Steve Tainton

Nova no more

The collapse of a colossal language school


Two weeks before the doors closed forever a guy named Charles started teaching at my branch. His timing couldn't have been worse. If he had applied for the job several weeks later, the recruiting offices wouldn't have granted an interview. If he had started a month or so earlier he might have seen one paycheck, or at least a salary advance that had been promised him. But no, poor Charles came smack dab in the middle of the maelstrom – he never saw his advance, nor paycheck and got evicted from his apartment only two weeks into his stay. Now, I'd like to give you the epilogue of the young lad's adventure, but I can't. The shutters came down on me too. In fact, I continued working longer than Charles because I could afford the train fare to the school. It seems Charles moved into a guest house too far away to gamble that commute would pay off – literally. And Charles chose right because none of us has seen a yen yet for our toil in September or October. We were employees of the largest, lowliest English school in all of Asia – Nova. And this is our story...well, mine at least.

I started working for Nova in 1999. My life was as directionless as Nova management. I was working in Quebec, Canada at the time, but not really working. We founded a translation company, a friend of mine and myself – Cartier Communications. I think we made somewhere in the neighborhood of a hundred bucks...Canadian (and though now the Loonie is strong, it wasn't then). I was a month away from moving back in with the folks when I came across an ad in the Boston Globe. Teach English in Japan. We'll get you in the country, provide shelter and even pay you. After several months of unsuccessfully looking for a teaching gig in South America I thought 'Why not? What's the worst that could happen?' In '99 I didn't have the prescience to think, 'Well Matt, the worst that could happen is that the company could nosedive into a disastrous bankruptcy that would potentially leave you and your wife stranded in a foreign country with neither money nor legal right of residence?' But even if I had guessed that, it would still have beat Mom's couch at age 24. And so I resigned my post as co-chair of Cartier Communications and signed up with Nova.

I showed up doe-eyed in Japan and was placed by the company in Chiba prefecture, basically suburban Tokyo. The company arranged apartment that I lived in was a revolving door of new roommates. The average duration of employment for a Nova teacher never really surpassed a year so at any given point in time someone was on their way in or out. Now, back in the day we all did forty lessons a week as opposed to a trimmed down thirty seven or thirty four that were more recently offered as a way to skirt government regulations for paying into the social welfare system. What that meant, the forty lessons that is, was I had a good enough salary to get out of jail, I mean the Nova apartment, at the end of the first year. This was a definitive moment. If I hadn't moved out, I would have probably moved home. Instead I stayed on.

In the space of the four years that followed, I was promoted twice, not a stunning feat at a company with such high turnover, and worked in five different branches. Flipping through the pages of my personal history, these were the golden days of Nova. Every time I renewed a contract I was given a decent raise. My title, 'Trainer', entitled me to more money on top of that. The structure of Nova was such that I was given autonomy in my branch and had plenty of planning time with which I planned what to do once the day was done. It was almost too good to be true - the kind of job that occupied you just enough to pass the day and pay for drinks afterward. I had little incentive to look for another job until I met my Thai wife. Once I had made the decision to move to Thailand I tendered my resignation and said goodbye to Nova and Japan. I thought that was that. If that had been that, well, that would have been a nice ending to a chapter in my life and now I would view the Nova downfall with a certain nostalgia, sense of pity and more than a hint of schadenfreude.

But I came back to Japan. I came back for money and dragged my wife with me. I went back to Nova as well. The devil you know is better than the devil you don't. Plus they offered me a better salary as a rehire than I would have made starting with another employer. Not long after starting back with Nova I found a second job. My wife started working. We were on the gravy train. But the train was set to go off the tracks.

Trouble was brewing for a while. It's hard to designate any one point in time as being the beginning of the end. For that matter the first day of Nova operations could have been the beginning of the end much in the same way that a person is born only to follow a path leading inexorably toward death. But if we are forced to flesh out a few events that ushered in descent from ascent then they would be the following. In 2005, while I was in Thailand, all the eikaiwa (English conversation) schools in Japan - but first and foremost Nova due to its first and foremost place of prominence in the industry - came under scrutiny by the Japanese government for not paying into the social welfare system on behalf of its foreign teachers. After some legal wrangling Nova and the others averted massive back payments but at the same time were forced to restructure teachers schedules, basically reducing working hours. Less hours equals less schedule coverage equals less happy customers. Nova students paid upfront lesson fees and were promised that they could more or less book lessons at their convenience. This was proving untrue as teachers schedules were being cut back. As this was happening Nova was on an all-out expansion. Unbelievably, Nova was opening small branches left right and center as teaching hours were shortened. Furthermore when I was preparing to come back to Japan in late '05 there was actually a hiring freeze (high turnover meant that constant hiring was necessary just to maintain the status quo). This is the business equivalent of adding more tables at your restaurant while firing some of your cooks. In the decadent days of Nova many small 'satellite' branches were manned by one staff member, one teacher and few students in the classroom. Never a great one with numbers, even I could figure that the satellite school system was losing money hand over fist on employee overhead alone.

Observers compared Nova's business model to a Ponzi scheme. Nova collected payments from students upfront and then spent the money to expand. Whenever they opened a new school they could expect an initial cash infusion from new customers paying lesson fees in advance, but operating expenses for these new schools would eventually exceed real revenue so they would open a new school to drive sales, rinse and repeat. As long as there was room to expand the scheme worked, but the party couldn't last indefinitely. By early 2007 there were signs that the booze had run out and dawn was poking through the blinds. Some areas were reorganized into 'task groups', meaning that Nova management was unhappy that these schools could draw no more blood from the students so they sent in a crack team of their most skilled sales-vampires to try extract a few last drops. Several ill-conceived sales campaigns took place aimed at kids and senior-citizens, but there was little budget for advertising and TV commercials gave way to handing out promotional tissues (if you've been to Japan you'll understand) in front of stations. The icing on the crap cake was an order from the Ministry of Economy Trade and Infrastructure in June of this year that punished Nova for sneaky refund practices. Without digressing into detail, Nova was banned from selling large 'ticket packages', those very instruments which kept the Ponzi scheme afloat, because of consumer complaints lodged against the company for manipulating numbers when refunding displeased students - the number of whom was growing. The dual effect of being ordered to refund massive amounts of money to students and the inability to bilk new students with big ticket packages, not too mention the negative publicity, spelled disaster. The house of cards was coming down.

The first whiff of decay that Nova employees got was in late July when the Japanese staff saw their paychecks delayed for a week. In all of my years with the company I had never heard of late payment. This is Japan after all, land of trains that run to the minute. August came and went with ominous sales figures, but everyone was paid – no bonuses for staff who would have usually received them at this time of year. September 15th was teacher payday, but pay was triaged to regular instructors in urban areas first. Those in a rural Japan or higher positions waited for up to two weeks. Now the corpse was really starting to stink. By the time October 15th came around everyone was on edge. The president, a megalomaniac who will likely be indicted on several counts of corporate fraud in the near future, was sending out faxes to reassure us that everything would be alright. However, the Japanese staff had not been paid on their payday, the 26th of September, and it appeared that the company was going to attempt to pay teachers by not paying staff. Branch closings had started and though management tried to make it look like controlled downsizing, it was clear that in many cases Nova was being evicted for non-payment of rent. In what is probably the most appalling aspect of this, many teachers started to receive eviction notices from landlords who had not received rent from Nova in spite of the fact that said rent had been deducted from their paychecks. The employees of Nova were riding a bicycle built for five thousand, but the chain had long since fallen off and only momentum was keeping us upright – not for long though. No money on the 15th. We got a fax saying that money would be coming on the 19th. Until then I thought we might see 2008, now I realized that we wouldn't see November. No money on the 19th. Teachers were dropping like flies. Students were not allowed to make new reservations. I was handing out business cards in every one of my lessons hoping to secure a small income base of private students when the shutters came down. Another promise of money coming around the 25th and news of shady stock deals being made with offshore funds in the Virgin Islands. No money on the 25th. I had still been coming to work, one of the few, but the 25th was my breaking point. I called head office to tell them I wouldn't be in due to lack of pay. I called again on the 26th but this time I was told that all branches were temporarily (for most permanently) closed. It seems I burned out right about the time that Nova did. The board of directors had staged a coup, fired the president and filed for protective bankruptcy on the evening of the 25th. Nova Corporation 1981 – 2007 RIP.

It's funny to be part of something so massive coming down. The Titanic analogy is a good one. The band just kept playing up until the end. We had one announcement come in from head office offering positions in 2008 with the government kids program which outsourced teachers to elementary and secondary schools. This as teachers were going unpaid and being evicted. There was another announcement inviting Nova instructors to post to a company blog whose aim was to promote overseas recruiting. 'Tell us about a typical day of your life in Japan,' it read. Hmmm, after waking up and checking my bank account only to discover it is still empty I rummage through the garbage in front of my apartment building for anything edible and hope the landlord doesn't see me or he'll start harassing me about the overdue rent again. Yeah, there were a host of surreal moments. In a large organization one hand doesn't necessarily know what the other is doing. We had frequent evidence of this. Unfortunately for a lot of newer people the recruiting offices had been kept out of the loop too long. They just continued to dump fresh meat onto Japanese soil in something resembling human trafficking. Sure, just go there. We'll pay you once you arrive. Doesn't the Yakuza employ the same ruse to get Phillipina women to come and work in bars as indentured servants? Ironically for a company that was going under, there was actually a surge of student attendance toward the end. They were trying to use as many lesson points as possible before the ship submerged. I asked a large group in the conversation lounge if they had smelt blood. Blank stares as a response, but I appreciated my own joke.

It's not completely over, however. I still work for Nova. I wasn't given a chance to resign. I heard that I could give my resignation by mail. I chose not to. I have more to gain from being a current employee of a liquidated company, but it looks as if Nova has found a corporate sponsor. (In fact, the katakana term 'suponsa' is being thrown around liberally in the media. I think it's nice that Japanese are so international and sprinkle their speech with English sounding words. It makes me feel at home in a time when I feel otherwise isolated and alienated, what with being out of work in a foreign country. For instance, the Japanese unemployment offices are called 'Hello Work'. I think 'Hello Work' has a nice ring to it. Better than 'Goodbye Work', which actually makes a whole lot more sense given that it's an office for people who have lost their jobs.) A small entity called G-Communications has bought thirty three percent of Nova and what is more amazing, they haven't ruled out the continued use of the Nova brand name. They plan to reopen thirty schools initially. Just to give you an idea, even after mass closings Nova still had almost five hundred branches when they filed for bankruptcy. So what's next, you ask. I don't know, but it's similar to driving by the scene of an accident; I'd like to look away, but I can't - Nova rubber-necking. I'm slated for a meeting tomorrow to hear all the gory details of this new setup. Someone should begin etching another tombstone... Nova G-Communications 2007 - ?

Matt

For and ongoing look at the Nova situation

http://asianalien.blogspot.com/




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