm. As a former Teach For America corps member and executive director, she had spent a decade in Louisiana working in education, and had deep knowledge about local schools and state policy. Realizing that her individual efforts to support new charter schools were just scratching the surface, she launched NSNO. She recruited longtime charter expert Matt Candler as CEO, and together they are building an organization that incubates new charter schools and provides a suite of services for independent charters across the city. They have been instrumental in connecting national organizations like Teach For America and New Leaders for New Schools (launched out of HBS eight years ago) with opportunities on the ground. They have also partnered with these organizations to attract $17 million in funding from national foundations to support reform in New Orleans.
Q: What are the reactions of MBA students when you teach a case like this? Do their responses surprise you?
A: The key to a good education entrepreneurship case is the same as with any case—is there a decision point or managerial tension that students can struggle through together in the class discussion?
NSNO developed a strategy to focus on a subset of charter schools that it believed could be helped most. (NSNO is off and running in that direction and is good at it.) It turns out that its vision is "excellent public schools for every child in New Orleans." Every child, not just the children in charter schools. The state runs the majority of traditional schools, and the traditional schools are really struggling. A new superintendent who is well-known and respected in education reform circles arrived this [past] school year. He asked Sarah and Matt to expand their strategy to assist him in building the success of traditional schools as well as charter schools. The case presents the necessary data to have a rich conversation about whether this early-stage venture should shift its strategy dramatically to support all schools, not just charter schools.
When we discussed the case in April, my 160 students were fully engaged in the hard choice, and they were split about 50/50 on what Sarah and Matt should do. Most of them were deeply disturbed by the data presented earlier in the course showing how poorly our urban public schools were performing, and by the time we discussed this case, they were motivated to come to class and apply their hearts and their heads to these difficult questions about how to improve the quality of education for students in urban areas. Sarah and Matt were in the classroom when we discussed the case, and as much as the students admired their commitment to New Orleans, they treated them like any other guests by asking tough questions and challenging their assumptions.
If anything surprises me about this it's that when we discussed the case it was just a few weeks before graduation and you might imagine that the students were beginning to "check out," but this group was fully present intellectually and emotionally. And they remained so to the very end of the course.
Q: What other topics do you cover in the course, and how do you explain such high interest in an education course at a business school?
A: As I mentioned earlier, the course is organized around entrepreneurial opportunities in U.S. public education, and we explore those in five modules: Understanding the Context, Tackling the People Problem, Focusing on Performance, Confronting Achievement and Opportunity Gaps, and Creating New Schools. Four questions run throughout the course: Why is there an entrepreneurial opportunity for private actors to provide some of the core activities of a publicly funded public good? Which opportunities are attracting entrepreneurs? Within each opportunity area, what possibilities and constraints do entrepreneurs face? How might we evaluate the effectiveness of entrepreneurial efforts at work in the sector?
The performance problem that knits together the modules is disparity in outcomes between students of different races, ethnicities, and family incomes. The organizations we study in class are working on some aspect of this performance problem. We explore well-known education organizations such as Teach For America and KIPP [Knowledge Is Power Program], as well as more recently launched technology companies like Wireless Generation, and a handful of urban districts that are led by innovative superintendents who are working with entrepreneurs or thinking and acting more entrepreneurially themselves. CEOs of the case organizations are in the classroom in about 60 percent of our 30 sessions.
I think MBA students are interested in the course for a number of reasons. As future business leaders, they understand that our public education system is critical to U.S. competitiveness in a global economy. As citizens, they care very much about issues of social justice—they come from all over the political spectrum, so their assumptions about how to solve problems are diverse, but they care about the same principles. Education is one of those issues that allows for concrete discussions about these assumptions and principles. They also tell me that the problems we discuss in class force them to integrate and apply many of the concepts they learn at HBS—strategy, governance, leadership and organizational behavior, operations, entrepreneurial management, and reporting and control. Some students plan to work in education immediately or within a few years of graduation, but most will spend their careers in the private sector. They leave the course better prepared to work on education reform in their communities as board members, community leaders, philanthropists, and parents.