Strategy for generational transition in education enterprise
Our client on this assignment was a successful family-ran private education enterprise that had existed for over forty years, running over four school sites running the British education curriculum, with a combined market share of just under 8%. This was significant because though private education enterprise was highly profitable, it was also highly fragmented with the top five British curriculum providers controlling just about 28%, and all the others less than 2% market share each.
Family businesses, big and small, can often be highly efficient compared to large corporations, in which organizational systems and processes designed to enhance governance and efficiency sometimes complicate decision making and the overall business processes. This advantage that family businesses have can quite frequently turn to be a set major back.
Much as our client's founder Chairman had a great passion for education for social transformation, as he advanced in age the process of transition in the business presented complex challenges. While both executive and non-executive family member directors and management were highly educated in various fields, as well as considerably experienced in the business of education, which is where they had worked for much of their life, their respective personal interests were varied, and not always in accord with the founder chairman. In particular, this "second generation" was less interested in "the business of education", and more interested in "education as a business".
These variances in leadership perspective within the business were beginning to threaten the client's survival, which was beginning to cause major concern.
CLIENT needed to obtain an appropriate governance and transition strategy to secure the divergent interests of the founder Chairman, independent members of the founder’s family, the CEO, management, employees and the school populations of parents, students, regulators, suppliers, the Kenya National Examinations Council (KNEC), Edexcel, and the Cambridge Assessment International Education (CAIE), all with who the business had been working with for over forty years.
This assignment called for extensive stakeholder engagement, mediation, arbitration and the careful management of expectations than it did knowledge and experience in strategy. Quite apart from this, the client was already not in great shape financially, and was not looking to a bright future having considerably stretched its borrowing capacity and at the same time faced with rapidly declining customer confidence in its market.
We structured this assignment into the following phases
1. Development of a comprehensive turnaround strategy
2. Structuring of a refinancing deal for the client
3. Engagement with the client's Board of Directors, management and employees to manage expectations and ensure successful implementation of the turnaround strategy.
1. The structure of the client's Board of Directors was reviewed to make it more inclusive and independent, as well as to strengthen its advisory capacity, on which the client was going to depend to effectively implement the turnaround strategy.
2. As part of the turnaround process, the client's management structure was also reviewed, and a new CEO appointed at each of client's sites – with their primary responsibility being implementation of the turnaround strategy, which included stiff revenue, operations and academic performance targets.
3. A refinancing deal was obtained from a local commercial bank, with the funds obtained used to restructure the business’ operations, inject much-needed working capital, and to undertake carefully selected business development activities.
4. Staff rationalization was also successfully undertaken to determine the client's optimum requirements for professional skills and experience and the corresponding structure of compensation and benefits.
5. With the business having been ran as an education enterprise without an overwhelming focus on profitability, its cost and pricing model was also reviewed, which saw school fees upped by close to 35% over a two year period to bring it to where it really should have been for over seven years.
The client's business turned around to profitability in twenty-six months, increased its enrollment by 34% in four years, and has since reconciled divergences in strategic perspective by separating, and pursuing both "the business of education" and "education as a business" through different vehicles.