first_img Previous Article Next Article Trainingproviders represent one of the last few cottage industries, but a shakeout inthe form of a wave of consolidation is on the cards. Is this good news fortheir customers? By Philip WhiteleyThetraining industry is highly fragmented, consisting of thousands of providers,many of them very small. This looks set to change somewhat as big business getswind of the big bucks being invested in training and development.Asknowledge and skills become much more important for competitive advantage thantangible assets, business priorities are beginning to change. Training willincreasingly figure as an investment on the balance sheet, not as a cost, andcapitalists are starting to be attracted by the returns that this investmentcan generate.Theventure capital industry is starting to plough serious money into providers.This will lead to mergers and potentially to the emergence of huge trainingcompanies, similar in scale to the generalist HR service providers Exult andCapita.Amongthe venture capitalists, ECI Ventures has led the way. It funded the £9.7mmanagement buy-in of the Hotel & Catering Training Company in 1998. HCTC isthe principal training provider for the hospitality sector, providingvocational training across the disciplines up to NVQ Level 4.ECIfollowed this with a multi-million pound investment in SCT, which providestraining courses to manufacturing companies in south Wales. The amount ofcapital provided was undisclosed.GrowingmarketplaceKenLindsay, investment executive at ECI, first became interested in the sectorbecause he felt it was underdeveloped. “It became clear that it was a verysizeable sector,” he says. “It is a growing marketplace, whether Government orprivately funded. “Traininghas really come to the fore [in companies]; and the Government is committed topushing training. The omens are coming together.”Themarket is “crying out” for consolidation, he adds. “Why have 20 providers whenyou could have three or four which could deliver all of your training needs?”ECIlast raised capital from the money markets, around £110m, two-and-a-half yearsago but is planning to raise between £150m and £200m in the near future.Lindsay anticipates that at least some of this will go to training companies.TheHCTC sees the pendulum swinging firmly the way of the larger provider, and islooking for both organic growth and acquisitions. Turnover has already leaptfrom £7m to £10m in the two years of its independence.Organicgrowth“Thewhole industry is going to change,” says HCTC chief executive Nick Rowe. “Wewill see some deals happening. My aspiration is to turn this into a £40m to£50m business in four years.” This cannot be achieved by organic growth alone.Changesto the infrastructure will accelerate this, with the switch from Tecs toLearning & Skills Councils from next April.“Takedelivery across the country: at the moment we have something like 72 separatecontracts with the Tecs, which are all different, but what we are delivering isthe same. “Oneof the things we are arguing for is to be able to go to the lead Learning &Skills Council and get a national contract.”Aboveall, training providers want a simpler system for statutory funding, and areduction in the proportion of grants that are withheld until completion of thequalification. Thefew national training providers that do exist have clubbed together to form a“Group of 10” which lobbies the Government on funding arrangements.Tecsoften withhold 40 per cent of funding until completion of a course, which maybe two years later. Rowe is confident that LSCs will be limited to a maximum of35 per cent paid at the end of a course, boosting cash flow and attracting moreproviders.TheTecs hold the amount in reserve to reduce heavy drop-out of courses that mightotherwise occur. Inplace of this arrangement the Government will look to inspectors to weed outproviders who would just seek the government cash and not bother about highdrop-out rates.Therewill be more inspections from the Training and Standards Council.“Thathas already started,” notes Rowe. “Anyone drawing down public funding will haveperformance rated and put on the web site. I think there will be increasingemphasis on quality and one of the things that is going to happen in theindustry is a lot of consolidation.”Bigis betterButis this all good news for the training manager? The pitch that “big is better”will not find favour with everyone. Even blue chip companies, for example, willuse lone consultants to do specialist work on the brand or with the topmanagement team.Thisis a different market from those attracting public funding, and even there thebetter small providers should have nothing to fear from inspectors.DavidSherlock, chief executive of the Training Standards Council, says, “Bigger iscertainly better in some important respects – if you have a number of centresyou can use the classic quality assurance technique of comparing theirperformance and analysing why one does better than another.”Buthe adds, “There are also some excellent small providers and we will not doanything to discourage them.”Moreover,the fragmented nature of the training provider sector reflects piecemealexpenditure by clients, rather than a considered preference for smallerproviders.Thisattitude is changing, with major companies finally waking up to the rewardsfrom a higher training spend.HRexpert Rhiannon Chapman, a former chief executive of the Industrial Society,reckons, “I do not think you should spend money at all on recruitment, but youshould spend a fortune on training. Recruitment is expensive. You could begetting the right people but it is costing a fortune.”Thisis borne out in practice, Rowe of the HCTC argues, “Jarvis Hotels are verycommitted to training and, quite unexpectedly, one of the things they havediscovered is that recruitment costs have gone down. “Thelatest statistic shows that across hospitality, annual staff turnover is 75 percent, which is quite horrendous. Even if you can get someone to complete a twoyear course that is nearly twice as long as normal.”Purchasingand provision of training is now becoming a regular, mainstream part ofbusiness. That represents upward progress. Related posts:No related photos. Comments are closed. The capitalists are comingOn 1 Jun 2000 in Personnel Todaylast_img

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