Education Behemoth Pearson to Cut 4,000 Employees, 10 Percent of Workforce

Managing Editor

Pearson today announced that it is responding to rocky conditions and poor performance in international markets by laying off 4,000 workers and putting a greater focus on adaptive courseware and classroom products, as well as blended and online learning.

The massive cuts will reduce the giant education company’s workforce by about 10 percent, down from about 40,000 employees based not only in the United States and the United Kingdom, but also in Asia and countries around the world.

A Pearson official told EdWeek Market Brief that that company is not yet revealing how many layoffs will be in the United States, or other Pearson markets. But the education provider said it has launched a “rigorous, bottom-up review of our markets, our operations, and our financial plans.”

The company’s chief executive officer, John Fallon, said the company has fallen short of some recent key financial goals, but predicted the changes in strategy would help it turn a corner.

“Our competitive performance during the last three years has been strong, but the cyclical and policy-related challenges in our biggest markets have been more pronounced and persisted for longer than anticipated,” Fallon said in a statement. “Faced with these challenges, we are today announcing decisive plans to further integrate the business and reduce the cost base, rationalize our product development, and focus on fewer, bigger opportunities.”

The shifts in the market that Pearson said it did not fully anticipate struck the company from across the globe. There was a decline in higher education enrollments in the United States, due to stronger employment and what the company called “increasing regulation.” New school accountability measures in England and Wales caused a steep drop in vocational course-taking, from 700,000 enrollments in 2012 to 320,000 in 2015. And in South Africa, textbook sales plummeted with a new adoption cycle and budget pressure, the company said.

The companies’ global strategy will now change: Pearson officials said Thursday their new plans include reducing the “geographic complexity” of the corporation, concentrating on fewer markets.

The announcement about Pearson’s job cuts came in the company’s January trading update, in which the company said it expected to report adjusted operating profits of £720 million for 2015. In 2016, the company said it expects to report operating profits — before the costs of the restructuring effort — of between £580 million and  £620 million.

Ramping Up Online Programs

In U.S. schools, Pearson is both an omnipresent provider of education services and a target for critics, who cast it as a symbol of corporate reach into public education.

Much of the recent publicity surrounding the company has focused on its work in the competitive and ever-controversial world of summative state testing. For instance, Pearson recently landed an potentially huge contract last year (upheld after a legal challenge) to deliver common-core tests to PARCC states. PARCC, however, has coped with numerous defections of its member states, raising worries about its ability to achieve anticipated economies of scale.

On the flip side, last year Pearson lost out on delivering a cluster of state tests in a huge market, Texas, valued at $280 million, to the Educational Testing Service.

But Pearson’s work in schools and education programs also extends to curriculum, language acquisition, online education, virtual schools and many other areas.

The company indicated it over the next two years, it will be putting new products and services into the market focused on “adaptive, personalized, next-generation courseware” aimed at helping teachers and students. It will also introduce a new platform focused on meeting global and U.S demand for blended and virtual learning, “at a greater scale.” It will create new certification programs meant to connect schools to careers, and it will focus on improving its English-language-learning programs.

Pearson also said it wants to reduce its exposure on “large-scale direct delivery” of educational services, and focus on scaling online and blended programs. The company also said it plans changes to its North American testing operations, which would cut costs, and focus on delivering more personalized assessments “in an era of ‘fewer, smarter’ tests.”

A Pearson official did not immediately say what this would mean for the company’s work in the state testing world. But it’s worth noting that another major player in assessment, McGraw-Hill Education, last year announced that it was abandoning summative testing entirely, saying it intends to focus on classroom-based and adaptive learning and  assessments. (Another testing organization, the Data Recognition Corporation, took over McGraw-Hill Education’s summative testing work.)

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