G8’s Gary Carroll talks about transitioning 50k families to the CCS

The Sector Founder Jason Roberts recently caught up with G8 Education CEO Gary Carroll to talk through what it was like supporting 50,000 families in making the transition to the Australian Government’s new Child Care Subsidy (CCS). Below, Mr Carroll highlights the team work required with the government, and the hard work put in by G8’s centre managers, and provides an insight into how he feels the CCS may impact G8 and the early childhood education and care sector.

Interviewee: Gary Carroll - CEOOrganisation: G8 EducationDate: 3 September 2018Topic: CCS Transition

 

Jason: Good afternoon and welcome to Gary Carroll, CEO of G8 Education. We are here to today to talk about the CCS transition from G8’s perspective. So, Gary, what has been your impression of the transition as of today? 

 

Gary: Thanks, Jason. From our perspective I think it's important to understand our assumption going into the transition. We assumed that given the significant level of change, for example: the introduction of an activity test; the changes to the income ranges in the means testing; and, the way that people on different income and activity levels would be affected - would be very significant. We therefore took the position that this would be a really massive change and actually that’s how it's turned out. We had expected the first four to six weeks to be very challenging. Lots of minor issues to deal with and then you add all of those up across 50,000 families, and you end up with a very large volume of issues.

 

Jason: Yes, understood.

 

Gary: So, by now things have settled down a lot. Families are, as a general rule, into the routine. I will give full credit to the Government. They were very responsive and communicated well, particularly in the weeks leading up to and in the weeks following 1 July 2018. I had Gillian Mitchell from the Department of Education calling me regularly. That being said, we as an organisation had some additional challenges to contend with because we moved our childcare management system over from Quick Kids to Xplor in the months preceding the transition. So we had two jobs to do: firstly, we needed to move data over from the old system to the new system; and, then we had to transition from the old subsidy regime to the new one. So it was very busy. The Government were very supportive though. They committed a lot of resources and I can't fault what they've done, and I mean they had their own big system change to contend with as well as is my understanding. So, it went about as smoothly as it could go. I mean none of these things happen without teething problems but for us the little bit of teething problems were pretty much in line with what we thought they would be. 

 

Jason: Great, thanks Gary. That is encouraging. So, if we cast our mind back to May/June last year, was that about the time you commenced your planning? 

 

Gary: Yes, that would be right. Mid- we set up a formal project team and got moving. It coincided with G8 deciding to move to the new third-party software provider. But it is worth noting that the actual CCS start date had been delayed a year. It was meant to kick off on 1 July 2017 but got postponed to July 2018. On one level that was good as it gave us more time, but on another level it precipitated lots of building activity in the sector because people felt there would be a demand uplift from the new subsidy and wanted to take advantage of it. So, the longer the period between legislation and an effective start day, the more at risk from an operator perspective. And I think it's exactly how it has turned out - with is lots and lots of supply.

 

“On one level that was good as it gave us more time, but on another level it precipitated lots of building activity in the sector because people felt there would be a demand uplift from the new subsidy and wanted to take advantage of it. So, the longer the period between legislation and an effective start day, the more at risk from an operator perspective.”

 

Jason: Yes, I see, developers essentially front-running the CCS.

 

Gary: Yes. I mean we're like any property cycle in that sense - where there's a demand signal in a market, people typically act ahead of that signal and then it takes a lot of time to absorb.

 

Jason: Yes, understood. You mentioned earlier that you set up a project team for the transition. Could you share a little bit about what that team looked like?

 

Gary: Yes, of course.  The first thing we did was move Martin Wright, who was previously a regional manager, to a system support role and from there he essentially moved full-time onto the project. We then appointed an external project manager to come in and then we started forming the project team. The team included business system team members, two centre managers, and representatives from the compliance, people and finance teams. We also set up a steering committee that would meet regularly to review progress.

 

Jason: I see.

 

Gary: And remember we were also planning on onboarding the new third-party software system so we were effectively making plans for both. Indeed, the centre managers started very early on and were working with the pilot version of our new third-party software.

 

Jason: I see.

 

Gary: We also had a separate work stream run by the marketing team. They were tasked with communications but also exploring how our offer may evolve on the back of the CCS. So that team started researching what that could potentially look like. 

 

Jason: Yes, of course. That’s an important consideration.

 

Gary: But the main person that played a role across both was really Martin. He was the key point of contact and key driver. He was supported externally by our participation on a number of working groups set up by the Early Learning and Care Council of Australia (ELACCA), our peak body partner. He headed up the operational impact working group.

 

Jason: I suspect that ELACCA would also have been a useful forum for all members to share generally about their experience.

 

Gary: Yes, that’s right. We would compare notes about what we saw as the changes and the impact they would have. Also, one of the first things we did was to meet with the relevant government departments and try and get an understanding of their timetable, and given that there were multiple departments that proved interesting.

 

Jason: Yes, that’s right because the Department of Education was leading the transition but we also had the Department of Human Services and the Department of Social Services involved.

 

Gary: Yes. That being said they had a pretty consistent representation all the way through. We tried to align with their streams so we had an operations impact team, an IT team, and a communications team. There were a few moving parts so a fair bit of choreographing that needed to happen.

 

Jason: Yes, I see.

 

Gary: Engaging with ELACCA was good for us. We really got to benefit from the scale of the sector in that sense because someone like Goodstart had really good IT resources that were at the forefront of the IT working group. Whereas G8, with Martin, were effective on the operational implications vis a vis procedure and how all of that works. So, we worked well and it was a good example of how the sector can mobilise quite well. We weren't competitors around that. We're all trying to work on it together and the government was supportive as well. They were  clearly trying to do the right thing by all the operators.

 

“...it was a good example of how the sector can mobilise quite well. We weren't competitors around that. We're all trying to work on it together and the government was supportive as well. They were trying clearly trying to do the right thing by all the operators.”

 

Jason: I see.

 

Gary: And from what I understand the third-party software providers had the same sorts of arrangements in place. All the major providers got equal access. I mean it will be fascinating to see in 12 months’ time what the fallout is. Arguably, we've got a lot more time on our hands now. We've gone through it. But no one can predict what the new CCS is going to function like because it's so different. In theory, we won't get the drop off we have historically experienced from the Child Care Rebate being used up, but it specifically excludes certain high-income people from the benefits and families with only one working parent - but what that means in terms of bookings is uncertain. Even in the early days it’s been very clear that operators are being impacted very differently depending on the demographic they service, and their fee structure, and all of that is quite interesting to see.

 

Jason: Yes, understood. Ok, so as we move into 2018 I get the sense that you and your team were on the front-foot planning wise. The first hurdle on the horizon from a process perspective will be the Provider Digital Access (PRODA) registration with the Department of Human Services. How did you guys approach the challenge of getting the team PRODA registered?

 

Gary: Well, first step for us was confirming the exact requirement because there were various interpretations out there. That was important to us because as a large multi-site operator we needed to understand exactly who was required to register - whether it be the nominated supervisors of each centre or the senior executive for each centre. At one point we thought we could limit the number of PRODA registrations to centre managers but then another version came out and said it has to be all the way up the chain of command.

 

Jason: I see.

 

Gary: So, once we got clarity we just got on with it. Once again, Martin did a great job planning it and co-ordinating. The key for us was giving people enough time and thenprovide support as required. It turned out that the executive team were required to register so we started the process and then the others followed. I mean, with us not being the most technologically adept people out there - if we can do it then really anyone can do it. And then it was just relentlessly following through. We didn't have to convince anyone on the why, Jason, like we know why we needed to do it. We just turned it into a routine and we got it done.

 

Jason: Well, yes, but it is a nice dress rehearsal for the big event on the 1 July because the PRODA registration was a hard deadline, and it had to be done. So, with PRODA out of the way, the next big focus is the implementation of the CCS on 2 July. How did the run up to the ‘go live’ go for you and your team?

 

Gary: Ok, so let’s break that down into the key stakeholders: the third-party software provider, the centre managers, and the families. With regards to the third-party software provider, we were using Xplor and they were always at the forefront in terms of getting their certifications. That was important and very helpful for us. They got their configuration completed as early as you possibly could and that gave us more lee-way from a systems perspective. With regards to our communications, we really started cranking up about two months out from the ‘go live’ date. It was important we raised the profile of the transition with our families in a prominent and appropriate fashion. So, we commissioned a campaign poster with a ‘trains leaving the station’ theme and had them placed in the centre foyers. They were large and colourful and fun, which went down well. That seemed to get the attention of our families and kids loved them actually.

 

Jason: I see.

 

Gary: With respect to direct support we set up a dedicated call centre to manage parents’ queries. Queries that came through our website were directed to the government website or to speak one-on-one with our centre managers. We tried to give people choices as to how they went about gathering the information they needed but we also made it very clear what their responsibilities were, for example if they didn't sign up they wouldn’t get CCS.

 

Jason: Understood.

 

Gary: And then we increased the urgency as the weeks went on. We were able to gauge the progress of parent registrations on a centre-by-centre basis. This level of visibility was really helpful in allocating support where it was most needed. We had a great run of registrations up to the second week of June and then it kind of started to stall. In order to address that, the team pulled together some training guides for centre managers who would then approach the parents who were struggling, and use those training guides to take the parents step-by-step through the process. I think we got to 98 per cent of families signed up prior to 2 July which is really good.

 

"We were able to gauge the progress of parent registrations on a centre-by-centre basis. This level of visibility was really helpful in allocating support where it was most needed. We had a great run of registrations up to the second week of June and then it kind of started to stall. In order to address that, the team pulled together some training guides for centre managers who would then approach the parents who were struggling, and use those training guides to take the parents step-by-step through the process. I think we got to 98 per cent of families signed up prior to 2 July which is really good."

 

Jason: Yes, agreed.

 

Gary: That being said, we found out of course in the first week of July that people who had signed up within a few days of 2 July had not been processed by Centrelink and unfortunately their CCS was delayed but that was ok in the end. I think there's actually a great deal of credit to the IT team that developed the communications packs. They were written very clearly and also the centre managers did an amazing job getting parents across the line. They just moved heaven and earth to make it happen. It was really good.

 

“...the centre managers did an amazing job getting parents across the line. They just moved heaven and earth to make it happen.”

 

Jason: OK, good. So that first Monday was OK. How did the second Monday go? I understand that was a much more critical date because in theory it was just after the first CCS payment cycle?

 

Gary: Yes, that right. For us it was more or less in line with what we thought would happen. From a systems perspective there were lots of little glitches and errors. That being said, the Government was terrific and Xplor were terrific, so we navigated that quite well. They both stepped in and helped when required. There were some special cases at the margin like Additional Child Care Subsidy (ACCS) and also the preschool exemption that proved challenging, and there was a general state of confusion on the payments that came from the invoices. Remember that many parents had an expectation as to what savings they would actually receive so when they got their bills through they quickly did the maths. In some cases, the invoices just didn’t feel right to parents and of course they would reach out. So, we made the decision in the lead up that we needed extra teams supporting families during that transition and that seemed to go ok but it certainly was a noisy period.

 

Jason: Is that where the call centre came in or was that centre managers stepping up?

 

Gary: That's a great question. It was actually a bit of both. We had the call centre where calls peaked at a few hundred a day. That says to us that most queries were directed to the centre. And they had to take on a lot of them I suspect, particularly when you have a new third-party software with the billing looking a little different. It's a lot for parents to take in. And also we had a fee increase as well which added to situation.

 

Jason: I see. And how did you manage those families who for whatever reason did not receive their CCS post-transition? Did you estimate their gap and ask them to just pay that or did you ask them to pay full fees, or was it on a case-by-case basis?

 

Gary: It was essentially on a case-by-case basis, with the centre manager working with the family to find the best solution.

 

Jason: And were you able to support any of those families who had zero hours allocated because mum was at home while dad worked?

 

Gary: Our approach here was to educate them on the eligible activities from an activity hours perspective, to see whether the family could legitimately include more activity hours into their calculations and therefore enable them to receive at least some hours.

 

Jason: Yes, I see. That is because there were a range of different types of activity like volunteering and travel that some families may not have been aware of. Ok, so, let's look at the subject of the subsidy itself. Did the introduction and its impact on families prompt you to introduce any changes to your offer?

 

Gary: Yes. We introduced our flexible hours offer at the end of July.

 

Jason: By flexible hours do you mean sessional care?

 

Gary: Yes, that’s right. Given that hours were now allocated based on activity it was important for us to create a system whereby families could seek to optimise the hours received in a way that suited their specific circumstances. So we introduced a 9-hour day, a 10-hour day, or a full day.

 

“Given that hours were now allocated based on activity it was important for us to create a system whereby families could seek to optimise the hours received in a way that suited their specific circumstances. So we introduced a 9-hour day, a 10-hour day, or a full day.”

 

Jason: I see. And are there any fee differentials on a cost-per-hour basis for each package?

 

Gary: Each session has the same daily cost.

 

Jason: Great. And what about fixed start and finish times?

 

Gary: No, we elected to be flexible in that regard too. And also, we have no penalties in place either.

 

Jason: That’s a very simple and generous package Gary.

 

Gary: Yes, we wanted to keep it simple. That was important to us. I understand some of our competitors have taken a different approach and that’s OK by us.

 

Jason: I see.

 

Gary: With respect to those families that were better off, we do not yet have a clear understanding as to whether their booking patterns have changed. We are only starting a deep dive on the data around out-of-pocket costs now. We wanted to give it a little bit of time for all the noise to die down and for the data to be clean before we started. We will very soon be engaging family-by-family with a view to seeing how they can adjust their sessions to maximise their usage. So, we'll be starting that journey now. Up until now, it's been about just supporting them through the change.

 

Jason: Yes, I see.

 

Gary: For people that are clearly winners, its then engaging with them on, "Did you realise you could take an extra day of care for your child at no extra cost?" and you see where that goes.

 

Jason: Great. On the fee side of things, did the CCS introduction and the notion of an $11.77 cap on the subsidy per hour feature in your deliberations as to what the appropriate increase was?

 

Gary: For us it was actually more around bench-marking to our main competitors, particularly given fees at most of our centres are below the cap. We were quite keen to put in an increase below them. We wanted to match our objective of being more middle-of-the-pack and we also wanted a benchmark below the prior years because we think, I mean our broad view Jason, is that operators increasing fees by a lot more than wage inflation every year isn't an overly sustainable model. So, I was keen not to push the envelope so to speak in terms of pricing.

 

“...our broad view...is that operators increasing fees by a lot more than wage inflation every year, isn't an overly sustainable model. So, I was keen not to push the envelope so to speak in terms of pricing.”

 

Jason: Understood. Ok, so as of today things are starting to settle. What about the future? Do you see the CCS actually changing the behaviour of operators and families over the longer term?

 

Gary: Oh, that's a fascinating question because the intent of the subsidy as we know has been positioned as a means to drive workforce participation by making it more affordable for working families. So it's about the bulk of the working population. And our view, Jason, is that it does provide the opportunity for most families to take on additional care at little to no out-of-pocket costs, which we think is a good thing primarily because we're believers clearly in the benefit we bring to early learning for children. We think that we provide a great service that does actually add value to families and if the subsidy makes it more affordable, fantastic. If that drives demand for our services, even better. We will be pretty cautious in the changes we make operationally off the back of the subsidy. So, we think that flexible hours - 9-10 hour sessions - absolutely make sense. We are yet to be convinced about shorter sessions. We think 6-hour sessions are quite challenging to make work for a couple of reasons. Firstly, the impact to the hourly rate that a six hour session would have and what that actually means in terms of whether the families are better off or worse off. And secondly, are we diluting the educational benefits or the learning benefits by shortening the day? Certainly, we're a long way short of moving to a purely sessional model. We think that doesn't actually fit with the intent of the sector and we don't think it fits the intent of the legislation either. I mean, if it's about making it easier for people to go to work then booking your child in for an hour or two doesn't feel to us like the parent is actually going to work. So, we think the sector will be reluctant about moving to a fully sessional model and by that I mean hourly.

 

Jason: Yes, I see.

 

Gary: The big question is will it bring people that are currently not using early learning services into the sector? Has it made a big enough difference to convert them? And on that we still are not convinced. It's absolutely made a positive benefit but has it moved the needle enough for people to go now it's truly affordable? We are not sure. It will be fascinating to see. In the meantime, we think the best thing we can do is improve the quality of what we provide both in terms of our assets and more importantly our educators and our centre managers. That'll be the best thing we can actually do for the families.

 

Jason: Thank you very much for your time and insight Gary. It’s much appreciated.

 

Gary: My pleasure Jason.

 

[ENDS]