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|Tuesday, May 28, 2013|
BY LINDA BAKER | OB EDITOR
The recession took a toll on the child care industry, as double-digit unemployment rates reduced parental demand for child care services. Portland-based Knowledge Universe-United States, the largest private provider of child care in the country, did not escape unscathed. In 2012, company revenues were about $1.45 billion, down from about $1.6 billion in 2010.
Now Knowledge Universe, which operates about 1,700 childcare centers nationwide, most under the KinderCare brand, aims to reverse the downward trajectory. In February of last year, the company brought on veteran apparel executive and former Old Navy president Tom Wyatt as CEO. Known for shoring up flagging companies, Wyatt has since hired a new executive team, pulled together a new 3-year strategic plan, and restructured and streamlined a company that at one point had dozens of brands in its portfolio.
Under Wyatt’s leadership, Knowledge Universe, Oregon’s second largest private company, also aims to connect more with its teachers and the community — and better align its corporate image with its child care mission. As I wrote in my 2011 OB profile, Knowledge Universe, which employs 550 in its Portland headquarters, comes across as very secretive and very corporate. Company executives are fond of repeating marketing themes such as “talent, innovation and quality” but say little about two of the biggest problems facing the industry: high turnover and low teacher pay.
Today, a kinder, gentler slogan, “sharing meaningful moments,” decorates the walls of the company's Lloyd District headquarters, as do playful “Be Heard” posters featuring photos of the senior executive team and field vice presidents prancing about with microphones.
I caught up with Wyatt, 58, an affable Alabama native this past week. The grandfather of three talked about high-quality education outcomes, integrating the company's three brands, the political push for universal preschool and navigating other challenges and contradictions of the highly fragmented child care sector.
Here are a few highlights from our 90 minute conversation:
"Knowledge Universe went through tough times in 2010, ‘11 and ’12, driven a lot by the economy and unemployment. But we're happy with where were going. We're taking care of 127,000 children in KinderCare, the largest number of children since 2010. It’s the math: 10% unemployment is very different than 7.5% unemployment.
When I got here, we were very siloed as businesses, as brands, and we weren’t leveraging each other the way we should. So out of the strategic plan came the story of one company, three brands. When we look at where do we want to take the company, we want to focus on those three brands.”
“I just came from Old Navy, the largest apparel brand in the U.S. It does about $5.5 billion and 30 million people shop there every month. The most loyal customer shops there about 7 times a year. In apparel, that’s a great cadence. At Knowledge Universe, we see our customer twice a day; they are dropping off their child and picking up. So if we don’t engage with you, if that child doesn’t drop your hand and run over to hug a teacher’s leg, we haven’t done a good job. So a focus of the strategic plan is we 'share meaningful moments,' not just with you but with each other. We see a lot of first steps: we see the first word, it's where children successfully have their first potty experience. So shame on us if we aren’t sharing all of that.“
“Where I believe we have differentiated ourselves significantly and we’re doing a lot more of it today than even two years ago is in the educational quality and curricula we offer. It is world class. We want to take care of your child; we want them to feel safe and secure, but more important is we want to develop that child academically, to give them an infatuation for reading, to give them an understanding in mathematical thinking, which many child care companies don’t do.
About seven years ago, 45 states adopted the Common Core curriculum, which was in the spirit of raising the bar for children. It was an opportunity for states that adopted it to consistently perform at a level that will make us competitive again in the world. We are just now bridging the gap in Common Core with our curriculum. We are rolling out partially in July of this year, and next year we are finishing that rollout. All of that will give us the opportunity for children from 6-months old through grade school to have the best possible foundation of learning relative to the new levels of expectations."
"If we truly believe we are changing people’s lives, I want proof of that. I want to partner with every state we possibly can and as a child goes into kindergarten and literally takes first assessment in kindergarten. I want to know how our children stack up to the entire state’s population of kindergarten kids. [Wyatt pulls out a chart showing KinderCare kids in Maryland, including those from low-income families, outperformed kids statewide on key school readiness indicators.] We are now out to many states getting that information. We are going to track our children going forward through 3rd grade, sixth grade, and junior high, because we sincerely want to know: are our teaching standards creating a leg up for these children."
Subsidies and universal pre-school
"We target middle and upper income families. But one third of our business is economically at-risk kids. They are subsidized from the states working with us. The stimulus that came from Obama — when that went away in 2011, that affected us. Right now, we’re seeing one state go up a little bit, the other go down. It's come down a lot over last 5-6 years but right now don’t see a risk to the subsidy, even in California, which obviously is in a terrible financial position.
“We’re excited that Obama is talking about preschool education. But what’s going to come from that, who knows. There was going to be a cigarette tax, and that’s gone up in smoke."
We’re at a 48% turnover rate, which is too high. It means since we have 28,000 teachers, we’re hiring 14,000 every year. So we make an effort to pay them what is appropriate. Of course, I’d never say it’s appropriate for what a teacher actually does, nor is the military paying what’s appropriate for public service, nor is a policeman getting paid what they should. But they choose to follow that purpose in life.
The challenge is how do you retain and attract the best teachers. We give them opportunities not just to be a teacher, but if they want to expand to be center director. Many teachers have been with us 20-30 years because it is their calling. We’re also developing our teachers. We have a curriculum to hone their skill sets, and we have two professional development days a year where we literally close 1,600 KinderCares and put all teachers into classroom for professional development.
This year, we’re spending $3 million on a meeting bringing all 1,700 center directors to Disney World. We haven’t pulled these people together in over 10 years. (I got chills saying that). I can’t imagine how you expect a consistent experience without bringing them together, getting them excited about the new curriculum and who we are and helping them develop as managers and educators.”
New business development
“We brought in a new group of highly-regarded professionals that are working with the best companies around country: JP Morgan, World Bank, Damler, Intel. We are leveraging relationships with those clients saying, yes we have the CCLC group, but we’re trying to extend what was sort of an on-site little benefit for those chosen few.
We just did this with Intel. They said: 'we are expanding into New Mexico, but we can’t afford to add a facility there.' We said: give us your zip codes, tell us exactly where your population lives, and we will map the zip codes against locations we have at CCLC, Champions and KinderCare in the local area. We just did that for a company yesterday, and within a 5-10 mile radius took care of 100% of their employees.
That has not been done here — ever. There has never been in the history of the company a banded-together approach to say we have one business development group that is offering a solution to meet your needs.”
From apparel to child care
“When I left Old Navy, it was 8 months before they replaced me because there was no sense that I was leaving. But I got a phone call from an executive search firm saying we know you’ve run large multi-unit companies; you’ve enjoyed turning companies around that have maybe lost their way and you’ve been successful at it. We would like to talk to you about going into private sector to help children and manage largest company in the space.
Well, I like being number one. I like the challenge. So I met with [KU cofounders Michael and Lowell Milken], I met Elanna Yalow [KU CEO of Early Learning Programs] and got smitten by it. I also became a grandfather. That's a life-altering experience.”
“It’s amazing what a well-kept secret this company is and that’s a disappointment. We have done a poor job of marketing the company in Portland. I made it a prerequisite for the executive team to live in Portland.
We have also engaged with Gallup, the world class engagement survey. We’re investing significant dollars in employee engagement to be sure we’re listening to our population. We need them to be happy and excited about what they’re doing here. In the beginning of 2014 we will add to the Gallup survey family engagement. We will compensate teachers, center directors, and field management down to the classroom level as to how well they engage with families and their children.
We know we’ve been challenged, and we know volume is $200 million below where it was probably when you asked that question before. Ultimately, the community will embrace us, the family will embrace us, the child will embrace us and I’m not at all worried about the top line."
Linda Baker keeps tabs on CEO and public policy issues.
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Oregon Sick Leave is here, and changes to the federal white-collar worker regulations are on the way. This workshop will prepare you for both. We invite you to participate in an interactive discussion on how to start planning now for the future impact on your operations and finances.
Presented by OEN + CENTRL + YESpdx.
This Roundtable will cover numerous issues under the employer "shared responsibility" rules of the Affordable Care Act, including how to track the "full-time" status of variable-hour employees, temporary or seasonal employees, and employees who experience a change in status or a break in service. Additionally, we will provide a brief overview of Code sections 6055 and 6056, which require most mid-sized and large employers to submit their first information reports to the IRS in early 2016 regarding the health insurance coverage being offered to employees. We invite you to participate in an interactive discussion on how to prepare for the future impact of the shared responsibility rules on your operations and finances.