Educational Testing Services, the longtime administrator of the SAT, on Tuesday morning offered a voluntary buyout to all U.S. employees with more than two years of service. This is the second major job cuts in the past year at the standardized testing pioneer, which has struggled to maintain a foothold in the shrinking assessment space.
In a video sent to employees Inside higher educationCEO Amit Sevak said the organization was “cash flow positive for the first time in five years” but was struggling financially due to a number of revenue issues.
“ETS is at an inflection point where important decisions are needed to ensure our sustainability,” he said.
This inflection point comes after the organization signed a new contract with the College Board this month, under which ETS will no longer administer the SAT, a College Board spokesperson confirmed. ETS' fiscal 2023 audit found that 30% of the organization's revenue, or about $300 million, came from College Board contracts alone.
The move also follows years of sharp declines in test takers for its flagship product, the Graduate Record Examination (GRE).
The news comes less than a year after ETS laid off 6% of its global workforce (about 150 people) last September, the second major downsizing in Sevak's two-year term. The company has also scaled back in 2021. In fact, this is ETS' fifth layoff in five years.
Sevak said that by proposing a voluntary severance agreement, ETS “will make this decision [employees’] Owned.” He encouraged those “on the fence” about staying with ETS to buy, adding that the package was “beyond market practice” and that officials had “no plans to offer anything similar again.” He also said the organization He said the pace of change will be 'intense' and that those who remain are expected to give '110%' effort.
“Our goal is to reduce staff in the most gracious way we can,” Sevak said. “This is your chance.”
A longtime employee of ETS, who has received a proposed acquisition, told Inside Higher Ed that messages from colleagues following the announcement suggest employees don't think so.
“This is affecting people who work at ETS and raise families, people who have dedicated their lives to a single product,” said one employee, who spoke on condition of anonymity to avoid backlash from the company. “An hour after the news broke, people are seriously sharing the self-harm and suicide prevention hotline.”
An ETS spokesperson confirmed the news via email. Inside higher educationThe acquisition, officials said, will allow them “to make the changes we need to make to our organization.”
“Today’s announcement is one of many ways ETS will continue to adapt and build momentum to best serve the learners and customers who rely on our solutions well into the future,” the spokesperson wrote.
An anonymous ETS employee said morale throughout the company has been low for a long time. This was confirmed by internal employee satisfaction survey responses. Inside higher education In September. But sources said the situation had worsened since the fall layoffs and employees had been expecting more bad news for months.
“There are so many people who just do their jobs and want their work to improve, but that’s not happening,” the employee said. “We’ve all been waiting for the bullet to hit the bone.”
Employees who receive the offer have until July 11 to accept it, and ETS will decide whether to approve it by July 25. An ETS spokeswoman declined to answer Inside Higher Ed's questions about how many have received acquisition offers, although the company has more than 2,000 U.S. employees. or the company's total expected layoffs.
“Once this voluntary layoff process is over, we will likely have to proceed with involuntary layoffs,” Sevac warned in the video.
'The perfect storm'
ETS, “the world's largest private educational evaluation organization,” according to its website, owns and administers the two largest tests in the United States: the Test of English as a Foreign Language (TOEFL). There is a GRE (Graduate Record Examination), a standard post-baccalaureate exam for studying abroad in the United States.
But the organization has faced increasing market challenges for several years, especially since the start of the COVID-19 pandemic.
This includes the declining popularity of the GRE, which has seen a sharp decline in its customer base due to the normalization of test-optional policies for graduate programs. The GRE has seen a sharp decline in test takers since the pandemic, from 541,750 in 2017 to 341,574 in 2021. Last May, ETS cut the time it takes to complete tests in half to attract more customers.
Sevak also noted a “significant reduction in workload for the College Board,” with which ETS has partnered for decades in administering popular standardized tests. ETS' previous contract with the College Board ends this month, a College Board spokeswoman said. Inside higher education In September, Sevak signed a new contract, which he said was less profitable than the previous one.
“The new contract preserves the relationship but significantly reduces its scope,” he said.
A College Board spokesperson said: Inside higher education Although ETS will no longer be the SAT administrator (a role it has held for nearly 20 years), their relationship will continue.
“We plan to continue working together to manage AP and CLEP. [College Level Examination] program,” a spokesperson wrote in an email Tuesday afternoon. “With the SAT Suite’s full digital transition from the College Board’s Bluebook testing platform, we now develop and administer our own SAT and PSAT-related assessments.”
Last March, the College Board launched the new digital-only SAT, a major shift in what remains America's most popular standardized test.
The testing industry is going through a period of disruption and change. ACT, the organization behind the namesake test, was acquired by venture capital firm Nexus Capital Management in April. ACT, which has struggled during the pandemic, laid off more than 100 staff ahead of the acquisition.
Sevak said that as the assessment environment continues to change, “inefficiencies” in the ETS structure and business model are making adaptation difficult.
“If we do nothing, we will be left behind. In fact, we have been looking at losing tens of millions of dollars by 2025,” he continued. “It’s a perfect storm.”
A technology-based pivot?
Last April, the ETS Institute released a report titled “Charting the Future of Assessment.” The report concluded that traditional college entrance exam opportunities are being limited and hindered by increasing challenges such as advances in data security and artificial intelligence.
The report declares that skills assessment, certification and credentialing are new frontiers, and the largest pool of untapped consumers for assessment companies are adults interested in lifelong learning and ongoing career development.
“Technology is the currency of the future,” the report states. Assessment companies continue to claim that they are just as reliable as accredited colleges and employers in identifying these skills and helping them turn them into cash in the job market.
“A variety of certification sources, including universities as well as corporate training and testing organizations, will have approximately equal value in creating certifications and credentials,” the report said.
In a video announcing the staff acquisition, Sevak emphasized that ETS must be nimble and adapt to rapidly changing market needs for educational assessment.
“Our competitors operate with much lower, more flexible cost bases and highly automated models,” he said. “Our structural practices are preventing us from pivoting quickly to mitigate external threats such as AI, geopolitics, future customer demands, and disruptive and competitive situations. [of testing].”
Several recent acquisitions mark ETS's foray into the technology assessment field. Last September, the company acquired Wheebox, a “ratings platform and supervisory solutions company,” for $12.2 million, according to the audit. Whibox’s LinkedIn describes it as a “global performance assessment company.” And in January, ETS acquired PSI, a “global leader in workforce certification and licensing,” which administers Federal Aviation Administration exams, among other professional tests.