Management plays a crucial role in the making of any organisation. There is a need for adopting various approaches and techniques in the process of educational planning so as to arrive at the most realistic planning model to maximise the output.
There are different approaches to educational planning. Each planning approach has its unique features.
Few important approaches of educational management are
- Manpower approach
- Cost benefit approach
- Social demand approach
- Social justice approach
- Rate of return approach
- Intra educational extrapolation approach
Rate of Returns Approach:
According
to this approach, investment in education should take place in such a way that
the returns from the investment are equal to the returns from other kinds of
investment of capital, e.g., investment in industry.
This approach treats education as
an investment in human capital and uses rate of returns as a criterion in
allocation of financial resources.
However, in reality, it is
difficult to apply this approach to education due to problems associated with
measuring rate of returns in education.
Key Difference – Cost Benefit Analysis vs Rate of Return
Cost benefit analysis is an analysis tool that
compares the costs and benefits of a potential investment decision whereas
return on investment calculates the return from an investment as a percentage
of the original amount invested.
Formula:
Rate of Return = (Current Value – Initial Value) X 100
Initial Value
In simple, it means educational planning should provide for
increase in the earnings of the individual with more education and also for
greater contribution by more educated people with economic and social growth of
the country. The approach implies that if rate of return is low, expenditure on
education should be curtailed.
Advantages of Rate of
Return Approach:
(i) It is very simple and
easy to understand and apply.
(ii) This approach says
education and earnings are positively related. (so more education, more investment,
more returns)
(iii) Rate of return in
educational planning may readily be calculated with the help of accounting
data.
(iv) The sample rate of
return will be truly close to real rate of return in investment, which helps in
measuring the current performance of the firm.
(v) It gives due weight age
to the profitability of the project if based on average rate of return
(vi)It is possible to measure or quantify the
increase in productivity of an educated person, using this approach, by looking
at the age earnings structure of the educated person.
(Vii) It shows the
connection between the cost of gaining more education and the increase in
imbursement which results from additional education.
(viii) The analysis can
show or propose the directions in which education system of a society should
expand so as to maximize the earning competence of its citizens.
Limitations of Rate of
Return Approach:
(i)An educated person’s
earnings or rate of returns depend upon his/her innate intelligence, parental
socio-economic status, motivation and aspirations. Hence, it is not easy to
attribute the rate of returns only to education acquired. Hence, this approach
is least frequently applied to education
(ii) At times ‘salaries
reflect productivity’ may be a wrong assumption.
(iii) It is not easy to
quantify the advantages that are obtained from investing in any type of
education.
(iv) Differentials in the
workers’ income cannot be accredited to additional education acquired in
developing countries. It can be attributed to other aspects like family
background, habits, primordial factor and customers.
(v) Some studies are of
the view that primary education provides the highest return to the society on
the basis of calculation of social return rates for all education levels.
However, this approach does not agree to the same.
(vi) Certain complexities are
present in this type of planning as it needs to clarify and work out the
educational investment that needs to be made and its corresponding
returns—returns in the form of benefits that are gained by the individual and the
society as a whole. The method to measure the benefits of individuals and
society is rather difficult.
vii) This approach ignores the non
economic benefit of education like values, knowledge, wisdom...
viii) Measurement of return is not
easy. It is difficult to obtain data on cost effectiveness
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