Start-ups – ready to provide vocational education and training?
Seeking areas of potential for greater participation in training
Pia Wagner, David Samray, Nicolai Bör
Despite a high demand for skilled workers and personnel recruitment difficulties, start-ups have been very unlikely to provide vocational education and training (VET) thus far. This article investigates the causes of this absence from training and discusses possible approaches towards increasing participation in training by start-ups. Its examination is based on results from an online survey of start-ups conducted between February and July 2021 and on qualitative interviews carried out to supplement this survey.
VET in the start-up scene
Start-ups (cf. Information box) are considered to be innovative companies which are significant in terms of the future alignment of the economic system. They are the source of new types of products and services and provide impetus for other economic stakeholders in terms of new business models, modern ways of working and the digitalisation of processes (cf. Behm et al. 2017; Fichter/Olteanu 2021). Start-ups are also expected to create new jobs (cf. Parsons et al. 2021). This is very much reflected in the 2021 German Start-up Monitor, which found that over 90 percent of the start-ups surveyed thought they would increase employee numbers over the coming twelve months (cf. Kollmann et al. 2021). The Bitkom Start-up Report (2021) also reports that 78 percent of companies expect growth in 2021. Nevertheless, there are curbs to the anticipated job creation potential. Empirical studies indicate difficulties in staff recruitment (cf. Bitkom Research 2020; Kollmann et al. 2018; Bör/ Samray/Wagner 2022). In some cases, these are being represented as a threat to the German start-up scene in terms of location and development (cf. Bitkom Research 2018; Kollmann et al. 2019). Yet , existing data show that start-ups are unlikely to provide VET themselves (cf. Bör/Samray/Wagner 2022; Bogott/Rippler/Woischwill 2017). This means that the start-up scene makes hardly any use of VET as a strategy for the acquisition of skilled workers.
Start-ups – definition and prevalence
The investigation presented here is based on a definition used by the German Start-ups Association which is normally used in the German-speaking countries. It states that start-ups are companies which have been in existence for less than ten years, which manifest plans to grow their workforce or sales; and/or which are (highly) innovative with regard to products, services, business models or technologies (cf. Kollmann et al. 2021). No official data is available for the statistical population of all start-ups in Germany. A start-up report by the KfW Development Bank estimated that there were 47,000 start-ups in Germany in 2020 (cf. Metzger 2021). Other estimates assume that some 800 new start-ups are established each quarter and, for example, that 3,348 start-ups were launched in 2020 (cf. STARTUPDETECTOR 2021).
Research design – quantitative and qualitative primary data
A quantitative online survey and qualitative interviews were conducted in order to investigate reasons why start-ups largely refrain from offering VET (cf. Wagner/Samray/Bör 2022). The online survey was carried out between March and July 2021. 11,422 companies were invited to take part after a machine-based and qualitative analytical procedure had been used to identify which firms with a trade registry entry could be characterised as start-ups. The survey generated 765 participations and was based on a questionnaire, the design of which was informed by specialist literature and information gleaned from the conducted interviews. Data evaluations were weighted by company age, location and sector in order to ensure approximate representativeness of results. The 25 semi-structured interviews were completed both before and after the online survey (up until and including February 2022). Theoretical prior considerations as well as results from the survey were addressed in the interviews. The interviewees comprised twelve representatives from start-ups, 13 stakeholders from outside companies including five persons with a close connection to the start-up scene and eight persons from the field of VET (cf. Figure 1).
Reasons for non-involvement in VET
The results of the online survey confirm that participation in VET by start-ups is low (cf. Table). Most companies (65%) do not currently provide VET and have no plans to do so in future. None of the twelve start-ups which were interviewed have any direct VET experience. Only one of these has a plan in place to offer VET in future.
As far as distribution across sectors is concerned, the start-ups in the online survey are primarily active in two economic areas. Over half of the companies operate in the information and communications sector, and around a third can be classified as belonging to manufacturing industry (cf. Bör/Samray/Wagner 2022). With regard to participation in training, there are virtually no differences between the start-ups in these two sectors (cf. Table). Another aspect which needs to be borne in mind alongside this high degree of concentration within specific sectors is the fact that the start-ups responding to the online survey are comparatively small and young companies. They are predominantly still in the foundation phase and usually employ few staff (cf. Bör/Samray/Wagner 2022). In respect of participation in VET, it is revealed that the proportion of companies offering training rises in line with increasing age and size (cf. Table). The tendency shown by the start-ups surveyed does not differ from that displayed by other small and medium-sized companies, although start-ups of the same size are less likely to participate in VET (cf. BIBB 2021, pp. 190 ff.). When addressing the low level of participation in VET, many interviewees accordingly make reference to the fact that their companies are still in the process of seeking to establish themselves. They emphasise the difficulty of proactively investing in skilled workers whilst a firm is at this stage of development. They also stress the lack of time resources available for matters such as training organisation or completion of the trainer aptitude examination. In the online survey, the fact that training organisation incurs too much expense is frequently stated as a reason why start-ups do not provide VET (38%; cf. Figure 2). The representatives from start-ups who were interviewed particularly pointed to the virtual impossibility of training people up and allowing them to learn on the job, while the company is still at an early stage of its development. This correlates with one of the findings to emerge from the online survey. The most common justification given by start-ups which have decided not to offer VET and have no plans to do so is that they need skilled workers who are already qualified (43%).
With regard to the set-up phase, many interviews make reference to the strong degree of momentum associated with company development. One representative from the area of business support highlights that this means it is seldom clear “what direction [the company’s] will be going over the next one or two years”. 23 percent of the online respondents with no aspiration to provide VET also say that the uncertain future alignment of the company and the question of whether it will remain in business are reasons for their non-involvement (cf. Figure 2). One view expressed by the interviewees from the area of VET is – in the words of a chamber representative – that the “wild phase of a start-up” is especially difficult to reconcile with legal obligations and with the particular responsibility assumed by companies providing VET. This is reflected by the circumstance that around a third (34%) of the companies surveyed online which neither offer VET nor have any plans to do so state that they do not fulfil the statutory stipulations in this regard. One further issue indicated by most of the representatives of start-ups and also by a number of external interviewees with a close connection to the start-up scene is the fact that, during the set-up phase in particular, the focus is placed on the business model or on product development. Students and graduates are (according to one company founder) most likely to be in possession of the relevant “know-how” for such development work. As soon as the companies become more established and more differentiated organisational structures with “more repetitive jobs” have been formed, the recruitment of apprentices might be conceivable (view of another founder).
In overall terms, the interview findings indicate that start-ups prefer to recruit graduates and students rather than apprentices. Start-ups believe that the qualifications of the former are a better match. The particular view expressed by the start-up scene is that employing students leads to greater flexibility of work deployment and to lower costs. The results of the online survey also give rise to the supposition that the educational background of the founders or managing directors1 has an influence on whether a company will refrain from providing VET. Start-ups with founders or managing directors whose highest vocational or professional qualification is a university degree or a doctorate are relatively likely to fall within the group of companies which do not provide VET and have no plans to do so (69% and 63% respectively, cf. Table). Start-ups with founders or managing directors who hold an initial or advanced vocational training qualification are less likely to state that they do not offer VET or do not wish to do so (51% and 59% respectively).
A further and often cited reason for refraining from providing VET is the fact that some start-ups exhibit a high level of specialisation (41%, cf. Figure 2). They therefore do not believe that they are in a position to impart all relevant contents of an occupational domain. This is confirmed by the remarks made by two chamber representatives. Companies which are highly specialised and which cover “only a tiny slice” of an area of production or services are not suited to VET. VET is “for logical reasons, very broadly based” and is aligned towards the achievement of “comprehensive employability skills” within an occupational domain (cf. also Hackel 2021 with regard to the aspect of occupational competence).
Further reasons propounded by the online respondents for deciding not to provide VET include a lack of knowledge of relevant training programmes (25%) and the opinion that training courses are obsolete and too inflexible to meet the start-ups’ own needs (20%). The lack of knowledge regarding relevant training programmes was also addressed in the interviews (“I can’t look for something if I don’t know what’s available” – the view given by one business support representative).
|Proportion of start-ups providing VET||Proportion of start-ups not providing VET but with plans to do so||Proportion of start-ups not providing VET and without plans to do so|
|Total start-ups (n = 763)||5%||21%||65%|
|Information and communications (n = 474)||6%||19%||67%|
|Manufacturing (n = 179)||3%||23%||63%|
|Other (n = 110)||3%||31%||58%|
|By number of employees|
|1 to 9 (n = 466)||1%||20%||67%|
|10 to 19 (n = 168)||6%||26%||63%|
|20 to 49 (n = 86)||12%||17%||67%|
|50 and more (n = 40)||22%||24%||42%|
|By year of foundation|
|2020 or 2021 (n = 224)||2%||22%||66%|
|2017 to 2019 (n = 265)||3%||24%||66%|
|2014 to 2016 (n = 206)||6%||21%||63%|
|2011 to 2013 (n = 68)||11%||14%||62%|
|By educational background of the founders/managing directors*|
|Doctorate (n = 275)||4%||19%||69%|
|Higher education qualification (n = 569)||5%||23%||63%|
|Advanced vocational training qualification (n = 67)||7%||29%||51%|
|Vocational education and training (VET) (n = 100)||7%||26%||59%|
|Source: BIBB online survey of German start-ups 2021; percentage values (weighted) on the basis of n = 760 to n = 763 cases; deviation of the line totals from 100% corresponds in each case to the percentage value of the category “start-ups not providing VET and without any indication whether they aspire to do so”.|
|* Multiple responses possible|
Possible approaches towards increasing participation in VET
One interviewed founder summed up the reasons emerging from the online survey and the interviews as to why start-ups do not engage in VET by saying that “start-ups and VET indeed do not seem [to be] the best match.” However, possible ways of improving this “matching” also became apparent from the interviews. One proposal made was that start-ups which ran into trouble or went under should be assured that they could dissolve ongoing VET contracts early and transfer their training responsibility to a third party. Another suggestion was to lower the bar for the trainer aptitude examination so that it no longer, for example, constituted the prerequisite for the commencement of a VET contract. Potential trainers could be afforded more flexibility by being allowed to take the examination at a later stage (a few months after the beginning of training). The idea of having guest trainers at start-ups was also put forward. However, interviewees from the area of VET were critical of these proposals and drew attention to the particular need to protect VET contracts. One chamber representative voiced the opinion that training should not be entered into lightly in circumstances where the future of a company is uncertain or if the designated trainers “do not even have time to supply evidence that they are pedagogically suited.” Given the fact that levels of specialisation are high in some instances, interviewees from the area of VET were, however, keen to point to the possibility of cooperative training. This could “solve the problem of not being able to impart the whole spectrum of training contents” (educational researcher), and start-ups could be gradually brought up to speed in terms of VET by acting as “junior partners” initially (representative from VET practice). Nevertheless, challenges such as high organisational costs and the lack of a relationship of trust between the companies themselves were also mentioned. Even so, as many as 15 percent of start-ups not providing VET state in the online survey that cooperative training would be an interesting option for them (cf. Bör/Samray/Wagner 2022).
Despite the cautious assessment of possible measures aimed at increasing commitment to VET on the part of start-ups, the benefits of greater VET participation were also addressed in the interviews. Start-ups offering VET could, for example, “help enhance the attractiveness of VET”. Young workers would get the opportunity to complete their training in a modern environment with flat hierarchies and autonomous task areas. They would experience the start-up phase of a company and would be taught entrepreneurial contents (with regard to the significance of fostering entrepreneurship and intrapreneurship cf. also Working Group 9+1 2022). One interviewee with a close connection to the start-up scene also spoke of the high employment potential offered by start-ups which achieve long-term success. This could lead to considerable possible job creation.
In order to exploit this potential, the interviewees from outside start-up companies and a number of start-up representatives in particular think that it is important to remove the existing information deficits from which start-ups suffer vis-à-vis VET. An active and low-threshold approach would be crucial in this regard, because start-ups “work with high opportunity costs” (representative of a start-up incubator). Frequent reference was made to the chambers of commerce and industry (IHKs), which should be more proactive in providing information on VET and on their own relevant consultancy and support services. Further, the view was that they should be present at (recruitment) events staged by the start-up scene. At the same time, interviewees from the area of VET in particular stressed that it was critically important for associations with close links to the start-up scene to raise awareness of VET amongst start-ups. The motivation displayed by start-ups which currently provide VET or which have plans to do so may also indicate as to how interest in VET could be awakened. The online survey shows that the ability to train workers in a way which precisely matches the needs is the most frequent reason by some significant distance (85%) why a company chooses to provide its own VET (cf. Bör/Samray/Wagner 2022). By the same token, the interviewees from the area of VET also perceive the securing of skilled workers in line with requirements as “the most effective lever” in respect of making VET more interesting for start-ups. Ultimately, upon completion of training, companies would have “qualified people who are familiar with their innovative products and with their particular company structures” (VET academic researcher). In addition, it would be possible to avoid the disadvantageous “coming and going” which often occurs when student assistants and interns are deployed. As many as 35 percent of the start-ups surveyed online accordingly explain their (planned) participation in VET by citing cost savings for recruitment and induction (cf. cf. Bör/Samray/Wagner 2022). An even larger proportion (56%) state that the main reason for providing or planning to provide VET is the productive deployment of apprentices during training (cf. ibid.). There is, however, a certain contradiction between this finding and the most frequent reason given by start-ups without any aspiration to offer VET – the need to have skilled workers who are already qualified (cf. Fig. 2).
This supposed dichotomy may be viewed as a further example of the fact that the VET potential of start-ups needs to be viewed in a differentiated way (by company age and status of development), in particular on the basis of their initially strong development momentum and uncertainty. The investigation conducted enables us to conclude that start-ups and VET perhaps are not entirely natural partners. Nevertheless, there is definitely potential to increase participation in VET by start-ups. In many cases, the interviewees from outside start-up companies in particular emphasised the high quality and adaptability of VET and recognised its high value, especially with regard to a German economy which is in a state of change.
If no founders were actually working at the company at the time when the survey took place, information was collected regarding the highest vocational or professional qualifications held by managing directors. This applied to 19 companies.
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(All links: status 20/07/2022)
Academic researcher at BIBB
Academic researcher at BIBB
Student staff member at BIBB
Translation from the German original (published in BWP 3/2022): Martin Kelsey, GlobalSprachTeam, Berlin