Zenith Education Group is on their own. The board of directors for ECMC has decided it will no longer fund Zenith Education Group losses. The board states that it agreed to allocate up to two hundred million dollars in funding toward the purchase and rebuilding of 56 Corinthian Colleges schools that Zenith Education Group took control of on February 2, 2015. These funds were to be spread out over a 24 month period but losses from the take over were grossly underestimated. Zenith Education Group has already lost more than one hundred seventy five million dollars in just the first eight months of operation and the board of directors state that it cannot risk putting ECMC in the position of losing it's liquid assets.
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Everyone's missing a key point, Zenith is competing in an ever shrinking market. They could not have picked a worse time to get into the career school industry. All career school companies are down sizing because of declining enrollment. Even traditional colleges are experiencing reduced enrollment numbers. Add that to the horrible reputation that hangs over Everest and Wyotech and you have a very high mountain to climb. Put all that together under an inexperienced leadership and it's a recipe for failure.
509 - You are right that it makes no sense to pour 100 million into a company only to close it down. It also make no sense to pour 100 million into a company - and do NOTHING to generate an ROI. Is executive management really that incompetent? When will they start doing something - anything - to grow the business? What are they waiting for? You can't shrink your way to prosperity.
509, do they have the money and the time to rebuild? I agree with the OP that there was gross underestimating the time and money it would take. I also believe it was grossly underestimated how much further the schools would decline after the take over. I believe ECMC was blackmailed into taking over CCi by the DOE. ECMC did their due diligence before agreeing to purchase the schools but CCi was very good at hiding the truth about how bad the schools were. ECMC now realize how bad they got screwed.
@498: Many share the view that there is a sinister plan from the outset that the ECMC was buying the schools just to slowly unwind operations. I don't see the evidence because if that was really the case all they would have needed to do was announce it from shortly after the acquisition and begin a full teach-out. There was no advantage to waiting and spending the hundred plus million that they already have spent just to make it look good. Fact is that ECMC's core business of managing the student loan portfolios is in decline and will be phased out eventually (yes, that is many years away) so it makes sense for the company to diversify into a related business. So why no advertising? More and more it looks like the folks in charge just don't know what to do at this point. The easiest part was cutting jobs and outsourcing functions to third-parties and that has been done with an unexpected and painful efficiency. So now the real skill needs to come to the fore: leading the rebuilding from the wreckage and making it the company that ECMC expected to begin with. Does Hawn and Co. have the mettle to make it happen? That is the 200 million dollar question!
455 - I agree with your observations, but I don't see a single indication that Hawn has any interest in growing the business. What has he done? Did I miss something? Do we have a spiffy new marketing program? Are we advertising in different places? Are we advertising at all? Did we change the name to distance ourselves from a checkered past? Any new lead generation activities? Every action - and lack of action -points toward a systematic deconstruction of the company. All we have done is terminate and lay people off, some deserving, some not. The most likely scenario is that Zenith will push every campus into teach-out very soon, which preserves student debt repayment obligation - ECMC's bread and butter. The next most likely scenario is that ECMC gets tired of the losses and pulls the plug, leaving the DOE (and taxpayers) on the hook for debt forgiveness.
@455- Agreed with the exception of the "questionable tactics" comment. Enrollments numbers are important but we need to get off the mindset that starts are the only number that counts. Starting a student that ultimately drops is no better than one that limps along to graduation and can't get a job either. I completely agree that with all the cuts that have been made at the campus level it is high time to start marketing the programs again (but please not back on the Maury or Jerry Springer shows)!
Dave Hawn may claim that it isn't about the number of enrollees it's about the number of placements. He is quickly learning that the number of enrollees is a major concern. For this experiment to continue he will have to adopt the practice of being enrollment driven or it will soon be over. For a career school to survive the numbers coming in are far more important than the number of placements. Don't get me wrong, the placement numbers are very important to long term survival but this company must concentrate all it's efforts on short term survival. That means cut all expenses to the bone and boost enrollment using all methods even if that includes using questionable tactics. They are at the point where cutting alone will not produce the needed results, they must increase revenue and do it quickly. I know this post will get blasted by people saying they should only enroll the best students, but the best students aren't enrolling in Everest and Wyotech. If CCi would have adopted that policy we would all have been out of work years ago.
352- I agree that we filled a need - but the shifting market and CCI's unwillingness to adjust caused the whole model to become distorted and corrupt. Instead of downsizing 2-3 years ago when enrollment patterns changed, CCI lowered standards in admissions and academics, and fudged the numbers on placement to try and maintain - or increase - revenue. The result is what we have today - a school largely populated by weak students who are barely being held to laughable standards and are not well-prepared for their chosen field. Layer in unethical management and you have the perfect storm. Yes, there are some students who take this seriously and have the motivation and ability to do well, but not enough to fill all (or even most) campuses.
352, I agree with you on how much more can they cut at campus level. No matter how low the student population gets it still takes a certain number of staff to keep a campus operating. At most campuses the only staff left to cut are the instructors.
@ W&W, yours sounds like something I would have written myself, but as far as the RIFs are concerned, the only way campus presidents will be affected is if their schools are closed. They may have to let RVPOs go. The latest rounds have already affected our ability to enroll, educate, and employ. I'm not sure who else they can cut at the campus level. I think they have a good idea of what remaining schools will be closed, and I don't think it will take months to make the announcement. I still believe that on the whole, we do a good job and that were needed in our communities. But, times are different...
Sounds like reasonable speculation but I somehow doubt that anyone has access to the "real story" of what is going on in that board room. It is also not surprising that there would be a limit imposed on the level of direct underwriting necessary to float the organization for a period of time. Has the limit been reached? Probably, maybe we are getting close, but then how much of the overhead of the company has since been eliminated? Half of the employees are gone, schools closed, closing, or to be closed and another large RIF looming just a few months away will most certainly impact the burn rate of cash for the organization. It could be enough to close the gap between income and expenses if not balance the budget in the short run. Maybe the big RIF will finally include the "untouchables" like campus presidents, and RVPs, etc. that have proven themselves incapable of leading the organization and instead have been trying to go back to the CCi playbook of failed strategies.
If anything, Hawn and Company have really failed miserably in filling the leadership vacuum and to provide a real vision for Zenith going forward. Good news one week ("We are spending millions on...") only to be followed by bad news (The need to right-size has resulted in the difficult position to eliminate 750 positions...) has killed morale among the survivors and made the chance of a successful turnaround dubious.
And when was the marketing supposed to kick in exactly?
Hawn made it clear in his email after the last big RIF that ECMC was underwriting Zenith's losses and Zenith would soon need to stand on its own. This definitely sounds possible because no one with any business sense would bankrupt a solid company pissing away money on a losing battle. Everyone knows that we just passed the time when enrollment had the best chance of increasing. We are now heading into the period of historically the slowest enrollment period between October and May. History shows that the best time to increase enrollment is between May and October and the next six months the population decreases to it's lowest level. ECMC stands to lose millions more during the next six months with total losses pushing a half billion dollars. I don't know how much cash ECMC has in reserve but I find it difficult to believe any company could afford to lose between a quarter and a half billion dollars in year with no end in sight. Any sold company entering into a high risk investment has an exit strategy to cut it's losses.
They RIF a lot of the loyal people. You stand a better chance of being terminated than getting a raise. Most will be gone soon anyway.
SP- Please try to stay on topic......
Who is paying for all of this Intelligent Heart training? You know that is not cheap. The company/school is losing so much money, but they keep pushing this Intelligent Heart bullshit. I wish they would use that money to give raises to the loyal employees who have stayed here for the past few years.
OP - sounds plausible, but how do you know?
Best news. Just pull the bandage all at once and close this thing down!
AMEN!