Kaplan's Boss Is Prepped

Kaplan's Grayer recharges the test-preparation company

Jonathan Grayer was already seen as a wunderkind at Newsweek when the call came. Within six months of joining the magazine, he had become marketing director--and moved out of the converted supply closet that was his first office. A year later, Alan G. Spoon, president and chief operating officer of Newsweek's parent, Washington Post Co., was on the line. "We have a struggling subsidiary called Kaplan, and I would like you to get involved," Spoon said. At 26, Grayer began his second career.

He got involved, all right: Less than three years later, in 1994, he became president and chief executive of Kaplan Educational Centers. Now 31, he's transforming what was a has-been test- preparation company threatened by new competition into a multifaceted education empire (table). "Honestly, I was nervous when we made him president at only 29," says Spoon. "But that feeling lasted for about 16 seconds, because I knew he was exactly the right guy."

"GOING SOMEWHERE." Spoon was first struck by Grayer's energy and brains when he hired the Harvard University business school student as an intern in 1989. Those qualities led Spoon to bring Grayer to Newsweek after graduation--and soon persuaded him that Grayer might help fix Kaplan.

Moving there as regional operations director in late 1991, Grayer found a company that, after creating the test-prep business in 1938, had changed little. Since 1981, Kaplan had been challenged by upstart Princeton Review Inc., which was cutting into its market--particularly in SAT preparation--with a hip, irreverent program and ads Grayer claims inflated Princeton students' test-score gains, a charge Princeton denies.

One of Grayer's first moves--a threat to sue over the ads--led to a pact to settle disputes through arbitration. Next, Grayer started hiring, signing up so many Harvard MBAs that the staff roster soon resembled that of an investment bank. "He would get you to say, `You know something? I'm going to leave a great job and a great situation to take what appears to be a step down,"' says Executive Vice-President Andrew S. Rosen, who moved from Newsweek because "I knew this company was going somewhere and that Jonathan was going somewhere, too."

Where Grayer was going was to the top. Promoted to vice-president for marketing, he got Kaplan into publishing books--an area where Princeton was flourishing. After publishing its first books with Bantam Doubleday Dell Publishing Group Inc., Kaplan this year moved to Simon & Schuster Inc., which created a Kaplan Books imprint.

Named president and CEO two years ago, Grayer began updating the core business. He launched Kaplan InterActive to sell software and online services, another area pioneered by Princeton. And he created an ad strategy focusing on nontraditional media such as New York subways.

Now he's leveraging the Kaplan name in other businesses. Last year, he purchased Crimson & Brown Associates, a minority recruiting company, and launched Kap-Loan, which uses Kaplan's huge database of students to market student loans from UBL Educational Loan Center. Recently, Kaplan purchased San Francisco-based Score! Learning Corp. It was renamed ScoreKaplan and plans to go national with its after-school enrichment courses for kids in grades K-12.

While Post Co. doesn't break out Kaplan's results, Grayer says revenues rose 8% in 1994 and 11% in 1995, to $90 million; profits are "well into the mid-seven figures." Notes Spoon: "You buy into trajectories, but you can't always be certain of landings. Jonathan's has been perfect."

Lately, Grayer has been talking up Kaplan's ventures to Smith Barney Inc. and Lehman Brothers Inc. He denies a spin-off is in the works. "We wanted to get the message out that we were buyers," he says. Still, Michael Moe, growth-stocks director at Montgomery Securities, muses: "I would love to see some kind of spin-out or some way to make this entity separate, because it has a very unique growing opportunity."

Grayer says his goal is "to create an educational institution that gives for-profit education an important place in American life." As for the humble room where his career began: "I hear they turned it back into a supply closet," he says.

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