Pearson said the restructuring — the second since John Fallon became executive director in 2013 — is required by “cyclical and policy related challenges in some of our largest markets” that “have been more pronounced and extended than we expected when we outlined our plans three years ago.” They include falling college enrollment in the United States, fewer students in England and Wales taking vocational courses and lower-than-expected textbook purchases in South Africa.
The company’s announcement said those factors reduced its operating profit by about $328 million. It did not mention problems in the U.S. standardized testing market — in which Forbes says Pearson has a stake of possibly as much as 60 percent — with a move toward fewer tests and the rejection by a number of states of a major Pearson-created Common Core test known as the PARCC.
Pearson’s dominant position in U.S. education was targeted in a segment on standardized testing done last year by John Oliver on his HBO “Last Week Tonight” show. Oliver said that it is possible for U.S. students to take Pearson-designed tests from kindergarten through at least eighth grade, use Pearson-designed curriculum and textbooks, and have teachers certified by a Pearson test. Furthermore, Pearson offers a test used in many schools to identify learning disabilities, and it now owns the GED, the test taken by high school dropouts who want the equivalent of a degree.
To get back on course, Pearson said, it was taking a series of actions that would result in a reduction of “Pearson’s head-count by approximately 4,000 FTEs, or 10% of Pearson’s workforce.” (That’s really the way the company referred to its employees.) Here, from the announcement, are the things the company is doing:
- Combine our lines of business for courseware into a single product organization, rationalize and integrate our product development capabilities to focus more on adaptive, personalized “next generation” courseware in disciplines (for example, STEM subjects, business, college and career skills) where enrollments are growing and which lend themselves to this approach.
- Integrate our North America based assessment operations, and reduce costs primarily to increase our competitiveness and focus more on adaptive, personalized, online assessment in an era of “fewer, smarter” tests.
- Reduce our exposure to large-scale direct delivery services and focus on more scalable online, virtual and blended services. In some cases we’re aiming to run more efficient operations while in others we’re exiting completely from loss-making businesses and contracts.
- Implement major efficiency improvements across all our enabling functions — technology, finance, HR — to bring the general and administrative costs of running Pearson more in line with global best practice.
- In addition, we are rationalizing our property portfolio and renegotiating and consolidating major supplier agreements to drive greater cost efficiency.
The company is also moving around some of its executives and now Pearson President and Chief Executive Officer Bob Whelan will lead the new combined assessments business. According to Pearson’s biography, Whelan has been with Pearson for more than three decades and has helped lead the company to become “the global leader in computer-based assessments.” It says that today, Pearson VUE delivers millions of exams in a network of more than 5,100 test centers in 175 countries worldwide.