From Central Office to Portfolio Manager in Three Cities: Responding to the Principal-Agent Problem

Abstract

A number of districts are moving toward a portfolio management model, in which central offices act as “portfolio managers” (PMs) that oversee—but may not actively manage—publicly funded schools. Using principal-agent theory, with its focus on goal alignment and the use of incentives, we explore how PMs operated in ways distinct from traditional district offices in Denver, New Orleans, and Los Angeles. We consider how PMs identify the goals of multiple principals, incentivize and monitor agents around principals’ goals, and select and develop agents who can meet principals’ goals. Drawing on 76 system-level interviews, we find that PMs in each city confronted similar tensions around PM responsibilities but addressed them differently. Specifically, we observed distinct PM approaches to managing competing goals of stakeholders in the context of school closure and to balancing school-based autonomy with more prescriptive measures for building school capacity and ensuring the equitable treatment of students.