Capella to Lay Off 65 Employees

The Minneapolis-based company, which owns Capella University, will inform the affected employees during the next two days.

Capella Education Company on Tuesday announced plans to eliminate about 65 positions, or roughly 4 percent of its non-faculty work force.

The Minneapolis-based company, which owns Capella University, said that the layoffs will not affect faculty.

Chairman and CEO Kevin Gilligan said in a statement that the company is transitioning to a new “brand-driven marketing strategy” that relies less on third-party marketers. The move has resulted in “excess capacity in specific frontline areas and the need to recalibrate marketing skills to fit our new model,” he said.

“Additionally, as we moved through our planning process for 2012, we identified opportunities to increase organizational efficiency,” Gilligan said. “Today's actions will allow us to make key strategic investments going forward in both our brand strategy and learner success efforts.”

According to the company's Web site, Capella Education Company and Capella University together employ about 1,300 in administrative positions and 1,600 faculty members.

Capella spokesman Mike Buttry on Tuesday said that employees affected by the layoffs will be notified during the next two days; until those workers are informed, he declined to discuss which type of jobs are affected. Buttry said, however, that the move mostly affects positions at the company's Minneapolis headquarters.

Capella, which is one of Minnesota's 60 largest public companies based on revenue, expects to record a charge of about $1.4 million during the fourth quarter but said that the work force reduction will result in an annual savings of about $5.5 million.

Capella has recently experienced declines in enrollment, which played a role in the company's decision to cut 125 positions earlier this year. Some have attributed the school's enrollment declines to uncertainty surrounding new regulations for for-profit schools that pertain to eligibility for federal loan programs.

During the third quarter, total enrollment decreased 7.5 percent to 35,755, while new enrollments decreased 36 percent compared to the third quarter of 2010. But those declines may be getting smaller: For the fourth quarter, the company expects total enrollment to drop by about 4 percent to 6 percent compared to the same period last year, while new enrollment is expected to decline by about 10 percent.

Buttry said that Capella's shift in marketing strategy and the accompanying layoffs are not in direct response to new federal regulations. But increased regulatory scrutiny has led others in the for-profit sector to ramp up efforts to attract learners-and the cost of competing for those students has therefore gone up, Buttry said. The company has recently boosted marketing and promotional spending to attract learners, and it is now focused on a more brand-driven strategy.