Capitalizing on Creativity:
Gertrude
Herbert Institute of Art -
Education
Department Program Evaluation
Author:
Thomas Neil
Larsen
Presented to:
Dr. Saundra Reinke
Dr.______________
PADM 7050
Spring 2008
Abstract
: The purpose of this research was to conduct a Program Evaluation of the Gertrude Herbert Institute of Art’s educational department. This program analysis can be used to help perpetuate the department’s growth while maintaining financial solvency. Ultimately, this evaluation will guide development of a strategic plan. Secondary data was used for this procedure. The areas of this department reviewed included the revenues and expenditures. This segment of the analysis presented a host of financial and economic models to pinpoint not only cost trends accurately, but potential cost savings. The same trends help spot the need for increased revenue which would include class tuition. Another area included was a statistical analysis of the student population size with an analytical review of growth trends in overall population as well as shifts in student population geographically in the local area. The results are negative in both areas and demonstrate a need to improve the marketing of the program itself.
:
Introduction
Art makes a person more
creative and perceptive. Research demonstrates this may be true, but there
is a lot involved to operate a comprehensive art program (Deich, Gersick,
Grossman, Lind, & Relave, 2006). Studies show a complete art program
allows every student to increase positive attitudes towards self, others, and
the environment through creative experiences (Smith, 2006). Problem
solving and creative learning encourage students to connect visual knowledge to
other subjects and to respond with innovation, understanding, flexibility and
imagination. Further examinations of this subject point out that an
understanding of our world, an acceptance of different cultures, an exploration
and mixture of visual culture and art history, and a recognition that
differences are to be welcomed not rejected are essential in creating a
balanced art program.
The Gertrude Herbert Institute of Art (GHIA) has been in existence for more than seventy years. Although it has a distinct and clear history, which concentrates mainly on art education, it lacks a clear focus for the future direction of its art education program. It does not have adequate resources for its current needs and plans for future growth would require resources far beyond what the Institutes has today.
The purpose of this study is to provide an assessment of the effectiveness of the GHIA education program. This study will evaluate benefits as well as the cost of program services. Also included in this study is a review of the product and services provided by the program itself. This study will also evaluate the program’s marketing and public awareness strategy. The data collected in this study will then be taken into consideration by the staff and board of directors of the Gertrude Herbert as it creates a new strategic plan for the education program. In conclusion, this study will give the Institute a more focused direction as it moves toward the future of its educational program.
Background
On a dreary Sunday
afternoon, October 13, 1932, thirteen men and women got together at Louisa
Mustin’s house to discuss their common interest in the visual arts, though each
claimed not to be an artist. Some saw art as an escape from the disappointment,
uncertainty and oppression of the Depression. They enjoyed art and agreed that
they and others in the
On April 13, 1935,
The Art Club, now The Gertrude Herbert
The art club
offered classes to adults, “no one under sixteen need apply”, at the Long
Studio located in downtown
The modern day
mission of the institution is to provide a creative outlet for all citizens
living in
The Board of Trustees, of which I am currently the Chairman, along with the Advisory Board are made up of everyday private citizens who seek community enrichment and in turn, recognize the urgency to fulfill the needs of the community that local government will not. The participants of this board spend countless hours and efforts working to accomplish the vision of community commitment to art, art education, community outreach, and art preservation. Due to the lack of public funding and government support for the arts in general, organizations such as GHIA exist to provide enrichment to those who are interested.
GHIA focuses on all forms of visual arts. Such forms of art instruction include oil painting, watercolor, monumental painting, and drawing. Other forms of art media taught at the institution include ceramics, fiber arts, photography, and sculpture. The institution instructs nontraditional as well as traditional students from all walks of life and from every background (GHIA, 2004).
GHIA provides after school Art Ventures to
approximately five-hundred latch key, underprivileged children each month. The
institution also provides an Artist-In-Residence to
The
Gertrude Herbert Institute of Art is a fully self-sustaining institution. This
means that it receives no federal funding, or funding from the state of
In
conclusion, The Gertrude Herbert
Literature Review
There is
a large amount of peer-reviewed literature demonstrating
the benefits of art as well as an art education. Years of research and
countless studies on the value of art and an art education have revealed some
consistent variables, two of which are the focal points of my subject. These
two variables include Cost Benefit (Value of an Art education), as well as Cost
of Service (Cost of Goods Sold), which have been identified among others as the
keys to understanding the past, present and future of art and art education in
communities across America.
Benefits of an Art Education:
We begin with an overview of society’s true benefit from
an individual’s receipt of an art education. Over the years, research has
presented a case for viewing arts as humanities, which places an
emphasis on creation, continuity, communication, and criticism. This approach
is embodied in a curriculum built around the study of masterworks and the
cultivation of percipience, or the “ability of a person to experience works of
art for the sake of their constitutive and revelatory values” (Smith, 2006,
p.14). In other words, the experience of good and great art holds potential for
shaping an individual in positive ways while simultaneously yielding insight
into human existence and natural phenomena. Research justifies the importance
of these ideas by noting that in comparison to the sciences, where timelines
are critical, “the dynamic communication in the arts and humanities is more
relaxed” (Smith, 2006, p. 23).
Researchers have revisited from
time to time the Greek notion of culture, which serves as the foundation for
understanding how the study of the arts can lead toward an ideal formation of
human character. The Greeks as “resources with which one composes a self” (Smith,
2006, p. 4) viewed dance, poetry, drama, vocal and instrumental music,
accompanied by geometry, arithmetic, rhetoric, and logic as the means to do so.
To study these disciplines is to examine the values and expressions of the
human condition. For contemporary Western culture, this Greek model constitutes
a robust call to transform oneself through the arts, establishing the
humanities as the means and the context for introducing the young into educated
society (Lowell & Ondaatje, 2006).
Demonstrating the importance of
an education in the arts seems especially relevant at this particular time. In
a brief section on policy and general public attitudes toward the arts in the
United States, research motivates educators and policymakers to at least
acknowledge the “vigorous and incautious instrumentalism” (Smith, 2006, p.34)
that is often used to promote the arts, promising that they will “humanize the
fortresses of learning, help teach basic skills, integrate a compartmentalized
curriculum, reduce the early school-leaving rate, and much, much more.”(Smith, 2006,
p. 34) Said studies counsel the
population that these permanent motives to justify the arts are as ever-present
as the arts themselves (Lowell & Ondaatje, 2006).
Arguments in favor of an art
education have been based on the fact that art programs develop finely tuned
abilities to not just understand the true motive behind great works of art but
develop an overall appreciation of an individual’s surrounding culture. Research
lists dispositions that come from the serious study of the arts, including the
appreciating and identifying of the artistic excellence, cultivation of
critical thinking, and greater awareness of “cultural alternatives.” Included
are studies that describe the “right and wrong ways to celebrate cultural
diversity”. Art education offers student’s opportunities to reflect on their
own cultural assumptions, compare and contrast diverse value systems, and
maintain open-mindedness when studying art of different cultures. One could go
further by using such cultural distinctions as an invitation for an individual
to ponder the dialectical tensions of life and art (Smith, 2006).
At the outset of the 21st century many educators and parents are considering the kind of education young people need to become productive and responsible members of a global society. Recognizing that schooling should help facilitate the development of creative, thoughtful, and responsible individuals, society is obliged to consider how said development occurs, and to provide rich opportunities for learning for all young people (Eisler, 2000). There is documented evidence of the important role the arts play in education; hence, such rich opportunities must include the arts (Dewey, 1934; Eisner, 1994; Gardner, 1991; Greene, 1995). There are, of course no guarantees or easy solutions to the complex challenges in education but an arts-rich curriculum can provide a vehicle for self-expression, self-understanding, self-confidence, creative problem solving as well as self, motivation (Gardner, 1982).
A report titled The
Arts-vision Report recommended the implementation of a comprehensive
approach to arts education which uses the arts not only as a discipline but
also as a means of teaching across the curriculum. Such an approach would have
the potential to make a decisive contribution to a school’s ability to meet the
complex and growing challenges before it. In addition to the compelling
argument for arts based education included in the Arts vision report, much has
been written about the value of art in areas such as creativity (Eisner, 1994;
Gardner, 1991). Subsequent work by Gardner and others (Eisner, 1994; Greene,
1995; Upitis, 1998) has reinforced the value of the arts as a tool for the teaching
and learning of many skills and concepts beyond the arts themselves.
Generalized conclusions from the studies suggest an art’s based education can:
·
Facilitate
the development of analytical and problem solving skills;
·
Stimulate
natural curiosity;
·
Cultivate
a broad range of thinking skills;
·
Make learning relevant
for students of the many diverse cultural
backgrounds that exist in
today’s schools;
·
Facilitate the
connections that need to be made among academic areas and events outside the classrooms;
·
Enhance
teamwork;
·
Strengthen the ability
to use and acquire information and to master different
types of symbol systems;
·
Develop creative
thinking skills and thereby access higher order thinking skills;
·
Serve as a vehicle for
self expression – give voice to feelings and experiences;
and
·
Serve as a vehicle to
help students make meaning of what they are learning;
All elements listed above have a mission to develop human potential through leadership in all areas of an arts education (Eisner, 1994; Gardner, 1991; Greene, 1995; Upitis, 1998).
Other cognitive benefits of art education focus on the development of learning skills and academic performance in school-aged youth. The benefits received from involvement in the arts examined in other studies (Eisner, 1985; Gardner, 1991; Greene, 1995; Upitis, 2001) fall into three major categories:
·
Improved
academic performance, such as grades and test scores (most particularly SAT scores);
·
Improved
basic skills, such as reading and mathematical skills and the capacity for creative thinking;
·
Improved
attitudes and skills that promote the learning process itself, particularly the ability to learn how to
learn, as well as increases in school
attendance, self-discipline, self-efficacy, and interest in school (Brooks, McCarthy,
Ondaatje, & Zakaras, 2004).
As this list shows, these studies focus on improved grades or enhanced learning skills. They do not look at what some researchers have described as the range of ways in which the arts broaden and deepen an individual’s understanding of the world (Brooks, et al., 2004).Understanding all the benefits of the arts is central to the discussion and design of policies affecting the arts. Several studies have addressed the need to make clear the private and public benefits of involvement in the arts. Said studies are intended to engage the arts community and the public in a new dialogue about the value of the arts, to stimulate further research, and to help public and private policymakers reach informed decisions (Brooks, et al., 2004).
Recent policy debates about the arts, their role in
society, how they should be funded, whether they are thriving or suffering,
have been hampered by limitations in available data and the absence of a
developed body of exact and independent research on the arts. Over the past
several years, the RAND Corporation has been building a body of research on the
arts to help inform public policy. In a series of reports on the performing
arts, the media arts, and the visual arts, RAND researchers have been
describing what is known, as well as not known, about the ecology of the arts,
including recent trends in public involvement, numbers and types of arts
organizations, sources and levels of financial support, and numbers and
employment circumstances of artists working in different fields.
Arguments for why the arts should be supported have
undergone a dramatic shift since the mid-1960s, when the
A national recession intensified budget battles at
the state and federal level, which fostered a growing skepticism about
government programs. A public movement was directed toward greater accountability
of works of art produced by publicly funded artists and was strengthened by
those who saw some forms of art as offensive. A basic culture war made arts
supporters realize that they needed to build a case for the value of the arts
that would effectively appeal to the American public and its legislative
representatives. That case has since evolved into an argument that the arts
produce benefits, economic growth, education, and pro-social behavior that all
Americans recognize as being of value. To support this argument, arts advocates
have borrowed from the language of the social sciences and the broader policy
debate to show how the arts benefit society (Brooks, et al., 2004).
The arts are said to improve test scores and self-esteem among the young. They are said to be an antidote to myriad social problems, such as involvement in gangs and drugs. They are said to be good for business and a stimulus to the tourist industry and thus to local economies. They are even said to be a mechanism for urban revitalization (Brooks, et al, 2004).
There are three principal categories of economic benefits from the arts. The first is direct benefits, which are those that result from the arts as an economic activity and thus are a source of employment, tax revenue, and spending. The second is indirect benefits or the attraction of individuals and firms to locations where the arts are available. The third is a variety of “public-good” benefits, which is defined as the availability of the arts, the ability to have the arts available for the next generation, and the contribution the arts make to a community’s quality of life (Deich, et al., 2006).
Measuring
the Cost of Out-of-School Programs:
At present, two working parents or a single working parent now heads two-thirds of American families. Accompanying the rise in working parents is a growing demand for high quality supervised care and enrichment activities for children and youth during out-of-school hours. To make sound investment decisions, policymakers, program providers and budget officials need a clear understanding of the costs of a variety of out-of-school-time options, which include art programs. Reliable cost of service information is essential for estimating the full costs of quality said programs, as well as the incremental costs of improving or expanding existing ones. Without this information, leaders cannot make informed decisions about how to allocate scarce resources to support high quality programs of all types (Lowell & Ondaatje, 2006).
Since 1993, several studies have calculated the annual per-child costs of various out-of-school programs. These studies rely on program budgets and funding data as well as surveys of providers to collect information about the cost of service provided. Taken together, they provide a sense of what it costs to run out-of-school-time programs. Key findings from a review of the cost of service studies include the following:
· There is a lack of up-to-date information on the costs of out-of-school- time care.
· Researchers and practitioners do not have a standard methodology for estimating the full costs of out-of-school-time programs.
· Findings from selected cost studies of out-of-school-time programs suggest a wide variation in costs—from $449 to $7,160 per child per year—more than a fifteen-fold range.
· Much of this variation can be attributed to program characteristics and methodological differences in how costs are calculated.
·
Not much is known about the cost implications
of investments that can improve the quality of out-of-school-time programs.
· Many cost studies do not include the value of in-kind resources (e.g., facilities), which can account for between 50 percent and 100 percent of total program costs.
· Many cost studies focus solely on ongoing operating costs and do not account for startup, expansion, or system-building costs.
· Staff costs and facility costs constitute the largest and most consistent shares of total out-of-school-time program expenses.
·
Little is known about the relationship between
costs and program scale.
This kind of information is necessary to understand the monetary costs of high-quality out-of-school-time programs and the incremental costs of improving lesser-quality programs. The Finance Project and Public/Private Ventures are studying the costs of high-quality out-of-school-time programs. The full report, to be published in 2007, was commissioned by The Wallace Foundation as part of its commitment to improve the quality of out of-school learning opportunities for children and families. It will include a reference guide on the costs of various types of programs offered in different settings, by different providers, and with different goals. It will also examine the cost implications of other types of program characteristics, such as staff-youth ratios, total size, and staffing patterns (Deich, et al., 2006).
Existing research suggests that economies of scale
are difficult to achieve in out-of-school-time programs, because only a small
proportion of total costs are sensitive to program scale. However, more
research is needed to understand if and how out-of-school-time programs can
benefit from economies of scale.
Although there have been important advances in understanding
out-of-school-time programs in recent years, more in-depth studies are needed
to determine the total costs, cost elements, and cost variations of
out-of-school-time programs across different program types, locations, and
offerings. Additional research is also needed to develop reliable models to
estimate the costs of expanding and improving various programs and services.
Addressing these information gaps is essential to support sound decision-making
and investments in high-quality out-of-school time programs and systems
nationwide (Deich, et al., 2006).
Many studies focus solely on operating costs, so they do not take into consideration the startup, expansion, or system-building costs associated with out-of-school-time programs. These cost elements are particularly important to understand the full costs of developing and growing out-of-school-time programs and systems (Horngren & Foster, 1987). Many studies fail to capture information on key out-of-school time program characteristics, such as child staff ratios, the operating schedule, the number and age of children served, and the types of activities provided. This contextual information is required to assess what the dollars are buying (Deich, et al., 2006).
Breaking total costs down into elements can help paint a picture of the major expenses that out of-school-time programs face and of how costs are allocated across these various elements. Researchers generally agree that the main cost elements of out-of school time programs are startup, operating, capital, and infrastructure or system-building costs. However, not much is known about the significance of various cost elements as a proportion of total costs. Most of the existing literature on out-of school-time cost elements focuses on operating costs. In contrast, little is known about startup, capital, and system building costs. A better understanding of these cost elements is essential to help inform the development and expansion of out-of-school-time programs and systems (Deich, et al., 2006).
Which costs are measured and how they are measured is also critical to determining the full costs of operating programs. Full-cost accounting requires researchers to identify and give a value to the cost of all resources used by a program, including costs incurred by a program along with the value of in-kind contributions. Determining program costs can be challenging, given the variability of financial record-keeping and the need to give a market value to donations (Horngren & Foster, 1987).
When evaluating nonprofit programs, another widely used model is cost-volume analysis, which can help trustees and administrators to better understand the potential economic consequences of their decisions. This model offers an overall view of costs and sales in relation to profit planning, and can provide clues to possible changes in management strategy. It also acts as a springboard for a different type of income statement, which emphasizes cost behavior patterns. This is often called the “contribution” income statement or the “variable costing” income statement. Such a statement differs from the traditional “absorption costing” statement because it excludes fixed costs not related to the specific program and includes a contribution margin. Which ever method or model used to evaluate a program or institution, the fluid nature of the relationship between program costs and revenue earned must be kept uppermost in the minds of those who are directors and trustees responsible (Horngren & Foster, 1987).
Methodology
For the purpose of my research, a
program analysis will be performed on the GHIA education program as a whole.
Secondary data is all that is required for this procedure. The first area of
this program to be reviewed will include an itemized cost trend analysis of the
Education Department’s revenues as compared to expenditures over the past nine
years. The second area of financial analysis will be an itemized review of the
programs revenue and cost both mutually exclusive to the program as well as shared
by the program. These two comparisons will be able to pinpoint not only cost trends
accurately, but potential cost saving or places where increases in revenue are
necessary.
Another aspect of the program analysis will
include a cost elasticity analysis of classes offered within the Educational
Department. The purpose of this analysis is to determine the student
population’s sensitivity to the cost of taking a particular class. One final aspect of the GHIA Education
Department to be reviewed is class location for performing this function. This will include a statistical review of
growth trends in population as well as shifts in population geographically in
the local area. These analytical trends are necessary to perform in order to
capture assessments of future needs of the department.
The Budget and Income Statement of the
Gertrude Herbert Institute of Art does not differentiate and or distinguish
itself from the norm of most such statements currently used in practice. The
budget is simply segregated into two distinct categories, which are Revenues
(Income) and Appropriations (Expenses). Because the entity being discussed is a
not for profit organization, the summation of all areas of revenue generation
should always equal the summation of all areas of expenses. In turn, for
budgeting purposes, when revenues are matched with appropriations, the net
result should equal zero.
Revenue sources for the
Gertrude Herbert Institute of Art include receipts from admissions to art
exhibitions, and individual memberships, which support the entity. Other areas
of revenue include contracted sales which are tuition and supply fees,
corporate support which is divided into memberships and general donations,
support by several foundations, and support of private donations which include
special events to raise money. At the
present time, there exists municipal support at the local level of government
only. This will come in the form of Special Local Option Sales Tax money
(SPLOST). This support is not extravagant in terms of municipal generosity;
however, every little bit helps. Other sources of revenue include investment
income, art exhibition sales and juried or art competition sales. Of the
available sources of revenue for the GHIA, only those funds that exist in the
category of Foundation Support as well as specified areas of Private Support
are earmarked and only used to cover specific appropriations of the
organization. All other sources of funding may be used and or transferred to
cover the appropriations necessary to operate the organization.
Appropriations of the
GHIA are classified in specific itemized detail as well. At least one-third of
the appropriations for the institute come in the form of administrative and
personnel salaries and benefits. Another quarter of the operating expenses of
the organization apply to the actual educational operations of the institute. The
remaining one-third of appropriations simply applies to the miscellaneous cost
of day-to-day activities of the entity itself. It goes without saying that no
matter what category any such cost is appropriated to, all expenses of the
organization are monitored on a perpetual basis. Both an independent Certified
Public Accounting Firm as well as the Executive Board Member holding the title
of Treasurer performs such a review.
Budget
SWOT Analysis:
A SWOT analysis is an
acronym for an organization’s strengths, weaknesses, opportunities, and
threats. This analysis is an evaluation of an entity’s internal strengths and
weaknesses and its external opportunities and threats. This type of review
underscores the basic point that strategy must produce a good fit between the
organization’s internal capacity and its external situation. Reviewing an
institution’s financial performance best does this. Several key measures that I will mention when
performing a SWOT analysis on an organization’s financial statements relate to
portfolio ratios. Such ratios include
return on assets, profit margin, and liquidity analysis. These ratios test the
true solvency of the organization strictly in terms of financial numbers.
The GHIA budget has a
number of strengths. The institution provides a service that most other public
and private institutions do not. By
doing so, thirty four percent of the revenue base of the budget is related to
tuition for art classes and art workshops (Cost of Product Sold in the private
sector). This is important since the cost of such artistic service is roughly
the exact same percentage. This is an area of strength in the budget due to the
fact that there should be a direct positive correlation between revenue and
expense in this area.
Another present strength
is the existence of the GHIA Trust Fund, which is part of the organization’s
Foundation support. This fund has been in existence for quite some time and
acts as a reserve fund (Rainy Day Fund). Revenues drawn from it can be
appropriated to cover any negative balanced accounts that may exist. A final
strength that will be mentioned is the minimum reliance on government assistance.
This non-profit organization is virtually self-sufficient and has removed itself
from the threat of depending on tax revenue support from a struggling local
government. This has been accomplished by developing stronger support from the
community both with individual memberships and corporate memberships to the
institute.
The most profound
weakness identified in the GHIA budget is the actual administrative cost or
day-to-day operating expenses of the entity, which are separate from the
expenses related to art education. These operational expenses exist with no
real or tangible revenue generating power. This is a burden on the budget because
they act as a fixed cost and are present whether revenue is being generated by
the organization or not. Such expenses include equipment costs, utility
expense, insurance expense, and miscellaneous administrative expense. These costs, which represent a little over
twenty five percent of the total budget, are all necessities yet do not
generate any revenue for the organization.
Opportunities found in
the budget of GHIA are plentiful. The one particular item that I will discuss,
however, is the GHIA administration’s ability to generate revenue by means of
grant funding. Such avenues of funding may be dwindling with relation to
government agencies; however, grant opportunities are very prevalent among
major corporations. The director of the GHIA is extremely proficient at grant
writing and has several leads and inside information available to score
perpetual funding from major corporations in the private sector. Most of the
funding of this nature must be submitted annually but once a firm relationship
is developed between both the private sector and GHIA, the institution can more
than likely count on said funds annually.
Most threats related to
the GHIA budget are relatively innocuous. The presentable threat of the budget
in my opinion is the possible erosion of private support the GHIA. This
statement specifically refers to the private sectors collapse with relation to
interest in the Art community itself. If this takes place, funding from areas
such as individual and corporate membership will surely deteriorate which
constitutes about fifteen percent of the total revenue of the budget itself.
The reason why this is a potential threat is because these forms of revenue
help provide balance for the non-revenue generating expenses spoken of
earlier.
Data Analysis / Results
The GHIA can be divided up into three distinct categories. The areas of operation include In-House Education, Out-Reach Education, and Art Exhibition. These three areas encompass the entire slate of operations with regard to this institution. However, this program analysis is solely directed towards the In-House Education Program of the GHIA. Even though the results of this document relate solely to the In-House side of the GHIA operation, data representing other areas of the institution will be supplied in the appendix section of this paper.
Financial
Analysis:
For this area of analysis, I first compiled an itemized data trend of the Institution’s revenues and expenditures over a nine-year period. These results of the GHIA profit-loss trend are demonstrated in the illustration below.
The results in figure 1 demonstrate that five out of the last nine years, the GHIA as whole has broken even or received more revenue that cost incurred. The next step was to separate the revenue and cost by operational relationship. Some of the revenues and costs associated with this trend analysis are mutually exclusive to the department. However, some of the revenue and costs included are shared (applied using a calculated percentage). Through my research as well as my own extensive experience in dealing with non-profits, it is apparent that said in-house operations of any sort internally (funded solely by the institution) can and will run the risk of becoming a cash drain with no return on investment by the program (Horngren & Foster, 1987). Therefore, it is necessary to include all related items of revenue and cost which a given program incurs. Below is a visual representation of the in-house revenue-cost trend analysis for the past nine years.
As one can see in figure 2, the GHIA In-House Education program has a negative return on investment for six out of the past nine years. Since the trend is sporadic in nature and the annual losses incurred by the department are not consecutive, I feel there is no need for the GHIA to consider discontinuing the operation. The next focus of this data analysis was to review the program’s revenue – cost in an itemized format. With some of the program’s annual results having higher cost than revenue and yet other annual results having greater revenue than cost, I chose to take an average in each category over the nine-year period. After the average in both the revenue and cost areas were calculated, I then identified each area with regards to its program relationship such as mutually exclusive (100%) or Allocated (Shared) which is illustrated below.
|
Figure 3 |
|
9 Year |
|
9 Year |
|
9 Year |
|
|
|
Avg.-Actual |
|
100%-Avg.Act. |
|
Shared-Avg./Act. |
|
|
|
Revenue |
|
Revenue |
|
Revenue |
|
100% = |
|
$56,710 |
|
$56,710 |
|
|
|
shared = |
|
$60,188 |
|
|
|
$60,188 |
|
|
|
$116,898 |
|
$56,710 |
|
$60,188 |
|
|
|
Expenses |
|
Expenses |
|
Expenses |
|
100% = |
|
$77,019 |
|
$77,019 |
|
|
|
shared = |
|
$39,630 |
|
|
|
$39,630 |
|
|
|
$116,649 |
|
$77,019 |
|
$39,630 |
|
|
|
|
|
|
|
|
|
Net Gain/Loss = |
|
$249 |
|
($20,309) |
|
$20,558 |
Upon review, one can see that the overall nine-year average is very slightly above break-even with a $249 favorable margin. With further review, one will notice that the 100% Revenue-Expense relationship results in a loss of ($20,309) while the Shared Revenue-Expense relationship results in a gain of $20,558. Having performed this exercise, the next step was to rearrange the expense side of the operation to help identify those costs that are the driving force behind the loss in the mutually exclusive side of the program. Identifying the expenses as either fixed or variable in each relationship did this. Below are the results of the new arrangement.
|
Figure 4 |
|
9 Year |
|
9 Year |
|
9 Year |
|
|
|
Avg.-Actual |
|
100%-Avg.Act. |
|
Shared-Avg./Act. |
|
|
|
Revenue |
|
Revenue |
|
Revenue |
|
100% = |
|
$56,710 |
|
$56,710 |
|
|
|
shared = |
|
$60,188 |
|
|
|
$60,188 |
|
|
|
$116,898 |
|
$56,710 |
|
$60,188 |
|
|
|
Expenses |
|
Expenses |
|
Expenses |
|
Variable = |
|
$39,088 |
|
$39,088 |
|
|
|
Fixed = |
|
$77,562 |
|
$37,932 |
|
$39,630 |
|
|
|
$116,649 |
|
$77,020 |
|
$39,630 |
|
|
|
|
|
|
|
|
|
Net Gain/Loss = |
|
$249 |
|
($20,309) |
|
$20,558 |
The results in figure 4 clearly demonstrate that the program’s 100% revenues are more than enough to cover the 100% related variable expense, however can only cover forty-six percent of the 100% fixed cost. The final step in this area of analysis was to quantify each one of the segments listed above into cost per student. By doing so, this exercise gives the reader a more finite view of revenue earned as well as cost incurred with the addition of one more student into the program. Found in the for-profit sector, one would call this technique marginal cost analysis. Here again, the program earns enough per student to cover the 100% variable cost but not the 100% fixed cost and therefore must rely on shared income to cover the remaining fixed cost. The results of this marginal cost analysis are listed on the following page in figure 5 and figure 6.
|
Figure 5 |
|
9 Year |
|
9 Year |
|
9 Year |
|
|
|
Cost Per Student |
|
100%-Per Student |
|
Shared-Per
Student |
|
|
|
Revenue |
|
Revenue |
|
Revenue |
|
100% = |
|
$86 |
|
$86 |
|
|
|
shared = |
|
$91 |
|
|
|
$91 |
|
|
|
$177 |
|
$86 |
|
$91 |
|
|
|
Expenses |
|
Expenses |
|
Expenses |
|
100% |
|
$117 |
|
$117 |
|
|
|
shared |
|
$60 |
|
|
|
$60 |
|
|
|
$177 |
|
$117 |
|
$60 |
|
|
|
|
|
|
|
|
|
Net Gain/Loss = |
|
$0 |
|
($31) |
|
$31 |
|
Figure 6 |
|
9 Year |
|
9 Year |
|
9 Year |
|
|
|
Cost Per Student |
|
100%-Per Student |
|
Shared-Per
Student |
|
|
|
Revenue |
|
Revenue |
|
Revenue |
|
100% = |
|
$86 |
|
$86 |
|
|
|
shared = |
|
$91 |
|
|
|
$91 |
|
|
|
$177 |
|
$86 |
|
$91 |
|
|
|
Expenses |
|
Expenses |
|
Expenses |
|
Variable = |
|
$59 |
|
$59 |
|
|
|
Fixed = |
|
$117 |
|
$57 |
|
$60 |
|
|
|
$177 |
|
$116 |
|
$60 |
|
|
|
|
|
|
|
|
|
Net Gain/Loss = |
|
$0 |
|
($30) |
|
$31 |
This completes the financial review of the GHIA In-House Education
program analysis. Economic
Analysis:
This second aspect of the program analysis includes both a cross price elasticity analysis of classes offered within the GHIA Educational Department as well as an overall elasticity demand model. The purpose of the cross price elasticity model is to measure the student population’s sensitivity to the cost of taking a particular class. The formula for calculating said sensitivity is presented below.
|
Cross Price
Elasticity |
|
Figure 7 |
|
|
|
Change in
Quantity |
|
/ (Divided By) |
|
(Quantity #.1 +
Quantity #.2) |
|
[----- (Divided By) -----] |
|
Change in Price |
|
/ (Divided By) |
|
Price #.1 +
Price #.2 |
Since price elasticity results can be positive, zero, or negative. The reader should be privileged to the following guidelines. If the results are less than one, the quantity demanded is inelastic (not sensitive to price changes). If the results are greater than one, the quantity demanded is elastic (sensitive to change in price). If the results are equal to one, the quantity demanded is known as unitary elastic with respect to price (Truett & Truett, 1984).
I performed this method of measure on two distinct art classes that were held from the fall semester of 2006 till the fall 2007. The first class to be discussed is Drawing and Sketching I, which was held in all four semesters. In fall 2006, the cost of this class was $80 and had 8 students. In winter 2007 the cost of the class was $100 and had 5 students. In spring 2007, the class was $100 and again had 5 students. In the fall 2007, the cost of the class increased to $110 and had only four students. I ran three tests using this class. Test 1 was the increase from $80 to $100. Test 2 was the increase from $100 to $110. Test 3 was the overall increase from $80 to $110. The results were 2.08, 2.33, and 2.11 respectively. With regards to the guidelines, the quantity of students is relatively elastic in relation to changes in price.
The second art class to undergo this type testing was Drawing the Human Figure held both winter 2007 and fall 2007. The change in price of this class was an increase of $5 yet the student body size did not deviate from 7 students. The result of this elasticity test was 0.00 or unitary elastic with respect to price.
Another economic measurement tool I used in this area of analysis is known as Arc Marginal Revenue. The formula for calculating said sensitivity is presented below.
|
Arc Marginal Revenue |
|
Figure 8 |
|
|
|
Change in Total Revenue |
|
[-----
(Divided By) -----] |
|
Change in Quantity |
This formula measures the average rate of change of total revenue incurred by a program to the change in quantity demanded. It emphasizes profit maximizing compared to the overall elasticity relationship on a macro scale. Using the total class data found in appendix D, the total student population declined from 91 in fall 2006 to 83 in fall 2007. However, the total revenue over that same period of time increased $564. The overall elasticity score was (70.5) which tells the reader that the price increases of some classes offered during this period of time had a negative effect on student population, however had a positive effect on total revenue. In other words, from a macro standpoint, our in-house education program is relatively inelastic when it comes to revenue generation.
Statistical
Analysis:
I
begin this final portion of the program analysis with an overall view of the
student population from 1998 to 2006. The total student enrollment which
pertains to the adult education classes over the past nine years totals 5,943
students. This number is made up of both
one-time and repeat students. Of the total student population, the majority of
the population which totals 5,035 or 85% resides in
Seven counties are represented in
the total student population from
Six
counties compile the total student population from
Another way to review the data compiled is to simply combine all thirteen counties which make up the total student body population. By doing so, potential areas of student population growth may be identified for targeting. After combining both sets of data, the percentage of population is restructured into four new segments. Three of the thirteen counties make up 92% of the total population while the remaining ten make up 8%. A graphical representation of this format is presented below.
Continuing my statistical analysis, we will now review actual trend models of the student population over the past nine years. The first trend to review is the total student population by year. The range over the past nine years has been as high as 860 students in one year to as low as 419 students in one year. The average annual student population from 1998 to 2006 is 660 drawn from the same thirteen counties discussed in the previous analysis. Included in this portion of the trend review is the breakdown of the student population by year. A graphical representation of both of these trends is presented on the following page in figure 13 and figure 14.
Regarding
the enrollment tracking by state, the reader should note that the average
annual population from
The final model to review is a trending version of the total population review presented in figure 12 of this analysis phase. The total data compiled is simply combined and arranged to identify the largest student populations by county. Again, by presenting the data this way, potential areas of student growth may be identified for targeting as well as threats of student erosion. After combining the data from both states, the percentage of population is restructured and tracked annually by four segments. A graphical representation of this format is presented below in figure 15.
Upon review of the information above, one can clearly see a steady
decline annually in each of the four segments tracked. In order to obtain a
true measure of annual decline in student population over this period of time,
I performed a compounded-aggregate growth rate calculation both by state and by
the four largest segments. The state findings trend a (5.60%) decline for
Conclusion and Recommendations
The data analysis presented reviews the performance of the GHIA from three different angles. From the standpoint of the financial analysis, we can conclude that in any given year, the In-House Education Program of the GHIA will break even and or not lose money. However, the area of focus by the GHIA to ensure this happens is found in the shared revenue and expense category and not the mutually exclusive (100%) revenue and expense classification.
As for the economic review which focuses on elasticity, the Cross Price Elasticity results demonstrate that there will be a level of sensitivity by the student to the change in the cost of an adult art class. However, on a larger scale, with the results of the Arc Marginal Revenue model, the GHIA must not refrain from raising the tuition fee of a class if the cost of operations requires the institute to do so in order to remain solvent. With regards to the statistical analysis, the most compelling results presented are the compounded-aggregate growth rates of the four segmented markets to be targeted. All four show a steady decline in student population from 1998 to 2006. This would signal the GHIA to invest in more marketing techniques in order to increase the public’s awareness of the GHIA In-House Education Program.
In closing, my own recommendation is for the GHIA to continue to review and track data like the information presented in the data analysis of this research. This information should be incorporated in both board meetings and strategic planning meetings from time to time. This information is needed for monitoring the changes taking place not only in the contextual dimension of the organization but the effects those changes have on the structural dimension of the institute.
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