Change management at any organization is a complicated business in the best of times. But it's even more complex if it's in the middle of a turnaround with the threat of bankruptcy looming overhead. In late 2021, Randy Hendricks was recruited by Zovio's board to save the struggling education services company and immediately faced just such a challenge. "How the leadership team handled it is a good case study in what to do when all the chips are on the table, and it doesn't look like there's anything else left in your stack," said Michael Treacy, a former MIT Sloan School of Management professor and strategy consultant.
Hendricks' track record included extensive time at heavy hitters like IBM and Accenture and leading Workday's education and government division. In addition, he had chaired or was a current member of several tech company boards.
"Our number one priority was to find a path forward which would avoid a bankruptcy proceeding. Turning the keys over to a trustee in the courts and filing for Chapter 7 bankruptcy was giving up," said Hendricks.
Time has proven Hendricks' arrival as a line of demarcation in Zovio's history. On his arrival and throughout 2022, the leadership team went about stabilizing, improving, and divesting Zovio's most valuable assets: its three subsidiaries.
Stabilize, Improve, and Divest
Stabilizing the businesses meant curbing spending and directing efforts to become profitable.
The company was shifting into EdTech services, providing tutoring services, tech bootcamps, IT outsourcing, and online program management for universities. Unfortunately, the transition, which started in 2019, encountered several operational, regulatory, and legal obstacles. In 2022, the team quickly reduced costs. They secured the first of two bridge loans to avoid bankruptcy, which would have been damaging for Zovio's businesses, employees, and its end customers, who were principally students.
Shutting down Zovio would have stranded tens of thousands of students: a fourth grader using online tutoring services through Zovio's TutorMe, the college student taking software development classes from the 20 universities that partnered with Zovio's Fullstack Academy via distance education, as well as 27,000 college students relying on Zovio's Online Program Management platform to take their courses.
In early 2022, The team identified a cash need on the near horizon and felt TutorMe could be sold at an attractive value to a strategic buyer. Technology-enabled tutoring services were doing well during the pandemic because they offer critical online tutoring services on demand 24/7. "It was the first business we focused on getting ready for sale because it provides such a valuable tutoring service to K-12 and college students," said Hendricks. TutorMe sold to a strategic buyer in May of that year.
Focus on what mattered
After completing the divestiture of TutorMe, Zovio's Online Program Management platform was sold to the University of Arizona Global Campus, which provided continuity of service and enabled the 27,000 students who relied upon the technology platform to continue classes seamlessly.
"UAGC took aboard 815 employees that were happy to become university employees," said Hendricks of the sale to Zovio's largest client. "The University got computer systems, a thousand online courses, and the expertise to operate - everything that took years of investment and time to build."
The team then used Fullstack Academy to secure a second bridge loan. They got Fullstack profitable and sold the business in November of 2022 to a strategic buyer - without disrupting services to thousands of bootcamp students taking cyber security, data analytics, and software engineering courses.
The result is a tale of triumph in a difficult situation. 1,400 jobs were saved, student education continued undisrupted, and bankruptcy was avoided. Good homes were found for Zovio's three businesses and their employees. Synchronicity of business acumen and timing created the opportunity to prevent a potentially disastrous ending.
