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JEXIT

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In case you hadn’t heard, my position as CEO of the IHLS Group ended – rather abruptly, it has to be said – a few weeks ago. After 26 years in the role this represents a profound change, both for me and for most of the IHLS team. The reasons behind the change are many and various; suffice it to say that my business partners and I have had serious differences of opinion for some time about how we should deal with present challenges, and the sort of route we should take going forward. They eventually decided that they would better be able to push ahead with their own agenda without me – which makes perfect sense. Time will tell if their decision pays off.

This unforeseen change caused ripples which stretched way beyond my immediate circle. Dozens of people from all over the world have sent messages expressing their sense of shock and incomprehension. One of the most memorable said “It’s as if they’d decided to take the Eiffel Tower away from Paris”. (I assume the author wasn’t simply referring to my height.) I’m truly grateful for all the support. I’ve even had a couple of tentative job offers!

Which brings me rather neatly to my next point. What do I do now? Well, Plan A is to try to negotiate a share swap with my partners so I get to keep some of the companies in the group and they keep the rest. That would leave everybody with something to work on. I could then set about expanding my own group of companies. But this sort of negotiation is easier said than done. While I have no interest in holding a minority stake in a group of companies that I’m not able to influence, my partners may have no interest in dividing the group, for all sorts of reasons.

Plan B is to start again, either alone, or with other partners. People ask: “But don’t you want to retire? Do you really need the hassle of starting another business?” My answer is simple: I love doing all sorts of things – travelling, gardening, reading, watching sport, playing music – but these are never going to be more than hobbies. I seem to have been genetically programmed to start and manage businesses in the field of international education. That’s what I do. And to a certain extent, what you do (and how you do it) defines who you are.

Watch this space.

 

 

 

Musings on pricing

pexels-photo-259092.jpegHow much should a language course cost? Needless to say the answer will depend on all sorts of variables: how long the course lasts; whether it is face-to-face, online, or a mixture of the two; where it takes place (country, region, town/city, location); whether the teacher is professionally qualified; how many students are in the class; whether the course is a standard ‘general’ language course or something more specialised; whether materials are included in the course fee; and so on.

For the sake of argument, let’s assume we’re talking about a general, ten-week semi-intensive course which consists of 100 hours’ face-to-face tuition, given by a professional language teacher in a private language school located in the centre of a mid-size town in the south of Europe, with a maximum of 10 students in the class. How much might a course of this description cost?

An easy response would be to say: ‘as much as a typical student is prepared to pay’. But what’s a typical student? Someone who is paying for her own course or having it paid for her by her company or parents? Someone who desperately needs to take a course to pass an exam? Or someone who is studying for no obvious reason?

Again for the sake of argument, let’s assume our typical student is a young adult who wants to improve her career prospects and her ability to communicate on her travels, but doesn’t have any urgent need to demonstrate her skills and is paying for her own course. How much could she be asked to pay for the course outlined above?

Is there any way of calculating a ‘Goldilocks price’ that is not too cheap (so the school ends up losing income unnecessarily) or too expensive (so that the student is frightened away)? This ‘just right’ price should help the school generate the sort of margin it needs to provide its services now and in the future, while giving the student the sensation that she’s getting good value for money. So what? More than 500 but less than 1,500 euros? That still leaves quite a wide range of possibilities to choose from.

There are dozens of pricing strategies designed to help companies determine the price of their goods or services (see for example http://bit.ly/2owp5Wz). A couple of the most familiar are cost-plus pricing and value-based pricing.

Cost-plus pricing is relatively straightforward: first work out your direct costs (the cost of the teacher, primarily, but also such items such as photocopies for students, course-specific advertising campaigns, etc.) and divide this by the average number of students per group. Let’s assume these direct costs come to 25 euros per hour and the average number of students per group is 5. Direct costs per student hour are therefore 5 euros. Next calculate your overheads or indirect costs (which means everything that isn’t a direct cost, such as your rent, lighting, administrative staff costs, etc.) and divide this by the total number of student hours you have over a given period (could be a month, a term, or a year). Let’s assume this adds another 3 euros to the cost per student hour, making 8 euros in total. Adding a gross margin of 25% will put 2 euros onto the total cost, giving a selling price of 10 euros per hour, or 1,000 euros for the 100-hour course. Sound reasonable?

The answer to this question will most probably be: that depends how much other schools in the same location are charging for a similar course. If a local competitor has lower salary costs and/or lower overheads and/or is happy to work with a lower margin, they could be offering a very similar service for as little as 600 euros. That’s a whopping 40% less.

So should we base our prices on what our competitors are charging? Well, we should certainly know what the going market rate is. But the danger of basing our pricing on what the guys down the road are doing is that it can easily lead to a price war, or a race to the bottom, leaving margins wafer thin or non-existent, and staff feeling underpaid, unappreciated and unhappy.

An alternative to a cost-plus pricing strategy is value-based pricing. This is based on the idea that the client (student) will pay in relation to the value she obtains from the service (course) she is receiving. In the case of a 100-hour language course, the primary value will most commonly be defined in terms of how much progress she has made developing her language learning skills. That can be measured in broad terms by progress tests and/or continuous assessment, but it will probably also involve ensuring our student feels that she’s made significant progress.

Other factors that contribute value will be less obvious but may be just as important: Is she enjoying the course and enjoying interacting with her teacher and the other students? Is the learning environment clean and comfortable? Does the timetable fit easily into her other commitments? Are the reception staff efficient and welcoming? Is the school easy to get to, and/or easy to park near? Does the school offer extra-curricular services and activities such as social events or access to digital study materials outside classroom times?

The value of all these additional factors can also be measured to an extent, but in many instances it could boil down to individual attitudes or preferences. So objectifying all these values can be tricky, never mind attaching a price to them.

As we all know, perceived value can also be heavily influenced by brand recognition and advertising. Car A may be objectively better (more fuel-efficient, more reliable, more spacious, faster …) than car B, but if car B is branded Mercedes or Range Rover (for example) it is likely to command a premium price.

Building brand value is easier said than done. It requires both delivering services that are perceived to be better than average (in some significant way) and communicating these differentiating values clearly and effectively. What’s more both delivery and communication usually need to happen over a prolonged period of time. But if we’re successful at enhancing the perceived value of our brand, the price of our sample course could be closer to 1,500 than to 500 euros. And no-one will complain.

Catalonia today (6th October, 2017)

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Having lived in Catalonia for nearly 40 years, I feel I might be able to offer some insight into the current turbulent situation, albeit from the perspective of a semi-outsider who is mainly concerned about the impact this turmoil could have on our business.

A slice of context first: Up until the global economic crisis of 2008, the vast majority of Catalans were more or less content with the degree of political autonomy the region enjoyed. The Catalan government controlled many key ministries such as education and culture and the Catalan language had been restored to pre-Franco levels of use. In opinion polls only around 10% of Catalans supported pro-independence movements, despite the fact that Catalonia was a net contributor towards Spanish state finances.

The financial crash turned everything around. Hundreds of businesses went bankrupt, unemployment soared (especially among young people) and both the central government in Madrid and the Catalan regional government were forced to adopt unpopular austerity measures.

Suddenly the difference between the amount of money Catalonia contributed to the central government and the amount it received back, became a burning issue. If Catalonia could only keep more of the wealth it generated, the argument went, there would be less need for austerity, and the mountain of debt that the Catalan government had built up could also be reduced. (Parallels with the Brexiteer’s attitude to the EU are strikingly obvious.)

A wide spectrum of Catalan politicians ranging from centre-right Christian democrats to anti-system leftist extremists saw their opportunity to gain support by fanning the flames of popular resentment, pointing the finger of blame at the government in Madrid, and arguing that independence was the only solution. Their task was made easier by the countless corruption scandals that surfaced from Spain’s governing Partido Popular party and the lacklustre performance of its leader, Mariano Rajoy. Of course the Catalans had almost as many corruptions stories of their own to digest, especially from the now defunct centre-right Covergencia i Unió party, but that simply provided the left-leaning separatist parties in Catalonia with more ammunition to fight their own, local battles.

A proposed change to the Catalan Statue of Autonomy that would have recognised Catalonia as a nation within Spain, and which was initially approved by the Spanish parliament, was overruled by the Spanish constitutional court in 2010 at the behest of the PP. This was a slap in the face for many Catalans and added a large amount of fuel to the already smouldering fire.

In the last elections for the Catalan Government, those parties in favour of independence won a majority of seats, although not a majority of votes. Despite not having a clear, popular mandate, the multi-party coalition government decided to press ahead with a route map towards full independence. A key step in the process was to hold a referendum, which would ask the local population if they were favour of forming a new Catalan Republic or not. The Spanish constitution in its current form (a document negotiated in its day by representatives from all over Spain, including a number of eminent Catalan politicians) doesn’t allow for this sort of separatist referendum and predictably enough, the Spanish government asked the courts to declare the proposed referendum illegal.

For their own political reasons, neither the Spanish government nor the Catalan government decided that it was in their interests to seriously attempt to find any middle ground so, despite some largely ineffectual attempts by the Spanish government to prevent the referendum taking place, it went ahead as scheduled last Sunday, October 1st.

Around two million Catalans turned out to vote, many of them queuing stoically in the rain for hours on end. This represented around 42% of those eligible to vote. Most polling stations were left to get on with it, but the police who had been drafted into the region especially for the occasion, attempted to disrupt voting in a significant number of locations. Sickening images of policemen in full riot gear kicking and beating people who were trying to block their path, throwing would be voters down stairs, or pulling peaceful protestors along the ground by their hair, soon filled the world’s social media. What purpose this outrageous behaviour was supposed to serve is anyone’s guess, but it certainly backfired.

So while the turnout didn’t exactly give the Independence movement a clear and unambiguous mandate to push on with their ambitions, the brutish behaviour of the police has given them yet more emotionally charged reasons to proclaim the merits of their case.

Where will it all end? No-one yet knows, but the political chasm is wider than ever and neither side is showing any inclination to back down. The Catalan government is threatening to declare unilateral independence in the next few days; the Spanish government says it won’t give in to blackmail.

Catalans frequently describe their culture as being dominated by ‘seny’ which is akin to common sense or reason. A little more of that on all sides wouldn’t go amiss.

Personally, I feel a profound sense of sadness. It’s not quiet despair, but I don’t see too many reasons to feel optimistic either. Popularism merged with nationalism is rarely a pretty sight. And while I can empathise to an extent with the Catalans’ sense of grievance (especially after the horrific scenes from last Sunday), I can’t sympathise with the way that many of their politicians are attempting to deal with it.

A slim majority of the people who live in the region probably feel equally disillusioned with the way the political landscape is evolving. But this slim majority has been largely silent up to now.  The protestors, the ones making nearly all the running, are the people who think that the answer to their problems lies along the separatist path. Many of my friends, colleagues, clients and neighbours are in this camp, which makes it rather hard for me to express a divergent opinion. But I’m not convinced that separatism will solve anything. On the contrary, I’m concerned that it could easily plunge the region into a deep and long lasting recession, which would make a difficult situation a whole lot worse.

Why it’s good to be green

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Back in 2007, on my way home from the ICEF workshop in Berlin, I was trying to think of new ways that we could make IH Barcelona stand out from the ever-increasing crowd of private language schools offering Intensive Spanish courses in our fair city. Having spent the previous few days in environmentally conscious Berlin, an idea occurred to me: we could perhaps become the world’s first accredited environmentally friendly language school. This could have three real benefits:

  1. It could become a useful marketing tool, helping us attract environmentally conscious students from other parts of the world.
  2. It might help us lower some costs, by cutting back on the amount of paper, water and energy we use.
  3. It would lessen the impact our activities have on the environment and, as the slogan says, every little helps.

Having spent some time researching options, we eventually decided to go for EMAS which is the European Union’s Eco Management and Audit Scheme. To summarise what this involves:

  • We have to publish an Environment Policy which specifies our aims and approach
  • We have to set ourselves targets to reduce the consumption of energy, water, paper and so on.
  • We have to recycle everything that can be recycled
  • We have to ensure that we avoid purchasing products that can be damaging to the environment (e.g. cleaning materials) and replace them with products that are as benign as possible
  • We have to keep detailed records of all of the above and undergo two external audits each year.

We almost certainly were the first language school in Spain (if not the world) to achieve EMAS accreditation and we have now been on the register for 8 years.

So have the benefits we anticipated from adopting this policy materialised? Yes and no.

  1. Our Eco-friendly policy probably hasn’t as much impact as a marketing tool as we originally hoped, although these things are notoriously difficult to gauge. One corporate client once told us that they had chosen us to be their provider as they were also on the EMAS register. But that’s just one case of our environmental policy having tipped the buyer’s decision in our favour. Has this policy influenced other clients in some shape or form? Our surveys suggest it might have, but not to any great extent.
  2. While we’ve clearly lowered the amount of money we spend on utilities and consumables, we’ve had to spend rather more money than we’ve saved. Primarily because we’ve had to employ a part-time (but extremely enthusiastic) Environment Officer to oversee and manage the whole process. Secondly because the cost of the external audits isn’t exactly cheap.
  3. The area where the policy has probably been most successful has been on lessening our impact on the environment. We have reduced the amount of energy we use in relation to student numbers consistently, year on year. The same with water and paper. We still have room for improvement – we still can’t persuade all our staff and students to always switch the lights off when they leave a room; and the amount of paper we use still seems excessive to me. But there is definitely a greater awareness of these issues in the school and while there will always be a number of cynics, peer pressure to consider how our behaviour impacts the environment increases each and every year.

So has it all been worth it? On balance I believe it has. We’re not about to stop global warming on our own, but at the very least we’re able to help raise awareness and we’re seriously trying to set a good example.

As our slogan says “The Earth is our International House”.

For more information on EMAS: http://ec.europa.eu/environment/emas/index_en.htm

To see our environment policy: http://www.ihes.com/bcn/medioamb.html

 

Where have all the adult students gone?

The EFL industry in Spain enjoyed a mini boom during the early years of the global economic crisis as many adult students rushed to improve their English language skills, either to get themselves back into the job market, or else in an attempt to hang on the job they had. As we reached the new decade, the boom slowed down and then started to tail-off. But no-one expected the sudden and significant drop in adult student numbers that hit the industry at the start of the current academic year.

The drop wasn’t school, city, or even region specific; it was the same story all over Spain. And the numbers were eye-watering. Depending who you talk to (and/or who you believe) adult student numbers fell by between 10-20%. Enough to make any school owner or manager wince.

What happened? Where did all these students go? Well, as is normally the case, there is no one, simple answer. There has been a slight upturn in in-company teaching, so it may be that some students, who were previously paying for their own courses in our schools, are now studying in their company (if they’re fortunate to have a job in the first place; Spanish unemployment is still well over 20%.)

The standard of English teaching in main-stream education is also getting better, slowly, so it may be that there are more school leavers who have achieved a basic level of communicative competence.

Some adult students – especially the younger ones – may also have decided to switch from a traditional, bricks and mortar language school to a Web-based classroom.

My own theory is that it’s the free movement of labour in the European Union which is having the greatest effect on our market. In other words, as there so few jobs available in Spain, hundreds of thousands of young adults – many of whom may previously have been our students – have simply upped sticks and gone abroad to find work.

A recent survey conducted in the UK indicates that migrants from Spain rose to 137,000 in 2015 (up from 63,000 in 2011). Most of them are probably working in relatively unskilled jobs in hotels, bars and restaurants, but at least they’re working – and they’re improving their English language skills as they go.

A similar number probably emigrated to other countries in the north of Europe and another significant number emigrated to Latin America. Add up all these emigrants and we could be looking at a total of well over 300,000 migrants – just in 2015.

On a recent trip to Oxford I met a young Spanish guy, working in a hotel, who had previously been a student at our school in Barcelona. He’s a typical example. Will he ever move back to Spain, I asked him? Perhaps, in the future, he said, but only if the situation in Spain changes and he can find a decent job. His new fluency in English, learnt by living and working in Oxford, might just help him with that.

So where does that leave Spanish language schools? Will adult students come back to our schools in the same numbers as before? Probably not. But that doesn’t mean we have to give up on this market. If adult students won’t come to us, we can use the Internet to take our services to them. Even those living and working abroad.

Accreditation – who needs it?

As avid readers of this blog will know, I’m responsible for a company called Net Languages that has been developing and delivering Web-based language courses for over 18 years. During this time we’ve established ourselves as a reputable company that knows what it’s doing and delivers an effective and reliable service.

One of our sales representatives recently suggested that it would make it easier for him to compete with some of the many new-comers to our market if our courses were accredited by a reputable university – preferably from an English speaking country. He’s probably right. We all know that the word ‘university’ has almost magical properties.

That said, I honestly doubt there is a single university out there that knows as much about second language acquisition and how to deliver effective Web-based language courses as we do. So if we decide we need ‘accreditation’ what we’re really talking about is a straightforward commercial arrangement i.e. paying for the respectability that the word ‘university’ conveys.

As most universities are struggling to make ends meet, it shouldn’t be too difficult to find one interested in the idea of charging us a fee to add their seal of approval to our courses – even if they don’t know too much about it.

Organisations like the British Council, the Instituto Cervantes, EAQUALS, or International House provide meaningful accreditation to bricks and mortar language schools, as most (if not all) of these organisations do know what they’re doing. They perform rigorous inspection visits, evaluate schools’ performance and help raise standards. But the field of Web-based language teaching is rather less well catered for.

Perhaps I should start an independent accreditation scheme for Web-based language courses. But I’ll probably just go and find a university.

Butterflies in a storm

Civil war breaks out in Syria (for all sorts of reasons) causing thousands of casualties, mass migration and unimaginable hardship. A group of fanatics who claim to be inspired by the Koran, but who seem to be motivated primarily by their own blood lust, attempt to fill part of the power vacuum and create “so-called Islamic state”. A number of countries, including the USA, France, Russia and Iran, form an unlikely and largely uncoordinated coalition, which aims to obliterate the fanatics. This provokes fanatics elsewhere to blow up a Russian plane full of tourists and cause mayhem and mass murder in Paris. So far, so horribly familiar.

So what has this got to do with the language teaching business? Well, as a direct consequence of the horrendous events outlined above, a number of students from both France and Russia have written to us saying they are very sorry but they have been advised to postpone or cancel their courses. In some cases, whole groups of students have called off their trips.

This is collateral damage of a very mild kind and in no way compares to the tragic events going on elsewhere. But it does go to show how we are all hostages to fortune. As managers of a small, far-away business, there is absolutely nothing we can do to prevent geo-political turmoil, any more than language schools in the north of England and Ireland could prevent a volcano in Iceland disrupting their business a few years ago.

Of course it’s not just language teaching companies that are taking a hit; any business that involves international travel will be feeling the effects, some much more than we are. Just imagine how many empty hotel rooms there must be in Sharm El-Sheik at the moment.

Disruption can of course be triggered by events closer to home as well. Business can be blown off course by local political uncertainties, changes to legislation, technological innovation and a whole host of economic tremors including inflation, deflation, currency fluctuations, interest rate hikes, unemployment, sovereign debt levels… the list is almost endless.

So are we just butterflies in a storm, being blasted whichever way the wind blows hardest?  Is there anything we can do to prepare for outrageous fortune’s slings and arrows and plan our way out of trouble?

Many large organisations engage in ‘what-if’ planning, or PEST analysis, but I’m not sure that many language schools do. Perhaps we should give it some thought.

Here are a couple of links to help get you started:

http://www.businessballs.com/pestanalysisfreetemplate.htm

https://www.mindtools.com/pages/article/newTMC_09.htm