Richard Chappell says organisations should be very wary of signing up to managed training service deals: they look – and indeed probably are – far too good to be true.
A managed training service (MTS), where an organisation manages huge and often complex training programmes and third-party suppliers for free, sounds good, but is it too good to be true? I believe that, in many cases, it is, and that any organisation subscribing to a self-funded or cost-neutral management service would be well advised to consider exactly how much this seemingly free service may eventually cost.
MTSs originated from specialist companies offering genuine HR/learning and development services. These companies don’t have their own training arms and are paid to secure and fully manage the most appropriate training for a client at the best price.
In recent years, large training organisations that historically made their revenue from the delivery of training, have identified this approach as an excellent commercial opportunity, and see it as, in effect, a method of ring-fencing a client’s account. Having leapt on the bandwagon, and in an attempt to squeeze the pure managed service providers, they have extended the concept into a self-funding model.
The big difference between the original managed service and the self-funded derivative, is that the original specialist companies were completely transparent, with the training and service fees fully itemised and costed – so the client company knew exactly how much of the bill was for training, and how much was for the management.
On the self-funding side, it would be very naive of any client to imagine that managing their training programmes did not involve a significant cost to the MTS provider, and that this has to be recouped to make commercial sense. So, the basic problem with self-funding, as I see it, is the way these costs are recovered. The true management fee is hidden, and there is no way a client company can check whether it is getting the best value for its money.
Clearly, a training company offering a cost neutral or self-funded managed service will try to shoehorn client requirements into one of its scheduled courses, rather than seeking a potentially better fit from an outside provider. This may be deemed as OK, but what happens when it uses a third-party supplier?
The managed training provider will negotiate hard and realistically achieve a 30% to 50% discount. This variance may bias the third-party selection and prove quite costly. For example, booking 50 staff members on 50 third-party public courses at £2,000 per course, could easily equate to a £50,000 management fee. This may or may not offer good value. However, with a specialist company charging for its services, the client would be able to see immediately the proportion of training cost versus service charge, and be confident that the course selected was the most appropriate.
In principle, a self-funded MTS makes good sense, with providers removing the need for multiple third-party relationships and the burden of organising complex training programmes. In practice, however, there is a real danger of decreasing quality and value for money, simply because the cost of this free management is being hidden from proper scrutiny.
Richard Chappell is managing director of Learning Tree International UK