Industry training narrative
Before 1992, according to interviewees, polytechnics controlled curriculum and assessment for
industry training to the virtual exclusion of industry influence, and this helped to create changes
made through the Industry Training Act 1992.
From 1992, ITOs formed by industry, took over responsibility for determining assessment and
outcomes from training, thus creating new participants in the tertiary education and policy
processes worlds. About $20 million, previously given directly to the polytechnics to provide
off-job courses for apprentices, was transferred to a new industry training fund to be used by
ITOs to purchase training through the newly formed ITOs.
The ITOs were keen to redress what they thought was wrong with the previous system.
Therefore, when they initially enacted their standard setting and purchase functions, they mostly
rejected the capability, knowledge and experience in polytechnics. In the words of one
informant, ‘the ITOs were out to kill the polytechnics’.
ITO contracts for training mostly went to private providers because they could undercut the
larger, multifunction polytechnics by offering courses which had lower overheads and were more
customised to the requirements of the ITOs and employers. More use was made of workplace
learning and assessment opportunities, in the place of off-job courses in institutions, because of
lower per-learner costs. The actions of the ITOs, and competition from PTEs saw a decline in the
viability of these areas in the polytechnics, leading to the closure or rationalisation of faculties
and courses over the next few years.
Further responses were triggered in the polytechnic sector. Polytechnics established new courses
(often called pre-employment courses) in the areas covered by ITOs, for which they could claim
EFTS funding from the Ministry of Education. Learners who did not have training agreements
with an employer could enrol in a polytechnic and be eligible for government funding through
the EFTS funding system. These students were also eligible for student loans and living
allowances. In contrast, learners in employment, with a training agreement with their employer,
received training arranged through the relevant ITO. The funding for training arranged through
ITOs came from both the industry concerned and the industry training fund administered by the
government agency Skill NZ. Training available through this fund was for the low end of the
Qualifications Framework – up to level 4. Learners progressing to higher levels were funded
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through the EFTS funding system and might or might not be assisted to pay the fees for this
enrolment by their employers.
Over a relatively short period, two systems emerged for producing industry skills: an ITO-funded
system and an EFTS-funded system but they were not independent. They both had a relationship
with the industry that employed the learner, with providers, learners, industries and government
agencies common to both systems. Government money went to both, although the funding level
per learner was higher in the polytechnic than it was through the ITO, because of the industry
contribution in return for control over assessment outcomes and purchase. These two related
systems illustrate interdependency and openness to flows of money, students, industries and
providers. They also adapted and co-evolved over time.
The passing of the Industry Training Act in 1992 influenced the feedback loops maintaining the
stability of these two interacting systems. The polytechnics responded to the ITO decisions and
their loss of income in a range of ways. Their responses generally undermined the ITO influence
and restored their lost income. Polytechnics mounted new courses in competition for learners,
forming alliances with parts of industries poorly served by ITOs, and purchasing PTEs which
they operated as wholly-owned subsidiaries. The polytechnics also shifted the overall balance of
their business away from the trade training areas into business courses and degree-level
programmes. This is an example of polytechnics searching for new adaptive peaks in a changed
tertiary education policy landscape.
In 1999–2000 a change in policy came into effect, removing the previous EFTS cap on funding.
Under the new funding policy, all growth in student enrolments was funded. The polytechnics
then accelerated the moves that they had begun making into alternative areas (a positive
feedback loop reinforced by a further positive feedback loop). New PTEs entered the field and
existing ones increased their activity to take effect of the policy change.
From 1992–2003, ITOs were contracted and tightly performance-managed by Skill NZ. The
contracting arrangements focused on easily counted measures of performance – number of
trainees and number of credits gained by learners – creating a positive feedback loop. ITOs were
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positively reinforced for concentrating on numbers of trainees, rather than more complex quality
issues such as what the industry needed then or in the future.
The operation of the ITO performance measures triggered further responses from the system.
The ITOs clubbed together and created a new body, the Industry Training Federation (ITF), to
represent them collectively. Individually and collectively, the ITOs were developing strategies,
working closely with their industries and employers. The ITOs considered they belonged to
industry and were becoming increasingly resistant to micro-management by government
agencies. The strategic thinking of individuals in ITOs flowed into the ITF and helped to build a
stronger ITO-owned sense of the industry training strategy and future strategy. The contracting
relationship with the funding agency did not allow for interaction around strategic thinking and
forward looking matters because of the way the boundaries had been defined by the funding
agency. So the ITF began to look for other ways to influence the policy processes system,
initiating engagements with other parts of that system such as the Ministry of Education,
ministers, and even other policy systems such as the labour market and employment policy
systems. As a result of these pressures, the new Labour government initiated an Industry
Training Review in 2002, later agreeing to a stronger strategic role for ITOs. At the time of
writing there was still little movement on how the strategic functions would be operationalised
within the performance management approach adopted by TEC.
People involved in the industry training and policy processes systems talked about the way each
part of the system adapted to the change. The polytechnics sought alternative income and
alternative ways of delivering courses for industry. Some polytechnics abandoned their industry
training role and went in search of other students, for example, overseas students. As a result,
polytechnic courses and the student base changed and less trade training was done in
polytechnics.
The ITOs strengthened their relationship with industry and as a result their industry knowledge
deepened. ITO strategies became more sophisticated and more differentiated according to the
industries they covered.
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Not all ITOs were equally good at their job. The firms and industries they represented were not
uniform and there were tensions in the development of individual training strategies. A lack of fit
between an ITO and some parts of industry provided incentives for individual employers or
groups of employers to look for alternative ways to get their needs met. This occurred in the
building industry.
There were polytechnics ready to look at new arrangements with industry. New courses were
developed by polytechnics to fill gaps left by ITOs or meet the needs of firms less well addressed
by ITOs. Thus, there was adaptation in individual polytechnics, and evolution of the polytechnic
system as a whole, as individual polytechnics pursued new strategies to compensate for the
initial ITO changes. Over time, the system evolved into something different from before the ITO
changes were made. Not all of those changes were part of the policy design or desired. Some
changes people regarded as an improvement and a benefit that was not anticipated. These
included strong working arrangements with local government bodies on regional development,
and with specific industries.
At the same time this mutual adaptation involving the polytechnic system and the ITO system
was occuring, the change to open EFTS funding introduced a further opportunity for adaptation
and evolution. ITOs and some firms saw the opportunity to form PTEs. These PTEs were
customised to deliver on a firm’s training needs, thereby reducing the transaction costs in
contracting providers to deliver through ITOs. Under this new arrangement, a firm could transfer
its in-house training, formerly done at its own cost, to a PTE and receive government EFTS
funding. Solutions emerged within the ITO system, without any apparent policy process
intervention, and some were a long way from the intended policy. Some ITOs were no longer
focused on their core role as training brokers – they are training providers. Something new
emerged that the policy had not considered because it did not exist, and the possibilities for it did
not exist when the policy was first decided, and before the system began to adapt and evolve
with the policy.
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