Bad news: The Level 3 recruitment issue is about to get worse, much worse…

I have been privileged to spend the last couple of decades working with a lot of childcare providers. In fact, I have personally visited over a thousand settings, not just in the UK, but also in the US, in Australia and New Zealand, in Africa and in Europe.

In doing so, I have seen a consistent pattern. Childcare owners who are skilled and passionate about their vocation, who work incredibly hard and yet have businesses that are struggling financially, or not returning the rewards their owners expect.

These business owners have often spent years learning their vocation and eventually saved up enough money to open their own nursery. They may have a huge bank loan or a second mortgage which they have invested in the building. It’s been painted and decorated, they’ve hired the staff and engaged with them, they’ve built brilliant relationships with the children and their parents, they’ve even gone into battle with their regulatory body and got a ‘good’ rating, and then… the bills keep piling up, the tax man is on the phone every week and it becomes increasingly difficult to make ends meet. The stress is enormous, and the impact on personal relationships is unbearable.

The problem is that, whilst they are vocationally exceptional, as entrepreneurs running small businesses they often have had no formal training in business, management, marketing or accountancy. And why would they? They are Early Years experts who have been taught to nurture, not to run a business with all the pressures that can bring.

This is backed up by published data. According to a 2016 study by the National Day Nurseries Association, 49% of nurseries in the UK are not forecasting to make a profit this year. In addition, Parenta undertakes a National Childcare Survey every year and came up with very similar results. In this case, the evidence we uncovered concluded that 40% of nurseries did not expect to make a profit this year. At the same time, according to official figures, the number of childminders continues to spiral downwards.

What intrigued me was why do half of these highly skilled and passionate childcare owners and staff struggle to make a profit? As I studied this issue, it reconfirmed my initial conclusions: that the actual “care” provision was rarely the issue. And, looking at the data specifically within the Parenta National Childcare Survey, it became increasingly clear that the most successful providers were doing something fundamentally different to those who were less successful. The most successful providers consistently return profits (often very substantial profits), whilst offering an exceptional level of care and education to children and a remarkable experience for the parents. Critically, in an industry reknowned for paying poorly, these settings also pay above the norm, sometimes significantly so. And before the argument is made, I have seen this is deprived areas, as well as more affluent areas.

And so, Improving the business of Childcare  collates the experiences that I have observed working with so many childcare businesses and highlights what the most successful are doing that makes them different; enabling them to be profitable and thrive.

Running any business is exceedingly difficult. Running a childcare business is harder still. Not only is the business exceedingly complex, but you have to operate under one of the strictest compliance regimes available and deal with an incredibly emotive subject, as well as engaging with the public day in and day out. The reality is, however, to deliver exceptional quality childcare, you must be making an acceptable profit, not merely break even. It’s the only way to continue to invest in services, in infrastructure, in staff and ultimately, but critically, in offering exceptional support and education for children.

Everyone in childcare is aware of the enormous contribution that the Early Years sector makes to the children in our care, to hard-pressed working parents and to local communities, as well as to society as a whole. Imagine how much more it could contribute if every  childcare business was successful!

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In November, the Parenta Trust  aimed to raise £1000 to give orphaned and disadvantaged children living in slums near Kampala, Uganda, an unforgettable Christmas and New Year party.

The appeal followed a visit by the charity to a primary and nursery school in the slums of Kosovo. Whilst there, the Parenta Trust team came face to face with children living in appalling poverty – with many of them orphaned through disease or war.

During the last day of their visit, the team met Pastor Deo who runs a church and local school. He disclosed that he wanted to provide a Christmas party for over 1000 of these children, but could not afford to.

In response, Allan Presland – founder of the Parenta Trust – launched a JustGiving appeal with a £1000 target. The support received was overwhelming, with over 75% of the money raised in just 48 hours.

Staff at the Parenta head office pitched in to help raise funds for the cause, by cooking breakfasts for colleagues and holding a raffle, which generated £150.

The charity is delighted to announce that the money was raised in full and that the children had a wonderful time over the Christmas period.

Allan Presland, CEO of Parenta, said: “Thanks to the amazing staff at Parenta, along with friends and family, we were able to raise the funds to pay for the children’s party. Having seen the pictures and videos, it’s clear the children of Kosovo had an incredible time. Well done to Deo and his team.”

PRESS RELEASE:

Recently, the Parenta Trust were able to share the exciting news that a third and fourth pre-school had been officially opened in Uganda. Following on from that announcement, the charity is delighted to be able to disclose that plans for a fifth pre-school are now underway!

In a bizarre turn of events, the decision on where to build the fifth pre-school was confirmed at a fundraising dinner in Kampala which was organised by charity Fields of Life.

The King of Karamoja – Chief Peter Adei – took off his royal black hat and donated it during the charity auction to raise funds for the education of his people. He said: “I do not have much, but I am donating my hat to be sold so that you can raise whatever you can to support us.”

CEO of Parenta, Allan Presland, successfully put in a bid for 72 million Ugandan shillings for the prestigious hat. The money will be used to fund the construction of a pre-school and primary school in Komoret village in Karamoja, north eastern Uganda.

Once built, the two new schools will work hand in hand to reduce one of the lowest school enrolment rates in Uganda; enabling a smooth transition from nursery to primary education for local children.

Allan Presland, founder of the Parenta Trust, said: “It was an absolute pleasure to meet the King of Karamoja, and to hear the stories of the history of his people and region.

“Bidding for his Chief’s hat was a fun experience but I’m really looking forward to getting the new pre-school built and meeting the children of Komoret and Karamoja when we visit the area to open the school next year.”

If you would like to sponsor a child in a Parenta Trust school or pledge your support in another way, please visit www.parenta.com/support-the-parenta-trust/.

PRESS RELEASE:

Last week, a group of 7 people representing the Parenta Trust witnessed the official opening of the charity’s third and fourth pre-schools in Uganda.

When both schools are at full capacity, they will be able to provide nursery education for 300 youngsters. Both schools were built by partner charity Fields of Life and funded entirely through money raised by the Parenta Trust.

The opening of Nyakabale Nursery School in the Kasese district was attended by prestigious guests, including the Bishop of Uganda and the local MP. A plaque was unveiled which dedicated the school in memory of Marlene Cameron, who is the late mother of Debbie Cameron – Head of Fundraising at Fields of Life.

The fourth school, Kiti Parents Nursery School, was similarly dedicated in memory of Moira Hawkins – the late mother of Parenta Trust trustee, Amanda Presland. This school is the largest within Parenta Trust’s portfolio, with 3 classrooms and 2 office rooms, and is located in the Wakiso district of Uganda, just north of the capital Kampala.

The completion of the two new nurseries takes the total number of schools built by the Trust to 4, in a time span of just 3 years.

The Parenta Trust is now laying down plans to commission their fifth nursery, which will be built in Karamoja (North Eastern Uganda). The fifth school will be partnered with a local primary school to ensure that children have a smooth transition from nursery to primary education.

Allan Presland, CEO of Parenta and a founder of the charity, said:

“It was truly humbling to open our two schools last week. The fact that we were able to dedicate both schools to the memory of the mothers of two of our trustees made the events even more special.

“The welcome we received at both schools with local dignitaries as well as the school staff and all the children was quite incredible. It included singing in English from both groups of pre-school children. Given that English is their second language, their ability was astounding.

“We now look forward to raising funds for our fifth school in Karamoja which we expect to be completed in late 2017.”

If you would like to find out more about the Parenta Trust, sponsor a child in a Parenta Trust school or pledge your support to the charity in another way, please visit www.parenta.com/support-the-parenta-trust/ .

History is littered with examples of the law of unintended consequences.

One of the most famous in British history comes from the era of British rule in colonial India. At that time, the government were concerned about the number of venomous cobra snakes in Delhi. They came up with what they thought was an ingenious solution by offering a bounty for every dead cobra. Initially, this scheme was very successful and the number of snakes in the city dropped substantially as they were killed for reward.

Eventually, however, the more enterprising members of the populace began to breed cobras for income and when the government realised this, the reward programme was scrapped. Suddenly, the snakes being bred were worthless, and so they were set free, leading to a significantly worse cobra problem than the city faced in the first place.

More recently, we have faced a similar example of the law of unintended consequences. The replacement requirement of GCSEs in English and Maths over Functional Skills for the L3 qualification must have seemed logical to Liz Truss, when she proposed the idea in 2013. I’m sure she believed this would increase the quality and skill level of the childcare workforce.

However, the result of this decision in 2016 is a recruitment crisis so large that the entire sector is campaigning against it. Simply put, there are not enough Level 3 qualified staff to meet demand due to this new qualification ceiling. Training companies within the sector, who process apprenticeship applications and monitor qualification attainment levels, have been saying since 2014 that this crisis was looming. Indeed, in this very blog, I have written open letters to Liz Truss’ successor, Sam Gyimah, and many articles about the profound reduction in the number of L3 staff being trained.

A little closer to home, I wanted to share a few case studies from within my own company which highlight how learners are at the mercy of this nonsensical GCSE ruling. One such case is that of a learner – let’s call her Sarah – who was doing her EYE but failed to get the required grade she needed for GCSE English.

Sarah passed her GCSE maths but narrowly failed the mark she needed for English by just 1 point. Understandably, as she was borderline with her grade, she asked for her exam to be remarked. However, before this could happen, Sarah was let go from her job due to failing her English GCSE and is now unemployed.

Another learner – let’s call her Lucy – is also doing a Level 3 course. She has been told by her college that she’s not at the required standard to take GCSE maths and is being pushed in the direction of Functional Skills.  This means she won’t be ready to sit her GCSE maths exam until next year, even though her course completion date is February 2017. Her assessor says Lucy feels under a lot of pressure and is uncertain as to what to do now.

To add to the nonsense, we now have the situation where learners can’t take their GCSEs at college at the same time as their EYE qualification, as training companies and colleges can’t both draw down funding at the same time! If these learners can afford to pay for their GCSE qualifications themselves, there’s no problem. If they can’t, however, it creates yet another barrier for us to overcome in order to get apprentices over the line with their L3 qualification.

NCFE (Cache) took up the mantle earlier in the year with their well-timed and relevant “Save Our Early Years” campaign to ask the Government to reverse their decision on GCSEs. Just reading the titles of blog posts on the campaign website, and noting who they are written by, gives an overview of the immense detrimental impact the GCSE requirement is having on the sector:

• The seriousness of the current situation cannot be underestimated (Pre-school Learning Alliance)
• This policy has to change – it is holding back quality (PACEY)
• The sector has reached crisis point (London Early Years Foundation)
• It’s vital that the DfE recognises parity between Functional Skills (Access Training)

…And so the list goes on!

We were offered a brief glimmer of hope by Sam Gyimah in June at the NDNA conference, when he pledged that the GCSE requirements for the L3 qualification would be reviewed.

Now, we all know that there’s been a massive upheaval in Government since then, but here we are in September and we are no further forward on this issue. Yes, we’ve had a commitment from the former childcare minister, but as yet no details or dates have been revealed.

The irony of the situation is that training providers such as Parenta are STILL having to turn away exceptional childcare candidates simply because they do not hold the required GCSE qualifications. I was explaining this to the MD of a top 20 chain of nurseries just last week when she was raging about how her settings are filled mostly with Level 2 staff (rather than having the 90% plus Level 3 staff she used to have).

Liz Truss intended to increase the quality of the staff in our nurseries. The unintended  consequence is that she has forced the sector to reduce  quality, as settings now have to rely on more Level 2 staff to stay open!

It is imperative, therefore, that the Government urgently reviews this matter and implements the reversal to Functional Skills that must occur to prevent a sector-wide disaster. Failure to act can only delay the crisis, causing the pool of outstanding practitioners to dwindle further and putting our children at risk of receiving a highly compromised level of care.

People realise their dream of starting a childcare setting for so many different reasons. Some, such as the founders of the UK’s largest chain, Busy Bees, do so because they can’t find suitable care for their own children, for others it’s a long-term dream and for some, such as venture capitalists (VCs), it’s about buying stakes in settings to make money.

Whilst we all have different reasons for starting our own businesses, few nursery owners give consideration to the best ways of growing their business and exiting it when the time feels right.

Traditionally, settings wishing to grow sell a stake in their business to one of the plethoras of VCs who are currently ploughing cash into the sector. And those who wish to exit often do so by selling their businesses to another chain. Both of these have drawbacks, though, for those who want to control their own destiny.

With a sale, the brand and the culture is, more often than not, gobbled up and replaced with the acquiring chain’s brand and values. Worse still, there can’t be too many chiefs in the company so often the ‘talent’ (such as senior managers) from the original setting(s) moves on.

In contrast, with  VC investment, the owner is tied up in tons of legal requirements and massive pressure is placed to grow and grow. Often, with this type of investment, it becomes not so much about ‘strings attached’ and more about ropes and padlocks! If things work out well, and targets are hit, then everything is rosy. Miss targets, though, and often control is passed to the investor without your say so. Suddenly, you are no longer in charge of your own business.

There is, however, another problem with VC investment. VC investment is about gains over, say, a five-year time frame. You work like mad, use the VC’s cash to grow, and when the VC says it’s time to sell, you will be sold. Yes, it’s likely you’ll get a good exit valuation but you are rarely in control of your own timeframe, and you have to wait to release your equity until the VC says it’s time. You also only end up owning a percentage of your company in the end as the rest is given up in exchange for the VC’s money.

There is an alternative, however. A model where you remain in control, where you manage your business and how it works with your own team. A model where your business is given an immediate valuation, allowing you to release cash to either part-exit or to grow, as is appropriate for you.

That model is called unity agglomeration, designed by a Singapore company called Unity Group. It’s a methodology to solve a number of problems entrepreneurs face in growing their businesses, facilitating the cash for expansion or the cash for a part or controlled exit.

In this context, unity means ‘togetherness’ and agglomeration is ‘to form a cluster’. In this sense, then, a group of companies come together to form an operating cluster which gives them the scale to float the combined group on the stock market. The P&L and balance sheets of the combined companies give the cluster a significantly enhanced valuation, providing a higher earning per share than the individual companies would have, as well as making the business ‘liquid’ i.e. the shares can be sold to create cash.

At the same time, though, the individual companies are maintained in exactly the same manner as before, run by the same owner and with the same management team. They are silos within the larger group, and yet they have the scale to be big and corporate if needed, whilst still being small and dynamic.

The advantages of this model are significant:

• Demographics  – By connecting smaller businesses together, you can create bigger players in the market and therefore a more stable, future-proof business.
• Liquidity  – The public listing gives owners instant realisable valuations and access to cash. It allows owners to sell when they want, or sell some and keep a bit. It creates financial freedom for the founders.
• Wealth  – By watching the share price of the group via your smartphone, you can literally monitor your net worth on a daily basis.
• Value creation  – A £ saved within the group, or an extra £ made, is then multiplied by the Group’s valuation. Suddenly, every one of the silo companies has an incentive to share best practice and knowledge as it’s to everyone’s advantage.
• Portfolio approach – Sometimes, nursery owners are fearful about getting into bed with strangers, but with this approach they now have liquid shares shared across a number of debt-free, profitable businesses, so they get a portfolio approach to running their own business. They also get share incentives for over performance and the share price is a derivative of profit, so they still have real impact over their own wealth improvement, but considerably de-risked.
• Access to capital – Individual companies have access to soft loans from the group, as well as their publicly listed stock. Cash to grow, or to acquire, is therefore instantly available, along with expertise from Unity Group’s Mergers and Acquisitions team.
• Ego/pride – The business owner remains 100% in charge of their business. The brand and values of the nursery staff stay the same and there is no external interference from the group.
• Staff retention  – As nothing changes operationally, there is no rocking the boat to scare off key staff. What’s more, given the owner is still involved, all the reporting structures are kept exactly the same.
• Brand retention  – The brand of each company remains completely intact.
• Management  – Under this scheme, each MD now sits on an executive board of directors but they still have total autonomy and control of their own business. There are, inevitably, basic safeguards with matters reserved for group decisions, though these are all set out in a group constitution designed by the MDs themselves. A non-executive board, voted for annually by the MDs, is also added to deal with the compliance, PR, legal and financial matters.

So, could unity agglomeration be right for your nursery or chain? Do you wish to grow or release equity in your business whilst still having full control? If you think this may work for you, then drop me an email to allan@parenta.com   and we’ll arrange a time for an informal chat to run through your options.

Last November, Childcare Minister Sam Gyimah addressed delegates at the Nursery World Business Summit. During the speech, he talked about how we are entering “a golden age of childcare”.

Mr Gyimah stated that he understood the importance of a sustainable rate of funding to deliver the entitlement – and yet here we are, in May 2016, with the participants of the 30-hour “free” childcare pilot scheme resoundingly refusing to take part due to the below-cost funding rates.

Not a great start for the Government’s flagship childcare project!

The consternation is not confined to the early years providers of York, however. The brilliant animated video  from the “Champagne Nurseries – Lemonade Funding” pressure group highlights the problem perfectly. As a member of their Facebook group, I am well aware of the alarm and utter frustration that many providers are feeling trying to adhere to the strict letter of the implementation law.

To this end, many providers are “adapting” their fee structure to circumvent the funding rules, and we now have one of the large nursery groups publicly charging for “general extras” to get around the issue. There is also confusion everywhere as each local authority interprets the guidance differently.

Very simply, the free entitlement is not “free” if providers have to subsidise it. Go back to calling it a “grant”, as before with the Nursery Education Grant, and the sector will be happy. Reduce the amount of funding that local authorities top-slice from providers and direct that to the front line, and the sector will be happy.

Providers are so frustrated that they have set up petitions. And there are many:

• Stop the underfunding of our nurseries
• Oppose 30 hours of free childcare
• Increase the funding for settings for free childcare/education for 2-4 year olds
• Increase funding rate for 3-4 year olds needing to provide pensions for staff

Mr Gyimah, there’s a pretty consistent message here!

And then we have the “Save Our Early Years” campaign which is led by CACHE/NCFE, and supported by Parenta, NDNA, PSLA and many, many others. Regular readers of this blog will know that I have been campaigning about the crazy restrictions created by the insistence of GCSEs for early years staff for over a year.

Hats off to CACHE for taking this issue forward and for creating so much publicity about it. We have a major recruitment crisis in Early Years and it’s only going to get worse, as explained in my blog post , “Bad news: The Level 3 recruitment issue is about the get worse…”. But it’s not only CACHE and Parenta who are campaigning for this. The Early Years Trailblazer Group, who are responsible for submitting the standards for the L3 early years apprenticeship, are asking for “all reasonable equivalents” to be accepted as alternatives to GCSEs, and have been lobbying the Government for this for a considerable period.

So, what can we conclude from all of the above?

Well, I think it would be fair to say that the early years community does not agree with the childcare minister that we are about to enter a “golden age of childcare”.

We have participants in the first 30-hour implementation pilot refusing to continue with the trial; we have multiple petitions to parliament about the underfunding of childcare and a nation-wide campaign about a major recruitment crisis created by government policy, for which I have yet to hear a logical argument.

Mr Gyimah, we are not seeing your golden age. In fact, we are seeing quite the reverse. Having been in the sector for a couple of decades, I have never seen so many early years owners so frustrated by the complete lack of understanding the Government has shown of the situation.

Asking the early years community to provide services at below-cost and make their settings unsustainable is senseless. More settings will close, reducing choice for parents and preventing local authorities from meeting their sufficiency requirements.

Equally, restricting the supply of quality staff to the sector by imposing qualification ceilings (which are not applicable to any other sector) is creating a recruitment crisis and increasing costs for providers.

Isn’t a golden age of childcare supposed to be about celebrating how we make a sustainable and vibrant early years solution for our country? In contrast, we have providers who can’t recruit qualified staff due to a government-created supply issue, and a sector unable to accept imposed payment rates as they’ll go out of business.

The farce of this whole argument is that it contradicts Conservative policy! The argument from Messrs Cameron and Osborne is the country must pay its own way. “We must reduce the deficit and ensure that we balance the books” is the recurrent mantra which, irrespective of our own personal opinions on the matter, we all understand (even if we don’t all agree on it).

Why then, are we asking the early years sector to do the opposite? We are asking the sector to work at a level below-cost, which can only lead to a lack of sustainability. Surely, if it’s good enough for the country, it must be good enough for the sector? You wouldn’t want us  borrowing to unsustainable levels now, would you?

Mr Gyimah, you need to listen! The early years community wants to support your plans. It wants to deliver 30 hours free childcare, providing it’s at a commercially acceptable rate or 30 hours of discounted childcare – we’d work with either. It wants nothing more than to have a higher paid workforce created through staff development. For that to happen, though, you must lift the current GCSE restrictions for Level 3 staff and enable a return to Functional Skills. We must have qualified staff to run these settings.

Work with the sector and we can find a mechanism to deliver what we all need. Talk to us and with us. We need a win/win. We need to achieve a solution that meets both parties’ needs.

Keep working against us, and you’ll find genuine sustainability issues. Providers will refuse to prop up a poorly funded idea, and won’t be able to deliver with a lack of qualified staff.

This is not about greed. It’s about survival. And not the survival of an individual setting. It’s about the survival of the sector as a whole. Providers are not asking for a massive increase in pay. They are, simply and realistically, asking for the Government to cover their costs. Nothing more! Tell me, is that unreasonable?

This message is not different from all the others. Government policies (plural) are leading to an unsustainable childcare sector.

A golden age of childcare? It really could be, if the Government would work with the sector and not against it.

Otherwise, it’ll be the dark age of childcare.

Providers who are forced to deliver services below-cost and who can’t find qualified staff will simply give up the fight.

PRESS RELEASE: Parenta Trust, the charitable arm of the Parenta Group, has commissioned its fourth nursery school in Uganda. The charity set itself the ambitious goal of building ten pre-schools for orphaned and disadvantaged children within ten years.

In commissioning its fourth school, it is ahead of plan, having commissioned four schools in three years.

The new nursery, which will be based on the same blueprint as its three predecessors, will comprise 3 classrooms, a latrine block and a rainwater collection system.  Once completed, it will be able to accommodate between 150 to 200 under 5’s.

Construction of the new building will be overseen by partner on the ground Fields of Life and it is hoped that the works will be finished this summer.

The nursery will be situated in the district of Kasese, close to the border with Rwanda.  It will be perfectly positioned to help children transition from pre-school to primary education due to its proximity to Nyakabale Primary School.

Allan Presland, CEO of the Parenta Group and founder of the charity, said: “I am absolutely thrilled that we have been able to commission our fourth school in Eastern Africa within just three years.

“By the end of this year, we will have nearly 700 orphaned and disadvantaged pre-school aged children receiving an education within Parenta Trust schools. A heartfelt thank you to everyone who has raised money or sponsored children for our cause, which will make a life-changing impact on these vulnerable children.”

To find out more about Parenta Trust, its charitable events, or sponsoring a child within a Parenta Trust school, please visit Parenta.com/Charity.

PRESS RELEASE:

The next Parenta Trust banger rally is scheduled to take place on 22nd-26thJune, with teams meeting at the Parenta head office in Maidstone.

This important fundraising event will see the charity raise money for the construction of its next pre-school in Uganda, bringing the total number of schools to 5.

The Parenta Trust has enjoyed enormous support since its creation in 2013 and has so far exceeded its aim of building one new pre-school each year in Africa. In just 3 years, it has already commissioned 4 schools to help disadvantaged children in some of the most deprived areas of Uganda.

This year’s theme for the rally will be ‘fur ball’, which the teams can interpret however they wish.

Talking about his experience of taking part in the rally, Andy Cooper, a trustee of the Parenta Trust, said:  “The idea of driving with my buddy and a group of like minded people down to Monaco on some of the world’s best driving roads was enough to hook me.

“What I didn’t know at the time was what a truly magnificent life changing journey it was going to be.”

To take part, each participating team must buy a ‘banger’ car for around £350 to make the journey through Europe to Monaco, and back again. Each team must also raise £1000 to put towards the build of the Parenta Trust’s next pre-school.

The charity is currently searching for participants to take part in this once-in-a-lifetime driving experience. To sign up, visit http://www.parenta.com/support-the-parenta-trust/