SOURCE: The Boston Consulting Group

The Boston Consulting Group

July 12, 2012 00:01 ET

Shift to 'Value-Based' Approach to Budgeting for K-12 Education Sharpens Focus on Results

BCG Report Finds Decisions Focused on Student Needs and Improving Learning Outcomes Can Maximize Impact of Available K-12 Funding

BOSTON, MA--(Marketwire - Jul 12, 2012) - As school districts across the nation struggle with demands to do more with less, it is increasingly imperative that they adopt a "value-based" approach to budgeting and decision making for K-12 education, according to The Boston Consulting Group.

In a new report titled Achieving More for Less in U.S. Education with a Value-Based Approach, experts in BCG's Education practice, J. Puckett, Reggie Gilyard, Lane McBride, Jeff Shaddix, and Adam Swersky, discuss an approach that has the potential to improve student outcomes in an environment of declining resources and higher demands for results. They describe a simple framework for increasing the effectiveness of budgeting and decision making in education systems around the world. Known as a "value-based approach," the framework aims to maximize the impact of available funds, recognizing the tradeoffs inherent in spending decisions across the portfolio of current and proposed expenditures, while maintaining an unflinching focus on learning outcomes among students.

The value-based approach can work in one of two ways: by holding costs constant while improving outcomes or by freeing up funds that can be spent somewhere else. The essential "value test" that district leaders and policymakers can apply to any proposed initiative is this: "Would you be prepared to cut costs or end other programs to pay for it?"

"For more than four decades, student performance has remained stagnant as K-12 spending has more than doubled," said J. Puckett, a senior partner who coauthored the report and the global leader of BCG's Education practice. "As demand for improved student achievement continues to grow, we must ensure that spending decisions align with outcomes. It is no longer just an issue of how much we spend, but how we spend it."

The report lays out a number of key questions that decision makers should ask themselves in setting K-12 budgets and spending priorities. These questions include:

  • Does the potential gain from a new program compare favorably with alternative uses of the same funds?
  • Can spending differently in a particular area improve the cost-benefit equation -- for example, increasing the class sizes of the most effective teachers while paying them more?
  • Are there areas of current spending that add limited value to students' education -- for example, in some areas of central administration? Would this spending deliver more value if it were reallocated to more promising programs?

Once initiatives that have unproven or limited impact begin, they are rarely assessed for effectiveness -- and rarely canceled, according to BCG. They persist year after year regardless of their value, layering legacy costs on top of other legacy costs. Too few legislators or administrators have been willing to acknowledge the tension between cost and outcome, or to accept that spending in one area might deprive a more promising area of funds, the authors assert.

"A value-based approach is not easy to implement," Puckett explained. "There will always be calls for more spending as a way to resolve conflicts. That is why any value-based program should tightly link savings to spending from the outset. Leaders need to communicate with the public, again and again, that tradeoffs can be worthwhile."

As examples of value-based tradeoffs, funds can be reallocated from paying teachers based on their seniority to measuring and recognizing differences in teachers' effectiveness, from a one-size-fits-all teaching model to teaching models that incorporate smart technology and teacher specialization, and from legacy expenses in central offices to proven frontline interventions in schools.

The value-based approach is being advanced by the Measures of Effective Teaching (MET) Project, sponsored by the Bill & Melinda Gates Foundation. Through MET, decision makers are gaining an improved understanding of which teacher characteristics lead to improved student outcomes -- and enabling these decision-makers to invest to develop those characteristics -- instead of paying salary premiums for advanced degrees or experience.

The report highlights the Los Angeles region of the successful Knowledge Is Power Program (KIPP) as another example of the benefits of the value-based approach, highlighting KIPP administrators' use of digital technologies to restructure the classroom and extend the reach of high-performing teachers.

"Value-based thinking demands evaluating the evidence for today's assumptions and current practices," explained Lane McBride, summing up the report's conclusion. "By persistently scouting and documenting the initiatives that work well and can be scaled up, the U.S. may be able to improve its educational system -- and do so without continued increases in spending."

To download a copy of the report, please go to www.bcgperspectives.com. To arrange an interview with one of the authors, please contact Patrick Riccards at +1 703 298 8283, patrick@exemplarpr.com, or Alexandra Corriveau at +1 212 446 3261, corriveau.alexandra@bcg.com.

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