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A framework for considering vocational training for self-employment

 

John P. Grierson and lain McKenzie

Self-employment, training and small enterprise development

Much has been learned in recent years about enterprise development and much of the long-standing wisdom is still valid. First and foremost, the evidence past and present continues to affirm that all types of enterprise development initiatives benefit greatly from maximising their involvement with local markets and local communities. This principle applies also to successful vocational training, but must be elevated to an imperative in the case of VTIs training for self-employment (ILO, 3 December, 1993c). The conventional wisdom on using proven approaches and on clear identification of target groups is still conventional and still wise: 'Those who are anxious to promote small enterprises should always look first at existing practices and institutions rather than attempting to create new ones' (Harper, 1984). 'The most effective projects ... are responsive to the plans and desires of those they serve and reflect the level of skills and knowledge that commonly exists in the community' (Farbman cited in Remenyi, 1991). Beyond these basics much has been learned about micro-credit delivery and traditional apprenticeship training techniques, about entrepreneur and project selection, and about the need for follow-up - and about many other aspects of a diverse and complicated field. Some of these issues will be touched upon in the following essays and case studies. Collectively, the current knowledge about enterprise development design and practice constitutes perhaps the most important single contribution to the self-employment re-orientation learning process that many VTIs are struggling with today.

Design is important. Though this simple statement invites little dispute there is often a considerable degree of mismatch between the conventional wisdom and common practice. Many self-employment programmes offer only low-level, scheduled, generalised, often standardised services. This approach seldom addresses the real needs of small and micro-enterprises. Characteristically, both new and existing enterprises want quick, short-term, moderate-to-high level, specialised services that are tailored specifically to their immediate needs. 'It therefore makes no sense to work out in advance a standardised action plan for all enterprises covering discrete aspects of their promotion (i.e. credit, training, technology, technical advice or market access)' (Maldondo, 1993).

The art of self-employment promotion lies in designing flexible systems that can accurately determine needs on an individual or target group specific basis, and provide the minimum necessary increments of tightly targeted assistance in timely, convenient fashion. Though the best of the micro-credit programmes have dramatically demonstrated that it can be done, it will not be easy for VTI self-employment programmes to emulate their successes. Training, unlike credit, is a very heterogeneous 'product', and thus much more difficult to design, target and deliver effectively. The hurdles in the way of doing so include:

a) correctly identifying and selecting appropriate target groups;

b) developing mechanisms that will accurately identify emerging economic opportunities;

c) designing training programmes of suitable type, duration and level of sophistication; and

d) developing low-cost local capacity that can provide follow-up services to embryonic enterprises.

Formal vocational training, whether private, NGO or public sector, remains fundamentally focused on wage employment. Self-employment, when it occurs, is at present largely an unintended by-product. If VTIs are to reorient themselves to self-employment there is much that must be learned from the field of small enterprise development. In training for self-employment informal approaches have enjoyed rather more success than formal institutional approaches, not least because most informal programmes have self-employment or micro-enterprise creation as their primary objective. Most do not identify themselves as training institutions, much less VTIs. Correspondingly, few VTIs identify themselves as enterprise development or self-employment institutions.

There are three common approaches to training for self-employment, two that are typical of public sector and NGO programmes, with the third found largely in the market itself. Broadly categorised these three approaches are:

a) general training in entrepreneurship, often in combination with business plan development and sometimes credit;

b) NGO and project-based skills training, again, often in conjunction with business planning and credit assistance; and,

c) various forms of enterprise-based training, particularly traditional apprenticeships.

Ahmed Ferej, in his essay in this volume on traditional apprenticeships in Kenya, outlines the fundamentals of what is, in one form or another, the most broad based and culturally embedded form of training for both employment and self-employment. Enterprise-based training is the approach commonly used by the self-employed themselves, most of whom will never receive assistance from a self-employment programme. It is worthy of note that none of these commonly used approaches places much emphasis on formal institution-based vocational training. Acknowledging this reality helps place in perspective the challenge of re-orienting vocational training institutions to self-employment.

There is an obvious mismatch between formal training methodologies and 'normal' processes of skill acquisition. This mismatch is conspicuous in at least two areas. Formal training is typically theoretical and institution based, while the skills needed for self-employment commonly emerge from an informal process of enterprise-based practical training. Formal training programmes favour structure and plans, while micro-enterprise skill acquisition and, indeed, enterprise formation, is typically an erratic, iterative process that seldom proceeds according to plan (Gibb and Ritchie, 1982). Though much of the evidence argues in favour of adopting training approaches that conform to natural processes of skill acquisition, most VTIs are bound by structures and methods derived from bureaucratic imperatives. Typically, flexibility is quite limited. Together these factors do much to explain why the state-of-the-art in vocational training for self-employment is so modest.

There is, however, a large body of relevant experience in related areas such as institutional networking, traditional training methodologies, enterprise networks, and enterprise development, that VTIs can and should draw upon to balance their modest limited experience and increase their operational flexibility (ILO, 3 December, 1993b). In his case study of Colombia's Servicio Nacional De Aprendizaje (SENA), Jaime Ramirez-Guerrero describes how a solid base of self-employment experience has been built up by drawing together many independent capacities into a dynamic national network.

In spite of considerable diversity of programme design and approach, basic issues are often reasonably clear. It has been adequately demonstrated that it is neither efficient nor effective for individual programmes or institutions directly to provide multiple support services (McLaughlin, 1989; König, October, 1992). Impact and efficiency follow focus and specialisation. Integrated packages of services seldom work well, are prohibitively expensive, are extremely difficult to staff and manage, and in any case, cannot hope to reach the huge and growing numbers of aspiring entrepreneurs (Tendler cited in Levitsky, 1989). Cost and complexity make sustainability unlikely (Boomgard, 1989). Operational and sustainability issues are not the only risk of overly complex approaches. The adoption of integrated and 'package' approaches often implies transformational change (which) 'will not be suitable for all vocational training institutions' and is not 'suitable for reaching the large majority of people who are likely to be involved in the informal sector' (McGrath et al., 1995).

The priority concerns of aspiring and existing entrepreneurs are various combinations of credit, market access, management skill, technology, and assistance and opportunity providing networks and linkages. Training is seldom part of the priority package, even though it may well be the base on which successful self-employment is built (King, 1984). VTIs should recognise that technical training is a specialised service, not a general one, and design their approach to self-employment accordingly. VTIs should focus on their core competency - training - but do so in close coordination with other institutions. The multiple needs of the aspiring self-employed are best met by networks of institutions providing complementary self-employment services (ILO, 3 December, 1993c).

Approaches based on cooperation and networking among institutions specialising in complementary services are increasingly the norm, reflecting both the growing sophistication of self-employment practitioners and the increasing pressures for programme efficiency. Oscar Corvalán describes how this is being done in Chile, through a national network of inter-related agencies, private institutions and enterprises; and Dinesh Awashti provides Indian examples of the benefits of inter-agency and market networking - and of the pitfalls of not doing so.

A well regarded study of 57 projects in Africa, Latin America, Europe and Asia found that effective small enterprise development institutions linked training with counselling, finance, and other forms of support, 'not as a bureaucratic service' but through linkages and networks (Gibb and Manu, 1990). Effective programmes complement their own specialised services by stimulating network and linkage formation, rather than by providing packages of services (ILO, 3 December, 1993b). The late Charles Abban and James Quarshie, in their case study from Ghana, describe how the Ghanaian National Association of Garages have drawn three quite different institutions together into a network offering a broad-based programme of support to the auto mechanic's sector. Effective networks of support services are a natural outgrowth of interaction among enterprise promotion agencies, local markets and local communities.

Anticipating re-orientation: Stages in the training for self-employment process

The widely acknowledged mismatch between the training on offer and labour market demand (Reich cited in Carnoy and Fluitman, 1994) may not be the fundamental failing in the design of vocational training for self-employment programmes. There is often a more basic mismatch, that between the aspirations and abilities of VTI trainees, on the one hand, and the opportunities that self-employment training and follow-up services offer them, on the other. Put bluntly, many VTI trainees do not aspire to self-employment and do not want self-employment services. That this reality is a commonplace serves both to highlight the different stages in the vocational-training for self-employment process, and to provide the basis for a framework for determining how VTIs can best re-orient themselves to self-employment.

There are three broad stages in the training for self-employment process:

• The Selection Stage;

• The Training Stage;

• The Enterprise Stage.

The Selection Stage involves the criteria used and decisions taken regarding target group identification, and the systems used to choose those to be trained from among those who qualify to receive assistance. The Training Stage involves the delivery all forms of vocational and technical training, whether institution, project or enterprise-based. The Enterprise Stage involves all actions taken, services provided and support offered to help initiate self-employment and to provide follow-up assistance during the critical initial period of enterprise 'birth and survival'.

Interventions in favour of self-employment re-orientation can focus on any or all of these three stages. The point of intervention, and the nature of the intervention, have considerable influence on the degree of self-employment success a VTI is likely to achieve, as well as on the costs and complications of the institutional changes involved. All self-employment programme design decisions are de facto decisions to intervene - or to avoid intervening - at one or more of the three stages in the self-employment process. The three stages are shown in sequence, in Diagram 1, below: Assessment Framework for Vocational Training for Self-employment:

Diagram 1

Assessment Framework for Vocational Training for Self-employment

(1)

(2)

(3)

Selection

Stage

Training

Stage

Enterprise

Stage

Initial

Interim

Ultimate

Objective

Objective

Objective

Higher Education

Training for

Further Education

Wage employment

Wage employment

Wage Employment

Self-employment

Training for Self-employment

Self-employment

Diagram 1 represents the need for consistency during all stages of the training for self-employment process. Ideally, those expected to become employed should be selected, trained and further assisted based upon their wish and potential to become employed. Correspondingly, those aspiring to become self-employed should be selected, trained, and assisted with the consistent objective of self-employment in mind. The actions taken, and the systems used, at each of the three stages in the process vary considerably depending on whether or not the objective is employment or self-employment.

In Diagram 1, when self-employment approaches are consistently applied, self-employment preparation is a horizontal linear process. The efficiency of the self-employment process is reduced when it is not; that is, if the approaches used in either or both Stages (1) and (2) are not consistent with the ultimate objective specified at Stage (3). In such cases the progression from selection through to enterprise will involve one or more 'inefficient' diagonal movements, as shown below in Diagram 2: Reduced Self-employment Re-orientation Efficiency:

Diagram 2

Reduced Self-employment Re-orientation Efficiency

(1)

(2)

(3)

Selection

Training

Enterprise

Wage Employment

Training for

Wage Employment

Wage Employment

Self-employment

Training for Self-employment

Self-employment

All diagonal movements represent reduced efficiency. For example, as shown above, interventions to re-direct those selected for wage employment in Stage (1) to self-employment in Stages (2) or (3) will not be efficient. Similarly, selecting and training for wage employment in Stages (1) and (2) is not likely to be an efficient approach to self-employment, even if self-employment assistance is provided (as an 'add-on') in Stage (3) Stage 3 interventions, particularly when the training is institution-based, are characteristically complex and costly in terms of staff and equipment requirements, changes in curricula, and in organisational practices. Stage (2) interventions, made in isolation, can be both costly and inefficient.

In cases where the logic of linear consistency is not applied throughout, inefficiency, in the form of high relative unit cost (per person successfully self-employed) and low relative impact, will be the likely result. Or, more succinctly put: the added costs and complications of an inefficient self-employment design will probably not result in many new micro-enterprises. Though the evidence is largely anecdotal, it is probable that the later in the self-employment process self-employment re-orientation interventions are first initiated, the less likelihood that they will achieve the desired result. The sheep must be separated from the goats early on; it is unlikely that they can be changed into goats late in the process.

The design principle that emerges is:

When self-employment is the ultimate objective self-employment programmes should make every effort to select those with self-employment potential in Stage (1), give them appropriate preparation for self-employment in Stage (2), and use techniques that provide them access to follow-up support in Stage (3).

It is worthwhile to bear this seemingly obvious principle in mind, not least because it is seldom rigorously applied in practice. As many project reports and evaluation studies attest, the reason lies not in any general misunderstanding of the logic involved, but in the practical hurdles that bar the way to doing so. These hurdles are considerable and should not be underestimated. Formal vocational training systems are characteristically complex, rigid and bureaucratic. Hence, from a bureaucratic or systemic point of view, Stage (3) interventions are amongst the easiest forms of self-employment support to initiate, and an easy and obvious place for VTIs to begin the process of self-employment re-orientation. Most Stage (3) interventions do not disrupt normal vocational training processes, they merely add to them. But, while it is reasonable to expect many VTIs to begin at this point, it is also reasonable to project that success, in terms of new self-employment, will be modest. The least efficient approach to vocational training for self-employment might well be that of only adding-on support services at Stage (3), with a view to altering the ultimate objective late in the process. Nonetheless, the importance of the ease of entry into the process of self-employment re-orientation may, at the outset, override the inappropriateness of initiating Stage (3) interventions alone.

To be sure, there are other relatively easy entry levels re-orientation options. It would, for example, be relatively easy to alter the controlling criteria at Stage (1) (selection) thereby creating specific opportunities for those with self-employment intent and potential. The advantage of such an approach, in spite of the inevitable political and bureaucratic obstacles to altering admission and selection policy, is that it is arguably the easiest 'efficient' approach to reorienting vocational training systems to self-employment. Such an approach would not, however, tend to yield either visible or quick results. The impact of a Stage (1) (selection) intervention alone might not be seen for several years. A pilot project designed to test the merits of intervening to select for self-employment as the single self-employment re-orientation intervention would need to include careful monitoring of the newly created self-employment stream. The self-employment selection criteria, a complex and uncertain area, would be of critical importance.

There are no properly scientific methods of entrepreneur selection, though there are many hundreds of systems in active use and steadily improving general guidelines. Selection remains, however, an uncertain area with much disagreement about the importance of various criteria. Age, for example, appears to be under-estimated as a constraint to self-employment creation. Conversely, work experience, is a known asset and useful predictor of self-employment potential (Mead et al., 1993). Both lack of experience, particularly work experience, and cultural norms make the handicap of youth a difficult factor to overcome. Nonetheless, many programmes select young people because of considerable pressures to do so.

Self-selection - that is, effectively transferring responsibility for selection to the aspiring self-employed themselves - has been found to be an effective technique, but one more easily applied in programmes with a distinct economic focus. Self-selection facilitates decentralisation, and thereby makes self-employment programmes 'more appropriate' (Pyke, 1992). Economic selection criteria normally seek to identify entrepreneurial potential by, for example, requiring applicants to demonstrate that they have specific entrepreneurial abilities, networks or resources. Examples abound, including requiring the elucidation of a business plan, and requiring evidence of access to credit to ensure that the training received can be put to good use (LaTowsky and Grierson, 1992).

Input objectives (selection) and output objectives (self-employment) must be well matched. Vocational training is simply the link between the two, though it may well be the basis for the micro-enterprise that results. Well designed vocational training for self-employment makes this match work. But, even if otherwise well designed, it can do little to correct for a mismatch at the selection stage. Avoiding mismatches in the design of self-employment programmes is a fundamental aspect of ensuring efficient programme design. Applying the logic of consistency throughout the self-employment re-orientation design process is a critical step in the process of re-orienting vocational training institutions to self-employment.

The merits of market involvement

There is a broad and eclectic endorsement of the trend in vocational training and self-employment towards increased market and community involvement at all levels, particularly with the informal sector (King, 1996). There is a growing recognition of the need to take into account the 'dynamics of the informal sector, and to draw upon the organisation, ingenuity and skills of the small producers themselves in upgrading skills (to include) training of artisans, by artisans, who are themselves involved in all stages of the process of designing and delivering training' (ILO, 1990).

An effective self-employment re-orientation will require partnerships with industry and enterprise; partnerships that are different - and perhaps more difficult - than employment oriented partnerships along classic dual system lines. The mutual self-interest that underpins most economic partnerships is not nearly so well defined in the case of self-employment. And yet, as the myriad formal and informal, modern and traditional systems demonstrate, there are also many clear benefits for the enterprises that participate in self-employment oriented training; benefits in terms of inter alia low cost labour, training fees earned, prestige, and business linkages (LaTowsky and Grierson, 1992). An oft-cited reason for businesses to collaborate with training institutions is to use them as they would consultants, to upgrade their in-house training capacity and improve their personnel systems. The fact that the enterprises that host training are not guaranteed trained employees as a result of their participation has not proven to be an overwhelming constraint. Indeed, participating enterprises can exercise their de facto option to hire those they have helped train if they so wish. Certainly, the market is sufficiently motivated if VTIs are forthcoming.

VTIs cannot hope to impart market survival skills without market involvement. Successful vocational training for self-employment will need to find effective ways of involving local enterprises and industries from both the formal and informal sectors. The following essays and case studies describe how a diverse array of VTIs and vocational training programmes are struggling, and sometimes succeeding, to take advantage of the self-employment support resources the market offers.