Colorado State University
December 16, 2014
In an attempt to begin applying some of the theories I have developed over the past several months, I am developing a workshop that teaches the basic tools of learning to adults that are occupied by work or education. While the details of the program are still in process, there are a few intended results that can be measured in terms of financial benefit to participants.
In short, the program takes place over a single week or less intensely over a four week period of time. During this time, participants receive practical knowledge of two or more learning tools, an overview of their personal strengths, weaknesses, and interests, practice with leadership, practice with group learning, and coaching in developing a learning contract with themselves. Participants in this program learn how to learn. When they leave, they should have a plan for continuing their education through relationship in a particular field or problem area of passion or relevance.
Because of its short-term nature, the return on students investment in this program can be expected to occur within the week of participation or shortly thereafter. Any habits not formed during this time or results not seen are unlikely to appear without some other external input. Nevertheless, habits, mindsets, and skills that are acquired during the workshop will return their investment long after the program is finished.
Purpose of measuring ROI
Measuring return on investment has value for the individuals who are involved in the program. It can help individuals make the decision to participate based on the perceived tangible and intangible benefits they could receive. It is also a means of determining how to produce the greatest amount of value for individuals that choose participate. Measuring ROI has benefits beyond simple proof of a program’s effectiveness if it is designed as a feedback loop similar to the process for valuations.
This requires that ROI measurements move beyond a simple yes or no answer as to whether the program was effective. The reason that students participate in the workshop in the first place is because they believe its content (or what they learn through the experience) will help them solve a problem or become a starting point for improvement. Some questions that will help turn the ROI measurement into a feedback loop include: What worked? Why? How do we change the program so that it can meet the objectives? What objectives does it meet if not the intended ones?
The program may return a positive ROI to students, but not in the way expected. The one difference between ROI and evaluation is that the value of accomplished objectives are measured in financial terms and compared to others on the same basis. ROI could be used as a comparative measure. How does one program return the money invested relative to another program? On the other hand, the ROI process could be flipped so that the various outcomes determine which aspects of the program are most valuable. This could help program managers determine where to place greater emphasis on development.
Depending on their attitudes, program directors may choose to focus on those things that produce the greatest ROI. However, there are two drawbacks to this. First, it is possible that the instruments designed to measure ROI are ineffective at pinpointing the real benefits of the program. As with most conversion of social activity to financial measurement, ROI is based on assumptions that can just as easily be proved as disproved. Second, it is possible that the ROI from the most beneficial aspects of the program is measured in a different way. Similarly, the same content and experience may produce a different ROI depending on the individuals that are involved.
Despite the difficulties of measurement, ROI still has value in terms of providing some sort of concrete basis on which to determine a price to charge students and an overall understanding of the value of the service. In this case, I hope to use ROI to determine the price that can be charged by the program. Work backwards from the estimated value of the program to determine its cost. Sometimes in business, an increase in cost increases the total value produced by the program because of psychological value by participants.
So far the greatest interest in this workshop has come from individuals who don’t necessarily want to commit to a college degree and who do not simply want access to information through a free massive online learning platform. For them, the value of the workshop can be measured in terms of time and improvements in their work and study effectiveness. They want to learn and perform, but without paying the necessary costs of time and money required by a degree-based program. This workshop gives them the tools to design their own learning experience and maximize learning through life.
Two or three primary benefits can be measured for ROI for these individuals. First, the cost and time required by alternative degree based courses. Time can be calculated based on the number of hours a student would be required to invest in a program that was not customized to their interests. An average of 8-10 hours weekly over 12 weeks gives a total of 96-120 hours that a student would be expected to spend in an information-centric program which they may or may not be able to take full advantage of.
Financial benefits of the program in terms of costs saved from other academic programs may average between $300-$3000, time spent in less relevant training (2 hours at $25 = $50), and remedial expenses to make up for not participating can also be built into the ROI calculation.
A third factor of the ROI calculation looks at the increase in student efficiency of working or learning. Time can be added in from work or other studies the student currently participates in that will be enhanced by participation in the program. If effectiveness in a single aspect of work or study (for example, meetings) increases by 10-25% for a participant that has an average of 2 meetings per day, this leads to an extra 1-2.5 hours of time savings every 5 day week. 12 weeks this single aspect of efficiency could accumulates to up to 12-30 hours of additional time for the participant. Ongoing efficiencies in learning that develop over course of participation will continue to give the benefit of time to the student, but at a decreasing rate. To average the amount of time saved over a year, multiply the 12 week calculation by 3 or 4. Total time savings should be multiplied by a factor of the participant’s hourly wage (average $25 [Table B-3, 2014]) to determine overall ROI.
Costs of the program include the 25 hours of recommended time (times the wage multiplier) and the price tag of participation. For the purposes of program design, price is the unknown variable that will be calculated based on ROI measurements.
ROI Measurement and Calculation
All of the previous calculations are estimates, but they can be verified through the following methods. The course opens with a group activity in which all participants form teams to solve a problem. This activity forms the basis of learning throughout the week and is compared to a final group activity of a similar nature. Students are asked to compare the two activities on a survey and this becomes the basis of estimating efficiency before the program and efficiency after the program. This difference is then multiplied by the average wage factor (or an exact wage factor) if students choose to anonymously contribute such data.
The following chart shows data for 6 sample trials run with various reported levels of time used and confidence in the solution developed. In this example, trial 6 and 5 were completed by the same group. 5 took place before the training and 6 took place after. While the group used the same amount of time to come up with a solution to the problem, their confidence increased by 20% leading to an overall calculation that their efficiency as a group had increased by (2700/2100 = 1.28) 28% as a result of the program. If the situation were reversed and trial 5 took place after the training, the efficiency of the group would have decreased by (2100/2700 = .77) 23%. This would lead to a negative ROI calculation for the program and a reconsideration of its benefits.
|Trial||Time Allowed||Time Used||Difference||% Confidence||Efficiency Factor|
It is assumed that most students will see an average of 10 to 20 percent improvement in their efficiency throughout the course of the program. This change should be effective immediately, but produce much of its benefit beyond the week or month in which the course takes place. In the following formula, an average of 12.5% efficiency is estimated to be conservative in ROI estimates. As students actually complete the program, ROI estimates will be readjusted to reflect actual results.
Benefits Calculation Worksheet
Blank spaces are for student inputs. The estimates used in this paper have been included in parentheses.
Cost of participating in alternative program _______ (estimated earlier at $300)
Time saved from alternative program _________ (averaged earlier at 108 hours)
Time saved from work/study efficiencies _________ (estimated 12.5% efficiency *12 weeks *40 hours = 60 hours)
Ongoing time savings___________ (Multiply previous result of 60 by 3.33 = 200 hours)
Total Hours saved _______ (108 + 60 + 200 = 368)
Total of ___________(368) hours of value multiplied by __________$25/hour (average US hourly wage).
____________($9200) = Total Measured Hourly Benefits to this Student
Add in the cost savings of an alternative program at _________ ($300).
Total Benefits of the program = _______________$9,500
25 hours or required time multiplied by the wage multiplier ($25) = $625
Estimated Cost of the Program = $1500
$2125 = Total Measured Costs to Student
Return on investment is calculated by dividing net benefits by total costs. Net benefits are calculated by subtracting total costs from total benefits.
$9,500-$2,125 = $7,375 = Net Benefits
Net Benefits / Total Costs = ROI
$7,375 / $2,125 = 3.470 = 347%
Return on Investment for this program with a price of $1500 is 347%.
Response to ROI
Based on this calculation for ROI, the program produces a 347% return on investment at a price of $1500. It looks like it will be a good idea to continue offering the program, though it will be difficult at first to convince students of its $1500 value. Until it’s value is proved, it is likely that the program will need to provide closer to a 1000% return on investment by reason of a much lower price tag.
As students fill out the calculation worksheet, they will discover the ROI particular to their own situation (alternative programs, changes in efficiency, hourly wage rates, etc…). If I am marketing to college students rather than young professionals who want to continue their education outside a college context, I will need to use a lower wage conversion rate.
Because of the complexity of the ROI formula, it would probably be easiest if this was converted into a digital format that required students to enter the time it took to participate in the measured group discussions, their confidence factor, and their wage rate. Other factors may be suggested and altered as students prefer to change the ROI. This makes the process simple and allows students to focus on the result rather than the process of calculating ROI.
Other factors not directly included in this formula are potential for pay raises and promotions as students continue their education and work more effectively within their teams, the increased student ability to learn from future classes, elf awareness, self confidence, new learning methods, improved leadership, higher GPA, higher levels of learning and engagement, and perhaps an increased ability to enjoy life. These things are not necessarily taught through the workshop, but are potential intangible benefits that may result from learning how to maximize learning through the experience of life.
Table B-3. Average hourly and weekly earnings of all employees on private nonfarm payrolls by industry sector, seasonally adjusted. (2014, January 1). Retrieved December 16, 2014, from http://www.bls.gov/news.release/empsit.t19.htm