Thursday, June 13, 2013

The Value Chain of Business English Training - Chapter One

There are several parallel conversations going on in Business English training at the moment.  The first is about money.  The second is about qualifications.  The third is materials.  There are certainly other issues, but I’ll limit it to these today.

The purpose of this article is to link these three threads and to give a few signposts out of the circular debate.  The link to all of these lies in business theory.  As Business English trainers, I hope this is familiar, but perhaps the application to our own field is new.

Porter’s Value Chain

Perhaps the most well-known name in business theory is Michael Porter.  In 1985, he presented the value chain, which explains the difference in price between the inputs and output of a business.  I think the clearest graphic of this process is from Wikipedia which shows a notional value chain for a manufacturer.


The business functions in blue are the primary functions of the business in transforming the raw materials into a product and selling that product to generate profits.  The functions labeled in brown support those primary activities and generally do not add value in themselves.  These are also typically the first business functions to be outsourced.  The difference between the cost of running these activities and the final price is the profit margin.  Each firm will have a different value chain, but all will resemble this model.

The Value Chain for Business English Training

Now, let’s take this model and apply it to Business English training.


The raw material of BE is the English language, which is a common good.  It belongs to no one and if you grew up in a native-speaking country you have it free-of-charge.  Indeed, there are enough resources and materials on the Internet that the language is available at no charge around the world.  Therefore, the main value of the trainer is to determine which parts of this massive body of knowledge are needed, organize that information, then transform it into a useful format for learning, mastery, and performance.

Overall, the first three activities are determining what to train, and the last two are how to train.  These primary activities include everything in training from using discourse analysis to determine key functions to elearning.  Additionally, materials development includes more than simply course books and handouts, but also the activities a trainer uses to instill knowledge, mastery, and performance. 

Note: It can be argued that marketing actually adds value but I doubt few trainers will be able to develop a brand with enough mass to considerably change what a client is willing to pay.  For simplicity I have left it as a supporting activity.

Why wages are so low...

Jenny has a CELTA and works at a private language school.  She is given Business English courses and travels to an accountancy for a 90 minute lesson every week.  The school and the client have decided to use a course book for the training.  Jenny supplements the material with some of her own activities and modifies some of the exercises in the book to better fit the needs of the group.  She conducted a short needs assessment at the beginning to find out which parts of the book are more important for the learners.  She is not that familiar with the company but she has read the company’s website and remembers some accounting from a university class she took several years ago.  She is very active reading blogs and articles to find creative lesson plans and activities to improve her teaching.

In the case above, Jenny is only one very small part of the value chain (marked in red).  The other primary activities were done by the course book writers/publisher (they were paid when the book was bought) and the brown support activities were done by the school.



Let's imagine the market price for this type of training is €60 per hour.  If Jenny gets a third of that, she is lucky.  Her limited needs assessment is added value and her addition of supplementary materials helps.  Most likely, she will receive a bit more than her peers at the school who do not do this.  But her professional development is limited to improving her training delivery.  This is admirable, but does nothing to increase her wages.  She is already receiving this portion of the value chain.

Susan has a CELTA and is a freelance trainer.  She started with general Business English courses but then started focusing on finance.  Every two weeks, she attends a local networking event for business leaders in the area.  At one event she meets a partner of one of the local accounting firms.  She talks about her business a little and how she has worked with other firms in the field and has seen good results.  She has developed a corpus of financial English and writes her own materials based on common functions and skills.  Prior to the training, she researches the firm and meets with a few of the partners to conduct a top-down needs assessment.  Then she conducts a bottom-up needs analysis with the participants.  She designs a course proposal and negotiates with the accountancy.  She then develops the materials and conducts the training.  Every month she invoices the firm and sends a progress report to the partners every quarter.

Again for simplicity, let’s assume that Susan is also subject to the same market rate for Business English training at €60 per hour.  But in this case, Susan collects every cent of the value chain.  Additionally, she is developing skills and tools which enhance her ability in other activities.  Over time, she becomes more proficient at billing, reporting, marketing and sales.  She checks on activities and methodology but is more interested in workplace discourse, specific needs in the field of finance, etc.  So, she does not ignore how she teaches, but spends an equal amount of time on what she teaches.

The end result is that Jenny spends three times the amount of time in the training room as Susan.  That does not mean Susan works less, but she is doing different things.  Additionally, Susan is developing skills which will help her earn even more money in the future, whereas Jenny is continually improving an activity she has already tapped (training delivery).

In the next chapter we will discuss the relationship between qualifications and the value chain to see how hitting the books will help increase wages.

The Value Chain of Business English Training - Chapter Two: Qualifications

How qualifications add value...

The ELT community and Business English in particular has rightly made the link between qualifications and earnings, but in the wrong way.  It is useful look at a few qualifications and what they really mean.  

First, the basic qualification to be a teacher is possess more knowledge about something than the learners.  This means that every English speaker in the world is qualified.  There is no way to create a barrier for entry.  In fact, there is probably no other field with a lower barrier of entry.  Providers will always hire from this pool and provide them with everything they need to conduct training.

A qualification demonstrates to clients a certain level of expertise in certain parts of the value chain.

The basic qualifications are a TESOL certificate or CELTA.  This shows a certain ability to conduct training.  In Jenny’s case (see previous post), she able to work for the private language school because of this certificate, probably earns a bit more, and has some more freedom in designing materials and activities.  But in essence, the certificate now really belongs to the school.  They will be able to gain a slightly higher price from the client because they offer a certified trainer.

Now, if we talk about university degrees in (Applied) Linguistics, this demonstrates a deeper knowledge of the subject matter.  The corresponding assumption is that these qualifications improve the ability to determine what part of language to train.  This is certainly valuable as fields like pragmatics emerge within Business English.  But to say that they will immediately translate into higher training rates is a bit exaggerated.  They will only allow the trainer to better identify certain skills needed, divide those skills into sub-skills, and prioritize them.  For example, within the main skill relationship building we have the communication skill of small talk.  One linguistic sub-task of small talk is showing empathy.  A trainer with a degree in Applied Linguistics will be better able to identify this sub-skill and develop linguistic strategies for performing this sub-skill.

If we turn to Education as a field for certification, this demonstrates a deeper knowledge of the how to teach.  This will show that the trainer is an expert in creating learning materials and delivering the training in a way that is easily absorbed.  A degree can be very useful, but it is important to remember that it supports only certain elements of the value chain.  The trainer may design and conduct outstanding training, with high learning and performance results, but which is also only marginally relevant.

The DELTA and MA TESOL could be considered a blend of these two fields in the context of ELT.  They appear to do a better job of improving all aspects of the value chain to a certain degree.

The final qualification would be a degree or certification in a special field, such as law, engineering, or finance.  This will typically help when defining the skills needed.  These degrees solely support the what side of the value chain.  But it is unclear which qualification would be most useful.

When in doubt, ask the customer...

I had a meeting with one of my clients a few months ago and we talked about an ongoing training project I am working on.  He is a manager in procurement and pays my bills.  If he is not happy (either with me or because the participants complain) I will lose my job.

During the meeting I started talking about my approach to training (materials light, maximum feedback, skills focused) and he cut me off. 

“I don’t need to hear about how you do things.  You are the trainer and you know the best way.  I am interested in making sure we are training them things that will help them do their job better.  We aren’t here to teach them ‘English’.  They should bring that with them when they are hired.”

Translation:  I see that you are an experienced and qualified trainer.  I’m assuming you know what you are doing and I have not heard anything to make me doubt that.  For me, the main value is the focus of the training.  Are you training them in skills which are applicable to their daily work, or are you sitting in there talking about grammar?  I’m not interested in how you train, rather what you train.

This client is not alone.  Most of my clients are more worried about the content than the approach.  From the client’s side, the methodology debate is a non-starter.  They do not care if you know Dogme, task-based learning, or the like.  What they really care about is whether you are training them things they can do in their job.  The method is only important in that is achieves results and satisfied learners.

This leads me to believe that qualifications which support needs assessment and skill analysis are more profitable.  There are several examples of this.  Some trainers are doing quite well with a law degree.  Evan Frendo is an engineer and mentioned how useful this has been in a recent interview in Business Spotlight.  On the other hand, ELT specific degrees and qualifications seem to only marginally pay off because they do not necessarily resonate with the client.

This what worries me somewhat about the planned teacher qualification scale being drafted by organizations such as British Council and Göthe Institute.  These scales will be designed based on their business model of teacher, DOS, and  director or on the university system.  In my experience at a private language school, the client was not willing to pay significantly more for a DELTA trainer than a CELTA trainer.  On the other hand, they easily handed over a premium from a trainer with a field specific qualification like a project management certificate or business degree.

In chapter three we will discuss ways we 'give away' parts of the value chain and limit our income.

The Value Chain of Business English Training - Chapter Three: Outsourcing

Outsourcing value...

In the first chapter of this epic post, we discussed the value chain of Business English training.  In the second, we looked at how qualifications can add to that chain.  In this chapter, we will look at how we outsource various elements.  In essence, this is the ‘follow-the-money’ of ELT.

A few years ago, one of the companies I work for decided to outsource their IT services.  As a support activity, it was not directed related to generating value for the company’s customers.  The provider who took over the services basically said, “Look, this isn’t your core business, you aren’t experts in it, and if you let us take it over, we will do it cheaper and faster.”  The company agreed and suddenly all the IT services came from a different company... for a fee.

We do the same thing with our support activities.  I hire a tax consultant to support my operations.  Sure, I could file the monthly VAT returns myself and produce all the financial statements, but that is not my core business and they can do it cheaper and faster.  I hire a part-time secretary to do all my invoicing and billing.  I have outsourced my administration.

We can take this a step further and outsource our marketing, sales, and infrastructure as well.  By working for a language school, we are sacrificing a certain amount of the income.  They control that side of the value chain.

Materials...

But the real outsourcing comes from using published materials.  For this post, we will ignore the “how to teach” books and instead focus on the learner-centered materials.  Just like the IT example, course book writers and publishers basically say, “We know which skills the learners need, we can break them down into sub-skills, and we can present this knowledge in a useful way.”  In many cases, they are right.  Published materials work, I have no doubt.

However, I have certain reservations about outsourcing my primary value added activities.  I can see that others feel the same way.  Often this comes in the form of half steps.  For example, a trainer may conduct a needs assessment and even go so far as to analyze those needs into sub-skills.  Then they will photocopy a range a published materials to fulfill those sub-tasks.  This effectively cuts the publisher out of the value chain and leaves more for the trainer.  In reality, the school may encourage this behavior because they are actually pocketing the difference.  They are telling the company that they create customized courses (which are sold at a slight premium) but are only paying the trainer for the value added of training delivery.

This is one of the most delightful ironies of the ELT field (Business English included).  Many of the same school directors, directors of study, and teacher trainers who are developing their career to write for a publisher are encouraging or ignoring ubiquitous copyright infringement at their institutions.  But it all makes sense from a business point of view.

The key to this system is the assumption that the client and the learners do not know the difference.  And in many cases they don’t.  However, as someone who writes all of his own material I can say that there is a HUGE difference in value to the customer when you say, “I did a corpus analysis of your field and I wrote this exercise booklet on 40 verbs that are common in your field.”  As long as the materials I write are pedagogically sound and support the sub-skills I am looking to train, they add considerably more value than photocopying published materials.

This weekend the BESIG is hosting a free online conference all around materials.  The talks they have lined up appear to address this issue head on.  I believe that writing materials for clients is one of the greatest values I provide.

The key to outsourcing the value chain is knowing what to leave to others and when.  In general, most companies do not outsource their primary activities.  In Business English training, however, sometimes we may need to focus only on the things we are paid to do.  If I am only allocated the training delivery step, I will expect the school to provide me with a needs analysis, an assessment tool, and materials for the training.

But in reality, there are many trainers taking less pay than the effort they are putting in.  In thenext chapter we will look at how to gain more control of the value chain.

The Value Chain of Business English Training - Chapter 4: Getting Paid

Building your share of the value chain...

We all want to get paid for what we are worth.  In chapter one, we saw how the trainer Jenny had nearly maximized her wages because she was adding only limited value to the training.  In fact, there is a cap on each step in the value chain.  For example, you might do the very best needs assessment ever, but a customer will only pay so much for that step.  You might also be the best materials writer in the world, but there is still a cap.

If we combine this with qualifications, it shows that they are subject to diminishing returns.  In other words, a Master’s in Education will not change my income that much as a trainer because I may have already reached the limit of what customers are willing to pay for materials development (including activities) and training delivery.

So the key is to take over more elements of the value chain, not to continually develop and market one step.  This means the trainer will have to do more work.  But before we look at four ways to increase value added we need to examine a fact about the consulting/training business.

Customers always remember the first price you charged them.
- Joe Rei, Management Consultant

Rates are sticky.  It is extremely difficult to go to a customer and ask for higher rates.  But we can never stop developing our product.  Furthermore, a training product needs testing, review, and improvement before it can be sold.  That leads to the first value building method.

1.  Test something with customer A and sell it customer B

Jenny is running her weekly business course at the accountancy, but she is unhappy with the pay.  She decides to use corpus tools to make her own materials about accounting and the needs she has identified.  She goes out and learns how to use the software and collects the texts.  It takes her many hours of work, but she eventually writes three vocabulary exercises and a role-play based on her data.  She uses the materials in class and sees that there are a few problems.  She corrects them and writes a few more.  She is not being paid for any of this effort.

When the class ends, she gets great feedback and the school wants to use her for another course focusing on financial English.  Jenny speaks with the director and says, “I can develop my own materials for the course.  I’d be happy to show them to you prior to the training.  But this takes considerable effort and I would need to be paid for it.  I believe the customer would be willing to pay for materials if they knew that they were specific to their company.  I think it would be fair to receive the materials budget for this course.”

2.  Take on the responsibility... go freelance

Mike Hogan has talked about going freelance at conferences a few times and he is right on that it is more difficult, more rewarding, and can pay more than using the support of an institution.  This is the path I chose and I love it, but it is not for all.  I also had certain abilities in every step of the value chain before I started out on my own.  I am not a success story yet, but I believe I am on the right track.

When it comes to assuming responsibility for marketing, sales, and product development, a freelancer must be patient and have a certain confidence that sales will come.  I have been turned down for many more proposals and offers than have been accepted.  I have been rejected by far more prospective customers than I have won.  In general, I believe that it will be another 3 to 5 years before I am really able to maximize my value.

3.  Take a share of value from others

This is the traditional money making model in ELT.  Course book writers take a certain portion of the value for every student who uses their book.  Elearning sites charge a fee for their material and delivery.
I know some trainers who have won a customer and then hire other trainers to perform some of the training.  They keep a portion of the income for the sales work and admin side.  They may even keep a larger portion if they conducted the needs assessment and designed the training program.  Private language schools who hire freelance trainers generally follow this model.

This method is simply not for me, but that doesn’t mean it doesn’t work.

4.  Use synergy gains to increase value

Synergy gains are a business concept for when two companies working together will produce greater value than the sum of working individually.  In this case, I am talking about working with other trainers to ‘bundle’ services which has a higher price than individually.  For example, I worked in the past with a human resources development consultant here in Germany.  She was an expert in outplacement to help employees find a new job when they were laid off.  Her services were typically paid by the company the employees were let go from.  We worked together in special cases to combine her training and support with my English training.  Together we were both able to charge higher rates.

For me, this is the ideal situation.  I am always looking for talented partners who have complementary skills.  By utilizing our various talents, we can approach customers with a larger added value.

Conclusion

At the end of the day, there is little we can do about the business model of Business English training.  The barriers for entry will always be exceptionally low.  And there will always be a place for under-qualified trainers in the marketplace.  I believe the best qualification to differentiate a trainer is something beyond the ELT field (assuming they have at least the minimum teaching certificates).  I also think writing materials is key to adding value to the training and makes a significant impact on clients.  Finally, there are several ways to increase rates within the field, but these methods must follow business principles.  I don't think following an academic career model attracts customer.