Here we go again

Image: The Construction Manager leading the way on site. Taken by Shona from Pipeline & Civil.

Jeremy Sole, from the Business Performance Team, reviews the year gone for industry training and shares his fears that it is ‘ground hog’ day with future reforms.

I had hoped that the Minister for Tertiary Education and Skills, Penny Symmonds, would have released the results of the 2024 Vocational Education Reforms consultation and her decisions on the new structure by now.

But, alas, the deadline for my perspective falls before its release so only time will tell whether the rest of this column is useful and whether I am justified in speaking with my cynical hat on. 

The recent history of vocational training in our country has been turbulent since the introduction of the Industry Training Act (1992) and the establishment of Industry Training Organisations (ITOs) .

Since then, there have been multiple interventions by successive governments that have routinely thrown the provision of training on its head. The most recent, the Labour Government’s Review of Vocational Education (RoVE), saw the disestablishment of ITOs and the ambitious Polytech mega merger that wasn’t.

At the time the RoVE came into the frame, I was CEO of the Electrical Training Company (etco) with 750 employed apprentices and a couple thousand independent apprentices studying with us.

I was no fan of the RoVE changes, but we decided that it was going to happen anyway, so we dove in boots and all to see if we could influence the outcome in some way. Towards the end of the process, we invited Minister Hipkins to open our new state of the art Wellington Training Centre, and he told the assembled that etco was one of the inspirations for the RoVE given the model consistently produced a 95 percent on-time completion rate of high-quality, industry-valued tradespeople.

What’s more, etco flourished under the new model – which in my view represents a strong proof of concept for the final model. We weren’t the only ones, as the other group apprentice employment schemes also did well. The commonality being the closeness and integration of information linking learners’ classroom performances and workplace support.

Te Pukenga’s transition into a fully functioning and efficient mega institution was apparently expected by Minister Symmonds to be a pretty much instantaneous event, but the organisation’s inability to condense what was always going to be a 10-year change and integration project into two years has been touted by the Minister as evidence of failure. 

According to the Minister, the main justification for the unwinding of the merger project was Te Pukenga’s appalling financial performance. But, interestingly, Te Pukenga’s financial performance statements were released with a different story at about the same time as the Minister’s announcement.

While the Minister claimed $250 million of accumulated debt, most of Te Pukenga’s inherited external debt had already been retired (under Stephen Town’s watch) and the financial statements showed that over $200 million of debt was from internal balance sheet transfers from the incoming polytechs, as part of the amalgamation, which was not in any way representative of the operational performance of the new entity.

There is a very big difference between internal accounting consolidations and transfers during a merger, and the financial performance of operations. Also, if you were running the show, would you prioritise retiring internal debt over retiring external debt?

Minister Symmonds was asked at the 2024 ITENZ conference about how she intended to pay for the latest round of restructuring given the government’s lack of cash, and she replied that Te Pukenga would pay for it out of its accumulated reserves.

Well, either Te Pukenga is running at a loss, or it is making enough money to accumulate reserves, which is it? Or is it borrowing its reserves? Given debt was reducing, it clearly wasn’t the latter.

The key to the different perspectives of the entity’s financial performance may be that, rather than operationally integrating the ITOs into Te Pukenga, they were simply reestablished under a new parent, Work Based Learning, which continues to operate independently of the Polytech campus training provision and funding.

This resulted in the UFS overfunded ITOs continuing to accumulate bundles of cash reserves, while the traditional Polytech campus-based provision continued to struggle. A fundamental principle of RoVE was the intent to bring these things together seamlessly. 

So, one might ask; what is the genesis of the problem here? Is it the inability to do a 10-year merger in two years? Or, is it the inability to understand and implement the underlying purpose of the RoVE? Or, was it a flaw in the UFS funding model imposed on Te Pukenga by the government? Or, was it that the government threw the RoVE at TEC and the polytechs with insufficient forward notice and without taking time to understand the real problems, the scale of the change or the available resources?

Whichever one, or combination, is correct – it presents no justification for throwing out the whole system and starting again. Let’s not keep trying to address operational issues through whole system changes. If you can’t recognise, and don’t address, the actual and fundamental problems then they will simply carry through into the new structures – as we have already seen. This whole thing is starting to feel like ideological ping pong.

In the latest consultation, the government proposed to resolve the polytech financial performance issues by breaking out the high volume financially stable polytechs, and then grouping the non-viable polytechs into a separate entity under the banner of the Open Polytech correspondence school.

If you are wondering; how does one create a financially viable model through clustering a bunch of non-viable entities into a group? then you are in the same camp as I am. I wonder, and maybe I’m way off on this, whether the regional polytechs might eventually become support nodes for Open Polytech learners? 

But, that doesn’t really square with the Minister’s espoused intent to bring local voice to the polytechs – which by the way they already have.

One of the outstanding successes of the RoVE was the establishment of the Workforce Development Councils (WDCs). Those of you who work with Waihanga Ara Rau and/or Hanga Aro Rau will know that these WDCs have been exemplary in their work engaging with your industry and have provided a refreshing change from the previous model. 

In defence of the previous model, the ITO model’s weaknesses were, to a large extent, a result of the lack of separation of funding based on student numbers from funding for qualification development.

This flaw saw ITO’s needing to accumulate cash reserves to cover operations in the context of fluctuating learner numbers. Of course, some of the ITOs appeared to forget why they were accumulating cash reserves, and some of us started to wonder whether, with tens of millions in cash reserves, the accumulation of cash had become their primary focus – and we started to refer to them as the money launderers and the process as the golum-isation of the ITOs. 

Again, was that their fault? Or was it system driven behaviour? Clearly something wasn’t working and something had to change. The introduction of WDCs that are specifically funded for qualifications and standard setting was an ideal solution – and it has worked.

With the current proposals the Minister is signalling the disestablishment of the WDCs, the bit that really did work, and a return to the problems the previous system generated. Here we go again?