Oh What a Year its been!

When I think back over the last year, it really has been quite a big one for the sector.  So as the holiday season approaches and as I probably will not be updating my blog as regularly again until January, I thought I might consider the year past and the year ahead.

As just about everyone knows, in fact I think it would be difficult to find anyone in this country who didn’t have an opinion on VET at the moment it has been in the news so much, the sector has been in turmoil for a pretty lenghty period of time.  I remember Rod Camm talking at the Queensland ACPET Christmas party last year and saying he both thought and hoped that the worst was behind us.  However with ACN going into administration, Aspire college and the rest of the Global Intellectual holdings disappearing overnight, Careers Australia and the ACCC decisions and agreements, and Ashley Services looking very shaky at the moment it has not been a great year, particularly at the top end of town.  Not that small to medium sized providers were immune either with quite a few either leaving the sector voluntarily or because they could simply not sustain their businesses anymore.  Add to this massive uncertainty about the future of the sector during a very very long general election race, what would happen to VET FEE Help and the debacle of the new Certificate IV in Training and Assessment qualification and this year has been a cracker.

Enough bad news for the time being though.  What have been the positives for the year? Well, whether we like it or not there is now a replacement to the troubled VFH system, VET Student Loans, so at least there now exists a level of certainty around the that portion of the market. A large proportion of those providers who were doing the wrong thing have now either left, been forced out, or either been fined or in the process of being chased by the ACCC and others.  Simply removing these providers from the pool can only help to improve the quality and perception of the sector.  In terms of large scale good news that is about it, however I have seen so many providers this year, working so hard to create outstanding outcomes for their students and clients and when we look at the research and figures from NCVER we can see that overwhelmingly, this sector does a fantastic job and contributes so much towards the Australian economy and workforce.

So what about next year? Let’s just say that I think the roll out of VSL will be an interesting (the Chinese curse kind of interesting) space to watch.  With stricter entry requirements, loan limits for students, variable caps for providers depending on completion rates and a raft of other things, a lot of providers who were VFH providers or who might have been considering moving in that direction are viewing it as simply falling in the too hard basket and won’t be seeking approval to deliver.  The National Partnership agreement on skills reform, up for renegotiation as the current on expires in June 2017 seems currently if not dead in the water, leaking severely, with the states calling for a one year extension to the current agreement and the Federal government pretty much saying no.  No NPA would basically leave most of the state budgets for training with holes of around $100 Million  plus.

In terms of providers and the market itself, I also dont think we are out of the woods yet in terms of closures, restructures and downsizings.  It seems to me, as an outsider, that Ashley Services may have a very hard time trading out of the position it is currently in, at least in its current form.  There are also a number of other providers who had grown substantially on VFH incomes who will see those incomes slashed by in some cases 50-75% even if they are given approval to deliver under the new VSL system.  This will mean in most cases that there will be little chance of them continuing in their current forms and closures or restructures in terms of both staff and delivery will need to occur.  Is this a bad thing?  Yes and No.  Clearly there are probably some providers who expanded rapidly, did not deliver and did not properly invest in their continuing existence and the market may well be better off without them.  The down side of course is much wider than that, fewer available places and less choice for students, quality VET staff finding themselves unemployed or moved to contract and part time, casual work. There may also in some areas be knock on effects in terms of skilled workers in certain areas over the coming years.  So while there is a need to make sure that providers are meeting their requirements and delivery quality outcomes to their students and stakeholders, there is also a need to ensure that happens while we keep an eye on the wider picture and the impacts the VET has more generally.

Next year will be a year for consolidation and restructuring throughout the sector at all levels, a year of readjustment and reevaluation.  A year where we will see the number of providers, particularly at the bigger end of town shrink considerably both in number and size, but also hopefully a year in which the sector can reestablish itself and begin to move forward.

Anyway that’s just my opinion.

Thank you all for reading and interacting with this little slice of me for the year and thank you to all the friends both near and far I have made or held onto over the past year.  May you all enjoy whatever it is that you do over this time of year and all return happy and safe in the new year.

Paul

State of the Industry Survey

As a lot of you know back in the early part of the year I created a state of the industry survey for the VET sector, and, and I am really grateful for this lots and lots of you took the time to fill it in.  I then shared the views and information that the survey had captured and also use it in a number of submissions and discussions with various people and bodies.  I was thinking today that with all of the changes which have occurred over the last six months (and it was always my intention to do these every 6-12 months) it might be a good time to do this again and to see what everyone thinks.

Now most of the questions are the same because it, well makes it easier to compare the data then, but there are also a couple of new ones and a couple that I have left off this time around.  So if you want to be involved and you want to shared your views on the sector no matter what part of it you are from I would really appreciate it if you would click on the link below and fill out the survey.  I will leave it open for about 2 weeks of so depending on how the level of responses goes and then I will sort through all of the data and let you know the results.

So here is the link    VET State of the industry survey November 2016

Doom and Gloom or an opportunity to Bloom – VET student loans scheme

So they say a week is a long time in politics and this last week has been a cracker for so many reasons.  The only one I am going to talk about today though is the Vet Student loan scheme which Minister Birmingham announced last week.  Today we saw the release of the eligible courses list for the new program with around 350 programs making the initial list, though there is room for submissions for the inclusion of other programs to be made and these close on 23 October.  Enough about that for the time being, I will come back to the list a little bit later.

There has been a lot of criticism, some of which I think has justification, some of which I don’t think does.  What there has been is a lot of doom and gloom and a lot of talk about the government ruining people’s businesses.  We even saw AIPE go into voluntary liquidation on Friday.  What cam to my mind when I was listening to all of the discussions, most of which will continue I think for at least some time yet, was how it all linked to some of the things I have often talked about in terms of business models and the business of vocational education.  I have heard an number of people talk about the fact that their businesses will be destroyed as a result of these changes or at the very least they will have to downsize their businesses substantially.  Before I go on it is really important to say that I feel for these people.  These people have for the most part done the right thing, obeyed the rules and built businesses which provided high quality educational outcomes to their students and the industries they were involved with and at least in some cases the investments they have made in these businesses over the years will be seriously devalued.   What this drives home to me is the important of distributed revenue streams in your business.  Providers who rely to heavily on one source of revenue, particularly when that revenue stream is controlled by the government in some way are always going to be faced with these challenges.  The same can be said of providers who rely entirely on fee for service markets, when the market wobbles, particularly if they are involved in niche areas, so do they.  All of those who are in the business of vocational education, even public providers need to have diversified models of revenue generation in order for them to weather changes to funding models and changes to the market in general.  It may be okay to make hay while the sun shines, but you always need to remember that some days its rains.

There has also been criticism of the tiered or banded system for student loans, with the levels being $5000, $10,000 and $15,000 depending on the type of qualification, although when we look at the draft list which has been released we see that everything but business and commerce it appears will be in the $10,000 band or above.  The criticisms leveled have again be around how providers can deliver the course for the value of the loan the government has put on it.  Now to be fair the government has said that the loan cap is just that a cap on the amount of money they will loan a student to pay for a course.  They have said that providers can charge whatever they want to, but then the student will have to meet the difference between the two figures.  It is also fair to say that there is an argument about access and equity which can more than reasonably be made about having significant differences between the cap and providers fee, the ability of potential students to meet that gap and questions of equity which arise around that.  This is however an argument for another place, suffice it to say here that large difference between the loan cap and the provider fee will make it difficult for those in the most vulnerable and lower socio-economic groups to be able to afford to enter training through this scheme without additional assistance, where providers choose to charge fees higher than the loan cap.  There are of course also counter arguments about appropriateness of qualifications, state entitlement funding and employment outcomes.  Again however a range of these criticisms are tied to the kinds of business models which were encouraged under the old VET FEE Help system.  I know of a number of providers who despite having extensive Certificate I-IV scopes only ever advertised the high revenue VFH courses on their websites and through other media.  They also did not seek to build their entitlement funding or fee for service businesses because there were substantial sums of money being generated through their VFH business operations.  The funding drove the business models, a little bit like the tail wagging the dog so to speak.  One of the reasons why some providers will find it difficult to deliver under this new scheme is that their model of delivery, and student acquisition is one that relied on the continuation of VFH fees at particular levels.

I have often suggested that most, (and it is really important that this is taken for what it is, a generalisation which also acknowledges that there are outlier courses which cost substantially more to deliver), that most diploma level courses can be delivered in such a way as to produce high quality student outcomes and competency for $10,000 or less.  Why do I say this; because less than 5 years ago they were and there was very little if anything wrong with the graduates being produced.  Over 5 years we saw prices of some Diploma level qualifications rise by 300-400% and business models develop which required these increases to be cost-effective.  It is vitally important to note that most of these business model were not flawed or did not seek to rort the system or rip of the government or students.  Their only issue was that they relied so heavily on both VFH and particular levels of funding.  The ability to set fees where ever providers wanted allowed and even promoted providers adopting business models that only worked under a certain set of circumstances.  Are there models which will work under the new scheme?  Certainly there are and I think the suggestion that it will drive all providers to deliver one to many elearning with little or no support are false.  There are solid face to face models which not only can clearly operate under this new model but can also be profitable.

let’s go back to the list then shall we.  As I said earlier the vast majority of programs are at the $10,000 or $15,000 dollar level with it appears only management and commerce at the lower $5,000 level. A lot has been made about the government ‘picking winners’ so to speak and the inequity between someone who wants to study a vocational education course over a Higher Ed course and while there is weight to this argument there is also weight I think to the argument that where the money is being provided by the government, even if that is through an income contingent loan of some description, there needs be a return on that investment in terms of workforce outcomes.  Is, by creating a list, the government saying one course is better than another, no I don’t think this is the case.  I think the government is legitimately saying, one course seems to have better workforce participation outcomes than another and because of that we are going to provide funding for students who want to undertake this course.  The interesting question that arises from this of course is whether it is fair to apply a test like this to VET and not to HE, but again that is a debate for another time.

So why did I call this post Doom and Gloom or an opportunity to Bloom, mainly because I think as with all change this one presents us as providers with a choice.  We can either spend the next few months worrying, complaining and trying to get the government to change it mind, which it may do on small things, but I doubt it will on anything major, or we can look on this as an opportunity to re-energise what we do, consider our business models, look at ways of not just working, but thriving in this new environment.  I will let you guess what I intend to do.

Anyway as always that’s just my opinion.

Massive changes to VET FEE Help – The King is dead, long live the king

While right at this point there has not been a complete outline of what is going to happen it is fair to say that the days of VET FEE Help are over.  The deeply flawed system which most of us have been critical of almost since its inception will be scrapped at the end of the year and replaced with a completely new system for 2017.  If you want to look at what is currently being reported about the changes you can see articles here and here.

What do we know at the moment?  Well it seems from looking through the information that I have a lot of the suggestions that myself and other have made and that I have talked about at length in previous articles (Redesigning VET and reinventing VFH) have made the cut shall we say.  Lets then look at the major changes we know about.

Everyone will have to reapply and there will be tighter conditions for entry

This had to be part of any package of reforms as far as I was concerned.  No package where currently contracted providers were simply rolled over into a new system was ever going to have legs. The old application system and criteria were systemically flawed and concentrated on the wrong metrics entirely when both determining if someone could be a provider and then managing that provider.  Making everyone reapply will almost instantly contract the number of providers because a number of current providers will simply self select out for various reasons and I am certain that the government will not accept contracts with a number of providers who may look at applying.  The idea that Relationships with industry, student completion rates, employment outcomes and a track record in education will all be assessed when deciding which colleges can access the loans program is a breath of fresh air and should have been included in the first place.

A ban on the usage of brokers and cold calling by providers

This is something that had to happen as well, not just because of what brokers have done to the system, but because cold calling random people and hard selling them a $20,000 diploma has nothing to do with educational outcomes and everything to do with making as much money as possible in the shortest period of time.  It has been my opinion for a long time now that the rise of brokerages, and providers willing to use their services, no questions asked shall we say, was the single most significant factor in the issues which arose from VFH.

A three-tiered system of loan limits will be introduced, with loans capped at $5000, $10,000 and $15,000 depending on the cost of teaching the course.

Again this is in my opinion a no-brainer.  I am yet to be convinced and a lot of people have tried, that a diploma of management is worth $10,000 plus. I think a tiered system rather than a flat cap acknowledges that different types of courses require different investments and have different costs associated with their delivery.  What this will do is reign in the costs associated with programs and bring them back to some sort of normalcy, something they haven’t had in a number of years.  Remember in some cases we saw 300-400% rises in course fees over essentially a 5 year period, with, in the vast majority of cases, no changes to costs or content, well except for having to pay a broker 25%.   UPDATE – Loan caps only apply to the amount of money which a student will be provided with by the government to ‘pay’ for their course.  Providers may charge whatever they wish for the course in question and students will be required to pay any difference between loan cap amount and course cost themselves.

Only students enrolled in courses aligned with industry needs and likely to lead to a job will be eligible for the loans.

I have said it before and I will say it again I am sure, vocational education is about employment outcomes and workforce participation and my mind has boggled at some of the courses which I have seen offered by certain providers.  I acknowledge that there are concerns around priority lists and the like, but if we are being honest here just how many personal trainers and counselors do we need to have.  This in conjunction with the tiered payments model should at least, if properly applied mean a much stronger employment outcomes for money invested in income contingent loans.

The new scheme will include tighter conditions so colleges can be paid in arrears and poor performing institutions can be suspended and have their payments cancelled.

All providers will be paid monthly in arrears based on authorised and verified student data. This is something which should have been part of the system from the word go.  Large upfront commencement payments drove the other activities which broke the system.  If there had not been such substantial almost unregulated upfront revenue a lot of the issues which occurred simply would not have happened.

The Fallout

Massive contraction at the Mega end of the market. Those providers with large exposure in their revenue streams to VFH, particularly those carrying a high level of debt which requires servicing are going to be in serious trouble as will any provider who has been used to charging $10,000 plus for a Diploma of Business, whether they are small or large.  Any provider which doesn’t have a diversified business revenue model will struggle to find their feet again and we will I think see a not insubstantial number fold or contract heavily.  If I was a provider who relied on VFH for a substantial part of my revenue, particularly if my dealings with ASQA or the Department had been anything less than favorable, I think I might be a little worried right now.

But anyway that’s just my opinion.

The Business of Vocational Education – Purpose

What is the purpose of Vocational Education?  For me this is a really important question because I think  our answer to this question will have some wide-reaching implications for how we might view the sector, and how we might be able to conceive of a business model which would be ethically and financially sustainable and meet the needs of the many and varied stakeholders within the sector.  If we look at a simple definition from the Australian government, Vocational Education and Training (VET) is designed to deliver workplace-specific skills and knowledge, and covers a wide range of careers and industries, including trade and office work, retail, hospitality and technology. While this is a solid definition, I tend to think that it does not go far enough, simply because it fails to mention the link between VET and employment or workforce participation.  Other definitions talk about it as preparing participants for work or for advancement, by providing with the skills and knowledge mentioned in the original definition and this is I think an important link in the VET chain.

It is an important link because if we consider VET as related to workforce participation (whatever that might mean in the long run) then that changes the dynamic and the purpose, at least to my mind.  If the outcome or the aim for someone undertaking a VET course is a greater level of workforce participation, rather than just to undertake study for the purpose of study, then what an ethical business model is going to look like is certainly going to change as well.  I say this because ones ability to participate in the workforce is not solely dependent on having a piece of paper which indicates that you should possess certain skills or knowledge.  I have over the years fired heaps of people who had pieces of paper that said they knew and could do certain things, but after a short period of time it became abundantly clear that they could not.  It is actually having the skills and knowledge which the paper you have says you have and being able to put them into practice which at least to some extent determines how long you will be able to participate in the workforce.  If we put the idea of producing competent graduates who can participate in the workforce at the center of our business model, then a lot of other structure around what that model might look like seems at least to me to be self-evident.

It is easy to see the first things to go in approaches such as this.  Models that preface provider growth on the strength of continuing streams of enrolments, or where the central concern is the issuance of certificates to generate payments are going to have a difficult time justifying themselves;  whereas models which consider the student experience and competence outcome as their central focus are going to be those that make the grade.  This should however be taken to suggest that a provider cannot be both student focused and profitable, the two are not mutually exclusive at all, nor should it preclude us from suggesting that the delivery of vocational education should not managed in as cost-effective way as possible.  It is simply a recognition that what we should always be seeking as an outcome is competent graduates, graduates who have the potential to participate in the workforce, even if for whatever reason they do not.

These concepts of competent graduates, workforce participation and cost effectiveness become even more important when publicly funded rather than personally funded vocational education is considered. It could be suggested that where someone is funding their own education, providing we meet the outcome of competency, the need for a workforce participation outcome seems not to be as strong.  It does need to be suggested here though that where the ‘personal’ funding’ is something like an income contingent loan scheme (such as VET FEE Help) I tend towards the suggestion that workforce participation and cost effectiveness or ROI come back into play, and all three need to be present.

So it seems to me that the purpose of being in this industry should be to provide high quality learning which leads to competent graduates with improved workforce participation potential in an efficient and cost-effective manner.  Now if we believe this it seems to give us very solid base from which we can develop an ethically and financially sustainable business model.

Anyway that’s just my opinion.

 

 

Where to from here? Some reflections.

Well hasn’t the sector been in the news again recently.  Minister Brimingham addressing the ACPET conference and talking about VET FEE help changes, the CEDA chief executive saying that VET has suffered significant reputational  damage, a suggestion that the VET sector is the weakling of the Australian educational system, the release of the apprenticeship reform report  and a number of other releases and statements has made it an interesting few weeks.  So given all of this I thought I would reflect on the last few weeks and ask myself the question where to from here. Interestingly as soon as I did the song “the only way is up” by Yazz jumped into my head, (And yes I did link to it for those to young to remember) because it feels a little bit to me like that is the only way we can go from here.

Now I know a few people were a little critical of my last post where I suggested that we perhaps look for the positive in all of this, but really when you look at the beating that the sector has taken over the last 12 months or so, it really does to me feel like we have bottomed out and are finally starting to move forward again.  While there are certainly issues with the sector, what I am finding now is that more and more people are talking about the underlying issues which have impacted the sector for a number of years now in a positive and solutions based manner; in particular the fact that the sector has been treated like a second class citizen when compared to the K-12 and university sectors in areas like funding, deep policy settings and the purpose of the sector itself.  Now sometimes I agree with what is being said and sometimes I don’t, but what is important in my book is that these issues are now actually coming to the surface and being talked about.

We are seeing the government move to fix the VET FEE help mess, which while as most of you know only really affected a small group of providers and clients, has caused the bulk of the reputational damage to the sector in the last couple of years.  The impact of such a small part of the system will, even with positive changes, haunt us for a while to come yet.  We are seeing changes though and more importantly we are seeing people called to account, either through legislative, market or other forces.  I agree with what Peter Noonan says around what he has suggested will be the changes to the program in his article in the conversation and while I disagree with some of the other points he makes (that might make an interesting discussion for another time) the need to come up with a workable system between the State and Federal governments is paramount.  This is particularly important because it needs to be remember that the National Partnership agreement ends in 2017.  It presents an opportunity for everyone involved to develop a comprehensive, robust system that addresses the reputational damage done to the sector as well as moving us out of the Middle child syndrome we seem to be stuck in.

 

Anyway that’s just my opinion.

Lets stop talking about VET and Higher ED and start talking tertiary education

For those of you that aren’t aware I have spent the last few days in Sydney at Akolade’s 2nd Annual Innovative Business Models for VET Forum.  It was a really interesting couple of days with a large number of highly experienced VET people in the room and presenting and it was chaired of course by yours truly.  One of the themes if you will that wound its way through the forum was the idea that VET is, well, often considered to be the poor cousin to going to university or what is traditionally spoke if as Higher Education.

There were a range of stories and anecdotes from many of the speakers and attendees relating to the idea that often in this country, and in other countries (Thanks Prof Mohan) that children and young adults who choose to undertake Vocational education are viewed in some respects as having failed or not achieved as much as they could have done.  Now interestingly while this view of children having failed if they undertake a VET course may not be the standard viewpoint in Australia, it is certainly the case, that the view that VET is the not quite so good second cousin to going to university is still very strong, in fact my very first post on this blog was a short piece which pointed out the academic snobbery that existed between Universities and RTOs.  There was also a lot of discussion at the forum about the fact that it is often better for a student to undertake a VET program and be successful than it is to try and struggle through university and either fail or get lower grades, as employment opportunities for someone with a VET qualification may be better, in a number of areas at least, than for someone with a a mediocre university transcript.

I think it was Norman Gray from the Box Hill institute (sorry if it was someone else) who made a point that really captured the essence of the sectors for me, he said (and I am paraphrasing a bit) VET is simply applied tertiary education and what is delivered in Universities is simply theoretic or research driven tertiary education, they are still both part of the tertiary sector.  It dawned on me at this point that this was one of the first times I had heard the post secondary education sector cashed out in a way that was simple and made solid sense.  Let’s think about it for a minute, when you leave secondary school and move into post secondary or tertiary education you are simply making a choice about whether you want to take a study path where the focus is on the application or a study path where the focus is on theory, it is all still tertiary education.   In fact when we look at definitions of tertiary education we see that in general all of the definitions agree that Tertiary education, also referred to as third stage, third level, and post-secondary education, is the educational level following the completion of a school providing a secondary education, for example universities as well as institutions that teach specific capacities of higher learning such as colleges, technical training institutes, community colleges, nursing schools, research laboratories, centers of excellence, and distance learning centers.

Now this should not be taken to mean that I think that RTOs (public or private) and Universities (public or private) should all just be lumped together, particularly in terms of how they are regulated and how they develop and provision the courses which they provide to the consumer nor that the distinction which Norman pointed out around applied vs theoretical knowledge is not an important one.  However if we talked about the post secondary sector as a single entity with simply two paths which could be chosen depending on the what learning experience and journey was important to the student, we may find some interesting things happening.  If viewed as a single sector, we might see a reduction in the number of Higher Ed students who drop out in the first year because it is simply not for them,  because rather than heading down the University track because it was expected, they chose a Vocational (applied) pathway from the start.  We might also see a raising of the profile of Vocational education as a legitimate choice for students and not just a poor cousin where people who couldn’t cut it for university go.

Anyway thats just my opinion

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