(FORTUNE Magazine) – AFTER A DECADE of adopting schools, lobbying legislators, consulting on curriculums, wrangling with teachers' unions, and struggling to understand a culture practically devoid of secretaries, telephones, and computers, corporate America is ready for a recess from school reform. Not to go to the playground to beat up intransigent educators, but to ask a central question. In an era in which CEOs are reminded daily ''It's the bottom line, stupid,'' those CEOs want to know: Are the millions of dollars they are spending to improve K-12 education producing any return whatsoever? The question must really be divided into two parts. One: Is the education reform movement making any progress? And two: Is business making a difference? The answer to part one is, painfully little. Says former Deputy Secretary of Education David Kearns, who has just taken over as chairman and president of the New American Schools Development Corp., a nonprofit organization formed by business leaders to support the design of a new generation of American schools: ''We put a man on the moon in ten years. Ten years is enough. But in terms of what our children know, have we progressed since the early 1980s? The answer is no. Since the early 1970s? The answer is no.'' That doesn't mean all the business efforts have been to no avail. ''There are programs out there that work and make a difference,'' says Kearns. ''But having 200 or 300 good schools will not impact in any significant way the issues that have been discussed at this conference over the past six years. We have to scale up.'' Such was the thinking of the 260 executives, educators, and politicians who attended FORTUNE's sixth annual Education Summit in Washington, D.C., in September, to share ideas on how to better educate tomorrow's work force. The theme of this year's meeting was ''Progress: How far have we come?'' The nearly unanimous answer: not nearly far enough. That opinion had been strengthened earlier in the month with the release of two reports from the Department of Education. The 1992 reading report card, which reflected tests of 140,000 students, showed that more than two-thirds of fourth-, eighth-, and 12th-graders are not proficient readers. A second report indicated that only 9% of high school seniors can solve math problems that require more than an educated guess. While not denying the bad news, Education Secretary Richard Riley points out there is good news as well. SAT scores rose slightly in 1993 for the second year in a row, even though a record 30% of the test takers were minorities, double the level of 1976. Close to 40% of students took college prep courses such as math, English, science, and social studies in 1990, vs. 13% in 1982. Says Riley: ''This boulder that we are trying to push uphill is moving steadily.'' Why isn't it moving faster? Too much tinkering at the margins and not enough restructuring, according to Rexford Brown, a senior fellow at the Education Commission of the States, a research organization supported in part by the states. Restructuring means what it says: fundamentally changing a school's curriculum, teaching techniques, management, and administration. ''Schools that have been committed to systemic restructuring for the last three to five years have superior outcomes on a broad range of academic achievement measures,'' says Brown. ''Those that have been taking short-term, quick-fix, bounce-around approaches to reform actually do somewhat worse than schools that are quite satisfied with the status quo.'' Brown says only 1% to 4% of the nation's 110,000 schools are in the process of restructuring, and he estimates that a paltry 0.9% have completed the job. Said one summit participant: ''I was staggered by the lack of progress. Just 0.9% of schools restructured? What an indictment. I was surprised everyone didn't get up and leave en masse, saying, 'We have work to do.' '' Among the things schools need most from the business community: technology, teacher training, apprenticeships for non-college-bound students, and -- ignore the howls of protest -- support for national standards. Says David Kearns: ''People will say different communities should have different standards. I could not disagree more. If I were a minority or lived in an economically disadvantaged community, and someone said my standards would be lower than those of New Canaan, Connecticut, I would be insulted.'' Secretary Riley, who is busy promoting President Clinton's Goals 2000: Educate America Act, agrees. If passed, the Clinton plan would set voluntary national standards -- a critical element of reform, but effective only if states create incentives for schools to meet those standards -- and provide a small amount of seed capital to states and communities to reinvent their schools. ''Americans are enormously impatient,'' says Riley. ''To make education reform happen, we need to put all these pieces together. That will happen only if we have people who believe in this effort and go the distance. Let us control our natural urge to find a quick fix and instead lean on this boulder some more. We will be at the business of reforming education for this entire decade.'' Here is the latest on what business is doing at the state, local, and individual levels to encourage change in the nation's schools. (For specific examples of how companies are helping, see the list that follows this story.)

STATE REFORM -- When we talk about systemic reform, we are really talking about state reform. Because the U.S. Constitution delegates all responsibility for education to the states, structural changes such as new forms of financing and measures of accountability must be enacted there. Since 1982, says Rexford Brown, 47 states have begun testing students more rigorously, 42 have raised graduation requirements, 39 have established teacher testing programs, and 26 are wrestling with serious school finance equalization lawsuits. ''There's a lot of action at the state policy level,'' says Brown. What's left for the federal government to do? Not much. ''This Administration is very strong on the states' function,'' says Riley. ''To get any federal support under Goals 2000, there has to be state systemic reform.'' That suits the governors just fine. The way they see it, the federal government is generous in handing down mandates but tightfisted about paying for them. Says Michigan Governor John Engler, who signed legislation in August abolishing the use of property tax revenues to finance education in Michigan: ''The federal government funds about 6% of education. So I think that's about what they're entitled to in terms of rules and regulations. One of the greatest contributions Washington could make to education reform would be to get out of the way.'' Business, however, is more than welcome to lend a hand. Governors say business backing is critical to their attempts to raise taxes to fund schools. Business needs to pound home the message that educating every child is in the nation's best interest. Companies can also help by refuting the pervasive parental notion that ''Public schools are in trouble, but my child's school is fine.'' Finally, distasteful as it may seem, business must use its clout to overcome the forces in the way of reform. Resistance comes from many quarters: teachers afraid of being tested, educational bureaucrats worried about losing their jobs, legislators and companies fearful of tax increases. Says Ronald Gidwitz, CEO of Helene Curtis in Chicago: ''You need a lot of heavy hitters to spend time beating on the politicos to get them to back off. Business people don't like confrontation with the politicians, so it's hard to get them involved and keep them involved.'' It is, however, essential. Says Riley, who as governor of South Carolina pushed through extensive education reform legislation: ''I know from my own experience that the push and muscle of the business community is an absolute necessity to make education reform happen.'' Making reforms stick once they've been passed can be even tougher. In South Carolina the reform movement has lost momentum during the past couple of years, mainly because there have been few incentives to keep it going. One result is that test scores of some South Carolina students have begun to flatten, after climbing impressively during the 1980s. ''You have to put ((good)) results out there so the people who are funding reform have confidence that you're doing your job,'' says James Wilsford, who is active in South Carolina's reform effort. ''We were doing a better job of results-based thinking back in the early Eighties than we are now.'' Setting standards and publishing results is not enough. Educators must also feel the consequences of achieving -- or not achieving -- those results. Says Lewis Solmon, president of the Milken Institute for Job and Capital Formation, an organization financed by Michael Milken and his family: ''Let's assume some school districts don't meet the standards. What do we do? Give them less money? Get rid of the superintendent? Get rid of the teachers? I haven't heard anything about the consequences of not meeting the standards we are all advocating.'' KENTUCKY, Missouri, Michigan, Vermont, and Illinois are all beginning to experiment with accountability measures. Says Robert Leininger, superintendent of education in Illinois: ''The guys in the private sector told us, 'You have to have rewards and sanctions.' Before, we didn't say the kids had to learn a damn thing. We just said their bodies had to be in a classroom for four years. That will go out the window.'' Missouri is working on one of the more ambitious plans. Last May, with the backing of companies like Hallmark Cards and Kansas City Power & Light, which supported a related increase in the corporate income tax rate from 5% to 6.25%, Missouri passed a far-reaching education bill. Besides equalizing funding among districts, the legislation will set new state standards and methods of assessment; provide money to prepare teachers and schools to implement the standards; and most important, establish strong incentives and penalties for schools that do and do not meet them. Specifically, if during accreditation a school is found not to be meeting the statewide standards, it will be declared ''academically deficient.'' The state will appoint an audit team to confirm that the school really is deficient. If it is, the state board of education has 60 days to convene a management team whose job it is to determine what the school must do to improve. Recommendations could include everything from recalling school board members to suspending long-term contracts for principals or teachers to allocating more resources. The school has two years to improve. If it is still deemed deficient after two years, the district will be forced to implement the management team's recommendations. That's a formidable stick. As for the carrot, part of the state funding for each school will be based on the percentage of students who actually attend class. Furthermore, schools performing at the highest level in all academic areas will be exempt from most state regulations and will remain exempt as long as performance stays high. Alas, no deadline has been set for fully implementing the bill. Educators say that moving to a standards-based system requires considerable time to train staff and devise new assessment measures. For instance, if the dropout rate improves, test scores could go down. That means Missouri must find other performance indicators to supplement the tests.

LOCAL REFORM -- Companies wanting to turn talk into action should look to the local school district. In the same way that corporate America is empowering its workers, * educators have begun to realize that if schools are to be held accountable for results, teachers and principals must have a say in how to achieve them. Says Martha Darling, manager of government affairs for Boeing, which has been working on education reform for a decade: ''The state of Washington is providing the 'what' -- what we expect of our students -- and the 'how' is left to the local districts and schools.'' Often business can help with the ''how.'' After spending a day at Manual Arts High School in Los Angeles in March of 1990, Robert Wycoff, former president of Arco, became so concerned about the plight of the city's children that he helped create the Los Angeles Educational Alliance for Restructuring Now. Learn is a coalition of more than 600 community leaders seeking to change every aspect of public education in Los Angeles. With assistance from the Los Angeles Educational Partnership (LAEP), which uses private sector resources to develop new approaches to education, Learn intends to decentralize the school district, give more power to teachers and principals, provide intensive training for school personnel, and hold each school community accountable for the success of its students. It will also offer vocational training options in addition to the college-oriented curriculum, strive for greater parental involvement, and improve health and social services at the schools.

LEARN'S PLAN, which some see as the last hope for Los Angeles schools, was unanimously approved by the board of education in March and began this fall in the first group of 36 schools. The initial phase involves training. LAEP is working with teachers in the pilot schools to help them improve their instructional techniques, while UCLA teaches them management skills. Next summer 60 more schools will join in; Learn's goal is to restructure the entire district by the end of 1995. Executives say they like to get involved with local school reform efforts, partly because the payoff is more tangible and partly because they don't have time for the politics of state reform. Well, here's a warning: Local politics can be even worse. Just ask the folks at Boston University, who agreed in 1989 to take over management of the public schools in Chelsea, Massachusetts. An impoverished immigrant community, Chelsea had a local government ridden with political corruption and fiscal problems, including a 25% budget deficit. With the help of private funds, Boston University staff managed to upgrade the curriculum, offer preschool programs -- even provide free dental services. But it was not until 1991, when the governor suspended the Chelsea city council, the mayor resigned, and the town was placed in receivership, that reform really took off. Says Paul Clemente, a Boston University administrator: ''The receivership allowed us to move forward without all the political garbage.'' Companies that hope to make a difference at the local level need to learn how the local school district operates. Says William Donahue, president of the Genesee Area Focus Council in Flint, Michigan, one of several school districts trying to incorporate the principles of total quality management into its restructuring plan: ''No organization is as difficult to understand and work with in a meaningful way as a school district.'' FIGURING OUT where the power lies is the key to getting programs implemented. It also helps to have a business representative on the school board, a group that wields considerable power. In the good old days, high- level executives often served on school boards; today such participation is rare. Says Ronald Prescott, an associate superintendent of the Los Angeles Unified School District: ''The business community used to have subtle influence on education policies because it had someone on the school board. So it wasn't a matter of getting grants from Arco or any other corporation. It was a matter of a Western Airlines executive's being president of the school board. Business involvement used to be natural. Now it's intervention.''

PARENTAL INVOLVEMENT -- In a recent FORTUNE survey on corporate efforts to improve education, 89% of the CEOs who responded said the biggest barrier to reform was the lack of parental involvement. Study after study shows that the No. 1 indicator of success for a child is a good relationship with a nurturing adult. Yet, says Adam Urbanski, head of the local teachers' union in Rochester, New York, ''parents are abandoning their children too much, not only in our poorest communities but also in our wealthiest. Left alone, these children are rudderless, and they are inventing values that are scaring the hell out of us.'' Once again, that's where business comes in. Companies must make it easier for employees to be good parents themselves, by offering flexible hours and time off to meet with teachers during the school day. Through one of its work and family programs, SchoolSmart, AT&T teaches interested employees how to get the most out of sessions with teachers, how to plan for post-high school education, how to structure the home environment for positive learning, and how to build a child's self-esteem. JUST AS IMPORTANT as building self-esteem is raising expectations. Americans have a tendency to emphasize innate ability over effort, thus dividing students into two groups: those who can and those who can't. Therese Dozier, the U.S.'s teacher of the year in 1985 and a special adviser on teaching to Secretary Riley, warns of the perils of this attitude. While teaching at the Singapore American School five years ago, Dozier noticed a startling contrast between her Asian and American students: The Asians worked much harder. ''When my American students had trouble in class, they immediately took the attitude that the class was too difficult for them, and they needed to drop to a lower level,'' Dozier says. ''My Asian students would simply say, 'I must try harder.' '' To convince kids that hard work does pay, regardless of IQ, Pepsi-Cola four years ago created what it calls the Pepsi Challenge. Now being piloted in Detroit's Southwestern High School and Dallas's L.G. Pinkston High School, the program encourages average kids from disadvantaged environments to complete high school and go on to post-secondary education. Unlike other programs that target the cream of the crop, Pepsi challenges C-students too -- borderline kids who can make it with the right support. Students who sign up must maintain a C average or above, meet state attendance requirements, and remain drug-free. In return they earn $250 per semester, up to $2,000, to be applied against future accredited education. To date, students have earned more than $1.7 million in scholarship incentives. The total is expected to top $2 million by the conclusion of the pilot in 1994. Each student is assigned a ''teacher-mentor'' -- a regular teacher or guidance counselor who volunteers for extra duty -- whom he or she meets with three to four times per month for academic review and guidance. With the help of parent volunteers, these mentors also plan field trips and outreach projects, such as working with the homeless. One happy result: Parental and community involvement with the two pilot schools has increased from zero four years ago to over 3,300 volunteer hours during the 1992-93 school year. So far, about 2,000 kids have signed up for the Pepsi Challenge. At L.G. | Pinkston, post-secondary enrollment is up from 29% to 66%; at Southwestern the percentage of students going on to college or trade schools has risen from 50% to 70%. One is Francoise Reynolds, now a freshman at Tennessee State University. ''What I found to be so extraordinary was how Pepsi served as an advocate,'' Reynolds says. ''It wasn't there to move mountains for me, but it was there to help me acquire what I needed to move those mountains. Pepsi has given me a lot. I feel more than obligated to succeed.'' REYNOLDS should serve as inspiration to business executives beginning to feel that a decade's worth of blood, sweat, and jeers has been for naught. Says Cynthia Canevaro, an executive at EDS: ''My one cautionary comment is that, as business people, we tend to want to see results charted and graphed.'' Canevaro knows that's not always possible. Says she: ''I had an alcoholic father, and there were days I didn't know if I could go on. I remember specifically a lawyer, a teacher, and a business person who all reached out to me. I doubt sincerely you could take my experience and chart and graph it, but I wouldn't be here today without those people.'' TRW Chairman Joseph Gorman similarly warns the business community against accepting an ''incomplete'' in the subject of education reform. ''We know it is a long, hard journey. Massive parallel efforts have to take place. Indeed, it is seemingly an impossible task,'' says Gorman. But he is reminded of the words of the late Casey Stengel, who once said, ''You know, they say it can't be done, but sometimes it doesn't always work out that way.''