While return-on-investment (ROI) analysis has historically been a tool of the private sector, government agencies can use it to measure the impact of policies and programs. Here’s how.
Return-on-investment (ROI) is a common performance measure in the world of business, where bottom lines and profit margins rule the day. However, it is much more challenging to measure the ROI of public service programs, where the value of the work can be harder to quantify and monetize. But it can be done—and used to drive insight into program performance and financial viability.
Our team of economists conducted an ROI study of the Corporation for National and Community Service (CNCS) AmeriCorps and Senior Corps programs. These national service programs address critical community needs like increasing academic achievement, mentoring youth, fighting poverty, sustaining national parks, preparing for disasters, and providing aid to senior citizens. What are the benefits to members, society, and government, and what are the costs of these programs at the national level? Are they a cost-effective investment for the federal government and other funders? The results of our study showed that national service programs that leverage the skills and talents of citizens to address unmet community needs offer substantial monetary benefits for all stakeholder groups and a significant ROI.
But getting to that conclusion was quite a process and illustrates the challenges of conducting this kind of assessment.
Gathering the data
One of the biggest challenges of a data-driven economic project is data availability. Because AmeriCorps and Senior Corps programs across the country vary in size and scope, we had to search for the most robust data for as many programs as possible. This included an extensive literature review of public data and program evaluations as well as reaching out to some of the grantees (e.g., Teach for America, College Possible, Habitat for Humanity).
For each program evaluation we reviewed, we used strict criteria to determine if the outcomes presented in the evaluation were based on rigorous research methods and whether the outcomes could be reasonably monetized. The answer helped us narrow the programs down to what we would use for the ROI study. We were able to leverage evaluation findings for about 30 AmeriCorps and Senior Corps programs that could be scaled up to the national level.
Next, we identified defensible ways to monetize the benefits that stemmed from each program using a variety of data sets. CNCS shared additional program evaluations with us, including some that weren’t publicly available.
Determining a dollar value
Once we had all of the necessary data, the next challenge was monetizing—or placing a monetary value—on the program outcomes. The question we asked ourselves was how could we reasonably monetize the benefits that are derived from these various service projects and effectively capture the impact across all applicable stakeholder groups?
Whereas most ROI studies are more generalized and based on broad assumptions, we answered this question by building an elaborate logic model that detailed the monetization process for individual program outcomes. To accurately depict the relationship between each program's outcomes and its economic value, in some cases we had to find proxies established by other third-party studies. For example, programs that offer literacy interventions for kindergartners can be reasonably tied to high school graduation rates through proxies that map reading comprehension at that grade level to high school completion. Other studies have demonstrated that high school graduation leads to an increase in earning potential and employability, and a decreased likelihood of public assistance dependence.
We further broke out the ROI analysis by type of benefit realized. Not surprisingly, programs that lead to improvements in participants’ educational attainment and employment rates have higher ROIs since those outcomes are tied to increased lifetime earnings. Healthcare programs also show higher ROIs because improvements in health outcomes reduce spending by the government, such as Medicare and Medicaid expenditures. Programs with less tangible benefits may not be able to be reasonably monetized, but it’s important to remember that intangible benefits and non-monetary outcomes still have a great benefit to society.
Communicating the value to stakeholders
Across the programs included in this ROI analysis, there were three stakeholder groups whose benefits were monetized: the program members (i.e., the volunteers who serve), the government, and society (i.e., those who participate—or receive services—from these national service programs). The analysis shows that AmeriCorps and Senior Corps members gain valuable skills, advance their education and careers, increase their earnings, and live healthier lives as a result of serving. The federal government directly benefits from tax revenue gains and savings because of the impact of these programs. Addressing community challenges early also lessens future dependence on other government programs, thereby reducing government expenditures in criminal justice, welfare, and public health.
Our model measured around 30 AmeriCorps and Senior Corps programs and assigned monetary values for their associated outcomes in areas such as housing, academic support, workforce development, public lands work, etc. Overall, we found that every dollar in federal taxes invested in AmeriCorps and Senior Corps returns about $17 to society, program members, and the government combined.
We’re seeing increased demand for ROI analyses from government agencies to measure the impact of policy and programming. Grantees who receive federal government funding can also use this tool to show other investors that their program is sustainable and making an impact. If they can demonstrate a positive return on every dollar invested in the program, that helps them attract additional donors and investments to fund and potentially expand their programs.
Our approach to data collection—going beyond tallies of numbers of people served to identifying, quantifying, and monetizing real program outcomes—makes our model unique and novel. More importantly, this model can be updated in the future fairly easily with new data. It can also be used to evaluate a number of different types of federal grantee programs. Because of its size and the robustness of the analysis, this study also adds to the evidence base of the benefits of national service.