Running head: EFFICIENCY IN HIGHER EDUCATION

Efficiency in Higher Education: Massachusetts

Luisa M. Lora
SDAD 5850-Summer 2014
Kurt Buttleman, MBA, Ed.D.
Seattle University
August 6, 2014

EFICIENCY IN HIGHER EDUCATION

Efficiency in Higher Education: Massachusetts

With growing concern over the value of an education compared to the debt acquired,
job placement, and overall financial security, more and more institutions are hoping to prove
their efficiency and value for students. Within every sector of higher education, there are
competitive factors that boast value for students. However, to prove the most efficient, more
than one indicator must be compared and surpass other institutions. In answering the question
what sector of higher education is most efficient, it is first important to determine what
indicators are important in measuring efficiency.
Although institutions vary by what they determine as being important for them, I
selected the following performance indicators of efficiency from a student development and a
current student perspective: graduation rates, retention rates, student to faculty ratio, and cost. I
also focused my research within the state of Massachusetts, which has a robust higher education
system. In particular, I compared public 4-year and private 4-year not-for profit institutions from
the 2012 cohort. I used data from the Integrated Postsecondary Education Data System (IPEDS),
which uses surveys to collect data and allows users to classify depending on various criteria. The
data yielded a sample of 96 institutions of higher education.
Performance Indicators
Graduation Rates
Graduation rates in particular have been widely adopted as indicators of institutional
effectiveness in state and national accountability measures and institutional performance reports
(Horn, 2013, p.1). Whether or not a student graduates from an institution is a clear measure of
how efficient and effective that institution proved for that student. Graduation rates are
obvious, commonsense indicators of how well an institution is serving its students (Cook &

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Hartle, 2011). However, graduation rates are affected by a number of factors and for that reason,
this study looked at raw graduation rates within 150% of regular time (4-6 years) completion.
Retention Rates
Retention rates are a good indicator of whether or not students feel they are getting a
good value and experience from the institution. First year to second year retention may be a
good indicator of students persisting to graduation, since data shows that the majority of attrition
occurs between [the] first and second year of college (Levitz, 2011). Therefore, institutions must
focus on this population if they are to succeed in achieving high retention rates that eventually
lead to graduation.
Student to Faculty Ratio
Student achievement is affected by many factors including parental support, student
effort, available resources, and competency in subject matter, among other things. The amount
of time professors spend with each student is also associated with differences in achievement for
each student. Having a classroom with fewer students allows students to have more one-on-one
time with professors, which may prove to be beneficial for students who need more attention.
When considering schools, those with lower student faculty ratios may appeal to students and
parents who associate smaller class sizes with achievement, and therefore a better value and
return on their investment.
Cost
Considering the high cost of a college education, students may question whether the
expected earnings after graduation are worth the debt acquired. For that reason, it is important to
compare cost with the other performance indicators to determine if the value is there. There is
also a lot more to cost than just tuition. When looking at institutions, it is important to consider

EFICIENCY IN HIGHER EDUCATION

your status as an in state or out-of-state student, living on or off campus, student fees, books, and
personal expenses. Still, the worth of a college degree is high and studies shows the value of a
college degree is greater than it has been in nearly half a century with today's young high schoolonly graduates earning about 62 percent of what their college-graduate peers earn (Kurtzleben,
2014). For the purpose of this study, I looked at data for cost of in-state and out-of state
institutions with on and off campus housing.
Data Analysis
The following figures compare graduation rates, retention rates, and student faculty ratio,
and the total cost of attendance for instate and out-of-state students living on and off campus at
public 4-year and private 4-year institutions in Massachusetts (Appendix A).

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Figure 1. Averages of efficiency indicators by sector in 2012

79%
63%
52% %

16% 12%

90
80
70
60
50

Public 4-year

40

Private 4-year

30
20
10
0
Graduation Rate( 150%)

Retention

Student Faculty Ratio

Source: National Center for Educational Statistics (2012)

Figure 2. Averages of cost for in-state and out-of-state by sector in 2012

EFICIENCY IN HIGHER EDUCATION

60,000
50,000
40,000
30,000

48,966

48,966

46,733

20,000
10,000

37,221
32,358

Public 4-year
Private 4-year

31,562

22,744
14,474

Source: National Center for Educational Statistics (2012)

Based on the data collected, the following determinations can be made on what institutions fared
better based on the selected efficiency indicators:

Graduation Rates (150%): Private 4 year

Retention: Private 4 year, Public 4 year
Student Faculty Ratio: Private 4 year
Cost: Public 4 year
The results indicate that private 4-year institutions have higher graduation rates and a

lower student faculty ratio, while public 4-year institutions have lower cost of attendance. The
retention rates for both sectors are equal. It may seem obvious that, based on the criteria, private
4-year institutions are in fact more efficient, however the difference between graduation rates
and student faculty ratios between the two sectors are low compared to the disparity between
cost. If we consider efficiency with a bang for your buck mentality, the public 4 year sector
may be considered more efficient and has a greater return on your investment.

EFICIENCY IN HIGHER EDUCATION

Regional and National Comparison

With the data from Massachusetts, and to have a more comprehensive look at
efficiency in American higher education, I compared the IPEDS state data with the New England
region (Appendix B). This new sample included 198 public 4-year and private 4-year
institutions from the New England states, which include Connecticut, Maine, Massachusetts,
New Hampshire, Rhode Island, and Vermont. The results were very similar to Massachusetts in
all the indicators including the disparity in cost. This however, is not surprising since in New
England, and with these criteria, Massachusetts represents nearly half of the sample with 96
institutions.
On a national scale, Horn (2013) conducted a study comparing efficiency by state.
Although his study included multiple variables, the entire United States, as well as limitations, it
is worth noting the results of the study and how they compare to Massachusetts. Horn found that
a full 80 percent of public institutions nationwide exhibited at least moderate levels of efficiency,
compared to 42 percent of private institutions. He also found that 51 percent of public
institutions nationwide rated as moderate or above efficiency, compared to 35 percent of private
institutions (p.27). Massachusetts public four-year institutions in particular scored a high
efficiency rating. Overall, the study found that most institutions are relatively efficient.
Limitations
As with every study, there are limitations to this analysis and collection of data. Using
the IPEDS data as my primary source, the sample was limited to first time, full-time degree
seeking undergraduate students that enrolled in the fall, which fails to include a large portion of
todays students. Additionally, since data for more recent years was incomplete, the data for all

EFICIENCY IN HIGHER EDUCATION

the indicators was collected for the 2012 cohort. With institutions and the economy changing,
these statistics may have shifted within the last two years.
Using data from only Massachusetts and comparing the public and private sectors in
that state is another limitation. Although it was my intention, being that specific makes it not
applicable to other states or other sectors of education in and out of Massachusetts. Another
limitation with studying Massachusetts is the number of institutions that are private vs. public.
The study looked at 14 public 4 years and 82 private 4 years, which is the number of institutions
within these particular sectors and state. However, with the regional and national comparison,
the limitation is less. Still with these limitations, it is important to remember that the results of
the study are not applicable to the national averages, even if there are similarities in the data.
Another limitation to the study of efficiency is the categorizing of schools as
inefficient based on standard measurements or performance. An article by stateuniversity.com
(n.d) states, Efficiency is not a yes/no kind of phenomenon therefore, instead of looking at
institutions as a whole, it may be best to look at one operation and how it compares to another to
measure its efficiency. The article also suggests that the school could look inefficient simply
because it chooses to pursue different educational goals. With debates on performance, and what
schools should be achieving, higher education institutions and those studying efficiency, should
compare many indicators to get a more comprehensive picture of how that institution is doing.
Especially if it affects funding such as with performing based funding.
Recommendations
With a focus on performance and return on investment by the institution, students and
parents, and other stakeholders, institutions of higher education want to earn the coveted high
efficiency rating. Understanding that every institution is driven by individual goals, mission, and

EFICIENCY IN HIGHER EDUCATION

values, specific recommendations are not as applicable. However, there are fundamental efforts
that every institution can take to better their efficiency no matter what their individual
educational goals are, target population, or sector of higher education they belong to.
In an article by Penn State (2010) that focuses on specific recommendations on
increasing efficiencies and cost savings in institutions of higher education, many options are
listed including standardizing processes, consolidating, and outsourcing. However, the lessons
learned list was more applicable to helping efficiency, managing change, and overall
performance in individual institutions and higher education in general. These included: having
confidence, delivering clear and consistent messages, follow through on commitments, cultivate
effective followers, speak with one voice as a leadership team, listen, and use challenges to build
capacity and leaders.
I found these particular recommendations to be interesting, because much like the
recommendations on how to successfully manage a budget (Barr & McClellan, 2011), they can
be applied to any profession and individual in a leadership position. Perhaps the most important
recommendation from these lessons learned, is listening. To be efficient, you must know the
needs of the institution and its stakeholders. At the core of efficiency is communication and
institutions implementing necessary changes that yield the best possible results. Doing so will
most likely prove to be fruitful in persistence to graduation, retention from one year to the next,
better performance in the classroom, and possible cost savings with enrollment increases.
Conclusion
Measuring efficiency in American higher education is not an easy task. Institutions
have varying educational goals and means to get there. With that said, measuring performance
based on variables that have been created to compare institutions as a collective, may yield

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10

inconsistent results. There may also be similarities in the data, as was my case when comparing
public 4-year and private 4-year institutions in Massachusetts. Graduation, retention, and student
to faculty percentages were either the same or slightly different. In my analysis of what sector in
American higher education is most efficient, specifically in Massachusetts, the answer came
down to cost. Public 4-year institutions, even when scoring slightly less on graduation rates and
student to faculty ratio, significantly outperformed private institutions on affordability.
This conclusion is also on trend with some of the studies on the real cost of education
and predictions for cost in the future (Saving for College, 2011, College Board, 2013-14). These
trend articles suggest that overtime, the cost of private institutions will rise significantly more
than public institutions, and if the gap in the data stays the same as it is now, a public 4-year will
yield a better return on your investment. For all the reasons in the data now and looking ahead,
cost alone suggest that the public 4-year institution is the most efficient sector in Massachusetts
and likely in overall American higher education.

References

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11

Barr, M.J. & McClellan, G.S. (2011). Budgets and Financial Management in Higher
Education. San Francisco, CA: Josey-Bass.
College Board: Average published undergraduate charges by sector, 2013-14. Trends in Higher
Education. Retrieved from: https://trends.collegeboard.org/college-pricing/figurestables/average-published-undergraduate-charges-sector-2013-14
Cook, B., & Hartle, T.W.( 2011). Why graduation rates matter and why they dont. American
Council on Education. Retrieved from http://www.acenet.edu/the-presidency/columnsand-features/Pages/Why-Graduation-Rates-Matter%E2%80%94and-Why-They- Don
%E2%80%99t.aspx
Efficiency in education - The choice of outcomes, the choice of inputs, the transformation
process and implications for policy.(n.d) Retrieved from:
http://education.stateuniversity.com/pages/1945/Efficiency-in-Education.html
Horn, A.S. (2013). Effectiveness and efficiency in promoting timely degree completion: A
performance rating system for the states. Midwestern Higher Education Compact.
Retrieved from:http://www.mhec.org/sites/mhec.org/files/201305-213wkingpapereffectefficiency.pdf
Kurtzleben, D. (2014). Study: Income gap between young college and high school grads widens.
U.S. News and World Report. Retrieved from:
http://www.usnews.com/news/articles/2014/02/11/study-income-gap-between-youngcollege-and-high-school-grads-widens
Levitz, N. (2011, February 22). When do students leave? Retrieved from:
http://blog.noellevitz.com/2011/02/22/when-students-leave-college/
National Center for Educational Statistics. (2012). Intergrated Post Secondary Education Data
System. Retrieved from: http://nces.ed.gov/ipeds/
Richard, A., & Thomas, R.( 2010) Efficiency and effectiveness opportunities within higher
education. PennState, Quality Endeavors, Issue 131. Retrieved from:
http://www.psu.edu/president/pia/features/Issue131.html
Savingforcollege.com. The real cost of higher education. Retrieved August 1, 2014, from:
http://www.savingforcollege.com/tutorial101/the_real_cost_of_higher_education.php
Woodruff, M. (2013). Public vs. private college: Which is better for your wallet? Business
Insider. Retrieved from: http://www.businessinsider.com/public-vs-private-college2013-4
Appendix A-IPEDS Data for Massachusetts

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12

Sector of institution
- Public, 4-year or above
Number of Observations (NOBS): 14
Variable

Mean

Graduation rate - bachelor's degree within 150%

of normal time (6-years) - (12)
Full-time retention rate, 2012 - (12)
Student-to-faculty ratio - (12)
Total price for out-of-state students living on
campus 2012-13 - (12)
Total price for out-of-state students living off
campus (not with family) 2012-13 - (12)
Total price for in-state students living off campus
(with family) 2012-13 - (12)
Total price for in-state students living on campus
2012-13 - (12)
Total enrollment - (12)

52
79
16
32,
3 58
31,
562
14,
474
22,
744
8,7
77

Sector of institution
- Private not-for-profit, 4-year or above
Number of Observations (NOBS): 82
Variable

Mean

Graduation rate - bachelor's degree within 150%

of normal time (6-years) - (12)
Full-time retention rate, 2012 - (12)
Student-to-faculty ratio - (12)
Total price for out-of-state students living on
campus 2012-13 - (12)
Total price for out-of-state students living off
campus (not with family) 2012-13 - (12)
Total price for in-state students living off campus
(with family) 2012-13 - (12)
Total price for in-state students living on campus
2012-13 - (12)
Total enrollment - (12)

63
79
12
48,
966
46,
733
37,
221
48,
966
3,4
16

Appendix B-IPEDS Data for New England

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13

Sector of institution
- Public, 4-year or above
Number of Observations (NOBS): 43
Variable
Graduation rate - bachelor's degree within 6 years, total
- (12)
Full-time retention rate, 2012 - (12)
Student-to-faculty ratio - (12)
Total price for in-state students living on campus 201213 - (12)
Total price for out-of-state students living on campus
2012-13 - (12)
Total price for in-state students living off campus (not
with family) 2012-13 - (12)

Mean

51
74
15
22,8
59
33,8
17
22,7
44

Sector of institution
- Private not-for-profit, 4-year or above
Number of Observations (NOBS): 155
Variable
Graduation rate - bachelor's degree within 6 years, total
- (12)
Full-time retention rate, 2012 - (12)
Student-to-faculty ratio - (12)
Total price for in-state students living on campus 201213 - (12)
Total price for out-of-state students living on campus
2012-13 - (12)
Total price for in-state students living off campus (not
with family) 2012-13 - (12)

Mean

63
77
11
48,0
13
48,0
13
45,0
41