Bringing the Profit Motive and Moral Values to Education - An Exclusive Interview with J.C. Huizenga
"Build a better mousetrap, and the world will beat a path to your door.
"Build a better mousetrap, and the world will beat a path to your door."
Attributed to Ralph Waldo Emerson
Many entrepreneurs have discovered that Emerson's maxim often requires a substantial investment in informational advertising before customers appreciate the superiority of a new marketplace offering.
But from the time he opened his first charter school in Grand Rapids, Michigan in 1995, businessman J.C. Huizenga has found thousands of parents beating a path to his door for a chance to enroll their children in one of the 51 new schools he has opened over the past decade. The schools had a waiting list of 6,300 students at the start of the 2004-05 school year.
Huizenga is founder and chairman of National Heritage Academies (NHA), a for-profit educational management company based in Grand Rapids. While most other K-12 firms have found it difficult to maintain growth and avoid losses, NHA has been profitable since 2000 and is one of the nation's fastest-growing companies. With revenues of more than $200 million, NHA serves nearly 27,000 students in Indiana, Michigan, New York, North Carolina, and Ohio. The company's aim is to create 200 of the highest-quality schools in the country.
Huizenga's vision in establishing National Heritage Academies was to offer schools that challenged children to achieve their greatest potential through a common-sense approach based on what parents expected schools to provide their children. NHA schools stress parental involvement and provide students with a back-to-basics curriculum--E.D. Hirsch's Core Knowledge Sequence in a disciplined environment with strong academics and reinforcement of the moral guidance parents seek to impart at home.
Test scores at NHA schools are well above the national average on standardized tests measuring grade-level growth, and a recent Wirthlin Worldwide survey showed 96 percent of all NHA parents were satisfied with the education their children are receiving.
"If we do not succeed ... parents will look elsewhere for their child's education," the company notes in its promotional materials. "This ultimate accountability is what keeps us totally focused on the success of every single child enrolled in our schools."
In addition to serving as chairman of NHA, Huizenga owns and is actively involved in six manufacturing companies. Born in Chicago, Illinois, he is a graduate of Hope College, Michigan, where he majored in economics. Huizenga has received numerous awards, including Michigan's Ernst & Young Entrepreneur of the Year Award in 2000, the first-ever Leadership Award from the Michigan School Board Leaders Association in 2001, and the James P. Boyle Entrepreneurial Leadership Award from the Education Industry Association in 2003.
Huizenga recently spoke with School Reform News' associate editor, George Clowes.
Clowes: How did you become involved in the education business?
Huizenga: I grew up in Chicago and went to Hope College in Holland, Michigan, where I majored in economics. My first interest in education was sparked at Hope as a result of studying Milton Friedman and his writings about education reform. He said we need to introduce privatization if we want to see true reform in education because privatization always does two things: It drives up quality and it drives down cost. In fact, quality and cost are the two biggest challenges facing us currently in public education.
It was Paul DeWeese who made me realize that privatizing public education was not only practical but also desperately needed. Paul is a trauma care physician--he also went to Hope College--who did his residency in Detroit and got to know the central city residents and their children. He realized those children didn't have much hope for success with the poor education they were receiving in the city's public schools, so he created a public policy group called "Teach Michigan" to promote school choice as a means of helping them. Paul enlisted me in that effort.
Teach Michigan was instrumental in helping win approval of charter school legislation in Michigan in 1994. That also was when my son was born. The conjunction of those two events made me start thinking about where I was going to educate my son and helped me understand education from a parent's perspective.
I got to thinking about the possibility of opening a charter school that would overlay a business model on top of the education model. I sought out Mark DeHaan, who lived here in Grand Rapids and shared an interest in education reform, to help put together an application that was due to Grand Valley State University by May 15. On June 1, I got a call that we had been approved. We had only three months to open a school, and we were too naive to realize it couldn't be done.
Mark joined me in working throughout that summer to create our first school. We converted an existing office building to a classroom facility. It took extensive renovation and I think we amazed the community that we were able to complete it, on time, right after Labor Day.
With so much to do and so little time, we had only three weeks at the end of the summer to market the school. We offered one class each in grades K-5, and we had three points of differentiation that were included from day one: first, academic excellence; second: parental involvement; and, third, a moral focus. Those were the three key points that connected with our original parents.
We were expecting 100 to 120 students when we opened the school. We got 174. With that many students, we had to hire another teacher and add a class. We were amazed at the very strong response, and we said, "Hey, that worked so well, let's try it again."
Clowes: When you began looking at a second school, were you looking long-term, at a chain of schools?
Huizenga: We had put a lot of time into figuring out how all the various agreements and contracts had to be structured so that the school could operate and meet the requirements of the charter school law. Realizing we had already completed the heavy lifting, we thought we might as well continue to open schools and test market demand. Although the Board holds the charter, we had to work out how the management company would work with the Board, how the management company would get paid, what services we would provide, and how that whole interface would work.
Before we started, I had theorized that in 10 years there would likely be a half-dozen major management companies operating schools and that one of them would probably come from West Michigan. That's because here in West Michigan, there's a real focus on quality private schools. There are a lot of private schools, they are all faith-based, and the Dutchmen have figured out how to create maximum value in education.
The Dutchmen of West Michigan are adamant about quality, but they're also thrifty. They don't want to pay a dime more than they absolutely have to. The result is that they get the maximum quality of education for the least amount of cost. I call that "educational equilibrium." Because of the marginal utility principle, any additional dollars spent result in marginally less value. Correspondingly, any fewer dollars spent denigrate quality.
We don't want to jeopardize private schools, or, for that matter, public schools. In fact, we don't go into small school districts because we don't want to deplete a significant share of the students in a smaller district. When we open a new school in a new area, we create grades K-5 and then add a grade in each successive year until we mature to grades K-8. Our expectation for a mature school is an enrollment of about 700 students and we will make every effort to fill every last seat because we believe an empty seat is a child left behind.
Clowes: I understand you're also looking at the possibility of creating charter high schools.
Huizenga: It's my desire to meet the needs of our parents, and our parents have been asking, "When are you guys going to do high school?" The question is arising more frequently now that we have begun to graduate classes that have gone through our schools all the way from kindergarten to eighth grade. What we're hearing from parents whose children are now in high school is that they have a very good educational foundation for high school work. If anything, their first year in high school is an easy year, which doesn't necessarily make the parents happy because they want to see their children challenged.
After listening to parents' needs and desires and wants for what happens to their child after they leave our school, we started to look at how we might create charter high schools. We're still looking at it, but we recently announced that we would not be able to offer a high school option this fall. That was a major disappointment for the parents.
Our concern is if we try to do too much, we could lose quality--not only in high school but across the board. High school presents a whole different aspect of education from elementary school: Separate facilities; different teaching certifications; a learning curve on regulations; cars; dating. We looked at all of that and decided we couldn't justify diluting our focus at this time. After all, we were already growing so fast that we'd been on the Inc. 500 list of fastest-growing companies for four years straight, and we did not want unmanageable growth to jeopardize our future.
Clowes: A recurring issue with charter schools is that the funding doesn't include capital needs, which the Goldwater Institute estimated some time ago to be $500 to $700 per student per year. What are your thoughts with regard to capital funding for charter schools?
Huizenga: In the states where we're operating, we receive somewhere between $5,500 and $8,500 per student per year, which is notably less than the school districts receive. I must admit, even though we aren't getting the capital component, we aren't doing badly. And so, from a taxpayer value standpoint, I don't think there should be a capital supplement. I believe we need to provide value not only to the child but also to the taxpayer. That's the other part of what Milton Friedman talked about--school cost as well as school quality.
In our 10 years, we have saved the taxpayer a substantial amount. We have approximately $200 million in land and buildings the taxpayer hasn't had to fund. In addition to that, we've paid somewhere north of $50 million in various taxes and oversight fees. Fifty million and $200 million add up to a quarter of a billion dollars.
Clowes: That's real money.
Huizenga: As a taxpayer, I think the amount is noteworthy. We also budget for future capital expenditures out of operating funds, so that as infrastructure needs to be replaced there will never need to be a supplemental millage against the taxpayer. That's the beauty of the business model overlaid on the education model--it keeps everybody focused on what provides value.
Clowes: Do you get much criticism for being a business that's in education, "making money off the backs of the children," as some critics put it?
Huizenga: I'm proud to be a taxpaying entity. If we weren't making money, we wouldn't be paying taxes. We're able to fill our schools only by providing an education that parents view is the highest quality of the choices afforded to them. If we can do that, pay a significant amount of taxes, and still have some left over, I think that's quite an achievement.
There are some people who take issue with the fact that we are a for-profit organization. My answer to them is: That money doesn't go into anybody's pocket. That money goes into the next school that gets built. At the rate we're growing, we're plowing it all back into future schools.
I also believe that if you're going to do something, you need to do it in a way that provides for future continuity. If we were going to grow and do it all on a not-for-profit basis, it would mean we'd have to seek contributions to fund what we're doing. That's not a sustainable model. The free market and the profit motive help for-profit organizations endure longer than the ones that are not-for-profit-- unless they've got a huge endowment.
Clowes: Your curriculum focuses on grammar, heroes, and patriotism, among other things. Can you still get textbooks to cover those subjects?
Huizenga: The problems we see in education today are, I believe, driven more by pedagogy than curriculum. Yes, there are social studies textbooks and history textbooks that are way off the mark, but there are quality choices in every market, whether it's widgets or education.
To the extent we can avoid it, I don't want to create our own curriculum. In a free-market society, competing alternatives will drive quality curriculum choices. Our hardest decision then is to choose between better and best. The danger with creating a proprietary curriculum is that you end up with a "not invented here" syndrome. You have to invest a tremendous amount on maintaining your own curriculum, whereas if you buy it, it will be maintained and updated for you.
Clowes: Some people have raised concerns that National Heritage Academies promotes religion on campus. What gives rise to those concerns?
Huizenga: We are public schools. There is nothing religious to what we do. Because virtue is one of our hallmarks, there has been some confusion about this, and I'm grateful for the opportunity to set the record straight.
The moral focus we offer serves only to reinforce the values our parents practice at home. It is based on the four Greek cardinal virtues: temperance, prudence, justice, and fortitude. This is a philosophical concept, not a religious one. From these four virtues stem qualities like courage, honesty, respect, integrity, fairness, and other virtues our forefathers sought to instill when they founded this great nation conceived in liberty.
The ACLU joined a lawsuit against us about five years ago on this very issue, and we demonstrated beyond the shadow of a doubt that our schools have no religious component whatsoever. A federal district judge dismissed the case in summary judgment, and his ruling was so convincing that the ACLU chose not to appeal.
If the state is paying the bill, then we'd better be willing to follow the rules and we do. I myself have a deep, personal faith, but I'm not going to bend the rules in any way, shape, or form. If a parent wants to get a good, faith-based education, there are plenty of options out there. That's not the market we wish to serve.
For more information ...
Further information on National Heritage Academies is available from the company Web site at http://www.heritageacademies.com.