Today, the evaluation of school productivity is defined as one of the crucial points for consideration. It is not enough to control all school districts in the country. It is necessary to understand how this type of productivity may differ across the country and what fiscal practices and budgeting approaches can be effective (Boser, 2014). Sometimes, school representatives are able to investigate their investments and returns and clarify the quality of these operations. However, in the majority of cases, a certain measurement of money is required. Academic return on investment (A-ROI) is one of the possible forms of cost-effectiveness measure that can be offered to school districts (Frank & Hovey, 2014). In this part of the work, the essence of A-ROI, its calculation peculiarities, reasons for using it, and steps of the implementation of a System-Strategy ROI approach will be discussed to understand why this measure is not used on a regular basis in higher education organizations.
Academic Return on Investment Basics
In higher education organizations, return on investment is a tool to identify cost-effectiveness in various budget decisions and investigate academic achievement regarding each dollar spent (Boser, 2014). A-ROI is used to define available resources within an organization and maximize the achievements of the majority of students (Levenson, 2011). This tool is a solid basis for the development of new programs or the termination of old programs which turn out to be not effective for an organization. If A-ROI is properly calculated, it is possible to save millions of dollars and raise student achievements in different forms (Levenson, Baehr, Smith, & Sullivan, 2014).
How to Calculate A-ROI
To succeed in the promotion of academic effectiveness, A-ROI calculations should be properly established and explained. There is a straightforward formula for A-ROI (Levenson, 2011):
To fill in this formula, several questions should be posed (Levenson et al., 2014):
- How much money should be spent on one student within a program?
- How much learning has been achieved?
- Are there any alternatives that can be offered to this particular “learning-per-dollar-spent”?
Pros and Cons of A-ROI
As an investment tool, A-ROI has its own positive and negative aspects. The awareness of the formula is not enough to be confident in the appropriateness of this measure in a higher education organization. The point is that A-ROI maybe not be applicable in all situations. Therefore, its benefits and shortages have to be discussed. On the one hand, A-ROI creates an opportunity to measure services and estimate if they can have any impact on organizational performance for a reasonable cost. School districts can use A-ROI in order to evaluate the worth of all expenditures and find out if each dollar is used properly. On the other hand, it is not recommended to use A-ROI without any specific academic benefit. Levenson et al. (2014) introduce several reasons why A-ROI remains to be uncommon for many districts. For example, they state it is not always easy to calculate all relevant costs even if specific (line-item) district budgets are available (Levenson et al., 2014). Even if all costs regarding salaries of teachers and resources are taken into consideration, it is difficult to identify the costs of a program offered to students. Besides, such needs may be numerous regarding the disciplines they are involved in. Therefore, it turns out to be impossible to predict all budgets and consider the role of each member in it. The fact that the same person may participate in different programs at the same time has to be also indicated.
Another significant challenge is based on the necessity of A-ROI supporters to recognize the difference between a program, a strategy, and their sizes. It may be difficult to calculate the cost of a strategy in case it has a small size and becomes a part of a huge program (Levenson et al., 2014). Many misunderstandings and challenges occur to come up with one particular cost. Therefore, as soon as a higher education organization face similar problems, they try to search for some other alternatives, including research-based practices, stars’ examples, and anecdotal evidence or invite the experts in the sphere of cost accounting and financial modeling to measure the impact and effectiveness of a particular program (Levenson et al., 2014). Finally, in some cases, cultural barriers may challenge organizations that decide to use A-ROI to meet their financial purposes.
System-Strategy ROI Approach Implementation
The success of a System-Strategy ROI approach depends on how well players are chosen, and roles are distributed. There are five main stages in this process, and each of them has to be taken properly.
The first step is the identification of a core need an organization has to focus on in order to demonstrate successful performance (Frank & Hovey, 2014). As soon as a decision is made, the performance target and an outcome have to be discussed so that the initiatives help to address and meet the goal. This stage may be defined as the most challenging step in the implementation of the System-Strategy ROI approach because something significant has to be created from nothing. Not all people understand why they should make such decisions and what resources they have to look for.
The second step is a consideration of a broad range of investment opinions (Frank & Hovey, 2014). At this stage, it is necessary to clarify what types of investments can be used to address the need. The third step is based on the definition of ROI metrics and gathering data about relative returns and potential options. It is time to use an ROI formula and identify what student learning return is, what impact it may have, and what sources can be used to succeed in academic performance. The last but one step is to weigh investment options and define the factors that have to be considered in a process. Sometimes, it is necessary to narrow down a program or a strategy and focus on particular steps. In some cases, the developers try to grasp bigger problems the scope of which cannot be predicted in advance.
The final step in the process is decision-making. At this stage, people take steps, choose resources, and evaluate the effectiveness of their actions. Sometimes, new resources, called reserve misalignments, should be chosen and used (Frank & Hovey, 2014). These misalignments can be piecemeal (when a missing part of a strategy should be added), ineffective (where all resources in a strategy should be tied up), under-investment (when already used investments are not enough for a good strategy), and over-investment (when a promising strategy is developed with the help of all available resources) (Frank & Hovey, 2014).
Boser, U. (2014). Return on investment in education 2014: A district-by-district evaluation of U.S. educational productivity. Web.
Frank, S., & Hovey, D. (2014). Return on investment in education: A “system-strategy” approach. Web.
Levenson, N. (2011). Academic ROI: What does the most good? The Resourceful School, 69(4), 34-39. Web.
Levenson, N., Baehr, K., Smith, J.C., & Sullivan, C. (2014). Calculating academic return on investment: A powerful tool and a great investment. Web.