What to consider ROI or VOI?

One ever green topic for discussions in social media and higher education forums is — What’s the ROI of doing a programme at institute A vis-à-vis doing the same programme in institute B?. This topic is highly popular with aspirants who wish to pursue higher education. The questions around this topic include — How much will I spend for the programme? What is the duration of the programme? What are the other expenses incurred while doing the programme? and What is the probable salary that I can expect post completion of the programme?

Return on Investment

Aspirants try to gauge what is the final monetary return that one can expect after pursuing higher education. Calculating Return on Investment (ROI) for an undergraduate or a post graduate programme is good, but looking at it only from a short term ‘monetary perspective’ would be myopic. While calculating the ROI, one takes into consideration all the expenses incurred including the ‘opportunity costs’ associated in pursuing higher education. But two pertinent questions to be asked while considering ROI from monetary perspective alone are: Is pursuing higher education an investment made only to make money? The answer is 'No' and the next question to ask is: Is pursuing higher education an investment of time, effort and money to gain knowledge, skills, networking - along with the potential to gain monetary benefit? The answer is 'Yes'.

Value on Investment

As there are several aspects which are intangible, it would rather be prudent to calculate the Value on Investment (VOI), while opting to choose a higher education programme offered by a higher education institution. The concept of VOI was introduced by Gartner for organisations, where the calculation was based on the intangible assets that contribute heavily to an organisation’s performance. Hence, while one calculates VOI on higher education he or she must consider all the intangible aspects including knowledge gained by pursuing higher education, the network that one can create for their life time, the abilities and skills that one can develop — which includes the ability to collaborate, team building skills and soft skills. Along with all of these intangible benefits, monetary return on investment which could be gained for life time must also be considered. While ROI considers only the tangible monetary benefits of pursuing the higher education programme from a short term perspective, VOI considers both tangible and intangible benefits. Hence VOI includes ROI.

Education and training have different objectives. While training helps in preparing a person for a specific job which requires a specific skill set, education is for life. There are very low expectations on innovation and creativity from a training outcome but this is not necessarily true for education. The purpose of education is to equip students with knowledge and skill sets that can be of use for any known and unknown situations which needs a creative mind along with innovative ability to solve expected and unexpected problems that exist and would emerge in future. Hence calculating ROI for higher education based on monetary values alone would be a gross mistake, but calculating VOI would do justice.

Calculating ROI for higher education is easy. If one sums up all the expenses that he or she would incur along with the possible earning that one would forgo while pursing the higher education programme one can arrive at the total investment required for the programme. If one can get to know the average package that he or she would earn by pursuing the higher education programme, then the earning potential would be available. A simple ROI calculation would then be as follows - the benefit (or return) divided by the cost of the investment.

Calculating VOI is not an easy task as it includes all intangible benefits along with the tangible long term ROI. When a student gets an opportunity to join a reputed higher education institution, after graduating, he or she would remain an alumnus of that institution for his or her lifetime. This is a great intangible benefit which would give immense sense of pride and prestige to the individual. The network that one builds with their peers, the knowledge that one gains through the programme are all part and parcel of the intangible benefits. In-fact these intangible benefits will also have a great impact on the tangible benefits. For example, getting admitted into a highly respectable and reputed public or private institution of higher education would certainly offer an excellent VOI and by default ROI would also be good. In contrary joining an institution which offers a good ROI need not necessarily give a good VOI. This is the reason for a high demand for reputable institutions, where as a meagre demand for institutions with low reputation, in spite of them advertising about their impressive placements statistics.

VOI of an higher educational institution would depends on six I’s namely – Image, Impact, Insight, Interaction, Influence and Income. Hence while choosing to pursue higher education the ‘Image’ or the brand value of the institution is of paramount importance. The ‘Impact’ that the institution would create in the student’s life and the ‘Insight’ - which is the opportunity to learn best practices and opportunity to learn from industry experts is mandatory. The ‘Interaction’ opportunities with the corporate stalwarts and opportunity to interact and identify real world problems will also help in real deep learning. It’s the ‘Influence’ that the institution has in its domain along with the ‘Income’ – earning potential that the institution would provide to those graduating – have to be considered while one opts to pursue a higher education programme both at undergraduate and post graduate level.

(The author is with Symbiosis Institute of Business Management)