Examination of Witnesses (Questions 820-839)
MR IAN
FINNEY AND
MRS DIANE
JOHNSON
20 JUNE 2007
Q820 Mr Chaytor: There is a relationship
between cost and profitability because it is almost a cash flow
issue where the initial cost is not recouped until it is reflected
years down the line in increased profitability.
Mr Finney: Even 20 years ago when
you took on an apprentice there was a cost for 12 months; you
got nothing back really. You taught them how to carry a toolbox,
you taught them how to make a cup of coffee and not spill it while
they were walking to everybody else to give them their cup of
coffee. It is like an ingratiation and an exposure to a group
of people of varying different skills and capabilities that enable
them to move forward. It was nothing to do with how much it cost
you to get past that 12 months; it was what they achieved over
the next three or four years to actually start to contribute to
your business. That long term planning can only be done in larger
types of organisations and with the greatest of respect profit
will always be a key issue regardless of whether you are massive
or very small. You only do it to survive.
Mrs Johnson: I think the problem
when it comes to the SMEs is that we do the training now; we invest
the training and the bigger boys come along who are not doing
the training. This is where the cost really counts when the return
you should have got on that worker has gone because he has gone
to work somewhere else for 50 pence on the hour. That is where
the costs comes in for the SMEs.
Q821 Mr Chaytor: Do you feel that
what employers need is more skills training and more financial
incentives? Or do they want to have more involvement in the planning
of the training and the design of the overall system and the content
of the design of qualifications?
Mrs Johnson: When I talk to other
employers they will turn round and say to me, "We feel that
when we do this training people do not think it costs us anything
and we feel we are already taking a burden for the training and
if they want us to do more then we would like some more help".
That is what I get from other employers, that is financial help.
Even to the point that every child who goes onto sixth form college,
if they turn up to college they get £30 a week—means-tested
of course—for putting their bum on the seats. Why do you
not say to the employer, "You take them on and instead of
that £30 going to them it will go to part of their wages",
something as simple as that.
Mr Finney: You have to keep them
active and the financial constraints will always be there. It
follows the money, does it not? So follow the money and you will
not be far from the answers. Part of the problem is that a lot
of the money as I see it—and I really do not know everything
about your policies even though sometimes I criticise them—
Q822 Chairman: This is an all-party
committee; we are not the Government.
Mr Finney: What I am trying to
say is that if you have X amount of money and you are trying to
distribute it among the zero and Level 2 which should have been
captured within the educational system, then you are diluting
the effort that could be targeted at a slightly higher level of
3 and if the educational system can push those people up to a
certain level the 3s will drag up the zeros to 2. That is my opinion
because if you get them inspired they will move forward. Education
is a graph like that. You start to learn very slowly. From zero
to seven you learn to read and write; at 14 it is too young to
chuck somebody in the bin, I promise you. Their learning curve
can equally be there and it can catch up at some time in the future.
Life is about learning on the way so when they get a house and
get some responsibility, you have closed all the opportunities
to them whereas within manufacturing or within other sectors you
have the capability of switching on the light for somebody and
they realise they had it wrong. It is all our jobs to make them
and help them achieve their full potential in life.
Mrs Johnson: This is just a personal
opinion, if the Government are giving money for funding, for training,
et cetera, I do not understand why, when they are giving
out government contracts regardless of how small—whether
it is a hospital, a school or whatever—they do not turn
round to whoever is tendering for the contract and say, "You
must have a number of apprentices who are on your books and therefore
if you do not you are not allowed to tender". If you make
people train we would not have the problem. The problem at the
moment is that it is all down to cost; we are going in for the
job at the cheapest price whereas if one of the stipulations was
that you have to train ... Depending on how many people are employed,
there must be a percentage of apprentices on your books otherwise
you do not get the work.
Q823 Mr Chaytor: Can I ask what you
think about this new system of brokers? Have either of you had
the experience of using brokers for training in your companies?
Mrs Johnson: Do you mean the Train
to Gain brokers? I personally have not. I tried to access Train
to Gain and, as I said earlier, I do not employ anybody who does
not have any qualifications. Basically most people who come to
me have a GCSE.
Mr Finney: It is a numbers game.
We do our own targeting.
Q824 Mr Chaytor: Have you had anything
to do with brokers?
Mr Finney: Not a lot.
Q825 Paul Holmes: Coming back to
what Diane was saying about enforcing employers to train by saying
they do not get a contract unless they do, another answer to that—which
we used to do and which countries like Denmark still do on a massive
scale—is to have compulsory training levels. When we were
in Denmark and looked at their college system, every area had
to pay a levy so every area took apprentices on because they were
going to pay for it effectively. Would you favour going back to
that system?
Mrs Johnson: The trouble is that
the levy can be quite an expensive thing to turn. If you put a
levy in, who is going to run it, who is going to collect it? ECA
companies would give you a register but those who are not registered
with a trade association, how do you know who is out there? All
of a sudden I might be paying my levy but Joe Bloggs down the
road can undercut me on everything because he does not get involved
in that, you do not know about him and he does not need to. I
think the industry would turn round and say, "How are you
going to regulate the industry so that everybody pays the levy?"
To me, if you make everybody who wants to be in electrotechnical
licensed it means you have to do an apprenticeship to be an electrician,
therefore you have to have that skill so you would not have a
black market economy where Joe Bloggs can go out in his van or
whatever. That, to me, would be far better than a levy.
Q826 Paul Holmes: So a wider use
of licence to practise in every field, shop assistants and the
lot; they should all have a licence to practise which forces the
training.
Mrs Johnson: I cannot talk about
other disciplines. In our industry we can kill people and to me
I do not like people out there unregulated so it would be unfair
for me to say that somebody who is a shop assistant has to be
regulated; that would be for their industry to say. I can only
talk about mine because I think it is something that would help
us with apprenticeships and would also make our industry far better.
Mr Finney: I think a regulated
industry is a way to go but everybody has to work to the same
set of rules. While there are drivers to undercut the system,
there is a lot of European legislation, safety issues, there are
a lot of local government drivers to save money, but until you
get everybody on a level playing field, at least within reason,
to create a balance then ticking the boxes is not enough to give
you work. It is about revenue streams; business is about a revenue
stream. You can feed the people, feed the training needs by good
revenue streams. It is not until people realise that these legislations
are coming in to place and actually government should be creating
a barrier to say, "You must achieve this certain level".
As long as you are at this minimal level then you have a free
economy; if you fail to meet that minimum level standard—whether
you are talking about electrical standards, whether you are talking
about safety issues or whatever—then the barriers are closed.
Whether that is at a local government level or a national government
level the barriers are shut; if you meet this level, you reach
a minimum standard, we open the doors. Everybody has to compete
on a level playing field. At the moment what you have is a disparity
where money is not a driver. I talk about the Internet being a
global thing you can do so you go on there and say, "I'm
looking at a picture, they seem the same, I'll just choose the
cheapest". That is not always the best answer. It drives
problems in safety. You can look in the Yellow Pages and
you can find a lot of electricians or plasterers; there are good
ones and bad ones just like everything in life. You need a certain
gauge—which I think we were driving towards earlier on—to
say, "I have ticked a box and I have reached this level playing
field" and you will stop the black economy, you will stop
the people who do not pay tax revenues and all the rest. At the
moment the balance is totally the other way. It is stifling the
SMEs, you are stifling them with the bureaucracy of what used
to be for large manufacturing. I am not saying that everybody
is trying to do it right, but if you look at the mass 80% of them
are trying to do it right. You, as Government, have to try to
assist that, to give the revenue streams into that as a path.
Q827 Paul Holmes: Training providers
criticise employers because employers will often say to one of
their workers, "Don't bother finishing that training, that
qualification, that apprenticeship because you've got the skills
we need now, you don't need to bother finishing that". I
was given an example yesterday by an employer saying, "I'll
increase your pay if you stop doing the apprenticeship now because
you've got the skills we need". Employers often criticise
Government and the training providers for saying, "You have
to do this complete package; Government will only fund a training
course that leads to a qualification so you can tick the box or
you can prove you've got something for your money". How do
you resolve that difficulty?
Mrs Johnson: I have to be honest,
in our industry I have not come across that because they need
the card to work, they need the JIB card. If you have not fulfilled
your apprenticeship you do not get it, you cannot get on the big
sites. So for us that is not an issue.
Q828 Paul Holmes: To give one example,
I came across it when I visited Chester College and they were
saying that with some employers there was a problem.
Mrs Johnson: I think that is very
backward thinking of an employer because to me if you have someone
who has gone through an apprenticeship as they are getting older
they bring in more skills. I accept that some of the people we
train will go onto bigger companies because they have that level
of achievement and they are going to go on to be the engineers
of the future or the business leaders or whatever. You have to
finish your apprenticeship so that to me, to be honest, would
be alien and a very backward thinking employer. I would imagine
now, especially in our industry, there are levels of pay where
if you are a JIB company you have to adhere to. My worker, if
I did that, would just jump ship and go. It is a bit alien to
me, that one, to be honest.
Q829 Chairman: How long are your
apprenticeships?
Mrs Johnson: Four years.
Mr Finney: Let us go back to what
was traditionally an apprenticeship and the craft apprenticeship
to engineering which covers quite a lot of disciplines. You have
to give get-out points, so you have achieved this level and it
is your choice, do you want to get out, do want to stay in. You
may be encouraged by the employer to get out but if it is not
the student's choice and they want to try to find somebody else
who will sponsor them through the next level then that is up to
them. You have to meet a minimum standard; give them a get-out
clause. For the first 12 months we talk about normal disciplines,
so you have achieved Level 1 and you can walk at that level because
you are a reasonable person to go and employ. You clock in on
time basically; you meet the minimum requirement. Level 2 or 3
means that you have reached another standard and you make the
standard the sliding scale all the way up and you have get-out
clauses because not everybody wants to be totally academic. The
vocational skills can equally follow that same pattern. You may
want to be very academic or you may want to be more vocationally
orientated, but they have to be on a level playing field because
people pay for experience.
Q830 Paul Holmes: The Leitch Review
envisages much more involvement from employers in designing qualifications
and having a say in that system, but since we have lost most of
the large employers who did the apprenticeships and training and
there are many more Small and Medium Enterprises, is that realistic?
Can all these Small and Medium Enterprises actually spare the
time? Do they have the interest? They do not all have HR departments,
can they really get involved in doing this?
Mrs Johnson: Yes, I think they
can through the trade associations. The ECA that my company is
a member of work very actively to make sure that what the employers
need is what they get. They are actually reviewing at the moment
what is called the AM2—which is the Achievement Measurement
2—which is coming to the end of the apprenticeship to make
sure it is fit for purpose for the 21st century. They are going
out to employers now and saying, "This is what we've got,
what do you want?" so that basically when it is reformed
it will be exactly as is needed because the AM2 has not changed
maybe for 20 years (although do not quote me on this), but things
have changed. In the electrical industry we are actively all the
time making sure that our qualifications are fit for purpose.
Q831 Paul Holmes: We have heard some
evidence when we were looking at diplomas that it is all very
well saying the Sector Skills Councils have been involved in designing
the Diplomas but most employers do not have a clue what you are
talking about, that the Sector Skills Councils are not really
representing the bulk of the people within their sector.
Mrs Johnson: I can only talk about
the Sector Skills Council which I deal with and that is Summit
Skills. We have actively gone out and talked to employers about
what we want in a 14-19 Diploma for building services. I cannot
comment on other Sector Skills Councils but Summit Skills have
definitely gone out to do that actively because the members and
the industry at large at our industry have said, "Hold on
a minute, if you are going to give us a 14-19 Diploma, make it
something that we want".
Mr Finney: To answer the same
question, at an individual level the norm would be not to get
involved, without doubt. By talking to the trade associations
whose job it is to start to implement you will get a much broader
version anyway and that is what you are actually looking for,
a broad perspective because if you allow certain businesses to
dictate what the training needs are you are going to hone it down
and not keep a broader perspective. So it has to be done on a
broader perspective. If you do it too narrow-mindedly you will
target one industry, the same as putting technical areas of expertise
within schools it would be very focussed. It will come out of
somebody's marketing budget to do it and you do not want that,
you want a broader vision.
Q832 Stephen Williams: I have some
questions about funding. Diane, you are the Finance Director of
your company—if I were to look at your statutory accounts
of the company, what would I see as the figure for training? What
proportion would it be of your turnover compared to other costs?
Mrs Johnson: That is a bit difficult.
The full training? The hidden costs? The whole lot?
Q833 Stephen Williams: How do you
account for your training?
Mrs Johnson: Basically we decide
how many apprentices we will take on and we will just fund whatever
is needed to do that. There is not actually a budget as such,
it is how many workers we have lost in the year to how many workers
we need for the future which will depend on how many we take on.
We could be a lot more profitable if we did not take apprentices
on. We will then also look at how much we want to do, like the
17th Edition is coming in, we do the ECS courses which are the
health and safety courses, I have health and safety courses for
management, and we will sit down and look at what we need and
basically we fund what we need to fund to keep the business growing
and active. We do not say, "We will only spend 5% this year",
we basically look at what is necessary. We do what is necessary
and then bolt on add-ons if the budget allows but a lot of the
necessary stuff like the health and safety is necessary. To be
honest a lot of training now is not what you want to do, it is
because it is a necessity to keep up to date. If you said to me,
"Do you budget for training?" I would say not properly
because we cannot always do it. If it has to be done then something
else like buying a new vehicle that would have to go because we
are going to do some training. That is my honest answer. I do
not sit down with a budget because something like the 17th Edition
has come in and we are going to have to send operatives on that
so yes, I will budget for that but it could be that we have lost
two electricians this year, gone off to a bigger business, so
next year we have to grow again. I might not have had that in
my budget; I might only have been going to take one on. Do you
know what I am trying to say? So to actually give you a set budget,
no we do not have one.
Q834 Stephen Williams: I understand
that. What I am trying to get out of you is what would be the
total cost of training. You have 15 apprentices from what you
said earlier out of your 50 employers. There is an opportunity
cost of those 15 when they are off site not working for you. There
are the employment costs you incur for them, the direct trading
cost you might incur for them, then there are the other 35 employees
who presumably have some sort of training as well.
Mrs Johnson: Yes.
Q835 Stephen Williams: You must have
some sort of ball park idea. Is it a quarter of your turnover?
A fifth?
Mrs Johnson: I would say something
like that, yes. Do you want the truth? I have never sat down and
done a complete cost analysis of it because I think it would frighten
me to death.
Q836 Stephen Williams: The same question
to you, Ian.
Mr Finney: To answer your question,
if you looked at our statutory accounts it probably works out
at about seven to 8% of our turnover. Do we allocate everything
against it? No. You are talking about courses, specific things
that people would allocate within the nominal ledger to say, "That
is a training exercise". A lot of hidden costs are really
derived around the one to ones. We have team meetings and things
that actually do not appear on the accounts. What are those hidden
costs? My guess is probably somewhere near double that, so in
the order of 10-14% is what I would say is our real costs of nurturing
our people through our system. That is not far from the truth
but within the statutory accounts it probably looks a lot less
because you only pick up those costs as physical expenditures.
Q837 Stephen Williams: Back to Diane,
is there any clarity, do you think, within your industry as to
what costs you are expected to pick up as an employer and what
costs the state would pick up to give you new trainees who are
fit for work?
Mrs Johnson: I think we are actually
looking at that at the moment. I know the Sector Skills Councils
are trying to work out an actual cost of how much an apprentice
costs from year one to year four. In year one basically they earn
you very little but by the time you get to year four, let us be
clear about this, if they are good they can earn you money. We
most probably spend something similar, 10-15%, I accept, but then
to negate that cost the trainee who is now in year four can be
very productive in earning me money. To say how much I spend on
training I should really offset that off the training costs. When
you asked me how much does my business spend on training, what
I am trying to say to you is that to get to an absolute figure
is an impossible situation. I know that for me we spend roughly,
I would say, about 10% on training.
Q838 Stephen Williams: I do not know
how this works, if an apprentice is with you for four years are
they expected to serve with your company for four years or could
they move around after three years?
Mrs Johnson: To be honest, yes
they can, but it is not very often. I mean you do get a clash
of personalities maybe. We are quite lucky because most of our
apprentices in all this time have stayed with us but we have had
an apprentice who has moved away so he found somewhere else. The
thing is, he has then got to find an employer to take him on so
he found an employer to take him on, swapped training providers,
so yes it can be done, that is not a problem. They normally stay
with who they have got because nine times out of ten there is
no-one else to take them on.
Q839 Stephen Williams: There is no
restriction somebody in year three when you have put them onto
the training course—
Mrs Johnson: Oh no, but you will
not get anything back. That is what I mean, when you start talking
about the cost of training to a firm it is how do you actually
work out the cost of training: "You've been with me for four
years, I've trained you right the way through, yes, in year four
you've earned me some money but now you come along and say to
me that you fancy going to London because the Olympics are on"
and they are gone. How do I now recoup any profit on those four
years? That is what I am saying, in the cost of training for companies
there are a lot of hidden costs.
Mr Finney: There is no way of
stopping somebody's choice of leaving or not leaving. Actually
it is a numbers game again really. You have to hope that you are
providing the right guidance and the right inspiration but unfortunately
if you do not have the revenue streams and somebody is prepared
to pay them more then they are going to walk and there is not
a lot you can do about it. The only way to try to negate that
really is to give them the mindset of the common goal of the organisation.
It is the job of the employer to inspire them to be a part of
it and actually most people want to be in a comfort zone, funnily
enough, so you can get them in a reasonable comfort zone just
slightly outside of it, challenged every day, feeling a part of
the team, feeling as though they are making a contribution to
the overall structure of the business then they are more likely
to be inspired and want to be a part of that business. Sometimes
you need to be the helping hand for them when their life is a
bit in turmoil or whatever and show a little bit of empathy on
that side, that inspires them to keep going forward. Ultimately
if somebody wants to go you cannot tie them up into some sort
of contract and tell them they cannot leave because it does not
work. It is like constraining somebody and they will not have
it, will they?
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