Former CEO criticizes Princeton Review
The decision comes after several years of declining stock prices. The company’s founder and former CEO, John Katzman ’81, said in an email that the corporate decisions since his departure were “definitely ... a move for the worse,” and added that the sale was a good decision. “Anything that takes the company out of the hands of Bain Capital is a good thing,” he said. Katzman left the company in 2007.
The agreement states that Charlesbank will gain the rights to the “Princeton Review” name, and the popular education company will repackage itself by focusing on its Penn Foster online college program, which provides online courses and degrees.
Representatives from the Princeton Review did not respond to multiple requests for comment.
Katzman founded the Princeton Review in 1981, immediately after graduating from the University. Although the amount of services it offers students has burgeoned in recent years, the company started small. Its test-prep method involves studying the test itself, not any particular skill it measured.
“None of these tests measure any particularly useful skill,” Katzman said in a follow-up phone interview. He added that there is “no correlation” between SAT scores and performance at top schools such as Princeton.
In order to help students raise their scores, Katzman’s company dedicated itself to researching the SAT, charting its development over time and hiring well-trained instructors to teach students in small classroom environments.
“I thought I could make really good SAT preparation for good students that was fun and interesting,” Katzman said. “Over the years, the mission expanded to all of college and grad school admissions. For many years, we helped half the students headed to a U.S. school find, get into and pay for it.”
The company grew enough that it went public in 2001. But in 2002 Congress passed the Sarbanes-Oxely Act, which set new, stricter standards for public corporations in response to various scandals involving multinational corporations such as Enron and WorldCom. By 2007, Katzman saw better opportunities elsewhere.
“Being a small public company became very hard, and I thought someone else might do it better than I could,” Katzman said. “I was wrong.”
Instead, according to Katzman, the company made a series of bad decisions that diluted the quality of its educational services and put it in a significantly weaker financial position.
“The company lost its focus on quality and instead focused on price,” Katzman said.
After Katzman’s departure, the Princeton Review focused less on expenses such as teacher training, working hours and small class sizes and more on expanding the range and reach of its services. This created what Katzman called “a sort of placebo effect” that masked an ultimately inefficient test-prep process.
The Princeton Review “was no longer giving very effective preparation, albeit at a higher price,” Katzman said. “It was giving mediocre preparation, pushing more kids through a program that wasn’t very effective.”
While the Princeton Review plans to rebuild itself by focusing on the Penn Foster program it acquired in 2009, Katzman is skeptical about its potential. New initiatives and new technologies alone cannot fix the Princeton Review’s problems — instead, he said, the company must adapt these new elements to its core educational mission.
“If you’re a penguin and you find yourself on a tropical island, it’s hard to become a tropical bird,” Katzman said. “You can make the company into a ‘tropical bird,’ but it’s not a matter of just trying to change things. You have to make it work.”
Still, Katzman maintained that it is possible for the company to recover with a new business strategy and realistic goals.
“If they renew their focus on excellence, they might make a comeback.”