Return On Investment in Education

The September issue of US News & World Report has the most recent rankings of the Best Colleges. However, I think what’s interesting is the article “Is College Still Worth it?” Instead of which college to attend, the question it asks is whether to go to college, given the rising costs at as much as $50,000 a year.

What is the return on investment in higher education? What is the return? How do we measure? The article didn’t answer these questions but pointed in the right direction.

Unfortunately, what’s not clear is whether the product an education is getting any better or any easier to evaluate.

If colleges were businesses, they would be ripe for hostile takeovers, complete with serious cost-cutting and painful reorganizations. You can be sure those business analysts would ask: Is the consumer getting the product we promised? What do you actually learn here? Can you guarantee a job? Admission to graduate school? There are ways to gauge these things, but colleges have just recently fended off a movement to demand such outcomes measures.

The common argument to support the ROI has been the fact that, on average, “people with a college degree earn significantly more money over their lifetimes than those without a college degree.” But the flaw is in the unspoken “on average” in such data and the meaning of “significantly”. The Six Sigma training in me always makes me ask “what is the variation in each group?” and “what are the factors that contribute to the variation?”

People making decisions based on such general differences between averages run the risk of not getting sufficient ROI or any at all. Although education decisions are highly personal, people could apply DMAIC thinking to make it a more informed decision.

  • Define: Decide what return you want from higher education. The metrics can be money (marketable skills), connection/networking, joy of learning, knowledge and understanding of the world itself, etc. Prioritize what is most Critical to your Education (CTE) and focus on maximizing that, very much like a CTQ defined for a LSS project.
  • Measure: Collect data on how well each college delivers the CTE metric, and make sure that all data are equivalent or measured similarly before comparing them.
  • Analyze: Ask the question “what critical factors contribute to the higher value of the CTE metric?” For example, if your CTE is marketable skills that pay well and you identified colleges whose graduates received the highest starting salaries, the question is “what factors helped them achieve these skills?” They can be academic disciplines, participation in Co-operative programs, leading a student organization, faculty quality, student quality, student/faculty ratio, or some other indicators used by US News in their rankings. The factors that are most critical to learning marketable skills may not help you understand the world better, and vice versa. Based on a better understanding of relevant causal relationships, choose colleges that excel at those critical factors.
  • Improve: Now you are in a college. Focus on critical factors: choose the right major, team up with the best students, apply for an intern program, join a student club, etc. This is where you realize the return, but only if you focus on the critical factors.
  • Control: The world changes. Your goals and priorities change, too. You will discover new critical factors that are more important to your current goal. Whether you are still in college or have started your career, continue to understand and focus on the critical factors that help you improve. That’s lifetime learning. That’s the spirit of Lean Six Sigma continuous improvement.

[I will write about applying LSS in education and about ROI in LSS training vs. conventional education in my future blogs.]

Comments 4

  1. Michael Toomey

    I enjoyed this article and can relate to it having put one son through college, one now a Freshman, and one two years out. As an MBB, I just wish it this easy. First, I concur that the higher education system needs to be revamped but colleges are pillars of resistance to change much like healthcare so I don’t expect much difference between my first and third son’s experience. That aside, the biggest challenge I see between my professional DMAIC application and my sons’ college experiences is that most of my professional associates can spell DMAIC. My sons, during their high school and early college years, have neither the maturity nor critical thinking skills to run through the phases. I would say that they fit within the 1st StDev of average. On the other hand, I have had the pleasure of association with some high potential HS seniors (top 5-10%), and it is interesting to observe how they apply their fledgling critical thinking skills to do just what the author describes…and then reap the benefits. These are our future leaders. Yet, there is one other intergradient that the author failed to mention and that is the critical importance of the engagement of parents. In terms of DMAIC, these are the project sponsors. Projects seldom succeed with out strong sponsors…Six Sigma is not a spectator’s sport! There could be a blog on just this subject alone.

  2. Fang Zhou

    Thanks, Michael. I completely agree with your points.

    One point I was trying to make is that regardless of our personal goals in higher education, there are many critical factors (x’s) that contribute to the goal. The college we choose only represents some, and many come outside it, including those you raised, personal preparation and parent engagement. Whatever the ROI college graduates received is not only a result of college education, but more a result of other factors (in my opinion). [We certainly recognize the potential interactions among all factors. ]

    Attending a college (no matter how good) itself is either necessary or sufficient to achieve life goals. It doesn’t guarantee success or ROI. The only thing it guarantees is the costs (money and opportunity cost), and a probability (for those who understand statistics, only a conditional probability) to succeed

    Over-emphasis on some factors and ignoring others often leads to poor outcomes, as we have seen in many improvement efforts. Education decisions are not different. Critical thinking brought by Six Sigma training helps people see the complete process and all factors involved before devoting time and energy to any solutions.

    Colleges are not customer focused, but in business serving their own interests not different from many other organizations, for profit or not for profit. Consumption in eduction is no different than consumption of any other products or services. Just because a commercial says you should buy a product, it doesn’t mean it’s good for you.

    Unless the higher education system becomes customer focused, it will never deliver the quality and efficiency we need. As a consequence, the average consumers of such services will always overpay and have low ROI.

  3. Fang Zhou

    Claudia, good points. I wish I knew better when I went to college. I didn’t think so much when I went to graduate school.

    I only learned to view education more critically through years of work experience and after working in LSS. I think it’’s time for us to re-define education, personally and as a society.

    As a LSS practioner, I always see myself as a life-time learner as well as a mentor who shares knowledge. I hope we share our knowledge and life experience with not only those at work but everyone around us.

    Thanks for sharing your thoughts and ideas.

  4. Claudia

    While this seems like a very good way to approach college and further education I do have issue with it on one level.

    The people facing these decisions are still kids. They don’t know about LSS, evaluating the importance of education, or where to begin.

    Many of the graduating high schoolers are too focused on how to get into college to worry about ROI. Most likely, middle to upper class students rarely, if ever, even ask themselves if college is for them. They’ve simply been told college is what’s expected.

    This is a very helpful concept for those considering returning to college, though I don’t see first-time, fresh out of high school students even considering things this in depth.

    I know it didn’t occur to me when I was applying to colleges the first time around…

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