Managing your RTO like a business

While I have spoken about this a little bit before and also about career progression in VET the really positive reactions to yesterdays post on financial viability for RTOs and a couple of discussions that have arisen out of that have prompted me to revisit this idea managing learning and RTOs like a business.

We are often quite critical of some (particularly the bigger) providers in the sector on the grounds of their organisations being run like businesses and while there may in some cases be other good reasons for criticizing some of these providers, I actually don’t think that being critical of them for running the delivery of learning like a business is one of them.  One of the issues I see in the sector, and one that has been there for quite a long time is that we have fantastically skilled trainers and educators and compliance and admin people, but it seems that we have very few truly great educational business people.  People who understand both what quality education looks like and what quality business looks like and can bring them together into a cohesive whole.  Yes we are seeing more people and organisations with high levels of business experience moving into the sector, but often what is lacking there is that understanding of the quality education piece, which brings about a disconnect between the delivery of learning and the delivery of business imperatives.

Before I go any further thought let me just cover off on one thing.  I know that at least some people will shout, learning is not a business.  Well the act of learning may not be,  but the delivery of learning is and in my opinion has to b.  Whether it is delivered by a public or non-public provider there are critical business skills and concepts that need to be part of the arsenal of any learning provider, otherwise, quite simply they will not survive or the return on investment (be that social, financial or whatever) for governments, industry, individuals and nation in general will not be what it should be.

We have seen the problems that not thinking about the delivery of learning as a business has had across the sector for some time now, both in the public and non-public space.  We have seen TAFEs struggling to survive when their seemingly constant stream of government funding has been cut or curtailed.  We have seen non-public providers in the same situation when governments make changes to funding models or when there is a drop in enrolments from a particular source (such as international students).  Why, well one of the reasons is that they have failed to pay enough attention to the business side of the equation and fallen into the trap of thinking that things were always going to remain the same as they were last year.

The biggest issue I see with people from outside the sector moving into management style roles in the sector is that they tend to fail to understand that the delivery of educational services is costly, both in financial and in terms of time and resources and the cash flows, particularly from funded training may vary wildly from month to month.

The biggest issue I see with the trainer and educator side of the picture is that they tend to fail to understand that at some point the money runs out.  There is only so much time you can spend with a class or individuals, or so much new technology you can have, or support that can be given before the value of the each dollar you are spending starts to become radically diminished or there is simply no more money in the coffers.

Unfortunately simply focusing  on the bottom line and financial viability will not produce great learning outcomes, but also focusing just on student outcomes and forgetting about the money will create massive problems for both public and non-public providers.

All providers need a mix of both sets of skills, not just in their teams, but also in the people charting the course of the ship.  There needs to be within every provider, whether big or small, public or non-public at least one person in a significant position, with sufficient significant decision-making power who understands deeply both sides of the picture and how to get the best out of each side in order to benefit the other.

Every provider should know some very simple things about their business such as:

  • Projected cash flow  every single month for at least a year in advance
  • Projected student commencement numbers and completion numbers the same as for above
  • Which are the busy months and which are the slow months (does anyone in training actually do any business over Christmas)
  • How much of their income comes from what streams and what are the risk factors around each of those streams
  • Exactly how much it costs to deliver a day, or a unit of training to one person and how that changes with changes in scale
  • Exactly what it is that the amount someone pays for training actually pays for  (resubmits, individual support hours, %of admin and management costs)
  • What are your direct costs and indirect costs
  • How much time do staff spend doing income generating work (like training and assessment) and how much is spent doing non-income generating work

The problem is that even some very good providers of high quality educational outcomes both public and non-public, struggle with what would be considered some very basic metrics in terms of business viability.

People talk a lot about the need to have high quality trainers and assessors and high quality compliance people, but often there is not enough talk about the value that a high quality education management person, with a good understanding of the actual business of learning can bring to an organisation particularly in terms of its continued viability.  Over the years I have seen too many high quality providers go to the wall not because they weren’t delivering fantastic student outcomes, but because they weren’t watching the financial football closely enough.

Remember the industry is changing and only those providers both public and private who understand that the delivery of learning is a business and what is needed to successfully deliver that business will survive.


Anyway thats just my opinion


About pauldrasmussen
Paul Rasmussen is one of Australia’s most widely read Vocational Education and Training Commentators. He provides deep, unbiased analysis and insights not only on topical issues, but also on the underlying structure and policy which supports the industry. His writing and analysis has been praised for its uncompromising and thought provoking style and its ability to focus on the issues of real importance to the sector. He has advised various government departments and ministers, training providers, public and private organisations, not for profits and small to medium enterprises on the VET sector and the issues and opportunities facing it. He is one of Australia’s most awarded learning professionals and a regular speaker at a range of conventions and forums. His extensive experience in vocational education, and learning and development coupled with formal qualifications in philosophy, ethics, business and education management allow Paul to provide a unique view of the road ahead and how to navigate it.

2 Responses to Managing your RTO like a business

  1. Business aspects of education is most important for all providers today.I fully support your views Paul.

    • Pankaj Patel says:

      Its a fundamental of any business to run on commercial term to provide value for money either private money or public money. My experience and observation in education sector is that they are mostly public funded and depend upon short of state or central funding. Even big private provider or listed company rely on funding.

      But being operating in a century where things are changing rapidly and demand are ever increasing , we need a dedicated person with decision making power to guide company in more balance way through achieving student outcome and financial sustainability.

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