Historically, Educational Testing Service (ETS) has been a stalwart in the assessment industry, setting standards and shaping the futures of millions of students worldwide. However, recent times have seen the giant grapple with a series of challenges, resulting in some tough decisions. One such decision, that has become a recurring theme in the organization’s recent history, is the layoffs.
The 2024 Layoffs at ETS
The year 2024 has been a challenging one for ETS. The organization offered voluntary buyouts to all U.S. employees who had served for more than two years. This move was a part of their broader restructuring efforts to adapt to the ever-changing customer needs and financial pressures.
While the offer of buyouts might seem like a considerate move, it has, in fact, caused a great deal of distress among the workforce. The reactions have ranged from disappointment to outright distress, with employees resorting to sharing self-harm and suicide prevention hotlines post the announcement.
If you’re wondering why the reaction has been so vehement, it’s because this isn’t the first time ETS has had to resort to such measures. The announcement made in 2024 was the second major round of job cuts within the year. And if the voluntary buyouts do not achieve the desired staff reduction, ETS may have to proceed with involuntary layoffs.
It’s also worth noting that the organization has been “cash flow positive for the first time in five years,” yet the financial strain persists. The revenue has been impacted by a decline in the number of test-takers, particularly for the Graduate Record Examination (GRE). Loss of lucrative contracts has also hit the organization hard, with the new contract with the College Board, under which ETS will no longer administer the SAT, being less lucrative and accounting for about 30% of ETS’s revenue.
A Look at ETS’s 2023 Layoffs
While 2024 has been a tough year for ETS and its employees, the cycle of layoffs is not new. In September 2023, ETS laid off 6% of its global workforce, which equated to around 150 employees. This marked the fifth round of layoffs since 2020.
Further layoffs were announced in April 2024, affecting 62 employees, with an additional seven jobs slated for elimination later that year. The impact of these layoffs on the employee morale has been understandably significant, with internal surveys revealing dissatisfaction with leadership and the organizational vision.
What makes this situation even more urgent is the current state of the testing industry. The industry is experiencing turmoil, with consolidations and acquisitions becoming common. For instance, a venture capital firm recently purchased ACT. In such a scenario, ETS has been forced to reevaluate its business model and seek new opportunities, particularly in international markets.
These layoffs and buyouts reflect some of the challenges ETS is facing in this changing landscape. While the organization’s leadership emphasizes the necessity of these tough decisions for its sustainability, the impact on the workforce cannot be ignored.
ETS Overview
Established in 1947, the Educational Testing Service (ETS) has been a global leader in the educational assessment industry. Known for its thorough evaluations and high standards, ETS has significantly influenced the educational paths of countless students worldwide. However, the company has faced a series of setbacks in recent years, compelling it to make some difficult decisions.
ETS has been grappling with challenges from various fronts. The most impactful among these is the decline in the number of test-takers, especially for the Graduate Record Examination (GRE). Another significant blow to the organization’s revenue was the loss of some profitable contracts. The organization’s recent agreement with the College Board is less profitable than the previous ones, which had ETS administering the SAT. This new contract accounts for approximately 30% of ETS’s revenue.
The Reasons Behind These Layoffs
To navigate these financial pressures and adapt to the changing customer needs, ETS offered voluntary buyouts to all U.S. employees who had served for more than two years in 2024. This move was part of their broader restructuring agenda. However, this decision resulted in widespread distress among the workforce.
Understanding the reasons behind these layoffs requires a closer look at the broader context. The testing industry is undergoing significant changes, with mergers and acquisitions becoming more prevalent. A recent example of this is the purchase of ACT by a venture capital firm. This turbulence in the industry has obliged ETS to reassess its business model and explore new opportunities, especially in international markets.
Can We Expect More Layoffs in the Future?
Layoffs and buyouts are often seen as drastic measures to ensure a company’s survival during challenging times. Despite being in a positive cash flow for the first time in five years, ETS might have to resort to more such steps if the current financial strain continues. If the voluntary buyouts do not result in the desired reduction in staff, the organization may have to conduct involuntary layoffs.
It is a challenging period for ETS and its workforce, but it’s important to recognize that ETS is making these tough decisions to ensure its sustainability. As the organization’s CEO, Amit Sevak, has emphasized, these measures are necessary for adapting to the changing landscape of the testing industry and securing the company’s future.
While these changes are difficult for the employees, they are crucial for ETS’s survival in this transforming industry. The company is striving to adapt and evolve in these challenging times while continuing to uphold its commitment to excellence in educational assessment.
Financial Performance of ETS
ETS has been a major player in the educational assessment industry for over seven decades. Its reputation for providing thorough evaluations and setting high standards has been unmatched. Yet, recent years have not been kind to this once thriving organization.
Despite achieving a positive cash flow for the first time in five years, ETS has been grappling with financial difficulties. These troubles have been mainly due to two factors – a decrease in the number of test-takers, particularly for the Graduate Record Examination (GRE), and the loss of some profitable contracts.
The organization’s recent contract with the College Board, which sees ETS no longer administering the SAT, is significantly less lucrative than previous agreements. This contract now accounts for roughly 30% of ETS’s revenue, a considerable drop compared to previous figures.
These financial pressures have led to drastic measures, including offering voluntary buyouts to all U.S. employees who had been with the organization for more than two years. If this doesn’t result in the required staff reduction, ETS may have to resort to involuntary layoffs.
The Layoffs Impact on Employees
The decision to offer voluntary buyouts and potential layoffs has undoubtedly caused a stir among ETS employees. The workforce has reacted with a mix of disappointment, distress, and in some cases, outright fear. This response is understandable given the uncertainty and instability such events can cause.
The atmosphere within the organization has been tense, to say the least, with internal surveys revealing a significant level of dissatisfaction with the leadership and the direction the organization is taking. This dissatisfaction has been further exacerbated by the fact that this isn’t the first time ETS has had to resort to such measures. In fact, the organization has seen multiple rounds of layoffs in recent years, shaking the faith and confidence of its employees.
The human impact of these decisions should not be underestimated. It’s not just about losing a job; it’s about the ripple effect it has on the individual’s life and their families. It’s about the loss of security, the fear of the unknown, and the stress of finding new employment in a challenging market.
Conclusion
The current state of affairs at ETS is a stark reminder of the trials and tribulations organizations can face in a rapidly changing industry. The testing industry is in flux, with consolidations, acquisitions, and a shifting market forcing companies like ETS to reevaluate their strategies and adapt to survive.
However, in the midst of these challenges, it’s important to remember the human cost. The employees who have served the organization faithfully are the ones bearing the brunt of these changes. It’s a difficult time, and while these decisions may be necessary for the survival of the organization, the impact on the workforce is profound and far-reaching.
As we look to the future, it’s clear that ETS will need to navigate these troubled waters carefully. The decisions it makes now will not only determine the future of the company but also the livelihoods of its dedicated workforce.
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