R to the O to the I

In March, we released More to Most: Scaling Up Effective Community College Practices, a guidebook that lays out a process for identifying promising practices and developing an expansion plan so that good programs reach as many students as possible. Central to the process is the SCALERS framework, developed at Duke University and discussed extensively on this blog. There are other steps that form the foundation for SCALERS application. We’re going to tell you about some of them in our next few posts. To download a copy of More to Most, visit the website: www.more2most.org.

The first step in the process is determining program value; you can read a rundown of that step here. One part of that rationale—and a rather popular one in these austere days of budget cuts—is demonstrating the return on investment (ROI), the sometimes-hard-to-quantify case that shows program spending generates a financial return (in increased FTE or other revenues) that offsets operating costs. Standardizing this process, where possible, can help you compare different programs and make decisions about which programs should be discontinued and which should be expanded. This kind of information, of course, needs to be combined with other qualitative data about program effects, and considerations of faculty and student engagement and institutional priorities.

Program ROI
There are a number of ways to analyze the connection between a program’s results and its costs. In 2009, Jobs For the Future and the Delta Cost Project released Calculating Cost-Return on Investments in Student Success. The report determines cost-return on investment by assessing student retention for program and non-program students, the resources required for program operation, and the revenue gained by additional retention using the following data and calculations:

1. Additional number of students enrolled into the next year because of the program: Calculated using number of students served, one-year retention rates for program participants, number of participating students retained, and one-year retention rates for non-program students.
2. Direct costs of program operation: Calculated based on expenditures for personnel, supplies and equipment, stipends for students, facilities, etc
3. Spending and revenue data: Calculated from average expenditures per student, and additional tuition, state, and federal revenue gained from increased retention.

These simple calculations could be the beginning of a formula that is unique to your institution, one that incorporates the costs, revenue, and priorities that are most relevant to your program goals.

Local and State ROI
You can also think about ROI beyond the bounds of a program. The various student success programs and policies at a college add up to increasing numbers of students completing credentials. (At least, that’s where we’re headed, right?) And increased completion outcomes can lead to positive returns for communities and states, even the nation as a whole. Being able to make such a case at your college—and across a system—could garner support from policy makers at the state and federal level. The Center for Law and Social Policy (CLASP) partnered with the National Center for Higher Education Management Systems (NCHEMS) to create a Return on Investment Dashboard. The dashboard combines data from the Census Bureau, National Center for Education Statistics, and Department of Education to project short- and long-term effects of maintaining the educational attainment status quo vs. increasing the number of credentialed adults in a particular state.

In addition to credential attainment, state summaries include projections for personal economic gain, as well as returns to the state in the form of state income, property, and sales taxes. The dashboard also has figures for Medicaid savings and correctional system expenditures. The dashboard allows you to manipulate high school completion, college going rates, credential attainment, and enrollment patterns to see how increases or decreases might affect individual and state returns on investment.

ROI and External Funding
The growth of social innovation financing or social impact bonds is one way that demonstrating return-on-investment is tied directly to external funding. Organizations cover initial program costs by borrowing money from foundations and other investors. If the organization meets agreed upon outcomes, they’ll receive additional funds from the state, and original investors will receive a portion of those funds. While this form of financing is primarily occurring in the nonprofit and social enterprise sectors, it could have implications for the education sector as well. You can read a great summary of social impact bonds on the Nonprofit Finance Fund website and check out how some social programs in Massachusetts are implementing this type of financing.

Whether you’re trying to quantify program costs, make a state-wide case for investing in a particular innovation, or looking for new ways to fund your efforts, understanding and articulating the return-on-investment is an important piece of the scaling up puzzle.