Certification: What’s the ROI?

Show of hands, please. How many of you have been told by your management that you are on your own for professional development and certification expenses because the ROI of a given class, curriculum or professional certification is not immediately quantifiable and, therefore, the organization doesn’t realize a benefit in return for the organizational expense? As I expected, a deafening show of hands.

Instead of inciting a riot over the shortsightedness of those leaders who underestimate the value of a certified professional and the education and experience that certification manifests, let’s consider this argument head-on and put numbers to the expenses associated with professional development and certification. The following expenses I’ll reference are based on the National Institute of Governmental Purchasing’s educational program fees and the Universal Public Purchasing Certification Council’s CPPO and CPPB certification requirements and fees.

Q: How much does it really cost to get certified?

A: For a CPPO certification, between $930 and $4,482. For a CPPB certification, between $930 and $3,138.

This range of expense reflects the certification application fee ($450 — CPPO; $350 — CPPB) plus the cost to achieve the number of education “contact hours” required to qualify to sit for the certification exam. The cost of each contact hour is determined by the length of each particular educational offering, the price charged for that offering and an allowance for travel expenses. Travel expenses are the primary variable and could be outright eliminated if you were only to attend local offerings. Thus, the upper end of the range should represent a conservative, worst-case number for justifying a positive return on investment.

Q: I work for Mr./Ms. Scrooge, who believes that any ROI calculation also should reflect the cost of lost productivity while away from the office. How much loaded expense would I have to justify for a certification?

A: Allowing for base salary plus an additional 20 percent for your employer’s expense paid for employee benefits, the chart below should help give you a good estimate.

Again, the range is due to the number of education contact hours necessary to sit for a certification exam. The more historical formal education and experience you have, the fewer number of contact hours necessary to qualify for the exam.

ROI: Efficiency and Effectiveness

Having identified the “I” of the ROI calculation, how then do we demonstrate the “R” that is the return on the investment?

One goal of professional development is to help us make better decisions, more quickly and more consistently over time (a critical factor that distinguishes successful businesses from mediocre businesses in the long run). Better decisions manifest themselves in two fundamental ways: revised practices that achieve efficiencies; and identifying and planning for contingencies that improve program and organizational effectiveness.

The chart on P. 34 shows how one large agency (Fairfax County, Va.) with 24 certified professionals (three CPPOs and 21 CPPBs) has demonstrated to its elected officials the value of its historic commitment to a culture that embraces ongoing professional development and openness to innovation. By implementing procurement practices over time that exploit the full value of cooperative purchasing of office supplies and use of P-cards, the county realized the following savings and revenue generation through rebates over the course of three years (fiscal year 2004 through fiscal year 2006).

In addition, as a result of its cooperative purchasing practices, the county achieved administrative savings of nearly $60,000. Is that hard-dollar savings? No, but it means that the time otherwise spent preparing IFBs and RFPs for commodities available by piggybacking or previous competitively bid cooperative contracts could be applied to more complex and higher-dollar-value procurement initiatives.

So, what was Fairfax County’s ROI if we apply the costs of certification back to the revenue generation and expense savings? For ease of calculation, we’ll assume all 24 employees obtained their education and certification in fiscal year (FY) 2002 and began implementing some of their newly gained information throughout FY 2003. The fruits of these efforts are borne out in FY 2004. (Though not a likely scenario, it gives us a worst-case, conservative figure to reference.)

To certify three CPPOs and 21 CPPBs, Fairfax County would have spent as much as $79,197 in education and related travel expenses. In FY 2004, the county realized hard-dollar savings or revenues totaling $393,716 – a net gain over two years (FY 2003 and FY 2004) of $314,519. That’s an ROI approaching 400 percent in just a two-year period; 1,100 percent in three years; 2,100 percent in four years.

If we rolled in soft costs, the FY 2002 investment would have been $378,000, resulting in a net FY 2004 gain of $15,716, or a 4 percent ROI. However, the ROI after FY 2005 would be 153 percent; after FY 2006, 362 percent.

The upshot of this example is that the benefits, whatever the order of magnitude, are cumulative over time.

Regardless of how large or small the upfront investment, determining ROI also is dependent on the period of time in which you would hope to see a return. Using smaller numbers than the Fairfax County example, let us say you obtain a CPPO designation in a year’s time and must demonstrate ROI based only on hard costs. In this example, you would have to demonstrate positive ROI based on an investment of $4,482. Is it necessary to do that over the course of the first year following certification? The second year? Keep in mind that your certification is valid for five years, so you could argue that added value back to your agency should be looked at over a five-year span.

‘What’s the Return on Ignorance?’

Whether you choose a one-year rate-of-return (ROR) or five-year ROR, identifying ways to improve your agency’s financial performance through greater efficiencies or effectiveness may not have been as difficult as you first thought. The most you would have to recoup in one year is $4,482, after which you would begin realizing the cumulative savings in Year 2. Conversely, the least return you might have to demonstrate, if distributed evenly over five years, is $896.40. Just by piggybacking one contract, you can probably realize between $400 and $1,000 in administrative cost savings.

Though these are just two examples demonstrating positive ROI for certification and professional development, they hopefully illustrate that justifying the rewards gleaned from a commitment to ongoing education need not be the monumental effort you may have envisioned.

For those of you interested to know the personal monetary benefits of certification, NIGP will release in the near future results of a study showing the earning power of certified professionals compared to their noncertified brethren. I will give you a quick sneak preview that CPPOs in some parts of the United States are earning almost $20,000 more than their noncertified colleagues. That’s at minimum a 500 percent return if you had to spend $4,500 to get your CPPO. Perhaps the next time you’re asked to explain the ROI for attaining professional certification, you can reference the above examples or simply ask in return, “What’s the return on ignorance?”

Share your comments or personal struggles and successes obtaining certification by e-mailing Brent at bmaas@nigp.org.