The Efforts of the Personal Finance Education Group - Case Study Example

Table of Contents Executive Summary 3 Introduction 4 Growing Up in Debt 4 Task 5 Management Strategy 6 Strategies to Promote Personal Finance Education 7 Resource Implications 8 Organisational Structure 10 Task 2 11 Vision 11 Mission 11 Objectives and Corresponding Measures of Evaluation 11 Task 3 13 Activity Calendar 13 Dissemination Activities 14 Monitoring and Evaluation 14 Conclusion 15 Bibliography 16 Executive Summary In 2004, the Bank of England reported that consumer debt had reached GBP1-trillion. By the end of 2007, it had gone up to GBP1.4-trillion. Moreover, even young adults are incurring debts even before they turn 18, such that by the time they graduate from school, they will have borrowed some GBP10,000. If this cycle is not corrected, the British population will put its future generations in serious peril, threatening the sustainability of the overall economy. This paper describes the efforts of the Personal Finance Education Group (pfeg) to address the debt problem, by way of promoting finance literacy among the student population nationwide. Its programmes have successfully gained the support of government and business and are being adopted in its pilot sites. The “Learning Money Matters” and “What Money Means” projects are its more prominent success stories, which have been awarded funding by the Financial Services Authority and the global bank, HSBC. While it is reaping some success now, if it continues to operate in “business as usual mode”, the pfeg may soon face sustainability problems, mainly because of its over-reliance on outside funding. There are operational matters that should be examined, as well, for potential difficulties that may result from decentralization. Also, some of its activities may also overlap with the efforts of similar agencies in the country, although these are probably outnumbered by untapped opportunities for collaboration. The most urgent issue pertains to developing new sources of financing. Introduction Just a few years ago, the Bank of England reported that the country had reached the GBP1-trillion threshold for consumer debt (BBC, 2004). With the population incurring about GBP800-billion in mortgage loans (and the rest in credit card and personal loans) and interest rates rising steadily, Malcolm Hurlston of the Consumer Credit Counselling Service warned consumers to “stop and think if they can afford their debt burden”. Yet, by December 2007 – only less than four years later – total personal liabilities had reached GBP1.4-trillion, rendering every British adult in debt by GBP30,000 (Credit Action, 2008). Put another way, every five minutes, consumer debt was increasing by about GBP1-million. Growing Up in Debt What is more alarming is that it is not just the adults that are acquiring loans. An online survey in 2007 found that, before they turn 18 years old, more than half of the teenagers in the country have already incurred some kind of debt (pfeg, n.d.). This might be aggravated further by the fact that today’s children get to handle money “earlier and earlier” in the form of school allowances and personal purchases (pfeg, n.d.). Another study shows that the habit of credit use among British youth starts during the teenage years and then peaks before they turn 30 years old, particularly because this cohort is “likely to be influenced by the celebrity culture, to feel strong pressures to consume, and to be prepared to borrow to do so” (Standard Life, 2007). As a result, they are resorting to loans “to finance lifestyles rather than to reflect need”. According to Credit Action, families will be spending an average GBP23.50 for every child until he turns 21 years old. By graduation time, more than half of college students end up owing more than GBP10,000, and their level of debt increases as they get older. Today’s youth are growing up in a world where, every single day, 77 properties are being repossessed, 305 people are turning bankrupt, and the average household is spending GBP30 just to stay afloat. Based on these indicators, if left unchecked, the prevalent mindset among the youth will perpetuate a vicious cycle that can put future generations in jeopardy. Task 1 Choose an organisation and construct a management strategy by proposing a suitable structure to ensure appropriate participation in the process. Develop criteria for reviewing potential options and construct an agreed strategy and include its resource implications. This paper looks into the efforts of the Personal Finance Education Group (or the pfeg) to stem the dangerous trend of debt among minors by way of promoting personal finance education in schools. Formed in 1996 and founded in 2000, the pfeg is a registered charity in the United Kingdom that seeks to advance financial literacy among the youth, especially those in the 4-to-19 age group. The pfeg approach to financial education seeks to sharpen the acumen and critical faculties of young students, not just to enhance mathematical skills. As Ron Sandler, Chairman of the pfeg, explained: It is about building confidence, and creating a willingness to engage. It recognises that the learning must be relevant, and placed in a context that pupils can understand. It must be inclusive. And it is not just about the pupils; an effective financial literacy programme in schools also has to deal with helping teachers overcome their own inadequacies and lack of confidence when it comes to matters financial. (Sandler, 2006) Management Strategy Because the consumer debt issue is so deeply entrenched, the problem cannot be solved overnight and requires a long-term perspective. For an organisation to be successful, according to Hauser (2003), those that are poised to scale up must have: 1. A stable financial base: An organisation must operate based on the actual level of funds that it can raise and not create a work plan and then, attempt to raise the money to implement it. It must also strive to develop a broad funding base to avoid over-dependence on a few sources. 2. A focused mission: Mission is everything. It motivates staff and engages funders and supporters and forms the basis for goal-setting. Without a clear and firm mission, any strategy will be doomed to fail. 3. Organisational structure: The “form follows function” maxim also applies to organisations. To be able to succeed, structural hierarchy and employee relations must support the mission. 4. Culture: The pervading culture and values set the kind of attitudes, behaviour, and approach to work that are acceptable within the organisation. Moreover, as a not-for-profit entity, the pfeg operates under a unique set of management, fiscal, regulatory, and legal parameters that are fundamentally different from corporate practices. Therefore, as a public entity, an effective strategy for pfeg must meet these criteria: 1. It must deliver public benefits. As a charity, the pfeg must adhere to certain standards and demonstrate the employment of good governance practices. 2. Initiatives must be inclusive and be acceptable to its wide stakeholder base. The pfeg is responsible to a wide range of stakeholders, from its direct beneficiaries (i.e., students) and intermediaries (i.e., teachers, educationalists, and school administrators) to its partners in education, government, business, finance, and the public sector. 3. Activities must be effective and yet resource-efficient because it is partly funded by government funds. The Financial Services Authority (FSA), the government agency that regulates the financial services sector, is one of its largest supporters. Its funds are also sourced from an eclectic group of donors – including Barclays, British Bankers Association, Citigroup Foundation, GE Money, O2, and the Royal London Group – all of whom are responsible to their own Boards and shareholders. 4. Its tactics must be flexible and replicable to allow it to scale-up its programmes towards nationwide implementation. The pfeg rightly employs step change improvement methods in implementing its various programmes, to be able to educate today’s youth to teach them to be more fiscally responsible than their predecessors, with the ultimate objective of creating a more stable business climate. Strategies to Promote Personal Finance Education The pfeg must employ a multi-sector approach to continue to enjoy the support of its network of partners. Conversely, by working with the pfeg, funders can achieve prestige in the community and be identified with an issue of national importance. Today, the pfeg holds dialogues with decision makers in government, to be able to shape public policy, especially to push for the incorporation of personal finance education into the national curriculum. Its advocacy work has encouraged the Treasury department to earmark support for the implementation of a “planned and coherent programme” in educational institutions. There is also the pfeg forum – a cross-sector community of practice – which is attended by more than 100 of the top organisations in the United Kingdom. Its work has even spread internationally, with the pfeg agenda being presented at conferences in India, Korea, Austria, Belgium, and Italy. Resource Implications Since it was formed, the pfeg has been successful enough to attract the support of government, funders, schools, and corporate partners. To date, the most significant accomplishment of the pfeg is its appointment as lead agency in the five-year “Learning Money Matters” initiative (originally called “Excellence and Access”), a GBP17-million programme funded by the FSA that seeks to promote financial education in secondary schools. Launched in 2006, it aims to cover by 2011 some 4,000 schools in London and the South East, the North West, the North East, South West, and Central England. For the primary sector, the pfeg was able to secure GBP3.4-million in funding from HSBC to promote the “What Money Means” programme (pfeg, 2007). It seeks to reach 17,500 schools by 2011, by working with 36 local authorities. The windfall from the FSA and HSBC represented major milestones in the corporate history of the pfeg. With the funding for the “Learning Money Matters” project alone, the charity was able to grow from a six-man operation to a network of 46 consultants and freelancers working to support 1,400 schools across five regions. In fact, the financial report of the pfeg for the 2006/07 fiscal period (Table 1) shows that nearly 90 percent of the organisation’s incoming resources were derived from project funding, which contributed largely to more than 300 percent increase in income compared to 2006. Table 1 – Financial Activities for the Year Ended 31st March 2007 (Source: pfeg, 2007) Unrestricted Funds, GBP Restricted Funds, GBP Total 2007, GBP Total 2006, GBP Incoming Resources Incoming res. from generated fund Grants and donations 37,717 95,333 133,050 336,820 Interest 48,227 - 48,227 28,491 Incoming res. from charitable activities Project funding 1,644,453 651,317 2,295,770 281,837 Member’s subscriptions 81,000 - 81,000 85,836 Quality Mark 6,450 - 6,450 11,900 Other project related income - - - 39,037 Other income 985 - 985 - Total Incoming Resources 1,818,832 746,650 2,565,482 783,921 Resources Expended Cost of generating funds 48,996 998 49,994 80,908 Charitable activities 1,420,178 722,502 2,142,680 632,275 Governance costs 71,870 573 72,443 50,589 Total Resources Expended 1,541,044 724,073 2,265,117 763,772 The rest were sourced from small grants and donations – the largest component in 2006 – as well as subscriptions and other minor activities. Meanwhile, 84 percent of all generated income was spent on charitable activities, which also represented 95 percent of all expenses. The remaining five percent was used to sustain the basic operations of the pfeg. Certainly, the multi-year project funding is a positive development but it also highlights an over-reliance on outside funding. Although the pfeg was able to manage overhead costs by contracting project-based consultants and freelancers instead of hiring full-time staff, the situation still points to potential sustainability issues: how can the pfeg continue its noble work if, in the future, it is unable to secure any more large endowments? This is a dilemma that plagues many charities and not-for-profit agencies everywhere, especially at the point when they are ready to take off. Organisational Structure The pfeg has adopted a lean management structure, operating under the guidance of its Board, which is headed by Ron Sandler, a former chief executive in Lloyd’s of London. He is supported by the pfeg Trustees – renowned experts in the financial sector from institutions like the British Bankers Association, Natwest, Roehampton University, Financial Services Authority, Share Centre, Building Societies Association, and The Children’s Mutual. The reputation of these specialists lends an element of prestige that helps the pfeg achieve a positive public profile. To run its various project-funded activities, the pfeg opted to contract non-permanent staff. From a resource point of view, this highly decentralised structure appears to be rational approach to scaling up. However, there is also a danger of its army of consultants being disconnected or alienated from the core culture. While the mission and strategy might be in place to guide both permanent and temporary staff on how to go about their work, there is a need for reinforcement at the operational level to make sure that programmes are implemented according to a certain corporate standard. Kaplan and Norton (2006) emphasised the importance of managing alignment and suggested the implementation of policies that will help “communicate, educate, motivate, and align employees with the strategy”. It would help mitigate potential risks through annual planning conferences and regular meetings, periodic team-planning sessions, and training in project management, relationship management, etc. Task 2 For the organisation that you identified in Task 1, develop vision, mission, objectives, and measures by considering the organisations ethical, cultural, environmental, social and business background against current standpoints. Develop appropriate vision and mission statement. Agree appropriate objectives and develop measures of evaluation. Vision To become the leading financial education organisation in the United Kingdom Mission To ensure that all young people leaving school have the confidence, skills and knowledge in financial matters to participate fully in society (pfeg, n.d.) Objectives and Corresponding Measures of Evaluation 1. Give expert support and training to teachers and students a. Full coverage of participating schools, institutions, and educationalists b. Training and continuing professional development for teachers c. Awarding of the Quality Mark to brand appropriate teaching aids. In 2007, the pfeg stamped 11 teaching resources its Quality Mark, for a total of 56 to date. d. Distribution of print and online learning resources such as case studies, lesson plans, and video clips e. Purchase and access rate of available resources f. Telephone, email, and in-person consultation 2. Provide policy guidance to opinion, decision makers, and potential funders a. Project support and financial contributions b. Supporting legislation and policies enacted or put in place (e.g., mandatory financial education in the school curriculum) c. Dialogues with key executives 3. Create partnership networks a. Participation in volunteer program, to deploy resource persons in classrooms, which will enhance the corporate social responsibility (CSR) profile of partners b. Member subscriptions c. pfeg Forum and round-table events 4. Disseminate financial information to the public a. Public Web site, to be measured in terms of visits, hits, and downloads. The pfeg Web site averaged 25,000 unique visitors every month in 2007. b. Media coverage. In 2007, the pfeg garnered 120 pieces on the “Learning Money Matters” campaign. c. Personal donations and support from the public Task 3 Plan for the implementation of the strategy by developing outline timetable. Create appropriate dissemination processes to gain commitment and set up monitoring and evaluation systems. Activity Calendar The timetable provided below depicts a range of activities that pfeg can conduct throughout an entire year. Table 2 – Annual Activity Calendar Planned Activities Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Annual planning conference for staff and consultants Team-planning sessions with staff and consultants Regular (1x/month) meetings with staff and consultants Staff training Teachers training pfeg Forum Round-table talks with key decision-makers Fund-raising activities Blitz promotions for “Learning Money Matters” programme Blitz promotions for “What Money Means” programme Media promotion and activities Dissemination Activities Announcements, news, updates, and other relevant information will be coursed through print-based and online means, including: 1. Annual report for Board, funders, and decision-makers 2. Printed newsletter for pfeg Forum members, funders, and decision-makers 3. Online newsletter for teachers and school administrators 4. Intranet site and monthly newsletter for Board, staff, and consultants 5. Really Simple Syndication (RSS) facility on Web site for general public 6. Press releases for media partners Wherever possible, information will be distributed through online methods, to be able to economize on production, letter shopping, and mailing costs. Monitoring and Evaluation Activities that are not monitored are not worth doing. Therefore, it is important that all project efforts, especially those that incur costs, be quantified, monitored, and subsequently, measured and reported. 1. On a regular basis, at least quarterly, the pfeg must review its financial position and make sure that fund-raising objectives are being met. Plans must be flexible enough to accommodate needed changes due to resource issues. 2. Conferences, pfeg forum sessions, and round-table talks must be planned thoroughly. Each activity must be followed by a meeting to assess whether the objectives, which should be set before launch, are met within the allocated budget. Feedback forms must be distributed right before closing the event to get comments from all participants. 3. Success of promotional activities can be measured through market research, by way of surveys and focus groups. While such efforts can be expensive, if conducted at the school premises, costs can be controlled better. 4. Field staff and consultants must be oriented properly on the desired results and corresponding quantitative metrics. They must be provided with reporting mechanisms, preferably Web-based for easy tabulation. The pfeg must conduct performance appraisal sessions, at least on an annual basis, to make sure that all staff are living up to their potential and to the expectations and needs of the organisation. 5. There must be open communication between pfeg and the educationalists because teachers and school administrators are key resources in the success of the pfeg programmes. Their feedback is essential in making sure that programmes are tailored to the needs of each individual institution. Consultants must pay regular visits and maintain positive interpersonal relations with their school-based counterparts. 6. Effectiveness of communication and dissemination activities must be measurable. Online, these would be easy to monitor through built-in mechanisms, although they should also be tested regularly for accessibility and user-friendliness (e.g., via Web-based surveys). Moreover, pfeg must make sure to comply with opt-in regulations to avoid spamming issues. Users must have a way to opt out. 7. Whether print- or Web-based, the pfeg must assess all its training tools and material and evaluate whether funds should continue to be spent on those that are not delivering the desired results. Conclusion Besides the pfeg, there are several other organisations within the United Kingdom that are working to promote the financial literacy agenda. The Financial Services Authority (FSA), the ifs School of Finance, and the newly formed Office for Standards in Education, Childrens Services and Skills (Ofsted), among others, have their own individual campaigns. The Government’s National Strategy for Financial Capability can serve as a blueprint for developing individual work plans and for forming alliances and collaborations. These entities must communicate properly to avoid any overlaps, duplications, and redundancies, and explore opportunities for benchmarking and sharing of best practices. For its own activities, the pfeg must start to consider funding sources outside its comfort zone. Granted that its legal status can be restrictive, it must take advantage of certain windows provided by the Charity Commission that allows it to make so-called social investments. For instance, the Commission actually allows its members to engage in “provision of loans, loan guarantees or the subscription or purchase of shares or through the letting of land and buildings” to generate revenue for charitable purposes. Besides funding-related transactions, the pfeg must also look at potential public-private partnerships that can alleviate the demands on its resources. Non-cash sponsorships and donations can be one modality. It can also investigate if any of its activities can be monetized. Wherever possible, the pfeg must utilize information technologies to conduct its work to be able to achieve wider reach and, more importantly, to use its scarce and usually restricted resources more efficiently. For example, besides providing downloadable materials on its Web site, the organisation could introduce e-learning courses that users can access for independent learning. This will benefit those school-age children that may be outside the formal sector. Bibliography BBC. (July 29, 2004). UK consumer debt hits £1 trillion. In London, UK: British Broadcasting Corporation. http://news.bbc.co.uk/go/pr/fr/-/2/hi/business/3935671.stm. Credit Action. (February 1, 2008). Total UK personal debt. In London, UK: Credit Action. http://www.creditaction.org.uk/feb.html. Hauser, J. (2003). Organizational Lessons for Nonprofits. The McKinsey Quarterly, Special Edition: The Value in Organization, 60-69. Kaplan, R., Norton, D.ab. (April 24, 2006). Managing Alignment as a Process. In Boston, USA: Harvard Business School Publishing Corporation. http://hbswk.hbs.edu/item/5305.html. pfeg. (N.d). Helping Schools Plan and Teach Financial Capability London, UK: Personal Finance Education Group. (Available at http://www.pfeg.org/Documents/General/pfegGeneralBrochure.pdf) pfeg. (N.d). Invest in the Future London, UK: Personal Finance Education Group. (Available at http://www.pfeg.org/Documents/General/pfegCorporateBrochure.pdf) pfeg. (2007). Annual Report 2007 London, UK: Personal Finance Education Group. (Available at http://www.pfeg.org/Documents/General/AR07.pdf) Sandler, R. (June 7, 2006). Speech at the Institutes Annual Presidents Lunch. In London, UK: The Institute of Chartered Accountants in England & Wales. http://www.icaew.com/index.cfm?route=137629. Standard Life. (2007). Easy Come, Easy Go: Borrowing Over the Life-Cycle Edinburgh: Standard Life Assurance Limited. (Available at www.pfrc.bris.ac.uk/publications/credit_debt/Reports/Easy_come_easy_go_fullreport.pdf) Read More