Chapter 01: Introduction

The term day care or child care refers to the care of a child during the day, usually by a person
outside the child's immediate family, and often so the parent(s) can work. "Day care" is the most
common term in the United States, while "child care" is used in both the United Kingdom and
Australia. It means the caring for and supervision of child or children, usually from age six
weeks to age thirteen. It is the action of looking after children by a day-care center, babysitter, or
other providers. Day care called "crches," appeared in France about 1840, mainly as a charitable
means of caring for the infants of working class women. The Socit des Crches was
recognized by the French government in 1869. The first day care center in Great Britain was
started in 1860, and most European cities had established day care centers by the second half of
the nineteenth century. Previously child care is a very significant and often overlooked
component of child development. Child care providers are our children's first teachers, and
therefore play an integral role in our systems of early childhood education. Quality care from a
young age can have a huge impact on the future successes of children.
The demand for child care services has been steadily increasing over the last few decades as a
result of demographic trends, public policies, and emerging scientific inquiry about brain
development and early learning. On the demographic side, the number of mothers of preschool
children in the workforce increased from 12 percent shortly after the end of World War II to 65
percent at the turn of the century (U.S. House of Representatives 2000). Similar increases have
occurred among mothers of school-age children.
The profitability of individual child care facilities depends on good marketing and efficient
operations. Large companies have economies of scale in advertising and administrations. Smaller
companies can compete in local markets by owning convenient locations. The US industry is
highly fragmented: the top 50 companies generate less than 20% of revenue.

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ABC Developmental Learning Centres was founded in 1988 in

Ashgrove, Brisbane, Queensland. It was the Australias largest
corporate child care provider founded by Eddy Groves and his wife,
Le Neve. During the time of its high peak it ran approximately 4,700
childcare centers and provide care services to more than 1,10,000
children throughout Australia, New Zealand, the United States and the UK which established
them as an International organization.
The main function of ABC Learning was the operation of its long day care centers. Most of the
centers also offered before and after school and vacation care. The dream of it was to improve
human life by providing the best care in the world. The vision of ABC Learnings was to ensure
that each child was loved, nurtured and educated and thus given the best possible chance in life.
The ABC learning had four building blocks to ensure the development of the children as 1. A
learning curriculum, 2. Nutrition and physical development, 3. Center staff training &
development and 4. Facilities and environment.
ABC learning focused on each child's unique style of learning. Its aim was to allow each child to
achieve the maximum while attending an ABC learning centre. It also developed a strong brand
presence through a consistent look and feel to its centres, arranged training of its carers and
authorized learning curriculum for the children.
ABC Learning was a high growth company. It collapsed late in 2008 due to financial trouble.
Since being listed on the Australian Stock Exchange in March 2003, with 43 centers ABC
Learning had experienced a meteoric rise. In 2005 ABC Learning entered the US market with the
acquisition of Learning Care Group Incorporated which operated 460 centers (Rochfort 2005).
ABC Learning was also considering expanding into Canada and Asia. According to its CEO,
Eddy Groves, ABC Learning aims to grow even further as it seeks to increase its market share
in Australia and develop its operations abroad (ABC Learning Annual Report 2005, p. 4).

The main objectives of this essay are given below;

Critically evaluate the main reasons for ABC learning's collapse
Identify and discuss the main business features of childcare industry
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 Recommendation on policy regime for a viable childcare industry

Chapter 02: Objectives of the essay

Objective no. 01: The main reasons behind the collapse of ABC Learning
ABC Learning collapsed late in 2008 after several months of financial trouble which started on
February 2008 by largely margin call after the share value fall from 8.80 to 54 cents in august
2008. The main reason behind the collapse was the ABC learnings rocketing debt levels from
the companys rapid expansion overseas mainly from acquisition in USA & UK. The main
reasons behind ABC Learning collapse are mentioned as below.
Opaque operation: Lack of transparency in operations was the main reason behind the collapse
of ABC learning.ABC Learning's business model was not well devised, the economics of the
individual sites were not fully coasted and no proper analysis happened for site selections. There
was no organizational hierarchy & it was not decentralized properly. Thats why no supervision
was there from the supervisors for the subordinates. In addition its income statement was
unclear and inaccurate in terms of sources of profit.
Inorganic expansion: The expansion of ABC Learning was not organized and based on
borrowing & equity margin. A huge loan made the company risky as its leverage went far beyond
its capacity to repay. It mainly grew through merger and acquisitions. It replied on credit money
to grow its business overseas and overpaid for some of its acquisitions.
Poor risk management: Eddy Groves was energetic, aggressive and visionary and his passion
for the company was unquestionable. But Groves took his eye off the management of the
company to concentrate on the growth strategy. There was no risk management before merger &
acquisition which increased their debt up to 1.7 billion within 18 months. There was lack of
systematic accounting practice which means a professional accountant was not hired by the
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company. As well as there was no professional recruitment for the finance department such as
internal auditors. The role of government was also very much important as there should have
government regulation against merger and acquisition which was not there by Australian
government.
Staffing problem: Staffing problem is another issue for its collapse. ABC Learning had a relief
staff provider named as 123 Careers with whom ABC Learning had also experienced a serious
problem. They had an outstanding of $9 million to 123 Careers as well as they faced problem
with compensation package of 16000 employees of $31 million which made the high turnover &
lack of efficient employees. There was no certainty about employees job security. The
employment throughout all centers were not properly distributed which means the ratio between
children & careers was ill managed. There was also casual employment which doesnt support
the industry standard.
Practices of nepotism: In the childcare industry, management needs to have sufficient
knowledge about the operations, management of the industry. According to the case lack of
service quality was found here. The CEO of ABC Learning practiced nepotism by involving his
former brother in law in the major expenditure as he provided the maintenance & refurbishment
work to Queensland maintenance service owned by that brother in law.
Poor managerial skill: Firstly, the CEO of ABC Learning Eddy Groves was fully inexperienced
in this particular industry as well as the board of directors was the politicians. So ABC Learning
was managed by the totally inexperienced management. Its

management also resorted to

unscrupulous business practices as there was no well developed service quality benchmark in
this industry. Those inexperienced management could not recruit the right persons for the right
places who might forecast & protect the collapse.
Ineffective HR department: In ABC Learning there was lack of human resource practices
because there was no HR planning as job analysis, recruiting & selecting the right person, proper
training and development. There was no performance management which could do the
performance appraisal of the employees.
Irregularity in accounts: Groves accounts were terribly messed up. There was a huge
complexity on its revenues and profits. A big part of ABC Learnings net profit was generated
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through an unusual system of Liquidated damages & compensation from developers of its new
centers. In fact, the accounts of ABC Learning are in such a poor state that the Federal
Government had to send forensic accountants from the insolvency and corporate recovery
practitioners PPB to investigate. It seems that "investigators will have to start from scratch in
assessing its records" (Karvelas 2008).
An inefficient board: The composition of board was not made of people with accounting, legal
and management expertise. It was maintained by politicians who had no knowledge over the
operations of this industry. They did not have the capabilities to understand the irregular
accounting practices. No operational details had been addressed in a timely manner by the board.
These are the probable reasons for ABC Learning's collapse. If the authority would give proper
concern on these matters it might not face this destructive situation.

Objective no. 02: The main business features of childcare industry

Industry refers a group of business which provides a particular product or service within a given
economy of a particular country.

Child Care or Day care Industry: Day care is typically an ongoing service during specific
periods, such as the parents' time at work. It is the caring for and supervision of children, usually
from age six weeks to age thirteen. Child care is the action or skill of looking after children by a
day-care center, babysitter, or other providers. Child care is a broad topic covering a wide
spectrum of contexts, activities, social and cultural conventions, and institutions.

The service is known as child care in the United Kingdom and Australia and child care or day
care in North America.

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Day care appeared first in France about 1840, and the Socit des Crches (means Society of
Day Care) was recognized by the French government in 1869. Originating in Europe in the late
18th and early 19th century, day cares were established in the United States by private charities
in the 1850s, the first being the New York Day Nursery in 1854.

Business features of the Industry:

The Childcare industry is not a profitable industry and they do not generate high profit unless
anyone can charge higher fees. Its a very expensive business to run and thats why the
occupancy has to be good. The major expenses are the salary of staffs which is almost 85% of
total expenses. In addition to that there are also few expenses as food, equipment, toys,
administration and maintaining premises.
The vast majority of childcare is still performed by the parents, in house nanny or through
informal arrangements with relatives, neighbors or friends. For example, in Canada among two
parent families with at least one working parent, 62% of parents handle the childcare themselves,
32% have other in-home care (nannies, relatives, neighbors or friends) and only 6.5% use a
formal day care center.
Customers: The industry consists of establishments that provide paid care for infants, toddlers,
preschool children, or older children in before- and after-school programs. So the ultimate
customers of the industry are the parents who are looking for an excellent place where their
children can be taken care of.
Goods and services: Child day care needs are met in different ways. Care in a child's home, care
in an organized child care center, and care in a provider's home. These are the common
arrangements for preschool-aged children. Older children also may receive child day care
services when they are not in school, generally through before- and after-school programs or
private summer school programs.
Types of service: Two main types of child care make up the child day care services industry: a)
center-based care and b) family child care. Formal center-based child day care centers include
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preschools, child care centers and Head Start centers. Family child care providers care for
children in their home for a fee and are the majority of self-employed workers in this industry,
which does not include occasional babysitters or persons who provide unpaid care in their homes
for the children of relatives or friends.
HR requirements for the industry

Preschool teachers, teacher assistants, and child and health care workers are required.

About 45 percent of all child day care workers have to have a high school degree or less,
reflecting the minimal training requirements for most jobs for specific territory.

Employment: Child day care services provided wage and salary jobs and there are a large
number of self-employed and unpaid family workers in the industry, most of whom are family
child care providers. Jobs in child day care are found across the country, mirroring the
distribution of the population. However, day care centers are less common in rural areas, where
there are fewer children to support a separate facility.

Types of Daycare:
Non-profit daycare: A nonprofit organization (abbreviated as NPO, also known as a not-forprofit organization) is an organization that does not distribute its surplus funds to owners or
shareholders, but instead uses them to help pursue its goals and objectives. Parents are typically
the legal owners of a non-profit day care but there are some non-profits day care operated by a
board of directors made up of community representatives who just want what is good for
children. Considerable research has accumulated showing that not-for-profits are much more
likely to produce the high quality environments in which children thrive.
Local governments, often municipalities, may operate non-profit day care centers. In non-profits,
the title of the most senior supervisor is typically "executive director", following the convention
of most non-profit organizations.

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For-profit daycare: The for-profit sector of this industry includes centers that operate
independently or as part of a local or national chain. For-profit day care corporations often exist
where the market is sufficiently large or there are government subsidies.
There are also many family childcare providers who have chosen this field as a profession. Local
legislation will regulate the number and ages of children allowed per family child care home.
Some localities have very stringent quality standards that require licensure for family child care
homes while others require little or no regulations for childcare in individual's homes. Some
home day cares operate illegally with respect to tax legislation where the care provider does not
report fees as income and the parent does not receive a receipt to qualify for childcare tax
deductions. However, it is beneficiary for Day Care providers to be licensed so that they can
have access to financial benefits from their state government, or the federal government.

Objective no.03: Recommended policy for a viable childcare industry

Childcare industry is not a profitable industry as it doesnt generate high profit unless one can
charge very high fees. The occupancy has to be good enough otherwise it will not generate profit
for the organization. The major expenses of the childcare industries are staff salaries while there
are other expenses as food, equipments, toys, administration and maintaining grounds or
premises. So all the above things need to keep under consideration before entering into this
industry. Followings are the policy regime recommended for a viable childcare industry.
Job Opening: Job openings should be numerous because dissatisfaction with benefits, pay, and
stressful working conditions causes many to leave the industry
Effective & organized HR department: It is obvious that, for every organization there should
be an effective & organized HR department with specific policies to run all the operations,
otherwise they might collapse as ABC Learning. And as main resource of this industry is the
employees, so organizations need to have an efficient HRD to run the business smoothly. The
employment for a child care industry would be as follows:
a) Job Analysis: Job analysis determines the duties and responsibilities needs to be completed
by employees on a regular basis and educational qualifications, skills and abilities required for
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completing the tasks. So when doing a job analysis for a childcare industry, firm first needs to
recognize the duties and skills requirement for operating the childcare centers efficiently. Mainly
Preschool teachers, teacher assistants, and child care workers are required for this industry.
i)

Job description: Helping children grow, learn, and gain new skills can be very
rewarding. The work should be sometimes routine; however, new activities and
challenges mark each day. Child care can be physically and emotionally
challenging, as workers constantly stand, walk, bend, stoop, and lift to attend to
each childs interests and problems. Child care workers must be constantly alert,
anticipate and prevent trouble, deal effectively with disruptive children, and
provide fair, but firm, discipline. The hours of child day care workers vary. Many
centers are open 12 or more hours a day and cannot close until all of the children
are picked up by their parents or guardians. So energetic & cool minded. There
might be unscheduled overtimes. Employees have to be there until all of the
childrens parents come & pick up their children.

ii)

Job Specification: Child care centers should have staffing requirements that are
imposed by the country. Although requirements may vary, in most cases a
minimum age of 18 years should be required for teachers, and directors or officers
should be at least 21. In some places, assistants may work at age 16in several,
at age 14. Teachers must have a high school diploma and, in many cases, a
combination of college education and experience. Assistants and child care
workers may need a high school diploma. If it is necessary, a childcare company
should hire workers who have received credentials from a nationally recognized
child day care organization.

b) Recruitment & Selection: In the case of recruitment & selection process, there should be a
clear personnel policy. Childcare industry is a very specialized industry, so HR managers should
hire accounting, finance, legal& management expertise, but the employees should be caring and
affectionate to the children. Before the final selection of an employee, HR managers should
obviously check the references of those particular employees and cross check the criminal
background, because parents will not ever handover their child to a criminal or bad person. There

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shouldnt be any practice of nepotism like ABC Learning. The CEO & the board of directors
should be manned by experienced & qualified people.
c) Training & performance management: Because there is no service quality benchmark for
childcare industry, so continuous training & performance management is essential for a viable
childcare industry. Each and every employee should be carefully supervised through
performance appraisal.
Employee management: A childcare industry should manage its employees in a well mannered
system. A huge number of employees are required for a childcare company. Employees should be
effectively distributed to each centre according to the employee demand of that particular centre.
To reduce employee turnover, a childcare company should provide enough job security to
employees. Casual employment is not a good option for a childcare industry, so HR managers
should concentrate on permanent employment.
Effective management decisions: Because childcare is a very specialized industry, huge
investments & expenditures are require in this industry, so management decisions should be
effective. A company may collapse because of a single wrong decision. Its too costly to establish
a new center, so the managers should be aware of site selection for the establishment of a new
centre. For a viable childcare industry, the scopes for effective management decisions are as
follows:
a) Merger and acquisition: In case of merger & acquisitions, management should conduct
feasibility study. They should justify whether they have enough capital or not, whether the asking
place is a suitable place to build up a centre or not, whether it will be helpful for both the general
people & company or not, how big should be the particular center, how many employees should
be recruited for that centre, how much should be the investment, what facilities should be
provided by the particular center etc. From the case we know, the expansion of ABC was
inorganic and it collapsed, so efficient management ability is needed to expand the business.
b) Credits and Borrowings: Borrowings should be conducted within a limit. Sources of profit
should be systematic (e.g. by improving service quality & by gaining new customers). Liquidity
damages, compensations & government subsidies shouldnt be the main sources of profit. If a
particular company does not have enough capital to establish a centre then it may choice
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franchise option. Although franchise is not a good option for childcare industries but if anybody
wants to develop franchise, HR managers should let those franchises to run independently so that
the staffs can concentrate on its parents companys own operations.
c) Efficient Board: In case of ABC the board was not consisted of accounting, legal and
management experts, so there was questionable accounting practices. But for a viable industry
the board should consists of directors who can read accountings, vet deals.
d) Ability to take advantage of Government Subsidies: Government assistance is available to
child care operators and crucial to the viability of many childcare centres. So the management
should be capable of grabbing the most opportunities of Government subsidies.
All these measures were not present in the case of ABC, so a flourished business collapsed. So
to get a viable childcare industry, above policies should be ensured.

Chapter 03: Recommendation

Recommendations for Objective 1:
First of all ABC Learnings was not supposed to be that inorganic in their rapid overseas
expansion. They would have transparency in terms of their operations for the consumers as well
as authority for the employees. They could have effective HR team so that they would get proper
risk management policy for their aggressive growth strategy. Effective HR team could also be
able to recruit the right person for performing the main function of taking care of children as well
as other functions like managing accounts etc. for the organization and could arrange training
and other development program for the employees betterment for performing better. HR team
might also be able to reduce the practice of nepotism so that the organization could get a better
management team.
Recommendations for Objective 2:
In the child care industry every child care provider should determine which specific services they
are going to provide like kindergarten, long day care, outside school hours care, family day care,
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limited hours care, occasional care, early childhood education and care services etc. They should
maintain highest health and safety issues for the children under their supervision. As well as they
should fulfill legal requirements for conducting their operations in a particular region.

Chapter 04: Conclusion

In our case study we have learned how a childcare company runs and what are the basic features
of this industry. Here we have discussed about the services, types, customers, and employment
practice of child care industry. In the case our main focus was on the collapse of ABC Learning.
Earlier it was a flourished business, but after huge expansion its smooth operations had
collapsed. The collapse of ABC learning was not basically because of the severe debt and
financial crisis but also there were many more things related behind it. The role of the
government was also a vital point, as well as the inexperience CEO, the unprofessional Board of
Directors, the wrong decision of management in every step, untrained and ineffective human
resource department, and many more. The vision was perfect for the ABC learning but the way
of achieving the vision was wrong and resulted as the collapse of the organization. So every
organization before entering into a service industry which is highly specialized as childcare
industry, should consider all those mentioned facts and policies. Each and every employee in
every department should be hired after matching with industry standard. The forecasting has to
be done by highly specialized so that the operations move smoothly and soundly. The financing
has to be secured by their expected revenue so that they can pay off their debt and does not fall in
bank crafty. If the industry can ensure expert and efficient management practices the childcare
industry can bloom, because in modern world there are huge demand of child care service as
women earners are increasing.

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Chapter 05: References

Bibliography:
1. Baker, J. (2004). ABC takes first steps into primary learning, The Age, 4 February.
2. Fraser, A.( 2005). Childcare magnate in $218m US coup, The Australian, 17 November,
p. 5.
3. Horin, A. (2006). Child-care chains damned by insiders, Sydney Morning Herald,
April 1-2, pp. 1-2.
4. Loane, S. (1997). Who Cares? Guilt, Hope and the Child Care Debate, Reed, Melbourne.
5. Patty, A. (2006). Schools stand to profit from promise not kept, The Sydney Morning
Herald, April 19.
6. Potts, D. (2006). When growth is as easy as ABC, The Age, Finance Section, March 26.
7. Rush, E. (2006). Child care quality in Australia, The Australia Institute, Canberra.

Websites:
1. http://www.londonspovertyprofile.org.uk/indicators/topics/11-services/childcareavailability-by-borough/
2. http://www.childforum.com/options-a-differences-between-ece-programmes/73-private
3.
4.
5.
6.

childcare-arrangements-making-your-own-and-what-is-involved.html
http://nannycity.com/checking-nanny-references
https://collegegrad.com/industries/child-day-care-services#nature
http://www.investopedia.com/terms/i/industry.asp
https://en.wikipedia.org/wiki/Cardiopulmonary_resuscitation

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7. http://www.childcaretraining.com.au/
8. http://www.business.qld.gov.au/industry/service/child-care/legal-requirements
9. http://www.abc.net.au/7.30/content2006/s1622919.htm
10. ABC Learning 2003, Annual Report 2003, Brisbane.
11. ABC Learning 2004 Annual Report 2004, Brisbane.

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