Layoffs Without Severance

Was this forwarded to you by a friend? Sign up, and get your own copy of the news that mattered sent to your inbox every week. Sign up for the On EdTech newsletter. Interested in additional analysis? Try with our 30-day free trial and Upgrade to the On EdTech+ newsletter.

Pearson should not be able to wash its hand of this mess.

This week the artist formerly known as Pearson Online Learning Services (POLS), which was sold to private equity firm Regent LP at the end of June, held a massive round of layoffs that was probably overdue, but nonetheless brutal in its execution. Based on multiple sources as well as online discussion boards at TheLayoff, the former POLS group laid off roughly half of its staff on Wednesday with no severance. Even for long-time employees.

Beyond laying off staff, the former POLS group is also terminating non-profitable academic programs. Many partner institutions are being notified that either they are being dropped overall or that several of their smaller online programs are being dropped.

The rebranded organization will be known as Boundless Learning, although that brand has not been fully released yet.

The Online Program Management (OPM) market is challenging, but how did we get to this point for what I believe was the largest ever acquisition in this space ($851 million in 2023 dollars) in 2012 to a no-upfront-money deal in 2023?

I don’t typically write about HR issues in depth, unless they affect corporate strategy, and there have been and will be quite few layoffs in the OPM space. But this specific case is particularly brutal and done in a way that could harm trust with customers in a market that has a long memory and is based on long-term partnerships.

Background

I’ll combine two sections from my coverage of the March 2023 announcement of the Regent sale:

This year’s deal?

What we are seeing this week is confirmation of that last observation.

OPM Marketing

The core of the OPM business in most cases is the OPM provider spending up front money on marketing and recruitment to help build up online programs until they are profitable. What POLS (and now Boundless Learning) have done this year is massively cut their internal expenses, including marketing spending that schools rely upon.

The economics of this market - particularly for tuition revenue sharing models - makes sense when the market is growing and money is essentially free (low interest rates). In that case everyone can bet on future growth and profits instead of current profitability. As I have covered, the world has changed in three regards:

• enrollments are declining, even with online master’s programs;

• money is no longer free (meaning that investors want profitability as their primary metric); and

• there is a full-on regulatory assault on the OPM market.

It makes perfect sense both that Pearson wanted out of this market segment that was hurting its overall growth plans, and that POLS (pre-sale) and Boundless Learning would need to cut expenses.

About the Lack of Severance

In June, Regent and Boundless Learning executives (and it is worth pointing out that the top leadership has not changed with the sale) changed corporate policy in two regards: no more 401(k) matching and no severance for layoffs. According to my sources, Boundless executives justified these change claiming that most American companies do the same thing (which is not accurate, particularly in the tech industry). And that was that.

When employees were notified about the layoffs, Boundless had already cut off the cameras and microphones on employee computers. Shortly after the notification, all access was cut off (email, internal systems, etc).

These were moves that clearly Pearson was unwilling or unable to make.

Based on TheLayoff discussions, it appears that Regent made similar moves at another portfolio company, Zulily. No severance, no payout for paid time off, no insurance coverage, mass meeting notification. These moves are deliberate and, I believe, part of the reason for the acquisition.

I understand the need for controlling costs and layoffs, but how a company handles these moves matters. And doing so with no notice and no severance is the wrong thing to do and reflects poorly on the character of leadership and ownership.

About the Lack of Branding

Typically there would be a big effort to rebrand the organization after a sale. Establish the brand, try to assure current clients that all is well, and to position the organization to try and obtain new clients. Yet none of that has been done in this case. I only found out that the sale was complete based on a footnote in Pearson’s half-year earnings release. The POLS page is still active on Pearson’s site, and Regent LP does not list Boundless Learning.

There is a preliminary page at LinkedIn, however, as well as a stub website.

Why would Boundless schedule the rebranding until more than a month after the sale was complete? One guess is that there are already two education-related companies named Boundless Learning. One is a center associated with Johns Hopkins University’s school of education, and the other is a tutoring company in the K-12 space. Clearly Boundless Learning the OPM company does not control the name, and there is overlap in the URLs. I wonder if Boundless simply did not do their branding and trademark research ahead of time, or is there some other reason for this gap in branding.

Pearson’s Hands

The reason that I believe Pearson is complicit in how the changes have been made is that the company still sells to higher education institutions, including the ones that were its OPM partners. And because Pearson agreed to a deal where its payment for the sale is directly based on these cuts: 27.5% of adjusted EBITDA - with little or no offset for the cost of the layoffs.

Expect more coverage here, including commentary on company strategy beyond cost-cutting and rebranding.

The main On EdTech newsletter is free to share in part or in whole. All we ask is attribution.

Thanks for being a subscriber.