When we think of growth at an educational institution, the obvious indicators are the number of new schools being established, students being enrolled, and new locations being launched. But is this sufficient to define successful growth? The most important question is whether the quality of education can still be maintained when an institution gets larger and enters into new markets.

This is where the economics of education becomes interesting.

A school requires investment long before a student walks into a classroom. There are not only the campus and its infrastructure, but there is also the investment that is not seen. This is recruitment and development of the teachers, creation of the knowledge base and modernisation, introduction of the technology, upkeep of the facilities and establishment of the environment where the students can learn. And these expenses do not disappear after the first year.

And these are not costs that disappear after the first year. They continue throughout the life of an institution. So, when we look at a new school or a new geography, should we only consider the initial investment? Or should we also ask what it will take to maintain the same standard five or ten years later? For me, the latter is a much more useful way of looking at the economics.

India makes this particularly relevant because no two markets are exactly alike. Availability of teachers, infrastructure, cost of real estate, and more importantly, the expectations of parents can change considerably from one city to another. This raises the question of how much an education model can be standardised?

Some things should not change. All stakeholders in education should somehow possess some standards regarding the quality of education, criteria that regulate the processes of teacher and school administrator training and evaluation, as well as policies and practices in school governance. The provision of effective education in one context may lead to the necessity of its adaptation to the circumstances of a small community. Thus, a big city model may require adaptation for use in a small town. The process of scaling is not about replicating a model from one context to another. It implies retention of the general criteria of quality and appropriate application of these criteria to various situations in different contexts.

But common standards are only the first step. The next question is how to measure the improvement in quality. Of course, it is important to analyse financial results and student enrollment figures, but these indicators are not sufficient. Actual learning results, development of teachers, students’ engagement in the process, and feedback from students and their parents are also important.

Another part of this equation is affordability. Quality comes at a cost, but that does not mean quality education will totally evaporate from the landscape. Not necessarily. As organisations progress, methods of production, for instance, procurement, shared services, technology, and improved use of infrastructure can result in an increase in efficiency of the core educational process. It’s not about reducing cost by any means, but it is necessary to determine where money has the highest effect and thus allocate the means efficiently.

Technology also needs the same discipline. Everyone agrees that advancements in technology play a significant role in the modern educational system; however, there is a more important question: how does technology improve education?

If technology helps educators, supports learning and eases administration, then it is beneficial. Nonetheless, efforts in technology solely for the sake of technology itself are futile. Accordingly, education is fundamentally still dependent on teachers, relationships, and understanding of students as human beings.

The process of planning and time management can help you gain some progress. It takes new businesses plenty of time to reach their full potential. The number of students is increasing, teams are forming, and expenditures are evolving. Financial planning should take all of these phases into account.

This is where the CFO’s role goes beyond numbers. The inquiries refer to the matter of timing and prioritising investment, as well as the ability to withstand difficulties that may come: Where do we invest resources today? What will the investments entail in the next years? Will we be able to continue investing in quality while growing the company?

Consequently, the responsibility for making these decisions cannot lie with the finance division alone. They need to be taken together with academic and operational leadership.

India has a great opening to improve the accessibility of quality education. But the goal must not be to simply increase the size of the network. The goal should be to form institutions that are capable of maintaining quality as they grow.

In my view, sustainable educational growth can be defined by a straightforward equation where access, quality, and financial discipline must go hand in hand. When this happens, expansion creates better possibilities for people without sacrificing quality.

Views expressed are personal

The author, CA Sarada Murali, is Chief Financial Officer, Birla Open Minds

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