GRE Woes Lead To Fifth ETS Downsizing In Five Years

Business school officials at GMAC’s annual 2024 conference in New Orleans last week

On the 70th anniversary of the GMAT, there was nothing but positive vibes at the annual gathering of the Graduate Management Admission Council in New Orleans. From the jazz-themed welcome reception to GMAC CEO Joy Jones’ talk about the trends shaping the business, it was an uplifting event that attracted more than 650 business school and industry professionals.

But the big elephant in the room, one that was undiscussed, was the dramatic decline in standardized testing. Test-optional and test-waiver admission policies has put unprecedented pressure on the beleaguered test taking industry. As business school officials descended on the Big Easy for GMAC’s biggest conference, Educational Testing Service, the administrator of the GRE, announced voluntary buyouts to every U.S. employee with more than two years of service. It would represent the second major round of job cuts within the past year and the fifth in five years. Only nine months ago in September, ETS got rid of 150 employees, or 6% of its workforce.

Things are not much better at the GMAC. For the third time in four years, GMAC has fallen into the red, reporting a record loss of $6.6 million in 2022, the last year for which figures are available. The deficit occurred in a year in which GMAT test-taking volume fell to a historic low. It’s highly unlikely that 2023 or this year will be a turnaround year. The results for 2023, in fact, would likely be impacted by the design, development and launch of the new GMAT Focus Edition.

‘ETS IS AT AN INFLECTION POINT’

GMAC CEO Joy Jones at the 2024 GMAC annual conference in New Orleans

Even though the GRE has gained significant marketshare against the GMAT in the past decade, the GRE has suffered years of declines in test takers. After the pandemic, which accelerated the move to test-optional and test-waiver policies, GRE test taking fell to 341,574 in 2021 from 541,750 in 2017. Besides the GRE, one of the largest exams in the U.S., ETS also owns and administers the Test of English as a Foreign Language (TOEFL) taken by international students who want to get a U.S. degree.

In a video sent to ETS employees, CEO Amit Sevak acknowledged that a number of revenue challenges have put it under financial strain. “ETS is at an inflection point,” he said, “one that requires critical decisions to ensure our sustainability…When this process of voluntary separation is over, it is likely that we may need to proceed with an involuntary layoff.”

To add pressure for more employees to take the buyout, Sevak predicted that the pace of change at ETS would be “intense,” and that those who chose not to accept the offer would be expected to give “110 percent.” He encouraged anyone “on the fence” to accept a buyout, warning that the organization does not plan “to offer something similar again.” The video was shared with InsideHigherEd.com.

GMAC, of course, plays a much larger role in the business education ecosystem, hosting numerous conferences and workshops and publishing many studies on the graduate management education market. Its conference and workshop business, however, accounts for a small portion of the organization’s overall revenue. In 2022, GMAC booked just $5.1 million in conference and other business, with the vast bulk of its $69.0 million in overall revenue coming from the GMAT test. Its research function provided no revenue at all, costing GMAC $841,000 in 2022.

GMAC HAS INCREASED ITS EMPLOYEE HEADCOUNT

Even so, the launch of the shorter Focus Edition of the GMAT last year has been lauded by some test prep tutors as the better test for business school applicants (see I Love The GMAT: This GMAT Doctor Has Diagnosed More Than 4,000 Test Takers). Jones also has received high marks from some GMAC employees since taking over the top leadership job at GMAC in October of 2022 (see Meet GMAC’s New CEO: Joy Jones Big Bet On A New GMAT).

While rival ETS has pared down its employee staffing, GMAC has in recent years increased its employee count. Over the five-year span from 2017 to 2022, for example, GMAC reported a 26% increase in headcount to 169 employees from 134. For every GMAC employee, the organization reports $408,300 in revenue. By that measure alone, ETS is vastly overstaffed. Its 29,995 employees count in 2021, the last year for which ETS filed a report with the IRS, the revenue per employee was a mere $3,718. Of course, the latest spate of layoffs at ETS would have changed that ratio but not enough to bring it even close to GMAC’s number.

Without disclosing its current employee count, a GMAC spokesperson told Poets&Quants that its last downsizing occurred at the end of 2020. “Like many organizations impacted by the pandemic, our last downsizing occurred in December 2020,” the spokesperson said in a statement. “Since then, GMAC’s employee count has stabilized as we remain committed to investing in having a positive impact on the markets we serve.”

Several GMAC employees, writing anonymously on GlassDoor, have described the organization’s culture as “very unhealthy.” Employees say the company is understaffed and suffers from considerable burnout. A person identified as a “senior director,” writing an assessment a month after Jones became CEO, noted that employees should be “prepared to do the work of two to three people and only be paid the salary of one. There’s a constant cycle of new hires who typically leave within six months to one year. The company recently announced in 2023 that more than 50% of its staff are ‘new hires’ – meaning that they’ve worked at GMAC for a year or less. The constant rotation of new staff creates a chaotic work environment and no one seems to know exactly what they’re doing.”

‘STANDARDIZED TESTING IS BECOMING LESS AND LESS DESIRABLE’

The anonymous employee noted that “GMAC is very revenue focused. However, things do not look financially stable for the company as standardized testing is becoming less and less desirable by both universities and students. This is public knowledge and there are plenty of reports to support this industry trend – just Google it. Educational testing is an extremely niche industry and job security at GMAC seems weak. The company doesn’t appear strong financially. There’s plenty of other jobs out there – be selective and don’t waste your time here.”

Despite the dramatic decline in test-taking, Jones is convinced that there is a place for standardized tests like the GMAT. In an earlier interview with Poets&Quants, she said “I see standardized testing staying as a part of the equation for people going to business school,” she says. “A lot of the conversation about moving away from testing happens in the U.S. but not globally and we have a global footprint. I don’t have a clue about whether the pendulum will move back to where it was in testing. The GMAT and the Executive Assessment still have their place, absolutely. But I think there will be other opportunities to evolve the way testing is utilized.

“Testing is a data business,” added Jones. “You get very high-fidelity data and if you continue to abstract as I often like to do you see a world of possibilities. We are committed to insuring that we have a really high-quality test for people who choose to use it. Schools value high-quality data in their decision process. We believe it’s a critical part of holistic admissions. Testing will find its rightful place in admission decisions and candidates will choose to use it because it gives them their best chance for preparation to be successful in a program.”

DON’T MISS: MEET GMAC’s NEW CEO: JOY JONES’ BIG BET ON A NEW GMAT or  WITH GMAT TEST-TAKING DOWN, GMAC REPORTS IN THIRD LOSS IN FOUR YEARS