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Tutorial.png Unit 9 

Introduction | What is the Difference between Efficiency and Effectiveness | Efficiency | Cost-Effectiveness | Cost-Effectiveness of ODL Institutions | Making the Case for ODL


We all know from experience that the cheapest product is not always the best. For example, one pair of shoes may cost £ 20 but wears out in only two months, while another pair that costs £ 60 will last for a year. The more expensive shoes are actually better value for money, as the cost per month of wear is only half of that for the cheaper shoes.

On the other hand, a programme can be very effective without being efficient. For example, intensive one-to-one tutorials are generally very effective in producing good examination results, but are a very expensive way of doing so.

We need another term to express the balance between effectiveness and efficiency. Cost-effectiveness is that term.

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Hülsmann defines cost-effectiveness as “. . . the most efficient way to achieve a set goal (2004, page 22).” Essentially, it expresses a balance between attempts to keep costs to a minimum while maximising the outcomes/outputs of an educational institution or programme.

The most common measure of cost-effectiveness is the average cost per graduate, which is simply a variant of the Average Costs Equation. In this context, the term ‘graduate’ refers to a student who successfully completes a subject/course/programme rather than someone who holds a qualification from an institution of higher education.

Equation for Average Cost per Graduate:

ACg = TC ÷ TNg


ACg = average cost per graduate
TC = total costs for programme or institution as a whole
TNg = total number of graduates

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Just as with Exercise 9.1, this activity should be carried out with other members of staff in your own institution.

  • You should already know the total expenditure for your institution for the previous financial year, but you will also need to have to hand statistics on the total number of students who passed their examinations or successfully completed courses with your institution for the corresponding period.
  • Using this information and the average cost per graduate equation, calculate the cost-effectiveness of your institution.
  • With your colleagues, brainstorm the limitations of this measure.


Cost-Effectiveness Ratio

Keeping these reservations in mind, it is possible to compare the cost-effectiveness of one programme in relation to another, or of one institution relative to another. The term cost-effectiveness ratio is used to refer to the relationship between the average cost per graduate in one programme, institution or system of education and the average cost per graduate in another programme, institution or system. The equation for calculating the cost-effectiveness ratio is the same as that for the efficiency ratio, but the average cost per graduate is used in place of the average cost per student.

EQUATION for Cost-Effectiveness Ratio



CER = cost-effectiveness ratio
ACGODL = average cost per graduate of ODL programme/institution
ACGC = average cost per graduate of conventional programme/institution

The cost-effectiveness ratio is concerned not only with average unit costs, but also with the relative success rates of different systems. In this respect, it factors in an assessment of positive learning outcomes. The cost-effectiveness ratio should be interpreted as follows:

  • When the ratio equals 1.00, then both modes are equally cost-effective.
  • When the cost-effectiveness ratio is less than 1.00, then ODL is more cost-effective.
  • When the cost-effectiveness ratio is greater than 1.00, then ODL is less cost-effective.

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Exercise 9.4 provides an opportunity to practice calculating cost-effectiveness.


Exercise 9.4 illustrates a situation where providing a course through open and distance learning is much more efficient than conventional classroom-based education, but is less cost-effective.

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Exercise 9.5
  • Open the Hülsmann resource in a new window
  • Go to Section 4: Cost-Effectiveness of ODL
  • Go to Part B: Efficiency & Cost-Effectiveness Ratios
  • Click on Activity A13 and follow the instructions in the MS Excel worksheets.
  • Return to the to Part B.
  • Click on Activity A14 and follow the instructions in the MS Excel worksheets.