The following interview is with Donna Desrochers, principal researcher in the education program at the American Institutes for Research and deputy director of the Delta Cost Project. The Delta Cost Project examines the relationships between spending, revenue and outcomes in higher education, and Desrochers has published extensively on the topic. In this interview, Desrochers discusses how efficiency is measured in the postsecondary context, and shares her thoughts on how these measurements could be done more effectively.
1. What are some of the most common metrics higher education leaders use to measure their institution’s efficiency?
For years, institutions have really relied heavily on input metrics to measure their institution’s quality and operational efficiency, and part of it really goes back to the measures that accrediting bodies use to determine whether institutions meet standards for accreditation. They’ve traditionally looked at measures related to program offerings, faculty credentials, student-faculty ratios and institutional capacity to deliver the education, such as library resources and those types of metrics.
In more recent years, there has really been an increased emphasis on outcomes; we’ve seen much more attention on graduation rates and retention rates. On the financial side, historically, most attention has been paid to revenue side indicators. Most institutions are tracking things such as fees, endowment size, changes to the endowment, fundraising revenues and, of course, student financial aid. You may be looking at overall total spending per student. Even members of institutional boards spend far more time looking at the revenue side of an institution’s finances than they do looking at how the money is being spent.
2. What do these approaches miss in terms of telling an institution’s “efficiency story”?
With this disproportionate focus on revenues, institutional leaders are spending far less time on where the money is being spent and, first, whether that spending is aligned with their institutional priorities and second, whether it’s used to improve student learning and success. Certainly by looking at a few key metrics, institutions can really evaluate how much they’re spending on their academic mission versus other types of functions that the university or college may provide. Certainly, colleges today are quite diverse—they have research functions, sometimes they have hospitals and public services as well. Really honing in on that, you can get a greater sense of how much is being spent on academics versus those other services.
Secondly, linking spending to student outcomes is also the purest measure of efficiency that is missing. Looking at how the money that is being spent translates into college degrees.
3. From your perspective, what are some of the most effective metrics postsecondary leaders could use to measure their efficiency?
First and foremost would be, “How much are you spending on the academic mission?”
Many colleges and universities are now huge enterprises that do more than just teach students. Certainly they have research functions, they run radio stations, conferences, student housing and dining, and a lot of times when you look at spending, they’re looking at the total of all that combined. What you really want to look at is how much you’re spending on academics, how much you’re spending on student instruction, student services and the overhead expenses that are related to that. When we can isolate the spending of the academic mission, we can certainly compare what is being spent across different types of institutions by filtering out the research spending, and really see how you compare, maybe to your peers, or to other institutions in your state.
A related measure to that would be to look at what’s being spent on instruction in relation to the changing student body. How much are you spending on instruction per student and is that going up or down over time? Is the proportion of spending that’s being dedicated to instruction going up or down in relation to the amount that’s being spent on administration? Is that really where your institutional priorities are?
4. Is there anything you’d like to add about the loss in terms of focusing exclusively on revenues when measuring efficiency and what institutions need to do better when it comes to actually understanding how efficient their operations are?
There are a couple other measures too that are certainly quite important. I mentioned previously looking at spending and outcome, looking at measures of cost per degree, cost per credit hour, those are critically important, particularly the direction that those are going and whether institutions are lowering their cost per degree and therefore becoming more efficient. A final measure that’s related is a measure of looking at how much of the cost of the academic mission is being paid for by students. We’ve seen in recent years that that’s gone up dramatically, just as we’ve seen tuition go up dramatically in recent years. Tuition is not a good indicator of what’s going on with university spending. In recent years we’ve seen that student tuitions are really replacing revenues that have been lost from other sources for the university. It’s an important measure to see where the money’s being spent, who’s paying for it and what institutions are getting for that investment. This interview has been edited for length.
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