Transcript
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Welcome to Why Is It So? Your last defence for common sense with your co-hosts
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Paul Zammit
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Music.
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Welcome again to Why Is It So? In this episode, we have the honour of hosting
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the founder and CEO of the Extend Group, Darren Stevenson, one of Australia's
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leading before and after school care providers.
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As we explore the landscape of the child care industry, we aim to provide informative,
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engaging content for our listeners.
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Thank you for being with us today, Darren. I always thought that after school
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care was a kind of a babysitting.
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So perhaps, Darren, you should at least enlighten me and tell us a little bit
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about your company. Certainly.
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We're the largest family-owned outside school hours care company in the country.
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And a lot of OSH providers have been taken, the bigger ones have been taken over by private equity.
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So it's been a lot of turmoil and chain. Paul, there's a lot of people,
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how can I explain it? Let me give you an example.
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There's people out there that go, after school care, how hard can that be?
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You're just babysitting children at the end of the day until mum or dad come.
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Let's be. Okay. And it happens a lot to me, social functions and so forth.
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And then we start talking and I explain, well, actually, there's a national
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law and there's national regulations.
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There's the regulations and there's the law, right? This is for outside school hours, Kent.
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So, number one, it's a highly regulated environment, which people don't understand.
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They think that the highly regulated environments are just for medicine and
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telecommunications and transport and those kind of industries,
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but it's hit childcare as well.
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Then they often don't understand the moving parts within our operation.
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So how we need to communicate with the school, because if the school board or
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the principal don't sign a contract with us, we then can't do business with
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parents and government.
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Oh, right. So we need them to give us the opportunity.
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So we've got to convince them that we're the right provider for their community.
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Community then we have the the privilege if
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you like to do business with parents send them
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an invoice generate money for the the company then there's
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the complexity of staff wherever i go everyone's saying we have staffing difficulties
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well we've got to try and make sure that we get the right numbers of staff because
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there's ratios of staff to children that we need to abide by and they vary a
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little bit across the country.
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And then we've got to make sure that we have all our staff working with children
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checked so they don't have a criminal record or anything that precludes them
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from working with children.
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We've got to make sure they're first aid trained. We've got to make sure they're
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trained in the key components of the regulations so that we get regularly inspected
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by government so that we pass those audits and assessments.
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Assessments, and then we get a rating that's made public for every service.
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Part of my challenge is, and you might be able to help me here, Paul, is.
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Explain a component or a topic without confusing the listener.
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I don't want to go on and on and then your listener's going, what does he mean?
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So I've got to make sure I capture it in the right context. In layman's language
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type thing. Yep, I understand.
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Well, in my background, Paul, I've always been involved in sport coaching or
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education and care of some kind.
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So I started out life many years ago, way back in 1988.
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As a teacher in a school. And that was a brand new independent school.
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So to help the school market and grow, we ran extracurricular activities,
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sports coaching clinics, etc., which I did.
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And so from those early days for me, I've always had a bit of a passion for
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that learning that takes place outside the classroom, the extracurricular things.
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And so I went overseas for a few years and became head of an independent school in London.
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And during that time, I also started a business, which was the first structured
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after-school care program of its kind.
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Interesting. Is that here in Melbourne? No, that was in London in the early 1990s.
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And we had a little group of mini buses that would transport children from schools,
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activities, and then ultimately deliver them home at the end of the session.
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That went quite well. I grew that business and then sold it to the school network
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that I was actually also working for.
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And then I returned to Australia and I became a manager of a community education
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facility for a large independent girls school in Melbourne.
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And part of that was delivering the outside school hours care activities for
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primary school aged children.
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And the board at the time were very supportive, and I spoke with them,
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and they agreed for me to take parts of that operation external under my own
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business name and grow that across Australia.
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Oh, okay. So they were very supportive.
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So that was our first school where we had holiday programs and after-school
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care. So that started in 2002.
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And since then, we've just grown steadily over those 22 years to now have 120
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schools that we partner with around the country.
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Australia-wide. Australia-wide. And as a consequence, as we've grown,
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we've needed to look to the right type of people that we want to bring into
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the organisation to be educators and carers in the service.
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And over that time there's also been growing
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regulation a greater emphasis on the national
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law that we need to abide by so a lot
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of our work is in recruiting the right people training
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them up to make sure that they're capable and they're able
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to deliver good levels of education and care
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for the children and and we want to do that for several reasons to grow a good
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business but also to give the parents of these children confidence in the care
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that we're delivering because we believe they need to be able to work free from
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guilt while we're caring for their children.
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Just to interrupt you there, with the kids doing the before and after care,
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if that's what you call it, I'm insured I'm saying that?
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Correct. With that, how does your tutoring, managing the children go against, say, opposition?
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There are opposition companies doing the same thing as you are,
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I assume. Why are you different and how are you different in what you do?
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Well, our sector has a really interesting makeup.
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There's about 4,700 outside school hours care services around the country.
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I thought there might have been a few.
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Yeah, there's a lot. Now, for most of those, they're run by individual operators.
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So mum and dad operations, for example, and they might have one,
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possibly two, small businesses linked up. In ours, we have 120.
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Some other companies are bigger than us, but the number of big companies in
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the sector is actually quite small.
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Now, the largest company in our sector has around about 500 schools.
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Now, they have been predominantly owned by private equity. So private equity
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entered childcare or outside school hours care in around about 2017.
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And so that changed the dynamics of things in terms of how the childcare businesses
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were run, how they were accountable, and an emphasis on profit margins as well.
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Well, so for us, we've remained free of any private equity buy-in or syndicate ownership.
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We're still independent, completely family owned.
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But probably the biggest differentiator for us in a business sense is we've
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remained debt free throughout the whole time.
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And I suppose, Paul, we have two parts to the business to look at.
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One is we're educating and caring for kids, the most important thing in the world to a parent.
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So that's a serious business even though we
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like to say we have fun along the way but then the other component is
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genuinely to run a good business that's going to be
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financially stable for the long term that's in
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everyone's interest and we've been able to do that because we've run a good
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business but also we haven't taken on debt and some companies now that took
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on a lot of debt before the pandemic are now facing difficulties in servicing
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that debt along with some reduced numbers of children attending after the pandemic.
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With staff, how do you find staff?
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Staff has got to be, as you say, A, they've got to like kids and they've got
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to like that sort of work.
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And then on top of that, they've got to have the education and the willpower
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to go into this business. How do you find them?
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We find staff through two key mechanisms. One is word of mouth referral.
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There's no better referral than someone already working in the business that
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says, I know someone who shares the values and the ethos of the company and
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might want to come along and work.
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So we have a strong network of referrals to come into the business.
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The second component is we actually do advertise on the job boards and online networks,
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the same as many other companies in other industries would, which means we have
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a dedicated catered internal recruitment team to advertise,
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shortlist, interview with line managers so that we choose the right people.
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And just like you said, we've got to find the right person because these are
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people that need to get up perhaps at 5am to go and work in a before school
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care shift. And that doesn't suit everyone.
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So we've got to find the right people who can deliver the the education and
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care components, meet the national regulations and quality and compliance,
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but also have a bit of spark in them. They're engaged.
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They enjoy being with kids. So it's a unique person that we're dealing with.
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So this is head office. Melbourne is head office.
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And when you're looking for staff in Western Australia, what's the situation there?
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Do you have a chief of staff over there or do you sort of send someone from
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here there to interview?
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Do you bring them here? How do you sort of, I mean, nowadays it's all done Zoom
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and things. But we didn't have Zoom in my day.
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Nine of mine, Paul, I understand. Well, in the example of, say,
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Perth, we have a regional manager, a programs manager based there.
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So Grace will be a strong part of the recruitment process.
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So we might do some preliminary interviews first by phone, perhaps by video
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conference, And then Grace would interview those people in person as well.
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It's a good mixture of using technology to move swiftly and get the recruitment
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wheel turning because you can't be too slow because you've got to be competitive
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and have a compelling offer to get the right people to come and educate and care for children.
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But equally so, you can't move so fast that you don't do a proper due diligence
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of people because you need the right characters. Oh, absolutely.
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Yeah, they've got a, kids are something that, you know, everybody loves.
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As long as there's like grandparents, they can give them back.
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Like it's your turn. I've seen the kids there later. Absolutely.
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There's a lot of similarities. Yeah, they sort of get there.
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You don't want people who, you
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know, have a bad day and they're going to take it out on the kids. Yes.
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Obviously, these things. And you have a supervisor or a manager in each state,
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I take it, the same way. That's right.
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Okay. So someone who can look after their cluster of schools and their job,
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because we're a people business, we don't have a lot of machinery in our operation.
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It really is a people business.
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So we talk about the three R's that we have in the company, which are relationships,
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relationships, relationships.
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Relationships it's all about developing good professional relationships
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with the school leaders with the parents with
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the children our colleagues the regulators the
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offices that we might deal with at local state and
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federal government as well so there's a lot of stakeholders involved
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so we need people who have
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a bit of emotional intelligence can communicate their
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messages well but also at the end
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of the day they have a desire they want to be in this sector
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done it is hard work dealing with people continually absolutely
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so uh so we need to find the right people and support them well there are people
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who you know love that sort of work and there's other people of course that
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be quick to sort of go off the off the mark if you like and you've got to be
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careful who you do pick in that in that sense don't you.
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You're absolutely right paul first of all we've got to make sure we have the
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right character sector and that's why working with children checks,
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criminal record checks are an important part of not just our operation but for
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any child care provider and then the right character traits as you've said for
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someone that actually wants to work in the sector because as I said before,
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I could think of no worse job in the world if you didn't genuinely like educating and caring for kids.
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Imagine having to turn up day after day.
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So we need the right people for the role.
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People that can collaborate as well for us.
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Probably one of the differentiators we have, Paul, is we employ all our own staff.
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And what that means is we don't use agency staff to cover gaps,
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whether they're short-term or long-term.
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Now, that's a little bit more costly for a business because you have to invest
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more in your own recruitment team.
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But it does give you a better educator and it's caring for children.
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Yeah, because they know what is expected of them. Whereas from an agency,
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they've come from a lot of different jobs they've had.
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That may not be the way you work, the discipline you're getting at.
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And basically, if you've taught them, they'll do it your way.
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If someone else has taught them, they may do it their way, which is correct.
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That's very correct. Yeah, okay.
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So you've been going now for 20 odd years. Where do you see you going from here?
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How do you get more and more schools to engage your company?
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Well, one of the things that I'm actually quite proud of, and particularly of
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our people in this organisation,
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in this business, is that during the pandemic, when we had to lock down services
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and open them all at short notice,
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and there was a massive task in accounting for children that attended or those
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that needed to isolate, are late.
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We had to do regular reports through to the government.
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And so what I'm getting at is during that time, we needed to be adaptable and flexible.
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And we had the key people in the organisation to do that.
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And for us, that was essential for where we are in the marketplace,
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for the promises that we make to schools and parents.
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So we didn't compromise on our quality.
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And that was a tough task, but well worth doing.
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And so now that we've emerged on the other side of a pandemic,
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we have a reputation for fulfilling the promises that were made without having to cut staffing ratios,
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reduce the quality of the services or programming or resources or toys or games or any of that.
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And so we like to say that we have a little bit of credibility in what we do.
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And so if someone says, I can see that you've stayed true to your values,
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to your promises services throughout the tough times, they know we're going
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to do it throughout the good times too.
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And so now we're using that. As I say, we have been in the industry for,
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as you say, over 20 years.
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We have an excellent track record, great people working in the organisation.
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We can help schools with the services. That's got to speak for itself.
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The time that you've been in business and, as you say, you've got a good name
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in the industry and you've sort of looked after everybody in the right way to get the right people.
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And we were talking about staff before. all, how many staff have you got Australia-wide?
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Yeah, we've got about 450 staff Australia-wide, and they come in at different levels.
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So there's a small sort of central administrative and management team that are
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based in Melbourne, but representatives in other states around the country as well.
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And they all meet up every month. We fly everyone in because we think that meeting
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in person is a really important part of our operation.
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Then out in the services, we have a a service coordinator.
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That's a bit like an on-site manager that will do the programming,
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the compliance, and make sure that the before school care, after school care,
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and vacation care programs are well-structured, they're great quality,
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and they're a bit of fun for the kids as well.
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So they lead the program, but they may well be small teams. So it could be two,
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three, or four educators working together.
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So there's a lot of work to be done to make sure that those teams get along,
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they're harmonious, they respect each other and that they fulfill their role,
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but also the promises that we've made to parents.
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Deliver great quality education and care. So one of the things we focus on continually is storytelling.
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So you mentioned before a similarity between grandparents where they can give the children back.
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Well, we give the children back as well. And just like grandparents,
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we need to give the children back in a safe and sound condition, but with a story to tell.
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So we often say that when the child goes back to the parent,
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they need to be able to say, well, mum or dad, here's something I learned or
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created or did in after-school care today.
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And I was with the educator, Jim, and he was fantastic, and I want to go back tomorrow.
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So they have a story to tell about their experience, and that's where we're
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a little bit different at the Xtend group as well, in that we focus a lot on
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storytelling across the whole organisation.
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That will seem to be very happy about things, and all very diligently working there.
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Maybe it's because the boss is walking around. I don't know,
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but they seem quite a happy crowd.
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And that's a good thing to retain and maintain.
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Yeah. We're very fortunate in the caliber of people that we've got working in the organization.
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But I'd also like to think that's because with our senior team in particular,
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we've been able to create the right environment.
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And when you have the right environment where people feel a sense of belonging,
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that the the environment is on one hand non-threatening.
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So they can feel comfortable, they can speak their mind, but it also balances
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a little bit of accountability with that.
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So the environment's non-threatening. We want to hear your ideas,
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but if, for example, your manager listens to you and then says,
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we're not going to follow that idea, that that person's still resilient enough
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to carry on with their job.
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So we're looking for the right environment to empower people and then support
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support them so that they can get on and do their job and do it well.
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What do you see next for you, for the company, the Xtend group? What...
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Where are you heading now? What is the agenda from here?
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Are we looking to expand in other states or more in Melbourne or just improve on what we've got?
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Where are you going with the way that the company's tracking?
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Sure. Well, we'd certainly like to expand, but we want to make sure that our
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growth is what I would call controlled growth. growth.
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Now, not all businesses in our sector have had controlled growth.
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Some of them have poured in private equity or syndicate funding to buy business
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with high rents. What that means is you might win a school tender or a partnership
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by paying an extraordinarily amount of a high rent.
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Now, we've never done that. And the reason we don't is because then to make
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a service viable, viable, you need to cut costs and corners.
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And invariably, being a people business, it would mean we'd need to cut corners
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in the number of people and their capability or their qualifications.
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And we don't want to do that. We want to hold true to the promises that we've
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made to a school community.
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So we want to keep growing a controlled growth on that platform.
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For us, we have an an excellent reputation.
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Now, the reason I say that, Paul, is some people think childcare,
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that must be an easy sector to operate in.
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It must be warm and cuddly and inviting and everyone's friendly.
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It actually can be quite ruthless and it's highly competitive.
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And in the past, there's been all sorts of under the table deals done for businesses
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to grow in particular sectors or states.
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We've never entertained anything unethical. We've kept a good solid line on
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the way we do business and our accountability and the transparency.
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And so that has meant that we've got a good, strong, stable company in place
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now, which is well positioned to grow for the future.
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And I said before, we carry no debt. That puts us in a unique position as a
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major player within our sector to now utilise the good balance sheet that we've
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had and the funds that we've accumulated to grow into the future.
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So we feel we can do that without taking unnecessary risks, which then compromise
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the quality of education and care for children and for families.
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With funding, just going back to.
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Government funding and your own funding in the company.
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Just recently, government decided to increase the childcare expenses,
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if you like, in what you get as a funding.
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But at the same time, I noticed a lot of childcare-type places raised the rates
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to exactly the same amount as the government raised the income or their part of it.
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What is the situation there? You mentioned before that although they increase
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the income, there's a lot of businesses that are struggling.
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Actually, there is a lot of businesses struggling at the moment,
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and they're delivering negative profits at the moment.
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So they're running at some massive losses, particularly with the bigger companies,
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some of them in the case of tens of millions of dollars.
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So there's a lot of money that's evaporated in that area.
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So the question is, with such high government funding and subsidy, how can that be?
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Well, the key driver is at the same time that subsidies have increased for providers,
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so too has the cost of delivering a compliance service.
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Regulation has ballooned in the past few years, particularly during COVID.
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Government reporting, the same. The training that's required for educators in
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the business has also increased exponentially, and they have also incurred significant wage increases.
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So all those things need to be brought into the calculation on what fee needs
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to be charged to deliver good quality care, but still keep it affordable for families.
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Now, you're not alone in saying, but there's an amazing coincidence.
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Government increases the subsidy, childcare providers increase their fees.
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And part of that reason is it all happens around the 1st of July each year,
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the beginning of the financial year.
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That's when governments roll out any
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increase in funding through the child care subsidy the
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CCS but it's also when educators fees
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increase through the children's services award which is the award that most
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child care providers need to employ their educators under and typically most
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providers especially in outside school hours care will have an annual fee increase
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rather than several smaller smaller ones each year.
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And again, typically, to meet their obligations of wage increases,
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they tend to be around the first of July. The same times the funding is announced.
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Okay, that makes sense. And I can understand now that we used to...
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You know, everything else has gone up, but it certainly has gone up.
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And you see it in the supermarkets where, you know, one day it's $5 for a particular
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item, and the next day it's $5.30.
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And it seems to go up from there. And although they have all these specials,
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it still costs a hell of a lot of money to go and get some food out of the providers.
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Yeah. And we're no different in our sector because our parents,
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for example, will see a fee increase, but they'd like to understand that the
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mechanics behind it. Why is the fee going up?
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So it's actually important for us to be a responsible provider and let the families
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know how much more the staff are being paid,
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the increase in regulation, because we find most parents are actually quite
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reasonable once they can see that their fees have gone up a a certain percentage
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that correlates with wage increases,
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that correlates with the increase amounts that governments charge us to license a service.
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Then they can understand. It's that, I think people get a little bit miffed,
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and I can understand this, when they can't understand.
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The rationale, the reason for fee increases. So we have an obligation to explain that to them.
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With what you know, I've heard people sort of say, well, look,
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we're funding other people's children.
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But does it seem to you that people are sort of expecting more?
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I know they're having tough, but it's not only now, it's been going for years.
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Do you feel that they're being unreasonable for asking for more or getting free
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as they've been asking to be?
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Child care in the community. What's your opinion on that?
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It's an interesting one because you're right, that the federal government spends
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an enormous amount of money on childcare, $14 billion and increasing.
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And a lot of that goes to subsidising the fees for working parents,
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so those parents that use whatever component of childcare that they need.
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And so at the moment, as an average across the country, If not everyone gets
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the same amount of subsidy, it's means tested.
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But if I were to average it out, the government's footing the bill for around
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about 70% of the costs. That's pretty generous.
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In return, they're asking for certain standards of compliance,
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meeting regulation and quality as well.
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So in my opinion, that's all very reasonable. reasonable
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you're right though that it's the
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families or taxpayers that
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may be making contribution through their tax
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that aren't receiving that benefit back the argument is however that they're
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helping working families with children a better quality of education and care
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for those children who in turn will become taxpayers in time that contribute
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to society society in other ways that create a better place for everyone.
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I believe there is some argument in that, that we do need to make sure that
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in this day and age we are providing good quality education and care for children.
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It's not like the old days.
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Perhaps, Paul, when you were a boy and the same when I was a boy,
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where it was easy to walk home from school or grab our bikes and ride for the
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day and come home at dusk.
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Our children don't have those same freedoms or opportunities.
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So we can deliver some of those opportunities in outside school hours care and
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other components of childcare.
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And I think we do have an obligation to do that for them.
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Actually, that was well covered. It makes sense. And generally in the public,
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it's usually that everyone's looking after themselves.
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And basically their argument was, as I said before, like they're not my children.
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They had the children. They should pay for it. And I understand what you're
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saying, which is really.
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And at the same time, I think the government is being generous with the 70%,
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even though not all the parents get 70% of whatever they've got to pay,
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depending, as you say, on their means test, which I wasn't aware of.
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I thought it basically was this is it. You've got one child.
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You get X amount of dollars. If you've got two children, you get X amount of
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dollars. And I thought that's it.
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But I can understand when you say it's means tested.
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So overall, it does make sense what you're telling me. It's very good.
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Yeah. So you've got to go shortly. I do in a few minutes, I'm afraid.
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Well, we won't hold you up anymore. So thank you very much for having a talk
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to us and putting us straight on what's happening in the childcare area.
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And good luck. And as I say, thank you very much for squeezing us in today.
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Thanks, Darren. Talk to you soon.
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That was very interesting, actually, speaking to Darren. I trust you found our
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little chat informative.
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And we look forward to speaking with you shortly in the not-so-distant future.
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Have a good day. Thank you for listening to Why Is It So?
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Make sure you tune in to our next episode. Remember, it's your last defense, but common sense.
