May 29, 2009

Using best-in-class hires to boost business

By Joyce Hanson, crain’s new york business.com, originally published on 5/22/09

Paying staff four times the competition’s going rate may seem like a crazy formula for success, but the strategy works for test-prep firm Manhattan GMAT.

When founder Zeke Vanderhoek used his savings and a credit card to start his business in 2000, he earned $50,000 that first year. By 2008, the firm grossed $10 million because, he says, Manhattan GMAT hires only instructors who score in the 99th percentile of the Graduate Management Admission Test, and it pays them $100 an hour.

“The idea that teachers are a core part of the experience of learning is not an original idea. The only innovation is that we were willing to pay for it,” says Mr. Vanderhoek, a Yale grad and former Teach for America teacher at I.S. 90 in Manhattan.

He stepped down as chief executive of Manhattan GMAT in 2007 to start up a charter school in Washington Heights, where he will duplicate his formula by paying teachers a salary of $125,000.

Though no longer involved with Manhattan GMAT’s day-to-day operations, Mr. Vanderhoek remains on as “something like a chairman,” noting that his company is not really into titles. He had this same flexible attitude at the start when supplementing his teacher’s income by tutoring everyone from elementary school students to M.B.A. applicants. Over a few years, he received so many word-of-mouth referrals from GMAT test-takers that when he left Teach for America in 2001, his business was already up and running.

Manhattan GMAT has tapped into the recession-proof market of test-takers who want to ace the exam and get into the best business schools so they’ll be M.B.A.-ready when the economy picks up. Far from viewing high staff pay as an indulgence, the firm sees it as an essential.

Chief Executive Andrew Yang says the firm’s formula depends on three key variables:

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Filed under: Academic Learning Centers,Admin/Management,Business Practices,Commercial

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