Ethics, Sustainability, Growth and Profitability in the VET.

I thought today I would explore some thoughts I have been tossing around since before the demise of Global Intellectual Holdings and the RTOs and other businesses it owned.  The collapse and some of the comments, particularly around it; the effect of VFH caps where there had been large increases in student enrollment numbers in courses, reliance on particular sources of income and rapid growth, along with a lovely little article I read yesterday sort of bought all of these thoughts to a head.  So what I want to explore a little bit is the concept of sustainable growth in the VET sector and whether or not the growth we have seen over the last few years was ever sustainable.

Firstly what is sustainable growth rate?  While there is an accounting formula and definition for this, there is also shall we say a more humble explanation of what this concept means.  Sustainable Growth Rate is to put it simply how much an organisation can grow without borrowing more money.  Which in even simpler terms means if your organisation has a lot of cash on hand it can expand quickly.  It is not simply enough to expand however endlessly, any expansion to a business, must at some point become a sustainable revenue stream otherwise all that is occurring is that the business is pouring more and more money in to expansion and not getting any return on that.

It is this issue of sustainability that intrigues me about the growth rates of some players in the sector over the last few years.  We have seen small providers suddenly, seemingly over overnight become very large providers with a large number of campuses in high-profile locations and being promoted by footballers and other of the same ilk.  New providers have suddenly appeared and in less than a year had multi million dollar revenues.  I feel that a couple of questions need to be asked; did the small providers who rapidly upscaled to massive student numbers and campuses do so because they had squirreled away profits over the years until they had a war chest from which to grow, did they acquire massive debt from financiers to fuel this grow or did the money magically appear from somewhere else.  Of the new providers we can well ask, did they have a business secret that the rest of us didn’t know.

We all know however in what it was in most cases that drove these expansions.  VET FEE HELP – Commencement payments, linked to massive enrollment numbers generated by brokers and fees 3 and 4 times what they were 4 years ago.  That is what fueled this growth and nothing else in most cases.  Aside from the payments themselves from the government, these massive income streams gave businesses access to unheard of levels of financing, the ability to IPO and range of other things.  Yet all of this growth was based on one simple premise, the premise that no matter how large the numbers got, VFH was a train that was simply going to continue on, on it merry way.  The thing is though anyone looking at the sector and the explosion of growth could have and should have seen this.

I know that people should have seen it because in the early part of last year I did some consulting work with a private equity firm who were looking at VET sector investments on the back of what was still be sort of looked upon as a successful float by Vocation and high profitability of other players in the sector and while they were interested in the sector, they were worried about how long this uncontrolled growth would last.  So much so that in the end they decided to not enter the market.  As they said at one point; even if this doesn’t look like it on the surface this is growth based entirely on debt and at some point your ability to do that stops.

They were right of course VFH is a system based on debt, not debt at the provider end but debt at the government end.  Now of course monies owed to a company or the government sit on the assets side of the register, however the larger that debt figure becomes, the more people become concerned about what percentage of debtors are actually going to pay off their debt and how, in this case, the government is going to deal with all those who default.  Now of course as the figure started to really get into the billions of dollars and it started to look like the outcomes that were supposed to have been produced, just simply were not occurring, someone somewhere was eventually going to say STOP and as we saw late last year the government did say stop.  Now we have seen caps on student enrollment based on student numbers from a point in time in 2015 (this is one of the causes cited for the Global collapse as, as reported by a Staff member they had 44 students enrolled in a course at the point in time the caps figures were based on, but enrolled another 1000 in the next 3 months).  Now a number of providers who have been fueled by large-scale student recruitment processes have found themselves in the situation where they will not be able to access any more funding than they did last year.

The problem with this is that just having the same amount of money as last year is not enough, given the massive expansion in campuses and staff and students, some of these providers are reliant on a continuing stream of enrollments to ensure that their whole system keeps working at least at the scale it currently is.  In addition it also just been suggested that the government is looking at a tiered system of loans for VFH which will limit the amount a student can borrow depending on the ’employment outcomes’ the course is likely to produce.  This is in my opinion a fantastic idea and will limit in yet another way, by reducing the fees that are going to be charged, the amount of money flowing out from the government, which will in turn create regulation on growth.

What we are seeing now is a correction in the market.  We are seeing system which saw rampant expansion, based on debt and unsustainable practices being reigned in.  Will there be casualties as a result of this? Certainly.  Perhaps more casualties then we would like to admit, but let us not kid ourselves, this is something that was inevitable and anyone who didn’t recognise this fact and prepare has probably made a serious business error.

The question which then still sits with me after I think about all of this is one of ethical and responsible behavior.  But I might let you decide what you think in relation to those two subjects.

Anyway that’s my opinion.

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Queensland’s VET Investment Plan – Moving forward 2016 and onwards

For those of you who are regular readers of this blog, you will know that for the most part I have been a supporter of the Queensland Governments VET investment plan both under the previous and current governments.  I also think it is necessary for me to indicate at this point that the organisation that I work for is a PQS under both VET investment and User Choice before I go any further however.  So with the end of the 2015-16 financial year approaching, yes it is almost the end of February folks, this means that the current plan is set for review.  I therefore thought that it might be a worthwhile time to have a look at the program and what possible changes might be useful and not useful in the next version of the plan.

My first thought is a simple one.  The PQS system, where providers are required to meet and adhere to additional guidelines and regulations in order to be able to access funding under VET investment is a great one.  Access to entitlement style funding, should have additional requirements attached to it, over and above simply being an ASQA registered provider.

My second thought is also a simple one.  Please don’t break something that is working.  I would appeal to the government not to follow the route of South Australia in thinking that portioning off a large amount of the available funding and earmarking it as TAFE only funding is a good idea.  We need to support TAFE and we need to have a vibrant and effective public provider, but cordoning off large portions of a funding program and making it TAFE exclusive is not the way to go.  Neither is I think putting in place quota systems, unless we are very very sure of the numbers of people we are going to need in particular areas over the coming years.  The system that we currently have is not broken, it is working and with a few modifications could be even more effective.  Throwing it out and trying to start over, or trying to massively overhaul the program is I think a recipe for disaster.

I guess what I am saying, is something that I have said before, I think Queensland has got there funding initiative pretty right, particularly if we look at the whole picture.

  • Skilling Queenslanders for Work – While only just starting up will really help to assist that segment of learners that are extremely disadvantaged, through programs supported by community services organisations.
  • User Choice –  Apprenticeships and Traineeships are important, in fact vital to business and industry and need to be continued to be funded
  • Certificate III Guarantee – This is a fantastic program which needs to be continued both for public and private providers, as with the SQFW program, this program really assists to get jobs and to change their circumstances.  Prioritised funding for those courses where there is high need and good employment outcomes continues to be the way to go and currently for the most part I think the government has the mix right.  The only tweak that could be made would be where a person has an extremely old qualification in a different field of education and wants to move into a new vocational area.  Being able to support this move for people who are not currently employed would make the program stronger.
  • Higher Skills – I am a fan of this program, the ability for people who are currently working and who only possess entry level qualifications to receive a subsidy to gain a higher level qualification or skill set is fantastic and has at least in our sector (community services) enabled significant numbers of people to improve their employment outcomes.
  • Funding for TAFE – TAFE needs to be funded, even if that funding is simply support to maintain their infrastructure and resources.  But keep it separate from the other funding and subsidy programs however, provide them with what they need to be strong and competitive, but also keep choice in the system.  Choice is actually vital to producing a vibrant public system.

On a side note with regards to the Certificate III and Higher Skills programs, having a mandatory student contribution is vital, however I would caution against setting what that contribution should be.

Therefore please @YvetteDAth and the Queensland Department of Education, lets keep what we have and keep it working.  Lets not go the way of some of the other states and throw the baby out with the bathwater.

Anyway that’s just my opinion.

Sustainability, Federalisation, and a new Minister

Well it has been a bit of a big couple of weeks yet again in VET world.  We have seen the collapse of a private provider, leaked documents and commentary around federalising TAFE and then suddenly a new Minister.  So let’s dive in and have a little swim in the VET pool shall we.

The rumors started late on 9 February, jumped up in intensity on the 10th and then hit the headlines on 11 February.  Global Intellectual Holdings which owned a number of different ‘education’ companies including RTOs had gone into administration.  For those interested in history, these groups were also closely associated with NTD which disappeared a little while ago with its website pointing to Keystone College.  Rumors, excuses and points of view, abounded and still do as to why this had happened.  The biggest reason put forward, particularly by those somewhat inside the circle of companies was the changes to the VFH legislation and caps on student numbers.  Others suggested it was the amount of money that was paid out to the directors of the companies.  For me it is simple.  One of the things we have seen over the past few years since the advent of VFH is a rise in massive growth fueled almost entirely by the upfront payments system of VFH coupled with ever-increasing student enrolments.  This was never going to produce a situation which was sustainable for anyone.  I remember being involved in discussions almost 2 years ago where the concepts of caps on either enrolments or payments were being mulled over as a way of controlling the every expanding costs associated with VFH.  Anyone who thought that the situation as it was, was simply going to continue was playing with fire.  Yet this is what we saw.  We saw smallish colleges suddenly expand to be large concerns with multiple, shiny, storefront, state of the art campuses, with huge lease costs or new players enter the market and suddenly be a $50 or $100 million dollar business.  All of this based on this unsustainable premise that VFH was going to continue to expand unchecked and that there was going to be a continuing flow of students enrollments.   In some cases we saw 2000% increases in the number of students enrolled in courses.  This was never sustainable.  Now don’t get me wrong, I feel deeply for the students and staff who have been caught up in this, but let’s be clear about this, if one starts to troll around the ASX and look at job ads and a range of other things one thing is certain, this recent failure is not going to be the last.  As I said recently if what is being said by those who know these things is to believed, there will be up to 10 providers (both public and private) who will be in serious regulatory or financial trouble or both, by the time we get towards the end of April.  The vast majority of it bought on by unsustainable, short-term growth thinking as opposed to sensible, reasonable long-term growth.  You can blame the government if you want but at the end of the day it is the RTOs themselves and their management who are responsible for making sure that they are able to continue should there be changes and issues with funding arrangements.

Back in July last year I wrote a piece entitled “would a federal funding system by good for TAFE” where I put forward the idea that perhaps for the most part we should treat TAFE as just another provider.  The recent leaked COAG document looks very much like the suggestions I made. I have a lot of sympathy for this position clearly.  One of the biggest issues at the moment, particularly for organisations and L&D people is trying to understand all of the various funding models that exist from state to state.  The same goes for providers, differing reporting models and information make it a nightmare to work across borders.  Federalisation of funding would, it seems, make this morass much more easily navigated.   In a system such as this TAFE can then be treated as simply a state-owned provider, where the state does what any owner of a business would do, things like, maintain facilities, support governance and the like, but everything else that is essentially  the day-to-day operational costs would, like with any other provider, have to be covered by the actual income generated through the provision of training.  Now for those of you who shout, what about TAFEs special responsibilities, well under a system like this, these responsibilities could be funded by the States in a clear and transparent way, unlike how it dealt with today where what these special responsibilities actually cost is hidden to a large extent within the general funding provided to the TAFEs.  TAFE clearly can and does do great things, look at TAFEQld SkillsTech, there recent outcomes data is amazing and shows what can be done when a public provider is managed well and has deeply committed staff.  It has been my opinion for a while now that this kind of structure and funding system would provide TAFE with a base from which to not only be sustainable but responsive, effective and vibrant.

Then over the weekend we saw another change in VET Ministers with Luke Hartsuyker MP out and Senator Scott Ryan in.  A few people have worried that this was starting to look like shifting deck chairs on the Titanic so to speak.  I am however less worried.  Importantly from my perspective we still have Senator Simon Birmingham as the Minister for Education and Training.  Simon as I have said before did I think a great job as the Minister for Vocational Education and Training, through what was quite a tough time in the sector.  Senator Ryan has experience in the department by virtue of being the parliamentary secretary for some time.  We are not seeing someone without portfolio experience being thrown in the deep end shall we say.  I also think that the appointment of the new minister will not lead to any great shifts in the directions that the reform agendas are taking and that things will travel pretty much in the same direction as we thought they would under the previous Minister.

Anyway, so that’s my thoughts on the week that was.

 

Quality Assessments in Vet – Student Assessments and Regulatory Reform

Last week I looked at the Quality Assessments in VET discussion paper that was released by the government and discussed some of the questions posed in the first half of the paper.  I also promised that I would come back and look at the second and third sections of the paper which talk about reforms to student assessments and regulatory reform.  So after spending that last week recovering from a severe chest infection here goes.

Chapter Two of the discussion paper looks at how we can assure the quality of qualifications issued to students and ensure that students who are issued with a qualification are competent.  It is of course vital that qualifications issued through the system are and can be trusted, otherwise what is the point of a nationally accredited system, we may as well just let anyone train people give them a piece of paper to say they are qualified.  As the paper rightly suggests independent validation of assessments to ensure validity and consistency of outcomes is one such way of attempting to achieve this.  There is without a doubt a need to have the outcomes of assessments validated, we should be able to say with confidence that everyone (or at least the vast majority) in Australia who has a certain qualification will be able to successfully undertake particular activities that relate to that qualification, whether it was delivered and assessed by the biggest private provider, a TAFE, or a small local provider.  The competency outcomes should always be the same.

One of the problems I think that often comes out of this discussion is one around how to make the process fair and equitable for all parties involved.  One could suggest that what is required is independent external validation of key competencies for all students prior to the issuance of a certificate.  Now while I can see the value of this in high risk areas and areas where there exist registration bodies that control who is licensed to work, there are a lot of vocational areas where the risks involved are quite low, particularly at the lower levels of qualifications and it would seem unnecessarily burdensome to have a carte blanc approach such as this.  I would however think that external validation of randomly selected participants might be useful across the board, with the percentage of participant outcomes being validated increasing as the number of graduates increased.

I also think a principles and risk based approach to validation of assessments and tools through a collaboration with industry is great start.  I know some have suggested that there is a burden here and that employers or industry groups may become reluctant to collaborate with a large number of providers.  It has also been pointed out that for providers with large scopes of delivery the process becomes almost never-ending and requires a significant staff commitment which they may not possess.  I personally think that the current requirements in The Standards for validation, if properly enforced are a sufficient base to work from.  Where there are particular concerns either around a qualification or a provider, or there is an acknowledged high risk area than additional requirements could be enforced.  The key here is of course enforcement.  There is as I have said before no point in having The Standards if they are not properly enforced.  The idea however of industry-endorsed, externally administered tests is not one that I could endorse primarily because it is something which is really outside of the philosophy of VET and the ideas of competency based training and assessment.

An argument is also often made that industry does not necessarily possess the skills to determine whether or not an assessment or tool has or will produce the right outcome.  The argument is that this is a specialist skill which is not necessarily part of the skills of an industry.  I am  not sure about this, but what Industry can do for us is tell us whether or not they feel that someone who has completed all of assessment tasks within a tool would be competent.  They can tell us in the case of particular students whether or not a judgement of competency was correct, both based on the evidence and through more practical methods.  It is industry after all who will end up employing VET graduates.

There is also  suggestion that one reason for industry satisfaction with graduates has more to do with the expectations of employers than it does with the actual competence of students.  It suggests that employers have a much higher level of expectation for say someone with a Certificate II or III than the qualification provides a graduate.  There is some validity to this argument, which suggests that employers both need to be better involved in the process of the development of qualifications, and that they need to be educated as to what should be expected of graduates at various levels.

Quickly now I want to move onto and discuss chapter 3, regulatory reforms.  I have long suggested that the regulator should be more concerned with the actual training that is being delivered and the outcomes of that training rather than just the tools, policies and materials.   Now I know that ASQA currently looks as a sample of completed assessments to ensure that a competency decision can be made from those assessments, but currently they consider or look at how those assessments were generated.  They don’t randomly visit face to face training or workplace delivery, or undertake random sampling of online delivered materials.  They don’t know if the training consists of the trainer standing at the front of the room as essentially reading the answers to everyone while they copy them into a workbook.  I firmly believe that this one single step, that is actually looking at how the training was being delivered who have a more significant effect on the quality of assessment outcomes than almost anything else suggested in these chapters.  It would also give ASQA a chance to consider the skills and quality of the trainer delivering the program and the quality of their qualification.

I think the idea of Training only RTOs is foolish and should be put out of its misery right now.

 

Anyway that’s my opinion.

Quality of assessments in VET Discussion paper – A discussion.

So the Federal government has just released its discussion paper on Quality Assessments in VET.  This is part of some ongoing movements around the Certificate IV in TAE and other matters that has seen the new qualification being held back while the powers that be see what they can do about the perception at least, that there is a significant problem with how assessments are being carried out in the sector.

My initial comments on this are simple.  There is nothing wrong with the Certificate IV in Training and assessment, particularly as an entry-level qualification into the sector.  The problems with assessments in my opinion have very little to do with the Qualification and a whole lot to do with;

  • Inappropriate delivery and assessment of the qualification itself by unscrupulous providers simply out for a quick buck, and
  • pressure being put on trainers and assessors to ensure that people are deemed competent, again by unscrupulous providers out for a quick buck.

The problem here is not the qualification.  The problem lies squarely at the feet of providers themselves.  If the TAE is delivered and assessed properly, and the assessment processes within providers were up to scratch then there would be no issues.  The Department, ASQA and the sector itself needs to man up and end the shonky delivery of this qualification.  We all know whose TAE qualifications aren’t worth the paper they are printed on, but no one seems to want to do anything about it,  and when someone suggests that we do, the old catch cry of not more regulation leaps out of the woodwork.

 

Now that I have got that out of the way let’s have a look at the questions/proposals in the first half of the discussion paper.

  1. RTO Limitations
    • Is it appropriate for large number of RTOs to deliver the TAE qualification – NO.  The TAE should be a qualification for which obtaining approval to deliver is a rigorous process, including having not just the assessment tools, and staff audited, but also to have the delivery of the program audited.  TAE should be a special scope item outside of other areas as it is the key component within the system.  The number of RTOs delivering the qualification should be reduced by ensuring that there is a heavy and continuing compliance and regulatory burden on any RTO that decides to place a TAE qualification on scope.
    • Should RTOs be restricted from issuing to their own trainers and staff – NO.  If the audit and compliance system is rigorous enough there should be no problems with issuing to internal staff.
    • Should TAE be available through RPL – YES.  There are significant number of people within this sector who are highly skilled and whom undertaking a full assessment process whenever there was a package change would be overly burdensome.  Again if the regulatory controls are right RPL is appropriate.
    • Should TAE only be delivered by practitioners with a specific period of training and assessment within the Sector – YES.  At least 2 years FTE.
    • VET trainers should have higher qualifications – YES.  Anyone training the Certificate IV TAE, should hold that qualification plus and additional higher level qualification relation to VET.
    • Should there be a practical component – YES.  There should be either a work placement (for those not currently employed) or evidence of work (for those currently employed).  It does have to be long 50-80 hours would be more than sufficient.   This would ensure that graduates had actually spent time with real students and undertaken real assessments.
    • Should participants in TAE be employed in the sector prior to entering the course – NO.  This would overly constrict entry into the sector of people who might otherwise be able to undertake a TAE course and become quality additions to the sector.
  2.  Skills and Qualifications of Trainers
    • Should a design and development unit be made a core part of the Certificate IV and would this improve outcomes – NO and NO.  Including a unit on design and development would do very little to improve student outcomes at a certificate IV level.  Design and development of assessment tools is skill which is above the AQF level of a certificate IV.  Assessment tools should not be being designed by someone who only holds the entry-level qualification unless that person has substantial experience within the sector and in relation to design and development
    • While there should be some weight given to majority considerations, these majority considerations should be tempered strongly with the views of key stakeholders (as long as those key stakeholders are chosen wisely) and the strength of the arguments made.  The idea of who are the key stakeholders for the TAE is an interesting one to ponder.  I believe there needs to some representation from the sector itself, but which must include representation from both the coal face of delivery through to RTO/provider management.  There must also be strong representation from government (The department of education) as they are the major stakeholder in this (you can disagree with me if you like).  In the long run it is the government who is the ultimate customer for the vast majority of VET work that occurs, be that through funding or loans, or special purpose project or what ever.  The system belongs to the government so it is the major stakeholder.    Now I know that there are going to be calls here for the unions (AEU etc) to be involved and the academic VET research set, but in the long run the decisions about the TAE have to be made by the sector itself and the government, others can have input and ideas and the decision should and must sit with these two groups.
  3. VET Professional association
    • Is there a need to have a national VET professional association – YES.  This to me is a no brainer, of course there should be.  Should membership be mandatory in order to work in the sector, yes, but there needs to be levels.  So the first would be an associate member shall we say which would be open to anyone who had a TAE with very little additional in the way of requirements.  From there, various level could exist depending on the experience of the person, continuing professional development, independent evaluation of their work and skills etc.  This would make it easy to delineate between those at the top of the profession and those just beginning and would also encourage the continuing improvement of skills.  There should also be categories for  Trainers/Assessors, Management, compliance etc and a person should be able to be in multiple categories.
    • The big barrier to this is of course money.  It would either need to be funded by the government or it would need to be a membership fees based process.  The problem with being funded is obvious, in that money would be need to be found somewhere.  With membership fees two things would need to happen, one, it would need to be ensured that membership was not just a you pay your money you get your piece of paper deal or there would be no point.  On the other hand the process would need to not  be overly convoluted or expensive as this may be a disincentive to gaining higher levels of membership.
  4. Activities of a VET Association
    • It needs to be a register of VET practitioners
    • Develop and implement a CPD system for the sector
    • Approve professional development activities for CPD points
    • Promote VET sector work as an attractive career path.
    • While these activities need to be coordinated at a National level, but in particular the CPD program could be achieved through existing groups and or other external structures which were approved as CPD
    • There are a number of bodies with significant sectoral membership which could be utilised.  One example would be ACPET, although this might be met with resistance from the public sector, another might be something along the lines of AITD, which is already a membership organisation for the learning and development sector and which has a significant number of VET sector members.  In addition a private sector organisation like VELG which already has a solid VET membership base may also be an option in this area.
  5. Models for a VET association
    •  I have a preference for the type B model, it is the simplest, funding can be easily accounted for, and maintenance and management of registration and CPD needs to be held centrally anyway in my opinion.
    • While model A has advantages in that it takes into account things which already exist, I think it would be too hard to manage overall and membership would not be centralised.
    • Model C is simply a registration model as far as i am concerned and would add nothing to the sector.

Well so there you have it, my thoughts on at least the first half of the paper.  I will make some comments on chapter two of the paper later in the week.

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