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By Emly Aysce Hassel, Bryan C. Hassel and Joe Ablednger

Going Exponential:Growing the Charter School Sectors Best


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ABOUT THE AUTHORSEmily Ayscue Hassel is co-director of PublicImpact. She provides thought leadership andoversight to Public Impacts work on human

capital, organizational transformation, parentalchoice of schools, and emerging opportunitiesfor dramatic change in pre-K to grade 12education. Her work has appeared in Education

Week, Education Next and other publications.She previously worked for the Hay Group, aleading human resources consulting rm. Ms.Hassel received her law and master in businessadministration degrees from the University ofNorth Carolina at Chapel Hill.

Bryan C. Hassel is co-director of Public

Impact. He consults nationally with leadingpublic agencies, nonprot organizations andfoundations working for dramatic improvementsin K-12 education. He is a recognized expert oncharter schools, school turnarounds, educationentrepreneurship, and human capital in education.His work has appeared in Education Next,Education Week and numerous other publications.Dr. Hassel received his doctorate in public policyfrom Harvard University and his masters degreein politics from Oxford University, which he

attended as a Rhodes Scholar. He earned his B.A.at the University of North Carolina at Chapel Hill,which he attended as a Morehead Scholar.

Joe Ableidinger is a consultant with PublicImpact. His work focuses on a variety of educationpolicy issues, including emerging technologiesin education, human capital management, andcharter schools. Before joining Public Impact, Mr.Ableidinger taught high school English with theFulbright Program in Korea and started a familyresource center at an underperforming elementary

school as an Americorps VISTA Volunteer. Mr.Ableidinger received his B.A. with highest honorsfrom Duke University, his Masters in PublicAdministration from the John F. Kennedy Schoolof Government at Harvard University, and his lawdegree with honors from Harvard Law School.

ACKNOWLEDGEMENTS

The authors gratefully acknowledge the excellenteditorial advice of Will Marshall and Lee Drutman

We would also like to thank Sharon KebschullBarrett for her invaluable assistance in the editingprocess. This report was made possible by thesupport of the Walton Family Foundation. Allerrors are our own. The views expressed hereinare those of the authors and not necessarily thoseof the Progressive Policy Institute or the WaltonFamily Foundation.

Made possible with the support of:

ABOUT PPI

The Progressive Policy Institute is an independentcenter for policy innovation with a provenrecord of driving political change. Fromprogressive market strategies to performance-based government, from public charter schoolsto voluntary national service, its ideas have

transformed progressive governance here andabroad. Guided by a spirit of radical pragmatism,PPI seeks to move the political debate beyond thepartisan and ideological deadlock that thwarts ournations progress.

2011 Progressive Policy Institute, Washington, D.C

2011 Public Impact, Chapel Hill, N.C.

Public Impact and the Progressive Policy

Institute encourage the free use, reproduction,and distribution of this working paper fornoncommercial use. We require attribution forall use. For more information and instructions onthe use of our materials, please contact us at www.publicimpact.com or www.progressivex.com.


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ExECutivE SuA PESSivE PiC iStitutE

Growth of Great Charter Schools: The Problem and the Opportunity

Executive Summary

Wh rapd growh lke peersn oher secors, he erybes charer organzaons

alone cold reach eerychld n poery n he u.S.

THE PROBLEM Though controversy rages about the overall

contribution of charter schools to U.S.education reform, few doubt that a subset ofcharter schools has achieved extraordinaryresults with disadvantaged students.

Relative to the enormous need for qualityeducation, the number of children servedby the best charter schools is far too low.

The top 10 percent of charter schools inthe U.S. serve 167,000 children annually,butmillions of low-income students in theU.S. are not on paths to diplomas becausethey are not reaching basic standards.

Numerous growth barriers confront even thebest charter institutions. Practical barriersinclude leadership and teacher shortages,operating decits, scarcity of facilities, thelack of scale-enabling systems, differing

community politics and state standards,and concerns about compromising results.Policy barriers include funding gaps; thelack of access to facilities; caps on thenumber of charter schools, regardless oftheir performance; and site-level governingboard requirements. Sector barriersinclude limited views of the children tobe served and of teaching venues, lack ofinnovation in instructional delivery, and theproliferation of mediocre and bad schools.

Perhaps most importantly, a pervasive fearof growth has permeated the sector, stiingfresh thinking and innovation to reachmore children with the best instruction.

THE OPPORTUNITY The charter sectors best must aim for

high exponential growth similar to thatof the best growth organizations in thefor-prot and nonprot sectors. Chartermanagement organizations (CMOs) todayare not approaching the growth rates of toporganizations in other sectors, includingnonprots. It would be one thing if rapidgrowth were impossible, or were possibleonly by compromising excellence. Butthe barriers to growth in the chartersector are remarkably similar to thosein other sectors. How to overcome thesebarriers is the subject of this report.


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Ambos, eponenal C growh componds o sere asly more chldren each year han moderae growh.

FiuE 1: C WtH AtE EFFECtS CHiE SEvE AuA: WtH EAS 1 t 15

Figure assumes each CMO starts the growth trajectories displayed with an equal number of schools, 20. It also assumes 296 studentsper school, the average school size reported in Robin J. Lake et al., The National Study of Charter Management Organization (CMO) Ef-

fectiveness: Report on Interim Findings (Mathematica Policy Research and Center on Reinventing Public Education, 2010), 42.

ears

umberofchildrenservedannually

rea-growh C, growng 40percen annally

Fas-growh C, growng20 percen annally

oderae-growh C, growng10 percen annally

Millions more children would bereached with excellence every yearif the charter sectors best pursuedsustained, rapid growth. For example:

For individual CMOs, speed of growth

makes an enormous difference in mission.If a CMO with 20 schools grew 40 percentannually, a rate comparable to that of greatgrowers in other sectors, after ten yearsit would have 578 schools serving 170,000children annually. If the same CMO hadgrown 10 percent annually, after ten years it

would have only 52 schools serving 15,000children. Even if growth were to stop then,the faster-growing CMO would be servingmore children annually than it would beafter an additional 25 years of continuousgrowth at 10 percent annually. During thattime, the faster CMO would provide almost2.6 million more child-years of education.

The charter sectors top 10 percent alonecan serve every child living in poverty if

they grow at the same rate as top peersin other sectors. If the number of slotsat top 10 percent charter schools grows16.9 percent per year (the 10-year averagecharter sector growth rate), only 1.7 millionstudents will have access to these slots in

2025. By contrast, if they expand 40 percentannually like rapid growers in other sectors,by 2025 every child living in poverty inthe U.S, and more, could be servedaswell as those in todays top 10 percent charterschools. Nearly 26 million children wouldhave access to schools as good as todaystop 10 percent. Even if only half as manygrew this fast, almost all children in povertycould have access to a superior education.

the charer secors besms comm o reachngmore chldren whecellence and ms looko oher secors o learn how.


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Lessons for the Charter Sector from Successful Exponential GrowersTo develop fresh insights to spur growth ofthe charter sectors best, we researched thedistinguishing characteristics of organizations inother sectors that have grown at sustained, high-

exponential rates. The table below summarizes thelessons that emerged from that research and ourinitial recommendations for the charter sector.

CROSS-SECTOREXPONENTIAL GROWTHLESSONS

RECOMMENDATIONSFOR THE CHARTER SECTOR

MAINREPORT:

Exponential growersdisproportionately . . .

Charter sector leaders committed to exponentialgrowth of excellence should . . .

1. Have or bring on board topleaders who commit to growth

by mobilizing the organizationswill to grow and by seizinggrowth opportunities.

Commit not just to excellence, but also toreaching large numbers of children with

excellence. Stop thinking of growth and innovationto reach more children as mission creep.

pp. 11-13

2. Generate money to expandby producing cash ow frompositive operating margins andcontinued revenue growth,and then invest in growthessentials, such as innovativeresearch and systems for scale.

Negotiate performance-based funding in chartercontracts to pay excellent charter schools more andcut future funding from lagging charters. Investnew operating margins and redirect philanthropicfunds to fuel growth among the best.

pp. 13-15

3. Tackle talent scarcity quicklyand creatively by searching far and

wide for experienced managersand inducting them carefully,developing talent internally,and maximizing productivity.

Import and induct management talent. Importexperienced operational managers for rapid growthand innovation, and teach them the educationknow-how they need to run schools and CMOs.Extend the reach of the best teachers andleaders. Use technology and job redesign toenable the best teachers to instruct more children,and leaders to manage broader spans.

pp. 15-19

4. Use nancial and otherincentives to fuel growthespecially for those in leadership

and management roles, but alsofor other staff who affect growth.

Reward charter leaders and staff for reachingmore childrenwith excellent outcomes. Providenancial rewards for growth of excellent programs toemphasize the importance of growth to the mission.

pp. 19-20

5. Reach customers whereverthey are, serving more needsof more people better.

Use micro-reach and micro-chartering. Enablegreat teachers and excellent charter operators toreach students in small venues without startingfull-size charter schools. Reduce the impact ofschool leader and facility shortages, while pumpinginnovation and talent into the charter sector.

pp. 21-24


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CROSS-SECTOREXPONENTIAL GROWTHLESSONS

RECOMMENDATIONSFOR THE CHARTER SECTOR

MAINREPORT:

Exponential growersdisproportionately . . .

Charter sector leaders committed to exponentialgrowth of excellence should . . .

6. Invest in innovation to pursueexcellence and growth usingresearch and fresh insights froma wide range of advisors andcustomers to create new andbetter services and products,operations, systems, and

ways to reach customers.

Use branding to enable innovation by thebest. Brand novel approaches to clarify theirdistinctiveness, hold their leaders accountable,and protect proven charter brands.Build a community of rapid-growth seekers whoalso achieve excellent student outcomes in order toexpose leaders to fresh thinking and catalyze advocacyfor policies aimed at growth of the sectors best.

pp. 24-27

7. Develop systems for scalewhen needed to manage morecustomers and employees,including information technology,human resources, nance, andkey operational systems.

Invest in systems for scale, using the moneycollected through new performance-fundingcontracts and cost-savings from reach-extensionto build growth-enabling systems.

pp. 27

8. Expand by acquiring otherorganizations to enter newgeographies, provide new servicesand products, increase cash ow,

acquire talent, or control quality.

Acquire other organizations strategically to reachchildren in new locations. Acquire excellent schoolsand small CMOs to spread to new geographies.Prevent looming loss of excellence when founders

of excellent stand-alone schools leave.

pp. 28-30

9. Form operational allianceswith others who are drivento grow, including suppliers,customers, and even competitorsto gain access to new geographies,distribution channels, expertise,funding, and scarce facilities.

Pursue operational alliances to overcome barriersto innovation, scale, and reach to serve morechildren in new locations, using new deliverymethods that sustain or improve outcomes.

pp. 30-32

Charter organization leaders, philanthropists,and policymakers all must play critical rolesto ensure that the charter sectors very bestschools reach far more children. While ourrecommendations include numerous policychanges that would eliminate signicantbarriers, they also include strategies that charterschools, CMOs, and their funders can pursueeven within the current policy climate. Twoof our recommendations performance-basedfunding and micro-charters would require

policy change but could pave the way for muchmore rapid growth by the best charter operators.

Great growth that will allow more children tobe educated with excellence is possible. Ourrecommendations, which stem from the tacticsof high exponential growth organizations inother sectors, provide a starting point. Wehope and expect that innovators in the chartersector will add to the list of possibilities.


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i ExPEtiA PESSivE PiC iStitutE

Going Exponential:Growing the Charter School Sectors BestGrowth of Great Charter Schools: The Problem & the Opportunity

Hgh-performng charerschools n hgh-poerycommnes hae shown sha dsadanaged chldrencan learn eceponally well.

Public debate continues to rage about the roleof public charter schools in education reform.Policymakers and philanthropists across thepolitical spectrum some with qualications,others with none at all have ocked to supportcharters as an alternative to district schools

with stagnant learning outcomes. In response,critics of charters such as Diane Ravitch havedecried the myth that charter schools are

the answer to our educational woes, citingevidence that there are twice as many failingcharter schools as there are successful ones.1

Yet few debate one fact about the chartersector: the existence of a subset of schools thatinduce extremely high academic progress andachievement by children who enter years behind,many of whom are poor and a disproportionatenumber of whom are racial minorities. Theseinclude both stand-alone schools and networks,typically operating under charter managementorganizations (CMOs). KIPP (Knowledgeis Power Program), Achievement First, and

Uncommon Schools are three examples ofCMOs that blossomed from single schools intohigh-performing networks serving primarilydisadvantaged children. They teach children thehabits of high ambition, hard work, and allowingoneself no excuses and in most cases they achievefar better results than other schools. Regardlessof the overall success rate of charter schools,high-performing charter schools in high-povertycommunities have shown us that it is possible fordisadvantaged children to achieve at high levels.

While every child counts, the number of childrenserved by the best charter schools is far too low.Millions of parents and children keenly feel thegap between the number of children these schoolsserve and the far greater number who need theirservices. Childrens educations are won and lostin the game of wooing top CMOs to cities andtowns and again during admission lotteries.

How big is the gap between the need andsupply? The charter sector as a whole servedabout 1.6 million children in the 2009-2010school year.2 According to one study, about17 percent of charter schools measurablyoutperform comparable district schools forsimilar children, disproportionately so fordisadvantaged children.3 The top 17 percentof charter schools reached approximately272,000 children in the 2009-10 school year.4

This supply of top charter slots is woefullyinadequate relative to the need:

Nearly 50 million children are enrolled in K-12education in the U.S., and almost 20 percent nearly 10 million children live in poverty.5

In communities with high rates of poverty,nearly half of high school students drop out .6

NAEP economic achievement gaps arelarge: In 2009, 16 percent of economically

disadvantaged children were procient ineighth grade reading on NAEP (NationalAssessment of Educational Progress),compared to 41 percent of their advantagedpeers, with an even larger gap in math.7

Many low-income children who areperforming at grade level are unquestionablycapable of advanced work unavailable tothem at their current schools but whichis offered at the best charter schools.8


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Whle desperae parensmgh op for any charerschools, chldren and ornaon need for he bescharer schools o reachmore chldren.

llons more chldren woldbenef f hey had access ohe naons bes Cs andcharer schools.

Large achievement gaps remain inschools where less than half of studentsare low-income. One-third of ournations poor attend these schools.9

The problems are not limited to the leastadvantaged learners. Only one-third ofall eighth graders were procient in mathon NAEP in 2009, and even fewer wereprocient in reading.10 Highly capablelearners, poor or not, do not receiveappropriately advanced instruction in mostschools.11 Even a conservative calculationindicates that many millions more children

would benet if they had access to thenations best CMOs and charter schools.

Poor and low-income parents grasp this reality andact on it in droves. They are among the most likelyto opt out of assigned schools over 50 percent ofthe time if they have a known free alternative.12A growing proportion of both black and Hispanicparents support charter schools.13 Many seecharter schools as their childrens only chance.14But while desperate parents might opt for anycharter schools, children and our nation needthe best charter schools to reach more children.

The federal impetus to turn around low-

performing schools has added pressure forthe best CMOs to grow by taking over failingschools. But few CMOs have responded. Theyare strapped to meet demand even in their

traditional new-start mode and thus are waryof new modes of reaching children, even thosesquarely within the scope of their missions.

Demand alone would not be enough to call forfaster growth by excellent charter schools if fastgrowth were impossible or certain to compromiselearning excellence. High exponential growthby organizations is not only possible; it is a

well-documented phenomenon in many sectors.

Indeed, high exponential growth is one hallmarkof the highest-impact for-prot and social goodorganizations. The best not only drive majorchanges in quality, speed, price, or aestheticexperience for customers, but also they are greatat growth. This combination drives sector-widechange that reaches far beyond direct customers.

BARRIERS TO GROWTH OF EXCELLENCEDespite immense effort to make the educationsector more responsive to parent demand byopening up school supply and recent ack abouthow education has become a business thischaracterization is inaccurate. Even the mosteffective CMOs and charter schools have notresponded like the best of their private sectorbrethren, for-prot or nonprot, to meet thesurging demand. Why not? To understand the

barriers, we interviewed several successful schooland CMO leaders and other sector experts, whogenerously shared their perspectives. We alsoreviewed recent research and analysis on the topic.Finally, we identied additional sector-level growthbarriers that became apparent as we reviewed theresearch and cases about growth in other sectors.

In summary, even the charter sectors bestface growth barriers, including very practical,operational challenges, policy walls, and perhaps

most importantly an insidious fear factor thatsties fresh thinking and the will to grow:

Practical barriers include an inadequatepipeline of school and CMO-levelleadership15 and looming teacher shortages,operating decits caused by the charterfunding gap,16 facilities scarcity,17 difcultyimplementing scale-enabling systems,18community politics and standards that


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r chldren need he bescharer schools o mare

from demonsrang wha spossble o brngng abochange on a naonal scaleby reachng more chldren.

differ across states,19 and concerns aboutcompromising results during growth.20

Policy barriers include funding gaps,21 lackof facilities access,22 caps on the number ofcharters regardless of outcomes, and unwieldy

site-level governing board requirements.23

Additional barriers to sector-level growth thatwe identied include: limited vision of thechildren to be served and in what venues,lack of innovation in instructional delivery,and the unchecked proliferation of mediocreand bad schools. Many leaders of successfulschools and networks also fear that rapidgrowth is impossible without underminingexcellence. While understandable, this fear

has squelched the motivation and innovationneeded to reach more children with excellence.THE COST OF LIMITING GROWTH OFEXCELLENCE: MILLIONS OF CHILD-YEARSHigh exponential growth of top-tier charterschools is essential to directly change outcomesfor children (especially disadvantaged

learners), to enable closure of lagging charterschools, and to stem the swelling tide ofun-closable mediocre charter schools.Over time, the mathematical effect of growthrates on the number of children reached isenormous. In exponential growth, a compoundingeffect occurs because a steady percentage ofgrowth builds on an ever-increasing quantity,leading to an enormous ramp-up, or inectionpoint, after the early growth phase.

Millions more children every year wouldbe reached with excellence if the charter

sectors best pursued growth at higher rateslike their peers in other sectors. For example:

CMO View:For individual CMOs, the speed ofgrowth makes an enormous mission differenceIf a CMO with 20 schools grew 40 percent

annually, a rate comparable to great growersin other sectors,24 after ten years it would have578 schools serving 170,000 children annually.If the same CMO had grown 10 percentannually, after ten years it would have only 52schools serving 15,000 children (see Figure1). Even if growth were to stop then, thefaster-growing CMO would be serving morechildren annually than it would be after anadditional 25 years of continued slower growthDuring that time, it would provide almost

2.6 million more child-years of education.

Sector View:With top-tier growth, the chartersectors best schools alone could provideevery disadvantaged child in the U.S. withan excellent education. Seventeen percent ofcharters outperform comparable schools, butlet us assume that only a portion of those the top 10 percent overall are really goodenough to grow fast.25 These schools serveabout 167,000 children today. If these top 10percent charter schools grow 16.9 percentper year (the 10-year average sector growthrate), only 1.7 million students will have accessto the equivalent of top-10 percent slots in2025.26 In contrast, if these schools expand 40percent annually like great growers in othersectors, by 2025 every child living in povertyin the U.S. could be served as well as thosein todays top 10 percent of charter slots and more (see Figure 2). Nearly 26 millionchildren more than double the number ofschool-age children living in poverty would

have access to schools as good as todaystop 10 percent. If even half as many grewthis fast, still almost every child in povertycould have access to a superior education.

Growing the number of charter slots that are asgood as todays top 10 percent would likely alsohave the indirect benet of squeezing outlow-performing and even mediocre charterschools.27 Today, some of these underperformingschools undoubtedly remain open simply


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Ambos, eponenal C growh componds o sere asly more chldren each year han moderae growh.

FiuE 1: C WtH AtE EFFECtS CHiE SEvE AuA: WtH EAS 1 t 15

Figure assumes each CMO starts the growth trajectories displayed with an equal number of schools, 20. It also assumes 296 studentsper school, the average school size reported in Robin J. Lake et al., The National Study of Charter Management Organization (CMO) Ef-

fectiveness: Report on Interim Findings (Mathematica Policy Research and Center on Reinventing Public Education, 2010), 42.

ears

umberofchildrenservedannually

rea-growh C, growng 40

percen annally

Fas-growh C, growng20 percen annally

oderae-growh C, growng10 percen annally

because there are not enough great schools

to replace them. Faced with the low odds ofattracting a top charter school, many authorizers,parents, and communities stand by laggingand mediocre charter schools.28 If bad charterschools were forced out by the rapid expansionof high-performing charters, todays mediocreschools would be the new bad and wouldfeel the heat of a performance imperative.

HIGH GROWTH RATES ARE WITHIN REACHBut is sustained annual growth of 40 percentpossible? Can organizations, with long,

complex lists of necessary resources and policyconditions, do it? In fact they can, but only theelite in fact achieve it. In other sectors, eliteorganizations can change whole slices of thehuman experience by driving new levels of quality,service, convenience, aesthetics, and innovationinto our lives. These are the organizations westudied to inform our thinking for the chartersector. If only a portion of the charter sectorsbest were to achieve similar growth, the sector

could mature from demonstrating what is

possible to changing our nations course.


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umberofchildrenserved

rea rowh: top 10 percen ofcharer slos growng a 40 percen

Hsorcal rowh: top 10 percenof charer slos growng a 16.9percen

FiuE 2: SECt viEW: . F CHiE SEvE B tP 10% CHAtES B 2025 WitH HiH ExPEtiAWtH vESuS HiStiC WtH AtES

ears

if he charer secors bes grow lke he slowes among ele growers n he prae secor, nearly 26 mllon chldren woldbe sered eery year as well as hose n odays op 10% charer schools. Hsorc growh raes wll lead o serng only 1.7mllon chldren annally.

Ele growers n oher secors

redefne he eperences ofmllons, somemes bllons,of consmers.

Exponential Growth Lessons from

Other SectorsIn other sectors it is not enough to beexcellent. To be great, you must also be big. Butorganizations in other sectors face barriers torapid, excellent growth similar to those in thecharter sector. The average annual revenuegrowth of businesses is just 3.5 percent.29Only a fraction of businesses grow fast. Thebest grow very fast often at rates well over20 percent or even over 100 percent. And theysustain this growth for multiple years, delivering

excellence to customers and shareholders.30

These great growers are the organizationsthat dene or redene the experiences ofmillions, sometimes billions, of consumers.They also change the industry standardfor quality, cost, convenience, speed, orsome other value proposition.

To be clear: rapid, sustained growth is noteasy. Most fail to achieve it. However, the

pattern of actions that elite growers use hasbecome apparent in recent years. The charter

sector can now benet from knowledge thatwas not apparent at its inception two decadesago. As in this sector, leaders of other sectorsfeel the tension between fostering growth andmaintaining excellence. Many limit growth outof concerns that expansion will compromisequality. But some organizations manage to doboth, growing rapidly while maintaining oreven improving their products and services.

How do these exponential growers do it? Whatcan we learn from them in contrast to other rmsthat grew less successfully? Here we summarizethe chief lessons that emerge from research onsustained, high-exponential growth organizations.

Tabulations from data provided by National Alliance for Public Charter Schools Charter School Dashboard.Downloaded August 4, 2010 from: http://www.publiccharters.org/dashboard/home. The historic 16.9 percent growth rate is the constant averagegrowth rate in the number of charter school students nationwide between 1999-2000 and 2009-10.


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Lessons from Research about Exponential GrowthExponential growers disproportionately . . .

1. Have or bring on board top leaderswho commit to growthby mobilizing the

organizations will to grow and seizing growthopportunities. See pp. 11 13.

2. Generate money to expand by producingcash ow from positive operating margins andcontinued revenue growth, and then investingin growth essentials, such as innovativeresearch and systems for scale. See pp. 13 15.

3. Tackletalentscarcityquicklyandcreativelyby searching far and wide for experienced

managers and inducting them carefully,developing talent internally, and maximizingproductivity. See pp. 15 19.

4. Use fnancial and other incentives to uelgrowth,especially for those in leadership andmanagement roles, but also for other staff whoaffect growth. See pp. 19 21.

5.Reachcustomerswherevertheyareto servemore needs of more people better.See pp. 21 24.

6.Investininnovation topursueexcellenceandgrowthusing research and fresh insights from

a wide range of advisors and customers tocreate new and better services and products,operations, systems, and ways to reachcustomers. See pp. 24 27.

7.Developsystemsorscale includinginformation technology, human resources,nance, and key operational systems whenneeded to manage more customers andemployees. See pp. 27 28.

8. Expand by acquiring other organizationstoenter new geographies, provide new servicesand products, increase cash ow, acquire talent,or control quality. See pp. 28 30.

9. Form operational alliances with others who aredriven to growincluding suppliers, customers,and even competitors in order to gain accessto new geographies, distribution channels,expertise, funding, and scarce facilities. See pp.30 32.

Not every organization we studied usedevery strategy, and they all used additionaltactics to improve quality and organizationaleffectiveness. To determine what lessons tohighlight, we focused only on elements thathave been noted by researchers as likelydistinguishers of sustained, high exponentialgrowth organizations. The articles and books

we considered included multi-organizationquantitative and qualitative analyses, which

typically identify the most successful growersquantitatively and identify the factors correlatedwith successful growth using a combinationof quantitative and qualitative analysis.

We examined stand-alone cases of organizationsthat had sustained, high exponential growthin the modern era of technological innovation,changing labor market conditions, and at-

world economics. We avoided organizationsthat were merely large (for example, because of

moderate growth sustained over a century) ormerely excellent in their products or services.

We sought to understand the period of time justbefore and during which some companies grow atfar higher, better-sustained exponential rates thanothers, achieving scale and bringing their productsand services to large numbers of customers fast.

Based on each lesson, we make recommendations

for the charter sector, addressing what charteroperators, funders, and policymakers can do tomake slots at excellent charter schools onesas good as todays top 10 percent much more

widely available.31 Some recommendationswill make more sense for any given charteroperator or funder, while others will not t.

While our recommendations include numerouspolicy changes that would eliminate signicantbarriers, they also include strategies that charterschools, CMOs, and their funders can pursue


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even within the current policy climate. Twoof our recommendations performance-based funding and micro-charters wouldrequire policy change but could pave the

way for much more rapid growth by the bestcharter operators. We hope that our insights

will inspire others to develop their own withequal or greater transformative potential.

1. Exponential growers have orbring on board top leaders whocommit to growth

Sustained exponential growth organizationsuniversally have leaders who are driven to reachlarge numbers of people with their excellenceparadigms their visions of quality, speed,

convenience, aesthetics, or innovation. Theyrally others will to grow through zealouscommunication of their combined excellenceand growth visions. They convey their desireto change the world in large measure.

Early leaders of exponential-growth organizationsare more likely than those of slower-growers tobe driven by bold visions to change the world.32Many, even in for-prot ventures, display apervasive urge to improve the human experience

in some fundamental way or to dominate a sector,and to reach large numbers of people.33 In thatquest, many explicitly reject immediate, largenancial rewards in order to achieve a larger

vision.34 They are not driven solely by a passion forexcellence.35 Rather, rapid growth to reach morepeople is front and center. Thus, they overcomethe tension between growth and excellence. Ifchanging the world or dominating a portion ofthe human experience is the goal, excellence witha small group of customers does not satisfy.36

Some founder-leaders begin with growth inmind.37 Others discover opportunities withexponential potential and expand their vision

to seize them.38 In other cases, leaders whojoin an existing organization see potential toexpand the vision and the remaining foundersare receptive to advice about how to grow.39

Once exponential growth leaders are committed togrowing the reach of their excellence paradigms,they pursue common tactics to internally build

will and to determine how to tackle seeminglyinsurmountable barriers. Common tactics include:

Pushing for rapid growth and making sureto avoid missing windows of opportunityfor moving great ideas forward. Theyadopt a never big enough attitude solong as they can manage growth andnot compromise excellence.40

Working in complementary leadershippairs or teams to drive and managegrowth, often with one as the visionaryand others as operational masters.41

Zealously communicating their visions thatunite excellence and growth throughoutthe organization, bringing others on board,quelling fears, and quieting resistance.42

if mprong a as swah ofhe hman eperence s hegoal, ecellence a a smallscale does no sasfy.


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Exponential Leaders SeeGrowth as Essential to theirVisions

Millard Fuller founded Habitat forHumanity with the goal of eliminatingpoverty housing and homelessness fromthe face of the earth. 43

Our little management team didntexamine our motives for wanting to growfast. We set out to be champions, andspeed was part of the equation. HowardSchultz, Starbucks Founder 44

Bill Gates and Paul Allen foundedMicrosoft to put a computer on every deskand in every home.45

Steve Jobs aimed for Apple to make thepersonal computer an informationappliance as ubiquitous as thetelephone.46

the Charer Secors Sccess =Sden comes x Annalmber of Sdens eached

RECOMMENDATIONS FOR THECHARTER SECTOR

Commit not just to excellence, but also to reachinglarge numbers of children with excellence. Stopthinking of growth and innovation to reach morechildren as mission creep.

A new success ormula. For millions morestudents to gain access to what the best charterschools have to offer, the charter sectors bestmust shift their focus away from excellent

student outcomes alone. They must committo a new formula for measuring success:Charter Sector Success = Student OutcomesX Annual Number of Students Reached.47

Student outcomes are critical. They are thefoundation of any valuable excellence paradigmin education. Nonetheless, the number of studentsreached is also a key measure of success. Asexponentially growing organizations with world-changing visions in other sectors know, rapid

growth of excellence is crucial both for its directeffects and for its indirect effects on others inthe sector. Rapid growth prevents entry by less-successful players and ups everyones game. Thecharter sector must grasp this new fundamentalif it is to achieve its greatest potential impact. The

number of children reached is the essential twinof student outcomes. Speed of scale matters.Seizing educational space with excellentoutcomes is the only way to ensure that thoseoutcomes reach more children. Those whosucceed in changing a slice of the human

experience do not leave the growth of theirorganizations to chance. Likewise, the chartersectors best must pursue the direct effects ofseizing educational space rather than assumingcompetitive effects on other school providers.

Mistaking innovation and growth or mission creep.One common strategy of successful exponentialgrowers is continuous innovation to nd new

ways to serve existing customers or to reach

completely different customers.48

Too often, thiskind of innovation is labeled mission creep inthe charter sector and therefore is strenuouslyavoided. Efforts to nd ways to serve studentsin other geographies, other demographics,and other venues (like low-performing districtschools), or even outside of school altogetheroften seem to charter leaders like diversionsfrom their core mission. For a successful schoolor CMO, avoiding these diversions can feellike a safe way to preserve learning excellence.

Exponential growers in other sectors woulddisagree. Indeed, as we explain in detaillater, innovation is one of the most consistentand critical distinguishers of rms that goexponential compared to those that do not.49 Ineducation, there are innumerable innovative waysto reach more children with excellent outcomes:in operations, instructional delivery and stafngmodels, in data systems to identify instructionalimprovements, in the venues where children are


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reached, and in partnerships and alliances thatenable growing into new states and locales, or eveninto district schools. The list goes on; some of ourother recommendations presented here are a start.

For some of todays charter leaders, stories of early

for-prot education management organizationsthat grew rapidly but failed still resonate. Butthese companies error wasnt mission creep.Instead, they undertook poorly planned orexecuted strategies for growth, such as spreadingtheir initial schools over many states, each with itsown charter laws, authorizers, state standards, andassessments. They underestimated the instabilityof relying on hastily assembled community-basedboards to govern their schools boards that couldthrow them out if the going got rough. These

experiences provide cautionary lessons, and weall can learn from them. Further, the eld andthe children will be better off if we counter thesefailures with a grasp of what successful growers do.

A new commitment to rapid growth of excellenceneeds to come from various actors in the sector:

Charter and CMO Leaders:Examineyourselves with fresh eyes. Ask yourselveswhether your organizations aged too quickly,

adopting the management practices ofold, large organizations before achievingthe size needed to achieve the founding

vision. Recongure your leadership teams asneeded to commit to a vision that includesthe new success formula (student outcomesX number of children reached = success).

Philanthropists:Make the new successformula your grant-making guide. Ask yourtop-notch charter grantees to consider moreambitious growth targets. Seed the creationof new charter organizations that havehigher growth sights from the start. Fundorganizations that can help great charterschools and CMOs grow using exponentialgrowth tactics. Fund periodic gatheringsof charter and CMO leaders focusedspecically on rapid growth of excellence,so they can learn from each other; invitethinkers from outside the inner chartercircle to infuse fresh thinking en masse.

Policymakers:Let the new success formulaguide your policy agenda. Remove policylimits on the growth of the best charteroperators by exempting them from chartercaps and eliminating growth-slowingconstraints such as the requirement for each

school to have its own governing board.

2. Exponential growers generatemoney to expand

Exponential growers disproportionately achieveearly results on key measures of nancial success,according to D.G. Thomsons study.50 Specically,cash ow from positive operating margins andrevenue growth are the two early nancialmeasures that matter most for determining future

growth trajectories. Leaders are able to invest thecash generated by operating margins in ways thatdrive further growth, such as innovative research,expansion to new sites, and the developmentof central systems that will produce economiesof scale.51 Moreover, by demonstrating positivecash ow and early, sustained revenue growth,companies attract investors, furthering growth.52


Negotiate performance-based funding in chartercontractsto pay more to excellent charter schoolsand cut future funding from lagging charters.Invest new operating margins and redirectphilanthropic funds to fuel growth by the best.

Most charter schools have operating decits,which are covered by private philanthropy.53 Inother words, most charter schools lose moneyon every child. There are three ways to reduceoperating decits and instead generate operatingmargins: decrease costs, increase productivity,and increase the revenue stream per child. Sincecharter schools operate on about 80 percent ofthe funding levels of neighboring districts,54most have already reduced costs through suchmeans as using marginal facilities, employing amore junior teaching staff, and foregoing non-essential amenities and activities. Enhancingproductivity holds more promise, as we discussbelow in our exploration of how to extendthe reach of the best teachers and leaders.


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But what about increasing the revenue owingto the best charter schools? Charter fundingequity has been a primary policy goal of charteradvocates. Indeed, any proven CMO sought bya new location should make additional funding,on par with public schools, a competitive

element of decisions about where to locate.

To promote sector-wide excellence, performanceincentives are a better bet. There is no goodreason to give charter schools educational space

without requiring results and no good reasonto clip the nancial wings of excellent schoolsthat could serve more children in need. Upsideincentives for achieving student outcomes wouldenable growth of the best charter schools andCMOs by funding them in the black rather thanin the red. Such contracts could be negotiatedby CMOs with states, districts, and other

authorizers whoever has the power of thepurse. Alternately, policymakers could buildperformance incentives into charter funding policyfor all charter schools in a given jurisdiction.

As with any performance-based reward system,using the right metrics and setting the right targetlevels of performance would be essential. Sincestate and authorizer accountability systems varyso much, we do not attempt here to set forth auniversal answer. Metrics would need to includenot just student prociency measures, but also

growth measures to ensure that schools servingstudents who start out behind can win theseawards by achieving rapid progress. And targetsshould be high, so that only excellent charterschools (e.g., the top 10 percent) earn them.

Either way, schools that achieved studentoutcomes better than specied in the contract

would receive more funding. In theory, thesebonus payments could be funded with new

money on top of existing charter funding. Intodays budget climate, however, a more viableapproach would be to mandate that the lowest-performing charter schools (e.g., the bottom 10percent) receive less the following year, or returnsome funds to the public. In effect, charter

schools would offer performance guarantees, aconcept explained more fully in Public Impactsprevious work on that topic.55 Reducing anyonesfunding is bound to be controversial. But inaddition to making performance upside bonusesbudget neutral an essential step in todayspolitical and economic environment downsideperformance guarantees could also speedclosure of low-performing charter schools.56

Middling schools ones that do not achieveresults good enough to receive performance

incentives or bad enough to incur penalties would keep current funding allocationsand stay open only if they can make endsmeet with regular charter funding or if theirmissions are compelling enough for them tocontinue attracting private philanthropy.

Even with performance bonuses, top charteroperators would not likely make a prot.Instead, they would be able to close gaps intheir current operational and facilities funding

and use any additional dollars to invest ingrowth to serve more children. If they werealso able to attract private funding, this toocould drive additional growth so that morestudents beneted from their excellent schools.

Charter and CMO Leaders:Negotiatefor what youre worth. Aim to reach morechildren with excellent outcomes bynegotiating performance-funding contractsthat generate operating margins instead ofdecits. Motivate your central and school-level

teams with the knowledge that your abilityto reach more children depends directly onresults with current students. When youhave achieved top learning results elsewhere,negotiate full-fare initial contracts in newlocations that want you to open new schools.

Philanthropists:Fund initiatives to developperformance incentives and advocate for themin conjunction with performance guarantees.

Polcymakers ha moe frso ncrease fndng of hebes charers a he epenseof laggng charers canransform her saes nomagnes for op proders.


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Fund creation and dissemination of modelcontracts and policies covering performanceincentives and guarantees. Fund charterquality advocates to shine light on authorizersthat squander money on laggard schools whileforcing high-performing charters to beg for

private money in perpetuity. Prime the pumpfor performance incentives temporarily bypaying the upside until they catch hold withpolicymakers.57 Continue to direct more fundsto charter operators that grow rapidly whilemaintaining excellent student outcomes.

Policymakers:Make your state a magnetfor top charter providers and unattractiveto less-effective providers by requiringand advocating for performance incentivesand guarantees. Lead the change of statecharter laws to include performanceincentives paid to successful charter schoolsand reduced funding for less successfulones. Charter performance incentives area potential political win for either sideof the aisle, since they would stop theow of money to bad schools and enablethe best providers to open new slots.

3. Exponential growers tackle

talent scarcity quickly andcreatively

Organizations that grow exponentially face thesame constraint that holds back todays bestcharter operators: an inadequate supply of talent,especially of management talent people who canorganize other people and processes to deliverexcellent results. Research suggests that fastgrowers do not let this constraint stop them fromexpanding. Instead, one factor that sets successful

rapid growers apart is the strategies they useto acquire and enable the talent they need.

Rapid-growth frms search ar and wide to fllkey management roles. Exponentially growingorganizations typically cannot grow managementtalent internally fast enough to meet the need.So, while they do everything they can to identifyand cultivate internal talent, they ll criticalmanagement roles by importing experiencedmanagers from other organizations and even

other sectors.58 Examining 30 rapid-growthcompanies, Hambrick and Crozier concludedthat successful growers often passed over long-time employees in favor of outsiders who werebetter prepared to handle the challenges ofincreased size.59 Another study of 45 rapid-

growth rms found that bringing in professionalmanagers early and retaining them are criticalstrategies in many of these organizations.60

Imported managers can come from verydifferent industries, similar industries, or directcompetitors. Starbucks CEO Howard Schultzhired a variety of seasoned executives to guide thecompanys growth: a 20-year industry veteran witheight years as president of a successful beveragecompany, a 25-year retail veteran, and a formerCFO of a freight company who was formerly amanaging partner at Deloitte & Touche. Eachof these individuals was 10-15 years Schultzssenior. Schultz recognized that each of them

was far more qualied than he to handle certainsegments of the rapidly expanding business.61Starbucks also hired talented professionalmanagers from Taco Bell, Wendys, and otherretailers.62 Similar stories abound at other rapid-growth rms, such as Microsoft andWalmart.63

Importing leadership can even entail replacing

a founder-leader who built the organization andshaped its culture with an outsider who offersstronger experience with larger operations.64John Sculley,Apples CEO beginning in 1983,had been the president of Pepsi-Cola.65Habitatfor Humanitys CEO as of 2005, JonathanReckford, was previously an executive withBest Buy and Disney and the pastor of alarge Presbyterian church.66 Both replacedcharismatic and revered founder-leaders.

Rapid-growth frms also do the most with thetalent they already have. Exponential growersdisproportionately expend resources on utilizingtalent well, developing staff, retaining theirexisting employee base, and giving their successfulemployees immense opportunity to advance

within the organization.67 Research shows thatfast growers commit more than slower growersto orientation and training programs that conveythe organizations values, expectations, andgoals.68 They offer development opportunities


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that prepare employees to advance and toexecute growth-oriented strategies.69 Rapid-growth rms also focus staff on growth goalsusing nancial incentives, including stockoptions, and they help new staff succeed rapidlyby putting them on task-oriented teams.70

The software and information services giant SASis often researched and cited as an example oftalent-driven rapid growth. SAS uses uniqueperks and benets to bond employees to theorganization and maintains a database inventoryof employee skills to enable its people to switch

jobs without leaving the organization.71 Theannual turnover rate at SAS is about fourpercent (compared to the industry average of 24percent), and the company maintains this rate

year after year, saving considerable amountsof money, which helps drive the companyscontinued success and rapid growth.72 Frequentinternal promotion complements a strong externalrecruitment program to keep the companyattracting, developing, and retaining key talent.73


While numerous lessons from exponential growersmay help the charter sector address its talentchallenges, here we focus on two compellingopportunities: importing and inducting managementtalent and extending the reach of the best teachersand leaders to more students.

Import and induct management talent. Importexperienced operational managers for rapidgrowth and innovation and teach them theeducation know-how they need to run schoolsand CMOs.

Though charter operators may have a naturalpreference for homegrown leaders (e.g., teachers

who grow into leadership roles), it is unlikely thatthe internal pipeline will be sufciently large tofuel the kind of rapid, exponential growth we areexploring here. In addition, like the founders ofrapidly growing private sector rms, operatorsof rapidly growing charter organizations arelikely to need a level of management talent

within their central ofces that goes beyondwhat most homegrown candidates can bring.

To grow more rapidly while maintaining quality,the best charter organizations need to vastlyexpand their efforts to import leaders fromother sectors with proven operational trackrecords and give them the know-how theyneed to succeed in education. Both leadership

competencies and knowledge of how to achieveexcellent educational outcomes are essentialto school-level and CMO-level leadership.

CMOs have engaged in signicant importingfor their central ofces. For example, theBroad Residency in Education imports andtrains individuals from other sectors to playhigh-level management roles in CMOs anddistricts, with 42 residents in the current2010-12 class. Similarly, Education Pioneersoffers internships with education nonprots,including charter management organizations,to potential imports from MBA, law, andpolicy graduate programs, nearly 300 in thesummer 2010 program; 70 percent of the internsgo on to take full-time jobs in education.74

Moreover, some surveys point to a vast talentpool, many of whom are former middle managers,seeking fullling second careers in their 50s.75Is the pool of leaders capable of running acharter school successfully, even with help from

an exceptional CMO, unlimited? Undoubtedlynot. Indeed, great growers in every sector arestrapped to nd enough managers at this levelduring periods of rapid growth when talentcannot be grown internally fast enough.

Despite this, most in the charter sector havebarely even considered importing schoolleaders. CMOs most often require school-levelleader applicants to be former teachers andmake leadership training part of induction.

Few have experimented widely with selectingproven managers and leaders from other kindsof organizations and spending the inductiontime on developing education competence.

What if carefully selected imported leaders spenta year teaching and assisting current schoolleaders with special projects? Would they be anyless likely to succeed than former teachers withno management experience? Or school leaders

who have succeeded only in very different school


20/4417


contexts? Would imported managers respond tonancial incentives for excellence and growth, evenif they fell short of opportunities in the privatesector? These questions are impossible to answertoday, simply because so few education managershave been imported.76

Importing is not without perils and pitfalls;however, neither is the traditional formula if

we consider the results in schools today. Asa result, various actors in the charter sectorshould consider ways they can contributeto the successful importation of leaders:

Charter and CMO Leaders:Importmanagers and leaders and experiment withnew selection, induction, and incentivizingto achieve both growth and excellent

student outcomes. Track your resultsand learn from peers doing the same.

Philanthropists:Fund redesign of leadertraining and induction for successful CMOsthat want to import leaders. Fund imported-leader provider organizations. Use corporatenetworks to shake loose potential educationgrowth leaders. Fund development ofalternative selection tools and processesappropriate for distinguishing imported-leader

candidates. Pay to track and disseminateresults of selection and induction methods.Fund incentive pay experiments with charterand CMO managers to identify effectson both growth and student outcomes.

Policymakers:While most charter schoolsare already exempt from requirements thatschool leaders be certied teachers or holda license in school administration, statesthat still subject charter schools to suchstrictures should eliminate them to ensure thatcharter operators can freely import talent.

Extend the reach of the best teachersand leaders. Use technology and job redesignto enable the best teachers to instruct morechildren and leaders to manage broader spans.

In addition to importing talent, rapid-growthorganizations make the most of the people theyhave, whatever their source. In the charter

sector, the best organizations could do muchmore to make the most of their talent by focusingon the productivity of people. While the word

productivity may conjure up images of squeezingmore effort out of already hard-working teachersand staff, we have a different idea in mind

here. One way to increase productivity whilecreating retention-inducing pay and advancementopportunities for top talent is reach extension.

Teachers.For teachers, reach extension meansreaching more children with the best instructorsand instruction already available. Reach extensioncan take several forms, such as redesigning

jobs to concentrate teacher time on instruction,putting star teachers in charge of more childrenslearning, and using technology to extend topteachers reach and meet their standard. We callthe different reach extension modes In-Person(reaching more students in person), Remote(interacting personally with students, but notin-person, using technology), and Boundless(pre-recorded video and online learning thatdoes not include human interaction).77

Potential reach-extension methods vary accordingto the level of touch, or direct student interaction

with top teachers, and reach, or number ofchildren served by each instructor. Eliminating

rote and non-instructional duties from topteachers schedules would increase touch andreach simultaneously, potentially decreasing groupsizes while increasing the number of childrenreached. This may especially benet students

who, because of age or learning needs, learn bestwith high levels of teacher interaction.78 Evenhigh-touch, low-reach methods of reach extension,such as voluntary, small increases in class sizefor top teachers, could signicantly increase thenumber of children learning from the best.

Most likely, the best reach extension will enabletop-notch onsite instructors to work with smallergroups and reach more children by eliminatingnon-instructional duties and having childrenspend a portion of the day with online learningdesigned or delivered by top-tier instructors.

Today, schools regularly squander their mostimportant assets teachers and leaders and thecharter sector has done little to get out of this


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ineffective mode of utilizing talent. Exceptionsare emerging. Rocketship Education, a California-based CMO, places students in learning labsfor about 25 percent of the school day, in whichthey learn basic skills online. Teachers then

work with students the rest of the day on more

advanced topics and meet individual needs. Asa result, each of Rocketships teachers reachesmore children than a typical teacher does duringthe workday, and the schools save money becausethey need fewer teachers. Since it needs a smallernumber of instructors, Rocketship can select ahigher caliber faculty from its applicant pool.79

In most schools, teachers must leave instructionto advance their careers. Great school leaders

who want to achieve more must leave schooloperations roles for positions in the centraladministration. Even in the charter sector, thebest talent is drawn away from children instead

of toward ensuring that more children gainaccess. By contrast, in schools that use reachextension, star teachers and leaders would haveunprecedented opportunities for achievement andimpact while staying close to the instructional hub.

Reach extension would also pay nancialdividends for charter organizations. Charterschools generally receive funding on a per-pupil basis. Finding ways for great teachers toreach more students means more revenue perteacher. Charter organizations could then use this

dividend in two ways. First, they could pay greatteachers more, creating economically sustainablecareer advancement opportunities for their best.Second, as we discussed in the preceding section,exponential growers tend to generate higher

margins, extra funding that they reinvest in rapidgrowth. The best charter organizations could dothe same if they extended the reach of their bestteachers and plowed a portion of the resultingdividends into meeting growth challenges.

Leaders.Public Impacts previous reports onreach extension address great teachers. Here weposit that reach extension of great leaders to morechildren also presents opportunities for achievingexcellent student outcomes at a larger scale.

Reaching more children with the best leadersmight be a relatively simple way to grow the impactof high-performing charter schools, and someCMOs are already actively utilizing this form ofreach extension. For example, some proven schoolleaders could go on to lead pods of three to vesimilar schools providing vision, drive, planning,and problem-solving while site-level leadersimplement. Similarly, proven leaders schoolscould inch upward in size, add campuses to reach

younger or older students, or aim to dominate theelementary, middle, or high school experience

for target children within existing locales. Manyoptions become apparent when the number ofchildren reached becomes a metric of success.

Moving forward with reach extension.Charter organization leaders, funders, andpolicymakers all have roles in using reachextension to tackle the talent challengefor high-performing charters:

Charter and CMO Leaders: Extendthe reach of your best teachers andleaders. Most charter schools do not facerigid class size limits, pay scales, role

denitions, and other policy barriers andlong-standing habits that constrain districtschools. Use your autonomy to make themost of the talent you already have.

Philanthropists: Fund experimentation,evaluation, and dissemination of reachextension efforts. Evaluate your giving usingthe new charter success formula: studentoutcomes X number of students reached with

the charer secor has done lleo sop he sqanderng of

edcaons mos precos asses:grea eachers and leaders.

each eenson of op alencold allow charer schools opay op eachers and leadersmore, whle sang money ones n growh.


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excellence. Fund design and implementationof reach extension in all three modes (In-Person, Remote, and Boundless) and incombination. Fund documentation, modelbuilding, research, and disseminationrelated to reach-extension experiments

and results. Avoid cutting support forcharter providers that lower costs andachieve operating margins though reachextension while not compromising studentachievement. Instead, provide as much ormore funding to enable their rapid growth.

Policymakers: Remove policy barriersthat may prevent the best teachers and thebest school operators from helping morechildren. Exempt charter schools from class

size limitations, seat-time requirements, andother constraints that may force them touse the typical one-teacher-one-classroommode and thereby limit the reach of greatteachers.80 Allow charter schools to usehighly effective teachers from other states toprovide remote instruction to their students,even if those teachers lack certication

within your state. Finally, enable charterschools with excellent student outcomesto expand enrollment and open new

campuses without counting against caps onthe number or scope of charter schools.

4. Exponential growers usenancial and other incentives tofuel growth

In the for-prot sector, of course, the owners ofa business have a built-in incentive to grow therm. If the business is making money, or willat a certain scale, owners have an enormous

amount to gain by getting bigger fast. Manyfounder-leaders who have driven exponentialgrowth in other sectors were motivated bygrand visions of changing some aspect of thehuman experience. Many sacriced short-termnancial gain to achieve their visions. In the longrun, however, they received personal rewardsnot only for excellence, but also for the largescale of their enterprises, which they achievedthrough sustained exponential growth.

Research indicates that successful rapid-growthorganizations push incentives beyond ownersand founders. Such organizations rewardemployees roles in driving growth and improvingexcellence with nancial and other incentives.

Barringer, Jones, and Neubaums 2005 study of50 rapid-growth vs. 50 slower-growth rms foundthat rapid-growth companies were signicantlymore likely than slower growers to providenancial incentives and stock options, coupled

with lower base pay.81 In 1985, Hambrick andCrozier discovered that successful rapid growersoffer bonuses and stock options at all levels, not

just for high-level managers. In doing so, theserms motivate their people by creating a feelingof ownership and common fate throughout the

organization.82

Fombrun and Wallys surveyof 95 of the fastest growing companies in theU.S. found that focusing and motivating peoplewith a nancial interest in the enterprise is acommonality among the fast growers acrossindustries.83Starbucks, for example, offered itsemployees stock options to generate enthusiasmand a sense of ownership. Walmart encouragedits employees will to grow by introducinga prot-sharing plan for all employees.

RECOMMENDATIONS FOR THECHARTER SECTORReward charter leaders and staff forreaching more children with excellentoutcomes. Provide nancial rewards for growthof excellence to emphasize the importance ofgrowth to the mission.

Compared with rapid growers in other sectors,too little funding in the charter sector owsto the individuals who could drive excellenceon a large scale. CMO and school leaders have

little nancial or reputational incentive to growexponentially. Doubling the number of childrenserved will not double the pay or reputation ofCMO leaders in todays environment. Likewise,CMO employees have little incentive to increasethe complexity of their jobs if reaching morechildren is neither expected nor rewarded. Thebenet to children already served is no greater.Thus, quite reasonably, most schools and CMOschoose to stick or to grow cautiously.


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Instead of applying the seductive altruism testto potential charter leaders, those who want tochange the educational landscape of our nationfor the better should consider applying the willto reach children with excellence test instead.They must create growth incentives that rewardcharter organizations and their leaders and stafffor the number of children reached with excellentoutcomes. Most funding achieved throughperformance incentives, reach extension, andphilanthropic focus on growth will ow to theorganizations for further expansion. But greatcharter founders, leaders, and central staff whocan effect growth should have the opportunityfor nancial rewards commensurate with theircontributions just as great teachers and schoolleaders should (see Reach Extension, above).

Charter and CMO Leaders andStaff:Those who take the growth-of-excellence challenge and succeed deserveand should be able to expect nancialrewards. More children will be better offas a result of such rewards than if thecharter school eld relies upon altruismalone to induce growth in the number ofexcellent education slots for children.

Philanthropists: Entice new entrants into thecharter eld with bold, new calls to potentialfounder-leaders compelled by both excellenceand growth. Philanthropists can make thishappen with venture funding explicitly andtightly focused on charter organizers who bothcommit to growth in word and have the child-reaching operational ideas to back it up. Makerewards personal, not just organizational, fortop leaders and central staff in a position toreach more children with excellent outcomes.

Policymakers:Do your part to makepossible performance contracts and reachextension of the best teachers and leaders.84This will allow philanthropists to redirectfunds for incenting growth rather thanplugging preventable operational holes.


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5. Exponential growers reachcustomers wherever they are

Exponential growers add new customersby expanding extensively and providemore products and services to nearby

customers. Strategies used by rapid growersto expand their customer base include:

Geographic expansion, Providing products and services in alternative

venues where customers already go, Adding new types of venues in current locales, Reaching customers online, Meeting more types of current

customers needs, and Continuing to meet current customers

evolving needs over time.85

For example, Starbucks rst expandedgeographically by moving into an urban hub,

where a team would open 20 or more stores intwo years, and then into surrounding spokeareas with the demographics of their typicalcustomer mix.86 They gained a foothold in onelocation before moving to another. Starbucks alsopracticed store clustering opening severalstores in close proximity to one another toincrease sales and customer awareness.87 As

it grew, Starbucks reached new and existingcustomers in current geographies, moving beyondretail stores and into bookstores (Barnes & Noble),airlines (United Airlines), supermarkets, andcommercial building kiosks.88 They eventuallyoffered products online, including not justcoffee but also music and books (in partnership

with Yahoo) to pair with the coffee-drinkingexperience.89 The YahooStarbucks alliance isone of many examples of partnerships that enablereaching more customers in unexpected ways that

meet the mission (see Alliances below for more).

Fast growers also do the most with the locationsand customers they already have.Walmartsplacement of groceries and other goods inits supercenters brought more customers toits current locations. The companys openingof warehouse clubs (Sams Club) was aimedat expanding within existing geographies butbeyond current store walls by offering wholesale

value.90Williams-Sonoma acquired Pottery Barn

and expanded into new markets with PotteryBarn Kids, PB Teen, and Hold Everything, allof which cater to the same customer base indifferent areas and stages of their lives.91

RECOMMENDATIONS FOR THE

CHARTER SECTORWhat these different strategies share is an intensefocus on nding new customers and thinkingoutside of the box regarding where and howto reach them. In the charter sector, the boxis the assumption that the only way to growcharter excellence is to create more full-sizeschools just like the already-successful ones.

Are there other ways to reach more children andto serve children currently attending top charter

schools even better? Undoubtedly. Indeed, somecharter organizations have begun to pursue themost obvious opportunities, such as expandingfrom networks of middle schools into the eld ofhigh school education. But many more possibilitiesexist for reaching children in need. The bestinnovators will start to see them once theycommit to rapid growth. (See Acquisitions andAlliances for ideas to aid geographic expansion.)Here, we want to suggest an approach for reachingnew children that addresses some of the most

vexing growth barriers. Ironically, it requiresthe sector to think small to grow bigger.

Use micro-reach and micro-chartering.Enable great teachers and excellentcharter operators to reach students insmall venueswithout starting full-size charterschools. Reduce the impact of school leader andfacility shortages while pumping innovation andtalent into the charter sector.

We see two ways to grow the number of excellentcharter slots in small venues. One, micro-reach,involves using existing schools for CMOs to reachchildren in venues other than whole new schools for example, single classrooms of district schools oronline material accessible to motivated individualstudents. The second, micro-chartering, meansopening the doors to new entrants individualteachers, small groups of instructors, andcommunity-based organizations by offering


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charters to educate small numbers of students,rather than a full-size schools worth of them.

The charter sector has a major opportunity toreach more children in smaller venues. Why?

Small pockets of children are not learningenough all over America, but they are widelydispersed and hard for even the bestcharters to reach in the current whole-school-replication mode. These childrencould learn far more if educations bestaimed to reach them wherever they are.

School-level leadership and facilities are two majorbarriers to growth of even the largest, mostaccomplished CMOs. What if we could offerthe best charter and CMO instruction to

students without having to put up a new schoolfacility and nd a great leader every time?

Instructional excellence exists all over America,but many teachers are isolated from thechance to reach children in need andare without the right support to achieveexcellent outcomes consistently.

Online learning is one mode, but not at allthe only mode available to reach childrenanywhere. As other commentators havesuggested, opportunities to unbundle theschool experience abound but have rarelybeen explored in U.S. K-12 education.92

Our small solutions to these big problems aremicro-reach and micro-chartering, both of which:

Find people with the will and skillto succeed with students, and

Empower them to reach childrenin any venue where they canachieve student outcomes.

Micro-reach. Micro-reach is for existingcharter schools and CMOs using the charters

they already have, or obtaining additionalcharters, to reach large portfolios of very smallgroups of children. Here are some examples:

KIPP in a Box. Some successful CMOscould experiment with enabling select,individual teachers in unafliated schools(district or charter) to reach classrooms ofchildren using direction, tools, and remotesupport from the chartering entity but

with access to facilities, extracurricularactivities, and other primarily non-

instructional offerings of the host schools.KIPP essentially started in a classroom,when two young teachers learned that it tooksomething different to get the best resultsfrom kids starting out behind. How manymore teachers-turned-leaders are readyto take on the no excuses challenge?

For example, selected teachers in diverseschools with large achievement gaps couldrun gap closing classrooms. The achievementgaps in relatively well-off schools have receivedlittle attention, yet large numbers of childrenare affected: About one-third of our nationseconomically disadvantaged children attendschools in which less than half of the studentsare low-income.93 Most diverse schools do notachieve acceptable learning outcomes witha signicant portion of these children, butare at a loss about how to meet their needs

while also serving already-advanced learners.

Such an initiative, unlike its twin described

below in the section on micro-chartering,would not require legal changes. The twoessential criteria of micro-reach are a matterof will: district leaders must be eager to closeachievement gaps and CMOs must be drivento reach more children and willing to work

with select teachers in district-run schools.Districts already shell out billions for theprofessional development and support ofteachers. What if they directed a fraction of

thosands of poenalproders s on he sdelneswhle chldren n needlangsh. cro-charers andmcro-reach cold change

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(such as local recreational league sports) arefamiliar territory for many home-schooledstudents today. Imagine if a student couldapply for a micro-charter that provided moneyto pay for materials, online course fees, andpersonal coaching, enabling the student to

achieve more during the high school years.

One exciting aspect of micro-chartering is that,while it mitigates school leader shortages, leaderswould nonetheless emerge from among micro-chartering individuals and entities. Some teachers

would develop leadership skills and grow theirmicro-charters larger or develop them into clustersof micro-charters. Others, having undergonetrial-by-re leadership development training,

would be ripe for school leadership recruitingby CMOs and (in some cases) district schools.

Some would stay small, reaching perhaps one to30 children. Altogether, a much larger numberof people would be able to achieve success withchildren by operating in smaller venues. Overall,a vastly larger number of people concerned witheducation would have entrepreneurial, studentoutcome-oriented experience under their belts.

How can actors in the charter sector helpit grow big by thinking small?

CharterandCMOLeaders:Considerpursuing micro-reach and managing micro-charter portfolios. Calculate how many morechildren you could potentially reach withexcellent outcomes by utilizing teachers,

venues, and instructional delivery modesyou are not using now. Envision achievingyour mission more fully by managing largeportfolios of related micro-charters and micro-reach initiatives, organizing or providingsome elements of instruction, behavioraland personal support, and materials.

Philanthropists:Fund micro-reach andmicro-chartering efforts, in particulardesign and one-time implementation costsfor CMOs, charter schools, and policymakersthat want to pursue either strategy. Payspecial attention to founder-leaders of charterschools and CMOs who are serious aboutinnovating to reach more children in small

venues. Fund crafting of and advocacy for

policies that enable micro-reach and micro-chartering. Establish microloan or grantpools for select individuals, community basedorganizations, and small teacher groups toplan and apply for micro-charters, and for

very successful micro-charterers to grow.

Policymakers:Square current policiesto allow micro-reach and lead developmentof strong micro-charter policies.

6. Exponential growers invest ininnovation to pursue excellenceand growth

Research indicates that exponential growersinnovate more and invest disproportionately

in nding new ways to achieve their visions.Even after signicant initial successes, theycontinue to seek what researchers have called

breakthrough, radical, and unique changesin what they deliver, how they deliver it, and whomthey target as customers.94 These organizationsinnovate by moving beyond what customers havecome to expect, attracting new customers, andproviding increased value to those who return.

For top growers, investing time and talent ininnovation is a habit, not a special project.They invest in innovation even though they arealready great. How do they innovate radically

when they have been so successful doing whatthey already do? Research shows that rapid-growers innovate by getting to know customers

very well, exposing top leaders to a diverseow of fresh thinking from multiple sources,and simply by spending more on research andinnovation.95 Leaders of other high-growthorganizations are a favorite source of ideas.96

Despite the constant change that innovationproduces, successful growers do not tend to takefoolish risks. They choose innovations that ttheir business strategies and implement them

with great planning and care. 97 For example,companies going global innovate in distributionsystems, network heavily in new locations, andtry new partnerships with local rms to help

with unfamiliar regulatory environments.Likewise, high-growth organizations that


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recongure products to reach an untappedmass market innovate in operations to producehigh volume without compromising quality.98

Rapid growers innovate on numerousfronts, and these tactics change over timeto enable continued growth. Efforts covera wide range of areas, including:

New and radically better products and services;

New venues that provide morecustomers with what they want;

Distribution and supply chain changes; Partnerships, alliances, and acquisitions; Management and technology systems to

enable formerly unattainable scale; and Policy inuence.99

Critical issues that every innovator must considerinclude: how measures of success will differ fromthe organizations current modes, how awarethe outside world will be of the innovationsassociation with the existing organization, andhow accountability will be divided within theorganization. Sometimes organizations executeinnovations internally under the same brand, butsometimes they use different branding that bothclaries the difference for customers and enablesinternal accountability for success of different units.

The addition of online retailing by existing bricks-and-mortar chains is one example with the leastdifferentiation between existing and new modes:

Branding is typically the same and the valueis similar (e.g., luxury goods are still sold for apremium; discount goods are still sold at bargainprices). The addition of Sams Club stores inlocations with nearby Walmarts is an example ofthe use of related-but-different branding to clarifya different mode of sale to customers, in this case

wholesale with an annual membership fee.100 Post-secondary education provider Career Educationis another example: It has fueled sustained, high-

exponential growth by providing services undermultiple brands for people seeking jobs in a varietyof sectors (business, health, culinary), in multiplegeographies, and online as well as in-person.101

Sometimes, different branding is not enough:

An innovation with very different kinds of targetcustomers, product or service offerings, andsuccess metrics e.g., discount rather thanluxury goods, or, in schools, excelling far pastgrade level rather than just meeting standards may need far more autonomy and brandingunrelated to the parent organization. DaytonHudsons prescient launch of Target is a celebratedexample of this. The organizations leaders werefar more successful than peers at companieslike Woolworth (which launched Woolco) thatkept similar new ventures tightly tethered to

the parent organizations. Harvards Clayton M.Christensen has examined this mode of disruptiveinnovation thoroughly in a number of works.102

RECOMMENDATIONS FOR THECHARTER SECTORHere, we do not recommend specic innovationsfor the best charter operators to pursue (aside fromthose presented elsewhere in this paper). Excellentproviders who choose to grow more rapidly canuse new operating margins achieved throughperformance incentives and reach extension fornumerous innovations aimed at quality and growth.

We have two recommendations for enablinginnovation by the sectors best: use new brandsto protect existing operator reputations whileencouraging innovation and build a communityamong the subset of charter operators trulycommitted to high exponential growth.

Use branding to enable innovation bythe best. Brand novel approaches to clarify theidistinctiveness, hold their leaders accountable,

and protect proven charter brands.

In the politically-charged charter sector,reputation is a huge concern for well-regardedCMOs. Innovation is risky: If new efforts fallshort, the operators reputation could suffer.

Yet, innovations should be subject to thesame fast-results, no-excuses rigor that hasmade the best charter providers successful.

top growers nes me and

alen n nnoaon eenhogh hey are already grea.


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Separate branding similarly separate internalaccountability within innovating charterorganizations could help. With existing CMOs,branded units could pursue small, targetedexperiments aimed at reaching children withintheir mission who cannot be reached with

existing operational modes. Successes couldgrow, failures could die, both without muddlingor spoiling the original brand. Separate brandingallows innovation without as much risk to theestablished name and claries the differentapproaches for funders, authorizers, parentsand students. Branding also can heightenaccountability and clarify responsibility forleaders of innovative efforts within larger entities.Like the organizations original entrepreneurs,innovative charter units must live or die by how

well and how fast they achieve student outcomes.

As an example, suppose a CMO with a highlysuccessful portfolio of start-up schools wants toget into the business of taking over and turningaround failing district schools. The turnaroundefforts results may lag behind the start-upsstellar outcomes for a number of reasons. Evenif a CMO rapidly nails the turnaround recipe,achieving immediate success with a whole schoolof students who are far behind is almost certain toprove more difcult than achieving success withone grade at a time, as many charter operatorsdo. Even if the same number of children (e.g.,all fth graders) makes very high progress in aturnaround as in a one-grade start-up, a smallerpercentage of the total student population willmake high progress in the turnaround than in thestart-up in the earliest years.103 Such a charterturnaround operator might achieve standards witha whole grade at a time over three years, withoutgraduating another child who has not achievedstandards. This would be a wildly successfulturnaround, just the kind our nation needs, yetthe results would misleadingly pale in comparison

with new schools where other grades are exclude

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