How Ohio Community Colleges Use ROI to Make the Most of Student Success
Experiences from Ohio in applying a return-on-investment approach to generate revenue can offer lessons to other colleges interested in new financial models.
By: Donna M. Desrochers and Richard L. Staisloff, rpk GROUP
Success for community colleges today extends beyond providing access to postsecondary education. It also includes showing that students are earning degrees or credentials at an affordable price. But how might colleges decide where to invest to achieve this challenging mix of goals?
Investing new and existing resources in ways that improve student success can generate financial returns for colleges. However, adopting this “return-on-investment” (ROI) approach requires a shift in the traditional business model from focusing on “How much does it cost?” to a more useful understanding of “What do we get for the resources we spend?
Over the past year, the rpk GROUP teamed up with JFF and the Ohio Student Success Center (OSSC) to help community college leaders in the Buckeye State wrestle with this very issue. We introduced community college leaders to strategic finance concepts and developed a custom ROI tool to assist them with making decisions on their student success investments.
Through our experience working with institutions across the country, we’ve come to realize that transitioning to an ROI lens requires three fundamental shifts.
First, colleges need to develop a clear understanding of the resources required. The biggest investment that colleges make is usually in their people. But how faculty and staff spend their time—and the cost of that time—is often poorly understood. ROI demands a better understanding of the time devoted to different activities and how it supports student success.
Second, colleges need to shift the focus from total cost to one of unit cost, and how it changes over time. Reducing the cost per student served or the cost per credential produced allows colleges to serve more students more efficiently—even if total costs are rising.
Third, colleges need to connect student success and financial sustainability. Improvement in various student success metrics—such as retention and average student-credit-hour (SCH) load—can generate additional net revenue for the college. When reinvested in existing or new initiatives, this revenue provides a sustainable funding source that can reduce the need to pursue external funding.
Applying ROI Concepts at Ohio Community Colleges
In Ohio, many community colleges have experienced enrollment declines, which are predictably accompanied by losses in tuition revenue. Incremental increases in state funding each year also are not guaranteed, with funding based entirely on student outcomes allocated through Ohio’s performance funding model. Sources of “new” money for investment, therefore, are hard to find. But Ohio community colleges were recently permitted to raise tuition rates and implement a new career services fee, prompting college leaders to consider the best use of these resources.
With this as its backdrop, the OSSC (which is housed with the Ohio Association of Community Colleges) saw the opportunity—and need—to hold a statewide convening of vice presidents of academics and student affairs and chief financial officers to dig into the business model of community colleges. With the support of JFF, the Ohio center invited rpk Group to make the case for strategic finance and to offer tools and training to guide institutional budgetary and business development decisions.
The rpk GROUP developed a custom ROI template to help colleges map out multi-year project expenditures and funding sources, examine unit costs, and estimate the potential net revenue generated from improvements in student retention and average SCH load.
The experiences from Ohio can offer lessons to other colleges interested in new financial models.
Mapping a Path Forward: Lessons Learned
- Colleges are receptive to ROI concepts but identifying initiatives can be challenging. Colleges examined ROI across a variety of student success initiatives, including a redesigned advising model, a cohort-based intensive support program for economically disadvantaged students, and new software for academic planning. Several colleges also were interested in how these concepts could be deployed more broadly—such as calculating ROI for a new campus, a new academic program, or software to streamline business processes. The latter types of investment can generate ROI but don’t
have the added benefit of helping students’ progress toward a degree.
rpk GROUP’s takeaway: Investing in programs expected to boost student retention and SCH load are a financial win-win for institutions (generating new net revenue) and students (reducing time to completion).
- Capacity to undertake ROI analyses is often limited, although cross-functional teams can ease the burden. Colleges using the ROI tool assembled cross-functional teams with the CFO and senior leadership from academic affairs and student affairs. Additional staff from institutional research, information technology, and enrollment management participated as necessary. Populating the ROI template was moderately challenging and took some colleges more than eight hours. Providing financial information for the initiatives was less challenging than estimating the number of students expected to participate. Despite interest and an easy-to-use Excel-based ROI tool, it can be difficult for colleges to identify staff with the expertise or time to perform an ROI analysis. ROI analyses can be particularly difficult at small colleges where staff may have even greater time constraints. The institutional research staff often doesn’t have the financial expertise for this type of work, and the business/finance office typically isn’t involved in this kind of managerial accounting.
rpk GROUP’s takeaway: An ideal solution involves the breaking down of silos and the use of cross-functional teams to collect data, conduct analysis, and create meaning from the leanings that emerge.
- ROI can support decision making, motivate change, and reset campus expectations. Numbers and metrics are critical components of ROI analyses. They can show the alignment between program expenses and funding, as well as the financial support provided by the college. Evidence from Ohio indicates that embedding ROI concepts into the decision-making process will take time. But the power of ROI lies in connecting it to broader conversations on performance and sustainability that are already happening on campus.Pressures from Ohio’s performance funding already have colleges talking about connections between student success and financial success. ROI analyses can push these conversations even further.
rpk GROUP’s takeaway: Showing linkages between targeted investment, student success, and new revenue can help colleges set goals for student performance and contribute to ongoing discussions on faculty and staff expectations and their role in student success.
Ohio community colleges have the materials and tools to apply strategic finance concepts on their campuses. Using ROI in decision making is still in its infancy, however, and colleges will have to leverage tools, teams, and time to estimate the potential financial impact of their student success initiatives. The payback from this front-end investment can inform their decisions and potentially sustain their investments in the years to come.