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Educational nonprofit makes software for schools

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Articles - May 2011
Wednesday, April 20, 2011

Northwest Evaluation Association
Incorporated: 1977
President and CEO: Matt Chapman
Employees: 412 (317 in Portland)
Annual payroll: $43 million, including benefits

NWEA, founded in Portland in 1977, pioneered the field of computer adaptive testing. Its database contains the results of approximately 200 million tests taken by students of all ability levels. But the organization was in poor financial shape when Chapman took over. His first priorities were to control costs, to develop a national marketing strategy and to work hard to retain the customers NWEA already had. Unlike nonprofits funded by charitable donations, NWEA is basically run as a software-as-a-service enterprise, with school districts paying annual fees to use the organization’s technology. The more children taking NWEA tests, the more the organization earns. With a 90% customer retention rate, each new partnership results in growth.

But Chapman is quick to emphasize that NWEA is not a business. It is a mission-driven nonprofit. There are no shareholders. The money the organization earns must go back into the mission. Chapman sees that structure as a benefit rather than a shortcoming. “We don’t have quarterly earnings reports,” he says, adding that he doesn’t miss them. “Because of that we can make the long-term investments we need to make to fulfill the mission and achieve the vision. We can afford to spend the time to make sure that we’re doing it right.”

The largest long-term investment that Chapman has overseen at NWEA is the organization’s new technology platform, which is due to be released this summer. The project represents a three-and-a-half-year, $40-million-plus investment. Of that, $26 million went to IBM and the rest went to internal expenses, including building up NWEA’s software development and quality assurance team from 15 jobs to 62. Chapman says the new platform will enable NWEA to serve the nation’s largest school districts. “We needed a platform built to scale, so that if you want to test 400,000 kids in Chicago on a Tuesday afternoon, you can.”

The new technology will also allow NWEA to expand its research of effort analysis, idiosyncratic learning patterns and other inquiries into the most effective ways to help kids learn. “I’ve been focused on the business end,” says Chapman. “But everything we do is research-based. The real question is what is the research showing us? It’s fascinating stuff, and we’re always looking at it.”

Another ongoing effort involves lobbying and public outreach. Chapman estimates that he spends about half of his work time on presentations and conversations around issues of education policy. In his view, the effort and expense that go into assessing the effectiveness of the nation’s schools detracts from the more important work of individual student achievement. “Too much of the focus of education has been accountability and No Child Left Behind, and we’re losing the focus on tools that can actually help kids learn.”

He doesn’t have to look far to find an example. Although NWEA was founded in Oregon and made its debut in Portland Public Schools in 1978, the organization’s products are no longer used in the state’s school districts. Instead the state uses OAKS tests, short for Oregon Assessment of Knowledge and Skills. Chapman criticizes this expense as “$8 million per year on a test that does nothing to help kids learn.”

NWEA has no presence in Oregon schools, but it is in all of the school districts of Wyoming and South Carolina and most of the districts in Wisconsin, Minnesota and Indiana. “For the most part we’ve spread by word of mouth,” says Chapman. “Now we’re applying a more sophisticated approach to marketing. With a 10% market share we’ve got a lot of growth ahead of us.”


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