Lady who saw that Pearson was for turning

When Marjorie Scardino was named as the new chief executive of Pearson at the end of 1996, her appointment created the kind of uproar generated when a venerable gentleman's club inducts its first female member.

When Marjorie Scardino was named as the new chief executive of Pearson at the end of 1996, her appointment created the kind of uproar generated when a venerable gentleman's club inducts its first female member.

Pearson was in many ways the corporate equivalent of the Carlton or Whites. Its board read like a list of entries in Debrett's. A hereditary peer and scion of the founding family still lorded it over the media and leisure conglomerate.

Calls from the outside world to sell off a bizarre assortment of historic assets including Madame Tussauds, Alton Towers and a stake in merchant bank Lazards were contemptuosly ignored.

Yet here was a new chief executive whose appointment was a clear breach of three club rules: - she was foreign, female and an outsider. It was the end of civilisation as Pearson knew it.

Ms Scardino and her fellow invaders have now had four years to make themselves at home and the modern Pearson is, predictably, unrecognisable. The bad news for the traditionalists is that, to the City's mind, the barbarians have proved the most civilising influence Pearson could have wanted.

On Monday, the 53-year-old Texan announced the £1.7bn acquisition of National Computer Systems (NCS), an American educational software company which had analysts rushing for enlightenment to their corporate registers. For most companies, a multi-billion-pound foray into an unknown technology company would have investors stampeding to sell.

But this is Ms Scardino, who has transformed an ailing City relic into the world's foremost private education publisher, while awakening the sleeping potential of the Financial Times and placing Pearson in the vanguard of the online information revolution.

The woman who broke the glass ceiling to become the first female chief executive of a FTSE-100 company could hardly have delighted her feminist champions more.

Back in January, 1997, the woman chosen to replace Pearson mainstay, Frank Barlow, was greeted with the bemused reaction, "Marjorie Who?" Plucked from quaint obscurity running the Economist, which is half owned by Pearson, it would have been impossible for her not to make an impact.

One fund manager recalls: "Pearson was effectively an investment trust, run like a gentleman's club by a board consisting of the Great and the Good. It had consistently disappointed, and growth was grinding to a halt. At the time, it was a stock we only held because we thought it was a takeover target."

To be fair to the Pearson old guard, the preparations to rationalise the company and realise its hidden value did pre-date Ms Scardino's promotion. Westminster Press, the publisher, and Royal Doulton, the chinaware group, had already been found more natural homes. Stakes in Yorkshire Tyne Tees Television and BSkyB had also gone or been reduced. Organisationally, new divisional directors had been put in place.

The incoming chief executive may have been a new broom, but Lord Stevenson, the management consultant who succeeded Lord Blakenham as chairman, had been on the Pearson board since 1986.

Ms Scardino's start was inauspicious. Within six weeks, the company discovered an accounting scam in the American arm of Penguin, the publisher, which ended up costing £100m. It was a particularly fiery baptism for John Makinson, the new finance director and former journalist who has since become almost as synonymous with Pearson's success.

Meanwhile, suggestions that Ms Scardino was a lightweight were heightened by reports that Greg Dyke, now the director-general of the BBC but then head of Pearson TV, was pressing for a buy-out of his division.

The sale of stakes in two television companies apart, 1997 was a testing year for the patience of investors eager for Ms Scardino to take a company once called "an investment trust without the tax advantages" by the scruff of the neck and shake out its real value.

The following year was a different story. First came the sale of Mindscape, the computer software company, which generated a measly £100m but represented a welcome exit from the previous regime's most disastrous legacy.

Future Publishing, the consumer magazines business, went the following month for £142m (this was not one of Ms Scardino's successes - Future's now worth £1.2bn). In October, London's Madame Tussauds, a division that also included Alton Towers in the Midlands, went under the hammer for £352m.

The clear-out continued the following year when she and Michel David-Weill, wily chairman of Lazards, agreed the sale of Pearson's stake in the merchant bank for £425m. This year has brought April's merger of Pearson's television interests with those of CLT-UFA, Europe's largest broadcaster, to create RTL, whose assets include Thames TV and has since been separately listed.

Ms Scardino earned credit for tempting Richard Eyre from ITV to run its television interests. Also this year, publisher Penguin was strengthened with the opportunistic acquisition of Dorling Kindersley, its struggling peer. But November 1998 proved to be Pearson's defining moment of reinvention, when it won a fierce battle for control of Simon & Schuster, the educational publisher previously owned by US media group Viacom.

It was rite-of-passage stuff for the still-unproven chief executive, who secured her prey in the teeth of competition from those gnarled old wheeler-dealing dogs, buy-out specialist Kohlberg Kravis Roberts, junk bond king Michael Milken and media tycoon Rupert Murdoch.

It is the potential of this £2.8bn acquisition which Pearson hopes to exploit with its latest find. NCS provides software to over 40,000 schools in America, facilitating the collection, management and interpretation of educational data. It provides a forum for parents and schools which Pearson will use to sell Simon & Schuster's educational content.

One investor said: "I'm a great believer that educational spend is going through a secular rise, particularly in the US. The idea that you will continue to learn throughout life is catching on. Pearson have a very powerful position in the market and the barriers to entry for online learning are surprisingly high."

"It looks like a very interesting deal," said another shareholder. "There's a great opportunity for schools to make themselves more efficient in the management of classrooms and NCS is in the lead to provide that."

There are some inevitable concerns about the scale of the outlay, although investors have been placated by the cheap means of raising the funds chosen by Pearson - a deep-discounted rights issue. Elsewhere, there remains some disquiet about FT.com, the online financial information site which is undergoing its second revamp. Nevertheless, Ms Scardino's performance allows her the privilege of having her decisions taken on trust.

"Rome wasn't built in a day", says Paul Richards, media analyst at WestLB Panmure. "If you look at the teething troubles of other internet companies, it shows that it's not easy. But she's done a fantastic job. When she took over, she inherited a portfolio of second-division businesses which through a judicious combination of acquisitions and disposals has turned into three first-division businesses."

Possibly the most remarkable aspect of the changes which Ms Scardino has rung has been her ability to retain the affection of followers and competitors alike. As well as adding a thriving bottom line, she has also earned in-house loyalty with her touchy-feely global e-mails.

The arrival of a woman has proved to be just the catalyst Pearson needed, as even the most misogynistic of its members would now have to admit.