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Teachers who work at the poorest schools are more likely to think that computer science is vital to their students’ futures, but are less likely to think their school boards agree, a new survey released Tuesday reveals.
The survey was conducted by Gallup on behalf of Google, and looks at perceptions of computer science for different groups, including students, parents, educators and school district administrators. It follows an earlier survey released in August, which looked at access to computer science courses and found that lower-income students have fewer opportunities to study the subject. However, this latest survey shows that low-income students’ lack of access is not due to apathy on the part of their educators.
Twenty-one percent of teachers who work at schools where more than half of the student body qualifies for free or reduced-price lunch said they thought access to computer science is more important to a student’s future success than other elective courses, like music or art. Only 10 percent of teachers who work at schools where 25 percent or fewer students qualified for free or reduced-price lunch said the same thing.
Sixty-three percent of teachers at the schools with the poorest students said they think most students should be required to take a computer science course. Fifty-one percent of teachers at schools with more affluent students said the same.
Still, teachers from schools with more affluent students were 13 percent more likely to say that their “school board believes computer science education is important to offer in our schools” than their counterparts at schools with more low-income students.
Brandon Busteed, executive director of education and workforce development at Gallup, called the findings a “huge call to action.”
“There are huge discrepancies between the will and the way,” Busteed told The Huffington Post. “There appears to be more will in these poorer schools but less access.”
He continued, “What seems to be missing here are school boards. There is such little conversation about this at a school board level … If I were to say, ‘What’s the one place I would want this data and research to land,’ it would be with members of school boards. They have to look at this and realize their constituents want this in schools.”
The study also looked at students’ perceptions of computer scientists. Unfortunately, their ideas of who is “good” at computer science reflected the field’s lack of gender and racial diversity. Males reported being more confident than females that they could learn computer science if they wanted to. Students and parents both reported that the people they see on film and television participating in computer science are typically white and wear glasses.
“Unfortunately, perceptions of who computer science is for and who is portrayed in computer science is really narrow,” said Sepi Hejazi Moghadam, head of research and development for K-12 and pre-university education at Google. “In your popular culture, media, television, etc., that narrow perception tends to be that of [a] white male and someone who is wearing glasses.”
“Even though across demographics they value computer science, the important piece is students often don’t see computer science as for them, and it’s further reflected in who is confident to learn computer science,” said Moghadam.
A majority of employees at Google are white and male. Part of the reason the company commissioned the survey was to learn how to increase diversity in computer science fields, Moghadam said. He also noted the company’s other efforts in this realm, including Google’s Computer Science Education in Media program, which works with television executives to feature more female characters in science, technology, engineering and mathematics-related roles.
“We know there are many students — especially girls, black and Latino students and students from lower-income families — who aren’t participating in computer science pathways equally,” said Moghadam. “In light of these trends, we decided we need a deeper understanding of these early stages, of the pipeline, to inform our own efforts around access and exposure to computer science.”
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From pre-kindergarten through graduate school, the education system in the United States faces tough competition from the rest of the world, a new study found.
The study made public Tuesday by the Paris-based Organization for Economic Cooperation and Development (OECD) shows other nations are catching up and in many cases have surpassed the United States at many levels, from pre-kindergarten enrollment to the percentage of adults with advanced degrees.
OECD’s annual “Education at a Glance” report finds, for instance, that 41% of 3-year-olds in the U.S. are enrolled in pre-kindergarten. Among all OECD countries, the average is 72%.
For 4-year-olds in the United State, the number rises to 66%, but still falls below the OECD average of 88%.
Andreas Schleicher, the OECD’s deputy director for education and skills, said the gap in pre-school enrollment — as well as other factors — isn’t necessarily because things have gotten worse in the U.S.. “There has just been enormous progress” elsewhere in the world, he said.
The report analyzes the education systems of the 34 OECD member countries, which include most industrialized nations, such as the United States, Canada, Australia, Turkey, Chile Israel, Japan, and most European nations, as well as non-member countries: Argentina, Brazil, China, Colombia, Costa Rica, India, Indonesia, Latvia, Lithuania, Russia, Saudi Arabia and South Africa.
On average, OECD nations invest about 0.6% of GDP in pre-primary education. Countries such as Norway, Iceland and Finland invest about 1% of GDP in pre-K, while in the USA, it’s closer to 0.4%, “at the lower end of the spectrum,” Schleicher said.
When it comes to class sizes in K-12 education, the United States has larger than average classes in primary grades, but below average in middle school and high school classes. But even that upper-grade advantage, long touted by education advocates, doesn’t necessarily give U.S. schools an edge, Schleicher said. In the U.S., he said, teachers may enjoy smaller classes, but they get fewer opportunities to collaborate professionally and observe one another at work.
By contrast, in closely watched Finland, 30% of instructional time is spent outside the classroom setting. “So there’s a lot of space and time that teachers have to do other things than teach,” he said. “You don’t see that in the United States.”
Most countries that have large classes “use the resources that creates, actually, to give teachers opportunities to do other things than teach,” Schleicher said.
And as Congress debates overhauling a federal law that could help change the K-12 testing and accountability system, the new OECD statistics present an unexpected finding: globally speaking, the United States doesn’t necessarily give more tests to its students, dispelling what Schleicher called a “popular belief” that the U.S. is “the country with a lot of heavy testing.”
That’s actually not borne out by the data, he said. “There are other countries where the stakes for students are certainly a lot larger and where kids get tested a lot more frequently.”
On the other end of the system, the United States, which once ranked second worldwide behind Israel in the percentage of adults with a college degree of some sort, now sits just above the OECD average.
“It’s sort of a middle position, basically very similar to many other countries,” Schleicher said, “not because it’s the worst, but because so many countries have made very heavy investments in equipping more people with university degrees or other types of tertiary education.”
In places like the United Kingdom, expanded grant funding for higher education means that “anybody who wants to and is qualified to go to a university … can now do that,” he said. “That’s clearly not what we see in the United States. You clearly have strong support for students in the United States, but at the end of the day, people have to pay that back. That poses a barrier for many people.”
On the bright side, he said, the U.S. labor market rewards advanced degrees like few others. “If you have great skills, that’s the country to turn those into a better job and a better life.”
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As Multinational Companies Scale Up Their Ambitions in Africa, They Are Coming Face-to-Face With Local Companies, Many With Capabilities Better Suited to African Markets, According to BCG.
CASABLANCA, MOROCCO–(Marketwired – Nov 10, 2015) – A battle for leadership is erupting in a variety of industries across Africa, with Africa-focused companies and multinationals vying for market share and each group counting on its unique strengths to gain an advantage, according to a new report by The Boston Consulting Group (BCG). The report, Dueling with Lions: Playing the New Game of Business Success in Africa, offers a concise analysis of Africa’s fast-changing competitive landscape and is being presented today by its authors in Casablanca Finance City, an Africa business hub in Morocco’s economic capital.
The multinational corporations that have been coming to Africa are looking to tap into economic growth that has averaged more than 5% a year since 2000. However, for many of these MNCs, success has been limited. Several MNCs that have enjoyed top-line growth on the continent have nevertheless been losing market share and have been outmaneuvered by local companies, the report says.
“International companies are absolutely right about the long-term potential of Africa,” said Patrick Dupoux, a BCG senior partner and coauthor of the report. “The surprise that some of them have gotten is the quality of the local competition that has emerged. African companies have access to a local ecosystem of suppliers, customers, talent, and stakeholders that is beyond the reach of most MNCs. That makes these companies very formidable in certain cases.”
The report highlights several situations in which international companies have lost ground to local players in Africa. These market-share setbacks have occurred in industries as diverse as beverages, cement, cosmetics, pharmaceuticals, banking, and insurance.
Equally Skilled but Very Different
The competition between locally based companies and multinationals is not one-sided. Local companies, which the authors call African Lions, have four main advantages over MNCs, the report says. These advantages are the Lions’ single-minded focus on African markets; the greater experience their executives have operating in local markets; their management teams’ superior grasp of market data and intelligence relevant to Africa; and their fast decision-making and adaptability. The authors call these attributes Focus, Field, Facts, and Flexibility — the four Fs of the African Lions.
“These local companies are at home in Africa and know the markets intimately,” said Lisa Ivers, a BCG partner in Casablanca and coauthor of the report. “They are fast moving and entrepreneurial. They sometimes play by different rules. These are all factors that work to their advantage.”
Multinationals have their own strengths. Some of them have been in African markets longer than the local companies themselves. In some of these markets, international companies have been able to use superior resources, brands, platforms, and processes to keep Africa-headquartered rivals at bay.
Each group of competitors has something to learn from the other. For instance, from African companies, MNCs can learn focus — which comes from having highly experienced management teams in Africa and taking a long-term view. If MNCs are to improve their positions in Africa, they must show some of this same focus, the authors say, starting with moving to longer tenures for their expatriate executives.
For their part, local companies can learn from MNCs how to offer a more predictable experience to end customers, to their supply-chain partners and to their own employees. Local companies can also learn how to manage volatility from MNCs.
The Continent’s Bright Future
The report doesn’t ignore the challenges that Africa faces, including the steep drop in oil prices (a blow to Africa’s oil-producing economies), the still-high incidence of infectious disease on the continent, and the high-profile attacks by militant groups such as Boko Haram and Al Shabaab. But the authors say these challenges aren’t enough to undermine Africa’s positives, notably:
Africa’s favorable economic and demographic trends explain why so many big-company CEOs now make Africa a destination in their travels.
“The question for many companies isn’t whether to come to Africa; it’s how to do it profitably,” said coauthor Ivers. “In the next few years, there’s going to be a lot of investing and partnering as companies try to figure that out.”
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November 2015 | by Marc Goedhart, Cindy Levy, and Paul Morgan
Executives, analysts, and investors often rely on internal-rate-of-return (IRR) calculations as one measure of a project’s yield. Private-equity firms and oil and gas companies, among others, commonly use it as a shorthand benchmark to compare the relative attractiveness of diverse investments. Projects with the highest IRRs are considered the most attractive and are given a higher priority.
But not all IRRs are created equal. They’re a complex mix of components that can affect both a project’s value and its comparability to other projects. In addition to the portion of the metric that reflects momentum in the markets or the strength of the economy, other factors—including a project’s strategic positioning, its business performance, and its level of debt and leverage—also contribute to its IRR. As a result, multiple projects can have the same IRRs for very different reasons. Disaggregating what actually propels them can help managers better assess a project’s genuine value in light of its risk as well as its returns—and shape more realistic expectations among investors.
Since the headline performance of private equity, for example, is typically measured by the IRR of different funds, it’s instructive to examine those funds’ performance. What sometimes escapes scrutiny is how much of their performance is due to each of the factors that contribute to IRR above a baseline of what a business would generate without any improvements—including business performance and strategic repositioning but also debt and leveraging. Armed with those insights, investors are better able to compare funds more meaningfully than by merely looking at the bottom line.
Although IRR is the single most important performance benchmark for private-equity investments, disaggregating it and examining the factors above can provide an additional level of insight into the sources of performance. This can give investors in private-equity funds a deeper understanding when making general-partner investment decisions.
Baseline return. Part of an investment’s IRR comes from the cash flow that the business was expected to generate without any improvements after acquisition. To ensure accurate allocation of the other drivers of IRR, it is necessary to calculate and report the contribution from this baseline of cash flows.
Consider a hypothetical investment in a business acquired at an equity value of $55 and divested two years later at a value of $100 (Exhibit 1). The business’s operating cash flow in the year before acquisition was $10. At unchanged performance, the investment’s cash return in year two, compounded at the unlevered IRR, would have been $23.30. In other words, the return from buying and holding the investment without further changes contributed ten percentage points of the 58 percent IRR. Strong performance on this measure could be an indicator of skill in acquiring companies at attractive terms.
Improvements to business performance. The best private-equity managers create value by rigorously improving business performance: growing the business, improving its margins, and/or increasing its capital efficiency.1
In the hypothetical investment, revenue growth and margin improvement generated additional earnings in years one and two, amounting to a compounded cash-flow return of $3.30. In addition, earnings improvement in year two translated into a capital gain of $20, bringing the cash return for business-performance improvements to $23.30 and its IRR contribution to ten percentage points. This is an important measure of a private-equity firm’s capacity to not only choose attractive investments but also add to their value during the ownership period.
Strategic repositioning. Repositioning an investment strategically also offers an important source of value creation for private-equity managers. Increasing the opportunities for future growth and returns through, for example, investments in innovation, new-product launches, and market entries can be a powerful boost to the value of a business.
Consider, for example, the impact of the change in the ratio of enterprise value (EV) to earnings before interest, taxes, depreciation, and amortization (EBITDA) for our hypothetical investment. The business was acquired at an EV/EBITDA multiple of 10 and divested at a multiple of 12.5—which generated a cash return of $30. This translates into 13 percentage points of the project’s 58 percent IRR. This measure could indicate a firm’s ability to transform a portfolio company’s strategy to capture future growth and return opportunities.
Effect of leverage. Private-equity investments typically rely on high amounts of debt funding—much higher than for otherwise comparable public companies. Understanding what part of an investment’s IRR is driven by leverage is important as an element of assessing risk-adjusted returns.
In our hypothetical example, the acquisition was partly funded with debt—and debt also increased over the next two years. In that time frame, earnings increased by 20 percent and the company’s EV-to-EBITDA ratio rose by more than two percentage points. The IRR of the acquisition, derived from the investment’s cash flows, would be 58 percent.
How much does the company’s debt affect its IRR? Adding back the cash flows for debt financing and interest payments allows us to estimate the company’s cash flows as if the business had been acquired with equity and no debt. That results in an unlevered IRR of 33 percent—which means leverage from debt financing contributed 25 percentage points, about half of the investment’s total levered IRR. Whether these returns represent value creation for investors on a risk-adjusted basis is questionable, since leverage also adds risk.
The disaggregation shown in Exhibit 1 can be expanded to include additional subcomponents of performance or to accommodate more complex funding and transaction structures.2 Managers may, for example, find it useful to further disaggregate business performance to break out the effects of operating-cash-flow changes from revenue growth, margin expansion, and improvements in capital efficiency. They could also separate the effects of sector-wide changes in valuation from the portion of IRR attributed to strategic repositioning. Moreover, if our hypothetical investment had involved mergers, acquisitions, or large capital investments, further disaggregation could separate the cash flows related to those activities from the cash flows due to business-performance improvements—as well as strategic repositioning.
The example above illustrates the basic principles of disaggregating IRR, which ideally should be done before any comparison of different investments. Consider, for example, two investments by a large private-equity fund, both of them businesses with more than €100 million in annual revenues (Exhibit 2). Each had generated healthy bottom-line returns for investors of 20 percent or more on an annualized basis. But the sources of the returns and the extent to which these represent true value creation differed widely between the businesses.
The investment in a retail-chain company had generated a towering 71 percent IRR, with more than three-quarters the result of a very aggressive debt structure—which also carried higher risk. On an unlevered basis and excluding sector and baseline contributions, the risk-adjusted return to investors was a much lower but still impressive 21 percent. By improving margins and the capital efficiency of the individual retail locations, management had contributed around 5 percent a year to IRR from business performance. A successful strategic transformation of the company formed the biggest source of management contributions to IRR. Utilizing the company’s real estate and infrastructure, management was able to launch additional customer services with more stable margins, which translated to a higher-valuation multiple on exit and drove 17 percent annual IRR.
In contrast, the equipment-rental business turned out to be one where management made more of a difference when it came to business performance and strategic transformation, which, when combined, contributed 32 percent to the business’s IRR. Most of this was due to higher growth and improved margins in its core industrial-equipment segments, combined with significant divestments of its consumer-rental business. Unfortunately, nearly 14 percentage points of the overall IRR was wiped out as the credit crisis reduced opportunities across the sector for future growth and profitability. With leverage adding ten percentage points, the IRR for investors ended up at 34 percent.
Understanding the true sources of IRR provides insight not only into the evaluation of individual investments but also into collections of investments, such as within a single private-equity fund or within an investment portfolio of many different private-equity funds. Such an analysis revealed that one fund, for example, was most successful in transforming acquired businesses through rigorous divestment of noncore activities and resetting strategic priorities (Exhibit 3). As with many private-equity funds, leverage was the second-most-important driver of investor returns. From a fund-investor point of view, a high level of dependence on financial leverage for results raises questions, such as whether a firm’s performance will be robust across economic scenarios—or whether it has a track record of successful interventions when high leverage becomes problematic for its portfolio companies. By contrast, reliance on business improvements is inherently more likely to be robust across scenarios.
Investors can conduct a similar analysis to identify which funds in their portfolios contribute the most to their returns and why. For example, separating leverage components reveals which funds boost their IRR by aggressive debt funding and are therefore more exposed to changes in underlying business results. Understanding where broader sector revaluations have driven IRR can help investors understand which funds rely on sector bets rather than improvements in business performance or strategy. Investors can also assess how well a general partner’s stated strategy matches its results. A firm touting its ability to add value from operational improvements should get substantial portions of its IRR from managerial changes and strategic repositioning, while a firm more focused on its financial-engineering skills might be expected to benefit more from the leverage effect.3
IRR calculations can be useful when fully understood. Disaggregating the effect of IRR’s various components can help managers and investors alike more accurately assess past results and contribute to future investment decisions.
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