The Implementation of A Decentralized Organization Design in Three Large Public

School Districts: Edmonton, , and Houston

By

William G. Ouchi

Anderson School of Management UCLA 110 Westwood Plaza, Suite B523 Los Angeles, California 90095-1481

July 30, 2004

This research was funded through grants from the National Science Foundation (Grant # 0115559), Dr. Peter Bing, the John M. Olin Foundation, the Frank and Kathy Baxter Family Foundation, and the Thomas B. Fordham Foundation. The author wishes to acknowledge the work done on this project by Bruce S. Cooper, Lydia G. Segal, Carolyn Brown, Timothy DeRoche, Elizabeth Galvin, John Gabree, Bernice Tsai, James Mirocha, Stephanie Kagimoto, Kristina Tipton, and Jennifer Riss. I also received helpful suggestions on early drafts from Fred Ali, Christine Beckman, Tom Boysen, Gloria Chalmers, Beverly Donohue, Harry Handler, Tom Hofstedt, Sanford Jacoby, Dan Katzir, Barbara Lawrence, Paul Lawrence, David Lewin, Allan Odden, Janice Riddell, Randy Ross, Morton Schapiro, Dorothy Siegel, Olav Sorenson, Deborah Stipek, Kaye Stripling, Joseph Viteritti, and Oliver Williamson, for which I am grateful.

Abstract

Although the study of organization design can be traced to the study of public school districts beginning in 1955, school districts themselves have been immune to organizational re-design until very recently. Three large school districts have recently undertaken structural redesign along the lines of the multidivisional form that is well established in large businesses. These three are compared to three large districts that are in the traditional centralized form and to large Catholic school systems. Measures of performance indicate that decentralization has yielded large improvements in student achievement and in organizational efficiency. Several other large school districts have been studying the successful redesign of these three and are now undertaking organizational redesigns of their own.

1 Organization Design in School Districts

The contemporary empirical study of complex organizations can be traced to the research

by Terrien and Mills (1955) on the structure of public school districts. Their conclusion, that the

administrative ratio increases as size increases, was counter-intuitive in an age that took it for

granted that larger organizations would enjoy economies of scale. One great irony is that school

districts have been almost entirely immune to organizational re-design during the past fifty years,

though the research that has underpinned the redesign of corporate structures stemmed largely

from that original study of school districts.

The nearly complete rejection of new organizational designs in school districts might be

the cause that has left them disconnected from their social and political environments. As a

result, Cohen, March and Olsen (1972), March and Olsen (1976) and Weick (1976) described

schools as “loosely coupled systems” in which the policies adopted by school boards seemed

almost entirely disconnected from the activities in schools (e.g. Swanson and Stevenson,

2002:2). In a similar vein, Meyer and Rowan (1977) and Meyer, Scott, Cole, and Intili (1978)

characterized school districts as “institutionalized organizations”, because they appeared to be so

immune to external influence as to be immutable, or “institutionalized” forms.

Recently, in a dramatic departure from this history of resistance to change, a few large

public school districts have undertaken the purposive redesign of their structures in order to

decentralize decisions away from the central office and to the individual schools. This paper evaluates the only three such organizational designs that were in existence as of the time of the research, during 1999-2002. The purpose of each of these redesigns was to achieve decentralization, in the belief that decentralization would permit local neighborhood variation in curriculum, staffing, staff development, selection of books and teaching materials and teaching

2 methods, and that these local adaptations would, in turn, result in improved student achievement

(Ouchi and Segal, 2003).

Size, Centralization, and Performance in Public School Districts

Public school districts have undergone tremendous growth in enrollments and in number of employees over the past seventy-five years, but without any corresponding change in their organizational structure or pattern of centralization. They remain today every bit as centralized in planning, budget control, and decision-making as they were in the 1930’s (Chubb and Moe,

1990; Chubb, 2001). Because the positive effects of decentralization are strongly related to size of the organization (Blau and Schoenherr, 1971), it is arguable that large school districts should benefit greatly if they were to undertake decentralization.

During the period from 1930 until 2001, the number of students enrolled in U.S. public schools increased by 1.85 times, from 25.7 million students to 47.5 million. Meanwhile, from

1932 until 2001, the number of public school districts declined from 127,531 to 16,850 (Tyack and Cuban, 1995; Young, 2002:1-2). With 1.85 times as many students attending 0.13 as many school districts, the typical school district now has 14 times as many students as did the average district of 1930. In the U.S., there are now 226 school districts which each enroll more than

25,000 students (31% of all public school students), and of these, 25 enroll more than 100,000 students each. It seems unlikely that any type of organization could experience that much growth and still prosper in a competitive setting without basic redesign. Blau and Schoenherr found in their sample of government organizations that the development of the bureaucratic apparatus that provides coordination and control is completely developed at about 3,000 employees (1971:64).

Beyond that size, one could argue that the problems of large size will overtake the coordinative

3 and control capacity of a unitary structure and that other, decentralizing organizational

adaptations should become necessary.

The performance of public school districts is typically measured through standardized

tests of student achievement, graduation rates, and scores on the SAT. On these measures, districts have been flat or down for at least the past fifty years (Hanushek, 1994, Tyack and

Cuban, 1995, Ravitch, 2000). Real spending per student has increased dramatically over this period, but none of the many reforms of teacher training, classroom practice, or curriculum has had a measurable impact on student achievement (Hanushek, 1986, 1994). Another measure of performance is public satisfaction with public schools. On these measures, school performance has declined over the past several decades. A 1940 Gallup Poll found that 85% of U.S. parents were satisfied with the public schools (Tyack and Cuban, 1995:13), while Education Week reported that the percentage of the public that rates public schools as either “excellent” or “good” has declined steadily, from 63.7% in 1996 to 53.7% in 2002 (May 21, 2003). In Los Angeles, a

2001 poll found that half of the parents surveyed gave a grade of “C” or worse to their public schools (Los Angeles County Alliance for Student Achievement, 2001).

School districts uniformly inflate their graduation rates (Ouchi and Segal, 2003:42). The typical district in our study reports a high school graduation rate of about 85%, but our estimates of the true rates ranged from 41% in Chicago and 45% in Houston to 66% in Seattle and 70% in

Edmonton (Edmonton rate is for 2003). The analysis of graduation rates was dropped from the study because the data provided by the school districts proved to be unreliable. However, I do not feel that this systematic misreporting invalidates the other decentralization gains in some of these districts.

4 Into this setting came a remarkable organizational redesign in the public school system of

Edmonton, Canada, beginning in 1975 (Ouchi and Segal, 2003). That change, which came about

through a process of organizational experimentation and trial-and-error, was then intentionally

and successfully replicated in the school districts of Seattle and of Houston beginning in the late

1990’s. Today, that Edmonton model of decentralization is being implemented in several additional school districts, including those of Cleveland, Oakland, San Diego, and San

Francisco. At least twenty-five other large school districts in California, Colorado, Hawaii,

Massachusetts, Minnesota, and Washington, D.C. are preparing to implement the Edmonton structural and managerial redesign.

The Approach to Decentralization in this paper

Decentralization has various meanings in many fields of study, and several meanings within the organization design of schools (Hannaway and Carnoy, 1993). In this study, the concept of decentralization is limited to the structural form described by

Williamson (1970, 1975), Chandler (1977), and Williamson and Ouchi (1981). This basic framework, which predicts that large, complex organizations (e.g. more than 3,000 employees, see Blau and Schoenherr, 1971:64) with decentralized structures of particular design will outperform other structures on the basis of superior “fit” (Williamson,

1970:133), has been replicated in academic research and has been widely adopted by large businesses. This approach has come to be known as the “M-Form”, or multidivisional form of organizational structure, as compared to the centralized “U-

Form” and the extremely decentralized “H-Form”. The critical feature of this structure is that each subunit contains many, though not all, of the functions necessary to provide the good or service, and that each subunit enjoys autonomy of decision and can, as a result of

5 its near self-sufficiency, be fairly evaluated with summary measures of performance, including measures of financial performance and of customer satisfaction (as noted by

Freeland, 1996 and by Shanley, 1996. See also Jensen and Meckling, 1976 for an explanation of why ease of monitoring is critical to decentralization). School districts are configured in just this manner, with each school having internally almost all of the personnel and resources necessary to a semiautonomous operation. However, as Palmer,

Friedland, Jennings, and Powers (1987) have noted, a decentralized structure will sometimes be operated in a centralized fashion when the social/political goals of powerful constituents prefer centralized control, and this has historically been the case with school districts.

Other relevant studies include those by Grinyer, Yasai-Arkedani and Al-Bazzaz

(1980), who have found that this particular form of structural decentralization is more likely to appear when the subunits of organization are geographically dispersed, as they are in school districts and by Odden and Busch (1998) who find that decentralized approaches to financing schools is associated with higher performance. Barzelay and

Armajani (1992) report that decentralization is more likely to appear in government agencies when credible measures of accountability are available, as is the case with the multidivisional organization and with the Edmonton model. Mohrman and Wohlstetter

(1994) find that while decentralization of decisions to school-based committees can lead to higher performance, these so-called decision committees rarely in fact enjoy real decision autonomy. These results all imply that a structural decentralization of school districts along multidivisional lines should lead to higher performance.

6 The Edmonton Model of Organization Design

This approach was developed by trial-and-error in Edmonton (80,000 students in

209 schools) beginning in 1973, and it was subsequently transported to Seattle in the

1998-99 school year and then to Houston beginning in the 2000-2001 year (Ouchi and

Segal, 2003). Perhaps the most innovative element of this decentralized, multidivisional

approach is a budgeting system known as Weighted Student Formula (WSF).

WSF provides each school principal with a “block grant” of money, arrived at by

attaching to each student an amount that is determined by multiplying the basic per-

student allocation by a weighting that reflects the number of “categorical” funds (such as

weights for low income, English language learners, special education, and gifted students) for which each student qualifies. Students are free to choose any public school, and schools that cannot attract enough students to reach financial breakeven will either be attached to stronger schools or will be closed. In some cases, the freedom to choose a school is attenuated by a shortage of openings, particularly at popular schools, in which case the school chooses students by lottery. Every state already has in place some form of student weights, with some such as California having as many as 140 of them. However, the weighted funds are typically not attached to the student, but instead the money allocated by the state to each school district is reallocated by the district among its schools, usually with more money going to politically powerful schools.

In Weighted Student Formula districts, students with a maximum weighting receive as much as ten times the annual funding as basic students. For example, in the

Seattle implementation of the system, the minimum child receives an allocation of $2,600 per year, while the maximum child (one with multiple learning disabilities, from a low-

7 income family, and non-native English speaking) receives a weighting of 9.2, or $23,920

per year (, 2001:5). Each student is free to choose any public school in Seattle, and the money follows the child to that school. In addition, each school receives a flat base allocation (e.g. $500,000 per high school) so that small schools can meet their costs. Principals are free to decide how to apportion these funds between credentialed teachers, paraprofessionals, clerical staff, materials, utilities, building maintenance, and so on. The result is that principals in these districts consult with their teachers on budget priorities, make local decisions about how to staff the school, and also decide at each school how much to spend on new painting, carpets, and computers. These consultations typically occur during the budget planning cycle each year, as well as during the school year as adjustments become appropriate. In traditional districts, most of these decisions are made at the central office. This traditional approach is typically referred to as the Enrollment Formula, or ERF system.

The architect of the Edmonton system was Superintendent Mike Strembitsky, who served in that role for twenty-two years, compared to the average tenure of U.S. urban superintendents of three and one-half years. The performance of the decentralized approach in Edmonton has been strikingly positive. By the year 2002, 87% of first grade students and 92% of twelfth grade students scored at or above grade level on the Alberta Provincial standardized test, and the decentralized approach was so popular with teachers, principals, and parents that private schools were effectively put out of business. Two of the largest private schools voluntarily became public schools and joined the Edmonton Public Schools during the five years preceding the study. Edmonton Public also won more than 5,000 students from the tuition-free (state- supported) Catholic schools of the city during Strembitsky’s tenure. Charter schools in

8 Edmonton are rapidly and voluntarily joining the public school system as public schools. A senior official of the union that represents teachers and principals offered this assessment of the decentralized approach in Edmonton:

As far as I am concerned, decentralization is a wonderful thing, because

it gave teachers the opportunity to be empowered and to have a role in

making decisions about their schools…It used to be that someone else,

somewhere at Central, would decide what books I should be using and send them

to me. It would be a surprise to me when the books arrived! Under

decentralization, they send the money to the school, and now the teachers have

decisions to make for themselves. (Ouchi and Segal, 2003:27)

Description of the study: Methods and Data

The goal of the study was to examine the characteristics and the effects of the decentralized Edmonton model of organizational re-design. Because decentralization arguably has a greater impact the larger the organization, the study compared a universe comprised of the three largest school districts in North America (New York City – 1,211 schools, Los Angeles – 789 schools, and Chicago – 597 schools) with the three districts

(all of which, by chance, are also large as defined by the U.S. Department of Education –

Young, 2002:1-2) that had adopted the Edmonton model of decentralization with

Weighted Student Formula (Edmonton – 209 schools, Seattle – 94 schools, and Houston

– 288 schools). At the time of the study, there were no other school districts in North

America that had adopted the Edmonton approach. In addition, the study included the three largest Catholic school systems in the U.S. (Chicago – 302 schools, New York City

9 – 286 schools, and Los Angeles – 269 schools), which are extremely decentralized (Bryk,

Lee, and Holland, 1993).

In each school district, we conducted interviews and gathered data at 5% or more of the schools, plus the central office. We were not able to draw a random sample but rather asked each superintendent to provide us with one-third each of high performing, average, and low-performing schools. In all, we gathered data in 223 schools, following a standard interview protocol. We also performed a “corruption” analysis of each school district by interviewing inspectors general, internal auditors, and by reviewing court documents, Lexis-Nexis, and local newspaper archives for counts of various kinds of criminal prosecutions relating to graft or corruption.

Perhaps the most challenging aspect of data collection was, as is usual in organizational research, obtaining entrée. Rarely are superintendents willing to permit outsiders to have the kind of access that we requested. In some cases, we met initially with resistance. In the end, though, we were able to gain access to everything that we needed in every district that we had originally intended to study. Table 1 presents the basic description of the districts in our study:

Table 1: Description of the School Districts

10 Enrollment Total Per Pupil Number of Average Operating Expenditure Schools School Budget Size

New York City 1,105,045 $12.419 bill. $11,823 per 1,211 913 Board of pupil Education

Los Angeles 722,727 $6.966 bill. $9,638 per 789 916 Unified School pupil District

Chicago Public 435,470 $3.575 bill. $8,210 per 597 729 Schools pupil

Houston 208,672 $1.160 bill. $5,558 per 288 725 Independent pupil School District (WSF)

Edmonton Public 80,862 $0.465 bill. $5,750 per 209 387 Schools (WSF)* pupil

Seattle Public 44,831 $0.435 bill. $9,710 per 94 477 Schools (WSF) pupil

Archdiocese of 115,000 NA NA 286 402 New York

Archdiocese of 130,000 NA NA 302 430 Chicago

Archdiocese of ~100,000 NA NA 269 372 Los Angeles

*Edmonton data are in Canadian dollars.

It is worth noting that the WSF districts, while large, are smaller than the three largest districts. We do not believe that this disparity indicates that WSF or decentralization are unworkable in these very large districts, because all three of them –

New York City, Los Angeles, and Chicago, are preparing to implement all or part of the

11 Edmonton model. In Table 1, it is also evident that we did not calculate average spending per student for the Catholic districts. This is so because the Catholic districts are so completely decentralized that their central offices do not attempt to collect such data.

However, we did learn that in the three Catholic districts, the typical tuition is $2,200 per student in the elementary schools, which are invariably organized as including grades K-

8, and is $4,500 in the senior high schools. With few exceptions, these urban Catholic schools receive minimal donations, about $100 per student per year. Two results of the lower revenue per student is that class sizes in our Catholic schools are larger than in the public schools, and teacher pay is about half that in public schools.

Data collection began in the autumn of 2001 and continued through the following spring. Thus, all of the districts were visited during the same school year of 2001-2002.

This period embraced the terrorist attack on New York City, which caused us to re- schedule our planned visits there and might have affected our data in other ways that are unknown to us. The period of data collection was preceded by a year of pre-testing and of work on obtaining entrée and was followed by a year of contacting the districts to clean up our data.

Results

The most important measure of any organizational feature was the discretion that a principal has in the spending of money. We interviewed each principal and went through with her or him their school budget in order to determine which funds were at their discretion and which were not, using protocols developed by Cooper and associates

(1994). In traditional districts, most of the money is decided by central office dictate, while the opposite is true in the decentralized districts, as Table 2 reveals.

12

Table 2: Percent of School Budget at Principal’s Discretion

Organization Mean of Principal’s Discretion Type (n) Principals District Principal Discretion Rank

1. ERF (3) 10.7% New York City 6.1% 1 Los Angeles 6.7% 2 Chicago 19.3% 3

2. WSF (3) 76.5% Houston 58.6% 5 Seattle 79.3% 7 Edmonton 91.7% 8

3. Catholic (3) 74.9% NY Catholic 54.4% 4 Chicago Catholic 77.9% 6 LA Catholic 92.5% 9

Mean (9) = 54.0% Standard Deviation = 35.1%

Because our data is on a universe rather than a sample, we felt it inappropriate to present statistical tests of significance. Table 2 clearly displays the difference in principal’s discretion of the budget of the school. Among the traditional, or ERF districts

– which is typical of virtually all school districts in North America apart from those using

WSF – principals control only the Federal Title I funds that are allocated to each school to support students from low-income neighborhoods. Chicago is an outlier, and in that district, a reform begun in 1988 granted to each school local control over state-allocated poverty funds, in addition to the Federal Title I funds. One Los Angeles Unified School

District principal commented that,

There is no belief system in the district now that schools can make decisions for themselves – and it’s only gotten worse.

13 Another added, …the habit of the LAUSD is top-down. (Ouchi and Segal,

2003:79)

The three districts that use the Edmonton model all display great local discretion over the spending of school funds. The largest difference in discretion between WSF and

ERF districts lies in local discretion over how to staff a school. In ERF districts, a school may not depart from the formulaic number of biology teachers, English teachers, first grade teachers, or teacher’s aides that it has been allocated by the central office. By comparison, in WSF schools, the principal controls the numbers of teachers of every kind, the number of part-time teachers, teacher’s aides, staff of each type, and so on.

One striking example of the effect of decentralization is the John Hay Elementary

School (K-6) in an upper-middle class neighborhood of Seattle. At John Hay, the principal controlled approximately $25,000 before the change to the Edmonton model and now controls about $2,000,000 per year, which is virtually the entire school budget.

After the change, the principal in consultation with her teachers decided to throw out the standard schedule of six periods per day and instead adopted an innovative schedule that

made more efficient use of teacher time. The principal also used her new freedom to hire

twelve part-time reading and math coaches and set up a tutoring station outside of every

classroom. Now, reading in that school is taught in groups of five to seven students, while

other classes are in larger sections. Over a four-year period following the change, the

school’s standardized math scores rose from the 36th percentile to the 62nd, and reading scores rose from the 72nd percentile to the 76th. In third grade, Black and White students

now have identical reading scores, and all of them are at or above grade level.

14 In Seattle’s Skid Row, the Bailey Gatzert Elementary School (K-6) serves a

student population of which about 30% are homeless, while 100% are low-income and of

color. These children all carry high weights, with the result that the school has enough money to hire the many kinds of specialists that these children need. Teachers there have long tenure, which is exceedingly rare for such a school, and they reported that they were glad to work there precisely because WSF gave them the resources with which they could enable their students to succeed.

In the John Stanford Elementary School (K-6) in a section of Seattle near to the

University of Washington, the principal conducted a market survey. She found that her neighborhood included predominantly families from graduate students and young faculty, who were from all over the world. She thus designed a school in which every class is taught from a global perspective, and in which every first-grade student must choose a second language that is not their own and then receive half of their education in that second language in grades one through six. After one year of operation, the school had a waiting list of 170 families. The Seattle Public Schools have recaptured eight market share points from the independent schools since the decentralization began. It is hard to imagine three elementary schools that are more different from one another than these three. These examples dramatize the way that decentralization permits each school to cusotmize its staffing, schedule, materials, and teaching program to its unique constituency.

Districts that decentralize should need fewer central office staff. Table 3 shows that the results generally support that expectation, but not unequivocally. In particular, both Houston and Seattle have larger central office staffs than we expected. However,

15 experience from 2001 to 2004 shows that both of those school districts have experienced significant continued reductions in central staff employment, while enrollments have risen in both districts. Most outstanding, of course, are the very small central office staffs of the Catholic districts. In these school systems, each elementary school is owned by its local parish, while high schools are owned either by a church order or by an independent board of trustees. A few schools are owned by the archdiocese, though these are exceptions. Each school is legally on its own financially, though it has become common for urban archdioceses to subsidize inner-city schools during the past few decades. These

Catholic systems are perhaps more accurately regarded as loose federations of schools rather than as unitary organizations.

Table 3: Central Office Staffs in Nine School Systems

Organizational System C.O. C.O. Payroll Rank Type (n) payroll FTEs per 100k FTEs students

1. ERF (3) New York City 25,500 2,311 2 Los Angeles 11,896 1,646 4 Chicago 4,279 983 5

2. WSF (3) Houston 3,730 1,787 3 Edmonton* 437 540 6 Seattle 1,613 3,401 1

3. Catholic (3) NY Arch 22 20 9 Chicago Arch 28 21 8 LA Arch 24 24 7

Mean (9) = 1,234 Standard Deviation = 1169

Edmonton Superintendent Angus McBeath commented that,

16 We have a small central staff. We can’t afford more. All of the central maintenance staff

have to sell their services to the schools. All of the consultation staff, plus the reading

specialists, social workers, and psychologists.

Another consequence of a smaller central office staff is that a larger proportion of

the district’s budget is devoted to teachers, and this expectation is borne out in Table 4.

Table 4: Classroom Teacher Pay as a Percent of a District’s Total Operating Budget

District 2001-2002 Number Avg. Total Teacher Pay as % Mean Ran Operating of Teache Pay of k Budget Teachers r Operating Salary Budget

New $13,236,000, 79,156 $47,763 $3,780,728,028.0 28.6% 1 York 000 0 City

Los $6,966,000,000 39,268 $51,181 $2,009,775,508.0 28.9% 3 Angeles 0

Chicago $3,575,000,000 26,348 $50,411 $1,328,229,028.0 37.2% 4 0

ERF (3) 31.6%

Houston $1,160,000,000 13,060 $43,070 $562,494,200.00 48.5% 5

Edmonto $465,000,000 4,382 $55,000 $241,010,000.00 51.8% 6 n

Seattle $435,000,000 2,798 $44,765 $125,252,470.00 28.8% 2

WSF (3) 43.0%

Grand Mean (6) 37.3%

Standard Deviation = 10.5%

17

Here, the sole outlier is Seattle. Seattle had suffered a precipitous decline in enrollment

from 1970, with approximately 100,000 students, until 1995, when it had dropped to 39,000

students. This enrollment decline was likely a result of the forced busing that was

implemented there beginning in 1977. As a result, the Seattle district had a central staff that

was very large compared to its enrollment, and the politics of downsizing were such that it

had been able to reduce that central staff only slightly by the time of our study (Palmer,

Friedland, Jennings, and Powers, 1987, describe this phenomenon in other settings).

We also combined our various measures of graft and corruption to create a “corruption

score” for each of the six districts. We had anticipated that one cost of decentralization might

well be an increase in local corruption, as had occurred in New York City under a quite

different 1966 decentralization plan (Segal, 1997, 1999) and apparently in Chicago under a

1988 decentralization plan (Bryk, Sebring, Kerbow, Rollow, and Easton, 1998).

Table 5: Corruption Scores

Dimensions of LAUSD NYC BOE CPS EPS SPS HISD Corruption Pervasiveness Systemic. Systemic. Systemic. Negligible Opportunistic, Some Many Many Lessening Very non-systemic. systemic examples examples sporadic But gross cases But waste fewer than in WSF districts Pervasiveness 2 1 3 6 5 4 Ranking (1 = most pervasive)

Level of From Bottom to Bottom to Rare Low level Bottom to administration most bottom to mid-levels, mid-levels school mid-level afflicted mid- and occasionally personnel who Occasion

18 upper-levels upper levels handle cash. al mid- Sometimes level mid-level management.

Rank for Level of 1 2 3 6 5 4 administration score (1 = high levels are involved)

Frequency rankingi 1 2 3 6 5 4 (1 = least frequent)

As Table 5 indicates, all three of the decentralized districts had lower corruption

scores than did any of the traditionally centralized districts. Although this came as a surprise

to us, our interviews revealed a common-sense explanation: when money is moved to the

school and out of the central office, even small dollar amounts mean a great deal to teachers,

parents, and administrators at each school. In centralized districts, which typically have

multiple, confusing accounting information systems and budgets in the billions of dollars,

corruption is so easy as to be almost inevitable. The specific forms of decentralization that had

been tried in New York City and in Chicago, by comparison, did not correspond to the

multidivisional Edmonton approach. Again, the words of Edmonton Superintendent McBeath:

Just think about giving ninety-two cents on every dollar to the schools. Just think about how

many eyes are on the money. They don’t steal money in this organization – trust me.

With respect to student achievement, we were able to make only limited comparisons.

Each state is free to use any standardized test of its choice, and several such tests are in use.

However, Houston, The Los Angeles Unified School District, and the Los Angeles Catholic

elementary schools used the same test during the study period, the Stanford 9, or SAT 9. In

addition, both Seattle and Chicago used the same test, the Iowa Test of Basic Skills, or ITBS.

19 The more compelling comparison is between Houston and Los Angeles, since both cities are

90% minority in their student enrollment and both are approximately 80% of students from low-income neighborhoods (29% of students in the Los Angeles Catholic elementary schools are from low-income families, and they do not report on student ethnicity, though they overwhelmingly serve Latino students). Seattle and Chicago, by comparison, differ greatly on both measures. Table 6 displays the SAT 9 scores in reading and math for the comparison of students in Houston with those of The Los Angeles Unified School District.

Table 6: System-wide Scores for Three Districts

SAT-9 System-wide Reading Scores (National Percentile) 1999 2001

LAUSD 28 33 Houston 38 42 LA-Catholic 53 53

SAT – 9 System-wide Math Scores (National Percentile)

LAUSD 36 42 Houston 42 49 LA-Catholic 51 49

Given the complexity of measuring student achievement, the results in Table 6 cannot be considered to be other than suggestive. However, our interviews revealed that schools in Houston that serve predominantly low-income, minority students have used their freedom to create distinctive, often unique, programs that are meant to motivate the particular students whom they serve. In the Los Angeles Unified School District, by comparison, all schools are on the ERF system and have a standard number and type of

20 teachers, teacher’s aides, and other staff. They all are required to use the same books and

materials for literacy and math, and to use those materials in the same way, and they all

have the same daily and yearly schedule. Given the fact that these two districts have nearly identical student demographics, though, the higher performance of the Houston schools must be attributed to some systematic cause, and that cause might well be the superiority of decentralized management (these results for Houston are confirmed by a longitudinal study by Snipes, Doolittle, and Herlihy, 2002:91).

For example, the Mabel Wesley Elementary School, located in the Acres Homes

public housing projects of Houston, has 816 students in grades pre-kindergarten through

five. Nearly all of the students are African-American, and 82% qualify for a free school

lunch. Wesley, though, has used its autonomy to craft a custom-designed program that is

unlike any other in Houston. Each morning, kindergarten students line up in their

uniforms. As they file in to class at 8:00 a.m., each hands his or her homework to the

teacher. The day begins with about twenty minutes of chanting in unison the days of the

week, the months of the year, the numbers one through one hundred, and so on. The

students read out loud to one another in small groups and to the class as a whole, and the

teacher reads out loud to them several times each day. It isn’t learning by rote, though:

instead these students, who have not had the 3,000 hours of at-home reading instruction

by their parents that is standard for middle-class children, are learning the sounds of

letters, words, and of punctuation. Unless students have acquired these sounds, they

cannot benefit even from the most basic forms of phonics instruction, which teach

children to match the written letter or word to the sounds that they have previously

acquired. This approach is not used in Houston schools that serve mostly upper-middle

21 class children, nor would it be appropriate there. In Los Angeles, this kind of local variation is not permitted. In Houston, though, each school has the freedom to control its budget, staffing, teaching materials, and teaching approach, and the results are striking:

99% of third and fourth graders and 100% of fifth graders in 2002 passed the state TAAS test in both reading and in math at Mabel Wesley School. Out of 182 Houston elementary schools, Wesley ranks twelfth highest in scores on the Stanford 9 standardized test, above many middle-class schools

Albeit with a much lower level of confidence, we can also compare the two districts that use the Iowa Test of Basic Skills, Chicago and Seattle. In this comparison, the Seattle students outscored their Chicago counterparts by 53 to 40 in reading, and by

58 to 44 in math in 2001, with even larger gaps in 1999. These are very large differences in performance, but Seattle has barely half the proportion of low-income students that

Chicago does, and Seattle has 41% White students, compared to 10% in Chicago.

Finally, in New York City, we can compare the public schools to the Catholic schools on the English Language Arts and Mathematics Exams. Raymond Domanico reports (2001:10) that Catholic students outscored public school students in grades 4 and

8 in both tests in 1999 and in 2000. For example, Catholic 8th graders outscored their public school counterparts by 703 to 686 in English and by 706 to 686 in math in the

2000 test. Again, though, the New York City Catholic schools have only 32% low- income students, while the public schools are 74% low-income students.

Implementing Change in Edmonton, Seattle, and Houston

What is particularly important about the examples of Edmonton, Seattle, and

Houston is that they involve the original creation of a decentralized structure in

22 Edmonton over a period of several years, followed by very fast, intentional duplications of the Edmonton model in both Seattle and in Houston. By all measures, it seems that the weight of the evidence leads to the conclusion, although with a very small population of three, that the implementations have been successful. Further evidence of the success of these three comes from the fact that, following close study, four additional urban school districts are now implementing that same model, while perhaps two or three dozen additional urban districts are preparing to follow suit. The entire state of Hawaii, with

180,000 public school students, legislated in the summer of 2004 an implementation of the Edmonton model as well.

In Edmonton, parents, teachers, and principals were at odds with one another and with the central office staff, which they regarded as authoritarian and unresponsive. The powerful union that represents teachers and principals was frequently on strike. In 1973

Mike Strembitsky, then in his mid-thirties and too young to have learned to be a bureaucrat, was appointed superintendent. Strembitsky had been a successful principal while also raising 3,000 hogs and building homes on the weekends to supplement his income. Following his common-sense nose, Strembitsky went through the entire budget of the Edmonton system and, piece by piece, gave control to the principals. At the same time, he put into place an accountability system that still holds principals accountable for improvement in student standardized test scores, for staying within budget, and for stakeholder satisfaction scores in which school employees, students, and parents rate their school as well as the leadership of their principal each year. Principals, in a similar questionnaire, rate the superintendent and the school board. All of these results are made public. Strembitsky remained superintendent until 1994, more than time enough to see

23 that his structural reforms mature sufficiently that the political structure around them had been molded into a shape that had an interest in maintaining decentralization.

Seattle’s public schools had fallen on hard times, with the dramatic decline in their student population and the corresponding growth of independent schools, which had attained a market share of 47% of students by 1995, when reform began in that city. The business community formed a coalition that sponsored reform candidates for the school board. The new school board hired a non-traditional superintendent, retired Black Army

General John Stanford. Stanford and his Chief Financial Officer, Joseph Olchefske, traveled to Edmonton, where they spent only four hours with Superintendent

Strembitsky. They found his decentralized organization to be so straightforward and so intuitively appealing that they returned to Seattle and implemented it, complete with

Weighted Student Formula, the following autumn(Stanford, 1999). General Stanford died of leukemia during his third year as superintendent and was succeeded in that office by Olchefske. Olchefske continued to press the decentralization until he left office in

2003. By that time, student test scores were up, the gap between minority students and

White or Asian students had narrowed, and the public schools had recaptured 8 market share points from the independent schools.

The Houston Independent School District, too, had elected a reform-oriented school board. After a few false starts, that board also hired a non-traditional superintendent in Dr. Rod Paige, who at the time was Dean of a school of education.

Houston had begun a managerial decentralization in the early 1990’s, and the board members were excited about their progress but were concerned that the next board or superintendent could easily revert to the old centralized way of doing things.

24 Superintendent Paige and his Chief Academic Officer, Susan Sclafani, went to Edmonton to seek the advice of Mike Strembitsky. Like John Stanford and Joseph Olchefske, they returned home and implemented the Edmonton model, though after a year of planning

(McAdams, 2000).

It is unusual to have a setting in which virtually all of the organizations employ a single (in this case, centralized) organizational structure, and in which a few then set out to intentionally decentralize, all using the same model. It might be the case that school districts are unique in this way. Nonetheless, these examples give clear evidence that the complete redesign of major organizations can be successfully undertaken.

Closing Thoughts

If ever there were an intransigent problem that faces U.S. society, it is the improvement of public schools in the face of an increasingly heterogeneous population of students, of teachers, and of administrators. To a student of organization design, though, it is anything but surprising that school districts, which have grown manyfold in size while changing not at all in structure, do not fit their task.

Those who have studied Organization Theory and Organization Design know that the most common response of a senior management team to dysfunction in the organization is to centralize control even more thoroughly than before (Gouldner, 1954,

March and Simon, 1958). That may explain why today’s superintendents are wont to consider decentralization as a solution.

However, students of organization have also long known that as heterogeneity increases, the successful organization must decentralize in order to permit each subunit to

25 effectively cope with its small part of the whole fabric of diverse complexity (Durkheim,

1949 and 1893, Simon, 1962, Lawrence and Lorsch, 1967, Williamson, 1975).

Among educators, the topic of organization design is largely unknown. In a

widely-reported study of three urban school districts sponsored by the Council of Great

City Schools, the authors Snipes, Doolittle, and Herlihy reported that,

We were met with a fair amount of skepticism when we started. We were told that there

were school “effects” and teacher “effects” and state “effects” - but there were no

district effects. ..This study, however, indicates that such an effect is possible…(2002:

preface)

In this case, district effects are equivalent to organizational effects, and there is a great

opportunity for students of organization design to bring to bear their considerable knowledge of organizations in the service of improving the performance of school districts.

26

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