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Anonymous

Restaurant vs Hotel Distribution & FDM Group

Disclaimer: This interview is for informational purposes only and should not be relied upon as a basis for investment decisions. In Practise is an independent publisher and all opinions expressed by guests are solely their own opinions and do not reflect the opinion of In Practise.

{audio:0:00:01} Could you briefly explain FDM’s business model?

{audio:0:00:07} I can explain it from both a customer and employee perspective. Customers are effectively able to utilize high caliber graduates or junior resources in the workplace. The FDM model itself is a recruit, train and deploy program, which enables those who are starting in an industry to join, be trained and then deployed on a customer site.

{audio:0:00:55} Is it a mix between a recruitment agency and an IT services business?

{audio:0:01:02} It bridges the gap between those two.

{audio:0:01:06} How do you typically recruit Mounties like young graduates?

{audio:0:01:13} People can apply directly through the FDM website and social media channels. There is also a visible footprint at job fairs and grad events, and equally there are referrals. Reputation in the industry is key and universities help drive the numbers required for growth. FDM has forged strong relationships with universities to help their find employment opportunities for their graduates at customer sites. It is a two-way street and there are many ways to apply, but the strongest is through those three that I mentioned.

{audio:0:02:43} Through your direct relationship with universities, do you select graduates from those cohorts to bring into your program?

{audio:0:02:58} Thousands of people apply for the program and are then rigorously assessed. Some are more suited to particular roles, from both personal and business perspectives, because ultimately you give that individual confidence in their career choice, while representing FDM as a business leader in that particular space.

{audio:0:03:27} Could the companies who use FDM not partner with universities directly?

{audio:0:03:37} FDM were the first to market and have the brand reputation and success, not only with specific red brick universities, but more wide spread. One boot does not fit all, and there are opportunities for those with any background and with any university degree to join a particular route to market in terms of their steps down into industry.

{audio:0:04:11} Do Mounties share a typical school, subject or aspiration to suit their role?

{audio:0:04:22} Over time, things change. Businesses have changed their view on how to railroad an individual down a particular path. The industry recognized that any university graduate could be suitable for a business or IT role. Students entering university choose careers based on what they enjoy at the time, not necessarily where they want to be six years later. That excludes medicine, law and some others. FDM ignores their background degree choices and instead focuses on their aptitude and enthusiasm and their ability to pass the assessment program. It opens doors despite the poor decisions made at age 18.

{audio:0:05:37} What is the biggest challenge in growing the number of Mounties who enter the system from universities?

{audio:0:05:58} The biggest challenge is having something which is deemed an opportunity to move into industry, not deemed as furthering education, because it is recruit, train then deploy. The big selling point is to spend time at the universities explaining what customers are looking for; people who want a career with a skill set or in a sector, or someone who never thought about that but wants an opportunity put in front of them.

{audio:0:06:58} The other challenge is not being thought of as a 5th choice, as many graduates want to work at the big FTSE 100 companies but few will qualify for their own graduate programs. This is basically a way of working for those big companies, but through a different channel. It is about how you sell that opportunity and why you should join this program. Instead of being one of 200 applying for a UK bank graduate program, you are one person applying for the role in front of you.

{audio:0:08:02} The engagement process does not start a month before their finals; it starts in year one and is continued through year two into their finals. Once they graduate, it is vital to ensure they don’t fall off the radar or that you, as a company, are not forgotten about by that potential individual who could represent you very well in the business community.

{audio:0:08:27} Do you sell it to them as a back door into the banks or financial service companies?

{audio:0:08:36} Yes, an alternative way of reaching their long-term career aspirations.

{audio:0:08:42} If many companies adopt this recruit, train and deploy model, and they all go to the same schools, make similar pitches and have similar clients, how does FDM consistently source graduates year over year?

{audio:0:09:07} By having a good reputation and some good case studies and being able to demonstrate that by having people who have been through the program come and talk about it, both positively and negatively, to reveal the good and bad points of joining the program. Graduates would look at the opportunity and realize it would be foolish to go for a one in 300 opportunity when these roles are out there. If they adapt themselves accordingly, it is a no brainer to apply.

{audio:0:10:06} Are the people who you employ to go to these events and keep engaged with them, seen as a head count cost, almost the cost of recruiting?

{audio:0:10:20} There is more to it than that. A company wanting to employ their own graduates has the cost of marketing internally, vetting people, going through that whole cost of recruitment and at the end, not having the right individual for that particular role because you only know once they are working in situ delivering for you. The underlying cost to a business can be looked at more operationally by realizing the absorbed costs because it is not only about the cost of recruitment. It is also about the tools utilized during training and the other business support offered to ensure that individual is successful. When they are deployed on site, they need support and back-office functionality to ensure they ultimately get a pay check.

{audio:0:11:32} Factoring all that into a specific cost per head within the organization makes it easier to calculate the value of a recruit in the market place by region and role. It becomes a straight buy versus sell and what margin can be made on that. You can adopt and adapt the cost of those elements of recruit, train, deploy, versus straightforward recruitment graduate program, direct into an organization. The locking aspect makes it a very good model to utilize.

{audio:0:12:27} What is the difference in cost between a typical graduate program at a big bank versus the FDM model?

{audio:0:12:44} The recruitment cost is currently £35,000, inclusive of salary. That cannot be deemed a one-off cost because there are continual costs of employment such as National Insurance contributions and other aspects a company may offer. Whereas the cost to a company for utilizing this type of model is effectively a day rate, the benefit of which is twofold. As a previous employer of such a program, I know that for a particular project I will need that individual for X amount of days at this rate and they will not move unless I ask them for them to be taken off.

{audio:0:13:45} It becomes a simple A times B situation for a hiring manager to apply internally. That internal cost can be offset by A minus B, the internal cost of this project per day versus the cost of that individual’s work on a project, means they are still within their financial budgets to deliver the program. With the benefit of a locking program, unless a hiring manager chooses to release that individual because they finish the project or on the rare occasion there are personal reasons involved or, equally rarely, they are just not able to deliver against that program of work you employed them to do, they still have the ability to say, thank you very much, I will stop that project for that individual and we can serve that individual notice on this program, typically between two and four weeks.

{audio:0:14:47} You can control all of that and are not left with anything other than being able to replace that individual for somebody who is more suited for the role, or you have finished the project and have no additional internal cost because that individual was never an employee.

{audio:0:15:09} So banks outsource training and recruitment of these graduates or roles?

{audio:0:15:21} They outsource similar to a managed service offering or to develop an application. They outsource the relevant operational cost of employment while ultimately deciding whether to continue with that recruitment placement or not. The key benefit is that 80% of the time, that individual serves the full two and a half year, 18 or 12 month placement with you and you are able to convert that individual to your own permanent head count. But again, that is not mandatory.

{audio:0:16:13} If a hiring manager wants to use that individual continually as a contractor or as an individual part of the team, but cannot permanently employ that individual from a head count perspective, they still have the benefit of utilizing them with several years’ worth of experience. This also makes it a great offering for individuals.

{audio:0:16:42} FDM train graduates for 16 weeks or more before deployment. Could you share how that works, the infrastructure required and time and cost which go into it?

{audio:0:17:08} The past 12 months have proved that technology allows people to be more flexible to alternatives to classroom-based training. When I first joined and helped grow FDM it was very much classroom based and courses were structured with a cool off period where both parties got to know each other better. Within that period, there was a way to say, you are not right for this role but perhaps you might be in three or six months’ time.

{audio:0:18:03} On the flip side of that, the individual might not be geographically flexible or the pathway was not right for them and, on reflection or due to personal reasons, they may change their route. There is an opportunity to embed people in for that cool off period and, depending on which skill set they are working towards, the training could last an additional three to eight weeks. More technical courses could be 12 weeks, so the whole training could be anything between six and 16 weeks.

{audio:0:18:49} Do customers choose which subjects to train graduates in to perfectly match supply and demand?

{audio:0:19:04} There is an aspect of flexibility because you have to match supply/demand culture otherwise you would not have a business to work with. For the generic aspects of the programs, customers always know what they are looking for on longer term projects. We are moving from a traditional waterfall delivery to something more agile. The skill sets we look for, as potential hiring managers, are individuals who are more adaptable and flexible to the way we deliver projects.

{audio:0:19:46} We would inform FDM or their competition of the type of individual we want, and ask them how their training could be tweaked to fit that bill. We could also not worry about it and take their bread-and-butter delivery of that individual and work with them to mold any additional knowledge into that delivery program to ensure both of us are still successful. Reviews and analysis have to continually take place to ensure Mounties utilize 70% to 80% of what they have learned within an academy, which needs to be relevant to the roles they are moving into.

{audio:0:20:45} There is a continual review of the delivery of that training because, over time, as businesses become more agile and as more people are working from home utilizing Zoom and other technology, those ways of working have to be integrated into the training. That way it is not a shock when they first expect to go to a business wearing a shirt, collar, tie and jacket, and turn up and everybody is wearing jeans and t-shirts, playing pool at lunch time. FDM and others have to understand the business they work with to ensure people blend in both professionally and technologically and, therefore, the whole cost of training is continually reviewed.

{audio:0:21:55} What might be right for one geography may not be right for another. Therefore, you need to tweak things slightly differently and always have a backup plan so that if technology fails you can get people into a classroom using white boards and flip charts and train that way.

{audio:0:22:20} Could you reduce the cost of training without the need for bigger centers?

{audio:0:22:32} You definitely can, however you need to understand what that individual is like. The more remote learning you deliver, the less you know how an individual will be in a one to one or a group session. It is important to have a blend of group and individual sessions and remote technology training because FDM need to understand what makes that individual more suited to a particular client base.

{audio:0:23:33} Historically, the business built bigger centers to bring graduates together, training then deploying them at big banks. If you find a way to train them remotely and assuming the day rate is unchanged, the company should have a higher margin?

{audio:0:24:05} You could, but there needs to be a blend of getting a feel for that individual. One of the benefits of having people in house in an office-based environment, where you are training, is that it becomes far easier if a customer comes into that academy or your office liking the program. They can meet some of the people going through the program in an open setting.

{audio:0:24:44} So customers frequently visit your centers?

{audio:0:24:47} Yes, because it is a way for them to understand the scale of the business, and get a real feel for the individuals who are going through the program. Hiring managers seldom speak to graduates without an IT or STEM background, but could meet one with a music background which is not deemed as an IT potential focus, and come up with a golden nugget or a rough diamond. That is a missed opportunity and a benefit to bringing a business into your organization.

{audio:0:25:38} Do these models suit training graduates from music or drama, to make them as good if not better than the degree would, and have them deployed in great IT roles?

{audio:0:26:13} They made a decision at the age of 18 to do sports science, music or drama, and three or four years later the world changed and opportunities in that particular field have shrunk. The FDM model acknowledges they made those choices years ago and, from both their application and the assessment program, discover they can be a business or test analyst or a dev ops engineer. Perhaps the way they organized their life at university equates to good projectmanagement skills. Therefore, this is an opportunity to do something you thought was impossible several years ago.

{audio:0:27:12} How integrated are these businesses with customers? Does a large UK bank with set work streams or projects scheduled over the coming 12 to 24 months, come to you asking for X number of cyber security leads or is it more ad-hoc than that?

{audio:0:27:41} It is a bit of both, because hiring managers have to evaluate the risk to the business of not getting those programs delivered.They need to be first to market and this could be a project which is migrating from a legacy system to a new program or platform. They also look at their portfolio of available resources to deliver those projects.

{audio:0:28:21} Is this you, as a customer, you are talking about?

{audio:0:28:23} Yes, I am talking about Barclays where I would look at all those different aspects. You would know how much per project you had to spend to deliver that program, as well as your timelines. You would also look at who and what types of skills were required to successfully deliver that program. After evaluating all of that, you would think about the type of and cost per individual and whether to use internal staff or buy specialist programmers or SMEs in that market space. After that, there is always space for somebody to go into that team for the length of that program. If you had a piece of work where you had two months to deliver a high-tech solution and be first to market as a gaming institution who wants to be better than your competition, you would probably not use a junior resource.

{audio:0:29:29} If you look at something more with longevity and, in the back of your mind, you know that in two to three years’ time you need to grow your head count from 40 to 80. Rather than bringing in experienced people you can nurture and grow internally, by utilizing Mounties or first year consultants or internal graduate programs to grow through that journey together. In that way, they do not come with any bad habits and work with you to shape your future business. Once you have done that you can approach FDM or others to say, this is what I am looking for and can currently only take one person. You could also have a 12-month piece of work where you only need junior entry analysts, so you request a team of 10 people to join the team to deliver against that.

{audio:0:30:39} When you were at Barclays, what team did you run and what services were you looking for from a company like FDM?

{audio:0:30:51} I was head of testing services for Barclays Wealth in a global capacity. I had the benefit of access to a sizable internal staff with varying degrees of technological experience. This was a long time ago when we were looking at many of the legacy apps. I had access to the Barclays graduate program, which was focused on individuals joining your team for a placement period of eight to 12 weeks, then moving on to different departments.

{audio:0:31:32} Yes, on rotation. So within IT, I never got the benefit of that individual because I would spend three to four weeks getting them used to how we operated and once they were able to effectively contribute to a program, they disappeared. I was constantly scratching my head thinking how long would they be there for and what project could I put them on to complement their stay. I would go to the contract market and decide whether to get pure associates or contractors with a high cost on a day rate, or outsource some of that work to a third party or offshore.

{audio:0:32:30} I had five projects moving from legacy to new futuristic platforms and the existing staff working on legacy could not adapt to the way new platforms would be built and delivered. To keep them happy, I gave them opportunities to work on things which were within their capability. Perhaps they simply did not want to because they only had a few years left until retirement. I had the opportunity to re-work permanent members of staff to keep them motivated, while bringing in a useful resource who quite often gave a whole fresh new lease of life to the team. They had ideas that were willing to be listened to and came with enthusiasm and wanted to impress because this was their first placement. They wanted to show they were good enough to be working at Barclays, even though they had not gone through the Barclays’ graduate program.

{audio:0:33:43} The final aspect was re-energizing permanent staff members because suddenly you had energetic, useful, forward-thinking people, willing to get on with things and share. It was a blended program which, after utilizing in testing services, we further expanded to development and other areas. It helps the business model to be solved internally by hiring managers and business partners and becomes even easier for companies such as FDM, M3 or QA that you work with. The selling aspect is almost taken away from them because, as a hiring manager, you do it for them through the quality of the individuals that are on site working for you.

{audio:0:34:36} The best sales people are not necessarily those sitting back at the head office, but those who deliver those projects for you. If they do a good job, you will go back and ask for another three or four people to join your team. If you have the opportunities, you will go back and talk to future graduates about what it is like to work for Barclays or Lloyds.

{audio:0:35:16} You received graduates from Barclays’ graduate program, but because it was not an IT graduate program and was rotational, you only had them briefly and could not fulfill your required capacity. Does that mean the recruit, train and deploy is only suitable for roles not on the graduate program or which do not fit in that bucket?

{audio:0:35:54} The program is flexible enough whether you work in IT, business or operations. There is still a way of coming up with a program which suits particular vacancies or a longer-term suite of skills where there is a gap. You may find robotics, RPA or BI sits within the business aspects of the company rather than in IT, or you might find that marketing are looking for different people.

{audio:0:36:36} Customers have the option to either source labor internally, from graduate programs, from the higher cost but more experienced contract market, or from FDM which has more junior, fresher and relatively cheaper options; does that suit certain projects or only longer-term projects?

{audio:0:37:06} There is more benefit on longer term projects because taking on board someone with no commercial or business experience has a higher risk. If you have something with more than six months of work, there is an opportunity to get benefit from these types of programs. This is not limited to IT – there are other business departments which could benefit from that – but you need to look at a longer rather than a short-term strategy.

{audio:0:37:47} Were the projects split 50% in IT and the rest in business and marketing?

{audio:0:37:58} Initially, it was probably 100% IT and over time has filtered to a lower level, but that is not due to the drop in the IT market. The business operational side has also changed how they deliver, and those aspects which were thought of as being IT projects, now sit firmly within the business and operations side. Companies who operate in the recruit, train and deploy sector have to adapt to those changing market demands. It is probably a 70/30 split because you still need IT. The way businesses are integrating with IT to deliver more agile based programs of work, the percentage split becomes irrelevant, because they are effectively merging two to four departments.

{audio:0:39:08} Is there a risk that Barclays train their graduates in a similar way?

{audio:0:39:19} There is probably a small element of risk but it is difficult for an organization to recruit, train and deploy people internally and still have the ability to lock in those individuals to a program which does not allow them to move away from Barclays for a certain length of time. There are operational costs at the end of it and you are still faced with internal head count costs.You are still faced with the cost of training and need the to deliver 13 trainers for 13 courses. Will those trainers always be available to deliver that training and will you look at an intake once or twice a year? That has a place but projects do not work on September and January intakes; they happen all the time and there are also legislative and regulatory changes.

{audio:0:40:26} Is it healthy for a business to have a mix between internal and external?

{audio:0:40:32} It is a wonderful balance, yes absolutely.

{audio:0:40:35} When you were at Barclays how did you choose FDM over others?

{audio:0:40:48} At the time, FDM were the only UK company operating in this space and delivering this style of program. We worked very well and had strong relationships with several recruitment agencies and other service providers.

{audio:0:41:12} Did you look at the price?

{audio:0:41:15} Yes, but we also looked at the roles, because for many of them we did not need someone with 10 to 15 years of commercial experience and a day rate of over £500. We had roles requiring good analysts in testing, development, Java and .NET; we needed people with a certain level of ability to deliver a certain level of good quality coding and testing. We wanted people with an analytical mind who could still try to break or create things.

{audio:0:42:34} Has that changed with other competitors to FDM offering similar models?

{audio:0:42:42} From a customer perspective, if you are a bigger organization, it is healthy to not put all your eggs in one basket. There is no reason why you could not utilize several companies who operate the same model to generate some healthy competition.

{audio:0:43:05} Could that put pressure on pricing?

{audio:0:43:08} A hiring manager or a business utilizing this model always squeezes the best deal. If you can play one off against another that is what happens in life and in sales. From a business perspective, just because the cost per day seems slightly higher or lower, does not mean you will get the right level of standard of ability. The ability is not down to the individual but rather the whole package of the quality of the training and the finished article. You need to be honest about that rather than being oversold somebody who just read a book in a room. You could have bought the Learn SQL in 24 Hour book for less cost. It is healthy having more people in the market.

{audio:0:44:10} Is it worth it for a large bank to find another vendor or would they prefer having a single relationship with FDM for that type of market?

{audio:0:44:29} It could go either way, because departments work differently. It comes down to what and how your relationship is with both the hiring managers and procurement. It is not only about fulfilling a role for a specific project but does this also tick boxes internally for HR. They could mean diversity inclusion or more women in IT. There might be a different solution it brings into the fold which also helps solve a bigger problem within that organization.

{audio:0:45:27} It is not only about wanting this person to do this role for this length of time. HR could be looking for more people from a certain background or without university education. This could be adapted accordingly to fulfill a bigger more aspirational change for those end customers.

{audio:0:45:55} What is the biggest competitive risk to this business model?

{audio:0:46:04} Over the past 12 months, the pandemic has affected the education system and businesses are looking at their balance sheets and thinking they need to either tighten their purse strings or refocus their projects in line with narrowing down the spend. There has been much press coverage about this forgotten generation who will be affected by recent events. Governments around the world may think it is time for us to give back to them by giving additional funding to individual businesses to run apprentice programs for those who do not attend university. People who never thought of having graduates before may get better graduates or grants to directly onboard someone within their team to effectively cut out the middle man.

{audio:0:47:26} Is it more a market risk than customers not spending as much on these types of services?

{audio:0:47:34} There is still a need but they may do it themselves, if supported by government. Not many companies can magic up £10 million to spend on an enhanced graduate program without funding from the government or elsewhere. Other companies may opt to do it themselves because it is a good news story showing they are offering something to the community. They recognize the current education program is under stress because of recent events and will reduce that stress by investing. It becomes a tick of the box and they get good press coverage and big kudos for doing it themselves.

{audio:0:48:45} In an FDM versus Sparta model for example, how do you define which wins?

{audio:0:49:01} I would ignore individual companies and do what is right as a hiring manager. I would ask if they have a successful case study in this market and if they are only UK focused or do they have opportunities in Gibraltar, South Africa or further afield. Is there the capability, not just to utilize it in this particular program in front of me, but could I roll that out globally? Who currently has that footprint and the capability to move quickly if I needed 10 to 20 graduates tomorrow?

{audio:0:49:52} The competition starts with, should I hire internally or externally? If external, should it be more experienced contractors or junior? Which recruit, train and deploy company should we look at?

{audio:0:50:19} FDM are the market leader and have a massive spectrum of opportunities through many different skill sets. Their global footprint allows them to move quickly with internal resources to set up a pilot program and deliver in more remote locations or new greenfield sites. There are smaller organizations who are where FDM were 20 years ago, who have to decide to either stay small and focus on one or two skill sets or practices, or bite off more opportunities by delivering more skills to market, but dilute the quality of individuals by spreading themselves too thin.

{audio:0:51:19} Do they focus on bringing high quality individuals who are deemed better in a market place than FDM or M3? Will their position in the market enable them to build a business case study showing they are of a similar quality, slightly behind in terms of time scale, but with the ability to grow into something akin to the way FDM grew over the years?

{audio:0:51:52} What is the pricing structure for Mounties? Do you commit to a certain time on a project and is there a day rate for that? How does that work?

{audio:0:52:09} Different companies offer fixed prices but that tends to be more around managed service delivery. Typically, this model is better aligned to day rates.

{audio:0:52:29} So an average testing Mountie cost around £250 per day?

{audio:0:52:34} That will depend on which geographical region they are located in and the length of a project. There is no contractual obligation to take somebody on board for a length of time; it has to be akin to what you are trying to deliver and whether that individual role would benefit within the time scales you want.

{audio:0:53:10} But without a contractual obligation, it seems difficult to recruit and train 10,000 Mounties and only utilize 50% of them?

{audio:0:53:24} Across any organization, the academy works to map out supply versus demand. Instead of looking two to three months ahead, you gauge what they are looking for and develop a time line which allows you to recruit, train and be ready for deployment, should they be needed in the time frame required. There will still be people coming through the program available for deployment for whom the sales organization are actively looking for roles. Looking across multiple sectors, there is a utilization rate of over 95%.

{audio:0:54:22} Has it ever fallen below that?

{audio:0:54:27} No not really, because you manage your supply and if you feel there will be a lull in the market, you can adjust the tap at the start of the chain and only employ some people rather than flooding the academies with many people who will not get jobs. All that does is lower the confidence levels of the people going through the academy because they expect to get a role. If they do not, bad news travels quickly which means further up the channel they will not recommend people at their university or colleagues. Bad press goes back to the universities, making the relationship between the university and FDM cloudy because you did not provide them with what you said you would.

{audio:0:55:17} Do you still have to pay Mounties their standard wage as an employee when they are not deployed at a client?

{audio:0:55:28} Yes, but things have changed over the years and companies work differently. Some pay their trainees during training while others do not. Some companies are legally forced to pay due to local government restrictions or labor laws. All that changes, but the underlying cost is you want people working where the utilization rate is as high as possible because if they are not working, they are not generating revenue. Those you have left over have been through training and/or have come back from deployment are kept to a minimum and you ensure they are the priority people to find new roles for or move them into others role quickly. You are minimizing your static costs, because they’re still across the business, they’re just not generating revenue. That becomes a very operational way of dealing with that supply/demand program.

{audio:0:56:53} The times people are likely to come back off deployments and not be extended on for a different project is continually monitored on a quarterly basis, typically on a 12 to 13 week cycle. So what might be week 12 this week is week 11 next week, but you also look at what is currently week 13 which becomes week 12. By continually looking at that you build flexibility between your supply and demand.