Crain’s New York Business
May 21, 2012
A British media giant’s public-relations debacle in New York intensified last week as a top state education official pummeled Pearson PLC over state standardized tests the company botched.
“I think the mistakes that have been revealed are really disturbing,” said Board of Regents Chancellor Merryl Tisch, referring to nearly 30 errors in last month’s English and math exams, including a puzzling reading passage about a race between a hare and a pineapple. “I would suggest to Pearson that they take this really seriously.”
Analysts said the snafu likely will not hinder the steady growth of Pearson’s education arm, which has gobbled up competitors in recent years and now dwarfs its leading rival, CTB/McGraw-Hill. Yet the controversy cast a spotlight on the burgeoning high-stakes testing industry and emboldened critics of the company, whose holdings also include Penguin Books and the Financial Times.
“If there were a test for accountability—which there is not—Pearson would have flunked out long ago,” said Robert Schaeffer, public education director for FairTest, an advocacy group opposed to standardized testing.
The company, which has lucrative educational assessment contracts with 18 states, is no stranger to testing dustups. It paid $7 million in 2002 to settle a class-action lawsuit in Minnesota after state education officials revealed the company had wrongly graded 47,000 graduation exams.
In 2010, delays in delivering scores for the Florida Comprehensive Assessment Test—for which it has a $254 million contract—cost the company $15 million in fines and penalties. Testing problems for Pearson have also surfaced in Wyoming, Arkansas, Oklahoma and Virginia.
Despite its stumbles, Pearson's education business—which includes everything from publishing textbooks to running online learning courses for colleges—is booming. Revenues for its education services in North America topped $4.1 billion in 2011, up 56% since 2007, according to the company’s 2011 annual report.
While a Pearson spokeswoman declined to say how much of that revenue came from standardized testing, it appears to be growing robustly. In 2010, the company won a five-year, $500 million contract with Texas to create and administer state exams. Last year, Pearson not only landed its five-year, $32 million deal to write and administer New York’s statewide tests, replacing McGraw-Hill, but it also inked deals with Kentucky and Arizona.
“They’re one of the best companies out there,” said Tim Nollen, a senior media analyst at Macquarie Bank. “They’re doing a superb job at running their operation.”
It will soon have a larger footprint in New York City, which is home to 1,800 Pearson employees. The London-based firm announced last year it would add 628 jobs in Manhattan, helped by $13.5 million in city subsidies. The expansion will include a development team focused on creating more digital educational materials, a company spokeswoman said.
Nollen said the bad press surrounding Pearson’s blunders in New York was an “aberration” and doesn’t seriously threaten its growth plans in the city. “Financially and perception-wise, it won’t make much of a difference,” he said, “unless there’s some rot we’re not aware of.”
Nevertheless, Pearson is scrambling to patch things up. In a memo obtained by NY1 last week, an executive vice president at the company told state education officials: “Pearson agrees that we need to work diligently to improve.” The memo added, “We strive for continuous improvement and pledge to continue to learn and improve as we work together.”
But some damage has been done. The hare vs. fruit flub in particular has been ridiculed by educators and national publications, including the New York Times, the Washington Post and Time. “In the media capital of the world,” Schaeffer said, “a pineapple could get the best of Pearson.”
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