The Return on Investment of Collaborative Virtual Reference Service
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The Return on Investment of Collaborative Virtual Reference Service. Jeffrey Pomerantz Lorraine Eakin School of Information & Library Science UNC Chapel Hill <pomerantz, eak>@unc.edu. Recent library ROI studies. Florida: $6.54 returned for every $1.00 invested (Griffiths et al., 2004)

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The return on investment of collaborative virtual reference service

The Return on Investment of Collaborative Virtual Reference Service

Jeffrey Pomerantz

Lorraine Eakin

School of Information & Library Science

UNC Chapel Hill

<pomerantz, eak>@unc.edu


The return on investment of collaborative virtual reference service

Recent library ROI studies Service

Florida: $6.54 returned for every $1.00 invested (Griffiths et al., 2004)

South Carolina: $4.48 returned for every $1.00 invested (Barron et al., 2005)

Southwestern Ohio: $3.81 returned for every $1.00 invested (Levin, Driscoll & Fleeter, 2006)

Florida & Pennsylvania: numerous economic and social benefits (McClure et al., 1998, 2000)


The return on investment of collaborative virtual reference service

Older reference ROI studies Service

  • Murfin (1993) reviews several from late 1960s – early 1980s

  • Cost-per-transaction range from $2.20 – $10.80

  • Some issues in identifying costs:

    • Length of a transaction, “idle” time → % librarian’s salary

    • Librarians’ task analysis, reference collection usage

    • Portion of a reference collection to charge to the reference desk


Rationale for model
Rationale for Model Service

These ROI studies focus on benefits (the return)

Cost provides essential determinant of ROI (the investment)

Few libraries know the true costs of their virtual reference service:

Accounting practices make accurate costing of individual services difficult to achieve

Focus tends to be on costing library’s structure rather than services provided to patron

Staff resistance (Marsteller, 2003)



The return on investment of collaborative virtual reference service

… to collaborative and third party sourcing around Serviceshared processes and data

Collaboratively sourced

Sourced

Third party


Accounting practices

Operating Budget Service

Equipment Budget

Materials Budget

  • Supplies

    • Leased Copier Charges

    • Supply Room/Computer Supplies

    • Departmental Supplies

  • Current Services

    • Travel

    • Postage

    • Phone/Infrastructure

    • Printing

    • Computer Services

    • Bibliographic Charges

    • Facilitiy/Equip/Furniture

    • Transit/Parking Fees

  • Fixed Charges

    • Annual Recurring Charges

    • Memberships

  • Equip/Facility Contingency

  • Equip/Facility Requests

  • EDP Equipment

  • Special Purchases/Projects

    • ContentDM

    • Credit Card Equipment

Serials

Standing Orders

New Subscriptions

Monographs

General (Special Orders)

Binding

Processing

Electronic

Manuscripts

Preservation

Research

Accounting Practices

“Typical” Reference Expenditure Categories:


Structure vs service costing

  • Books and Serials Publications Service

    • Academic Affairs Library

    • Health Sciences Library

    • Law Library

  • Binding

    • Academic Affairs Library

    • Health Sciences Library

    • Law Library

  • Salaries

    • Academic Affairs Library

    • Health Sciences Library

    • Law Library

  • Fringe Benefits

    • Academic Affairs Library

    • Health Sciences Library

    • Law Library

  • Wages

    • Academic Affairs Library

    • Health Sciences Library

    • Law Library

Structure vs Service Costing

“Typical” System Level Expenditure Reporting:


Accounting approach
Accounting Approach Service

  • To provide the most value to the patrons requires being able to tie the costs of service provision to the benefits received

  • Approaches that have been taken:

    • Traditional Functional Costing:

      • Focuses upon the internal administrative structures of operations

      • Difficult to tie activities to the value provided

    • Activity-Based Costing

      • Focuses on cost “drivers,” those goods or services that provide value to the patron and are costly to produce

      • More detailed attempt to tie value provided to cost of providing that value


Activity based costing
Activity-Based Costing Service

  • Steps to engage in ABC Costing:

    • Identify operational activities

    • Assign Resource costs to activities

    • Identify service/good/output

    • Assign activity costs to output


The return on investment of collaborative virtual reference service

Breakdown of costs Service

Individual libraries / Entire collaborative

Capital / Operational

Start-up / Ongoing


Individual collaborative
Individual/Collaborative Service

“Micro” approach: how an individual library can begin to cost the virtual reference services provided

Line item approach: detailed line item activities that lead to overall costs

Costs of collaboration to be determined in future studies


Capital operational
Capital/Operational Service

  • Capital: expenditures on resources like equipment, buildings and land

    • Typically long-term costs that can be depreciated

    • Associated with resources that have a long-term (e.g., >1 year) useful life

  • Operational: expenditures on resources that have a shorter-term lifespan

    • Will not be depreciated

    • Associated with the relatively short-term resources used to engage in creating the organization’s goods or services


Start up ongoing
Start-up/Ongoing Service

  • Start-up: The upfront costs associated with implementation of the service

    • May be fully or partially funded from a “project budget,” external agency or grant that will not be continued after the implementation is complete

  • Ongoing: The ongoing operational costs associated with the service after it “goes live”

    • Usually comes directly from the library’s operational, materials, and equipment budgets


Costs over time npv
Costs Over Time - NPV Service

  • Net Present Value

    • The value in terms of today’s dollar of cash flows that extend over a period of time, such as months or years

    • Uses the idea that getting a dollar today is more valuable than receiving that same dollar next year

      • Inflation would reduce the dollar’s value over time so next year’s dollar is worth less than this year’s

      • Interest rates would allow you to take that dollar and invest it, making today’s dollar worth more than next year’s

  • Evaluating costs over time require you to take into account that future dollars spent “cost less” in terms of today’s dollar


The return on investment of collaborative virtual reference service

Cost Categories Service

Licensing costs

Outsourcing costs

Staff salaries & benefits

New hardware purchases

Telecommunication costs

Print materials costs

Electronic materials costs

Training

Facilities costs

Program planning & management


The return on investment of collaborative virtual reference service

Example: large urban library Service

Excel file of model


The return on investment of collaborative virtual reference service

Use of this model Service

Cost-Benefit Analysis

Cost Effectiveness Analysis

Budgeting and Budget Planning

Controlling Operations


The return on investment of collaborative virtual reference service

Additional information Service

Project report:

oclc.org/research/grants/awarded.htm

Cost model Excel file: www.ils.unc.edu/~jpom/costmodel/