1.
The Value & Economic
Measures of Libraries
10th Northumbria International
Library Conference
Joe Matthews
July 25, 2013
Afternoon Session – Economic Perspective

2.
Agenda
 Return on Investment (ROI)
 Cost-Benefit Methodologies
 Direct Use Benefits
 Economic Impact Benefits
 Indirect Use Benefits
 Consumer Surplus Method
 Contingent Valuation
Method

3.
Agenda
ROI in Libraries
What to do?
Communicate Value
Orr’s Fundamental
Questions

4.
Financia
l

5.
Library Budgets
Competition for scarce resources

6.
At the table or
On the menu?

7.
Perspectives on Value
Benefits
Use
Nonuse
Direct
Indirect
Option – Preservation of option for
future use by me
Existence – Perceived value and
significance
to the community
Legacy – Value of preservation for
future generations
Personal
Organizational
Financial
Impacts

8.
Financial Impacts
• Direct use benefits
– Cost savings
– Access to other resources
– Access to trained professionals
• Indirect use benefits
– Estimated value
• Non-use benefits
– Benefits that arise to you in the future
– Benefits that arise to others in the
future

9.
What is ROI?

10.
ROI Applications
• Projects
• Services
• Organization

11.
ROI in Library Contexts
• Demonstrating the value of libraries
• Evaluating existing services, collections,
etc.
• Making the case for additional services or
resources
• Recruiting support for a program or
initiative

12.
ROI Terminology
• Cost-Benefit Analysis (CBA)
– Compares cost or purchase price with
estimated value of variables that are difficult to
measure
• Consumer Surplus
– Value that consumers place on the
consumption of a good or service in excess of
what they paid for it
• Cost of Time and Effort
– Measures time and effort expended by users
• Contingent Valuation

13.
Cost/Benefit Methodologies
• Maximize the benefits for given costs
• Minimize the costs for a given level of
benefits
• Maximize the ratio of benefits over costs
• Maximize the net benefits (present value
of benefits minus the present value of
costs)
• Maximize the internal rate of return

14.
Ratio of Benefits to Costs
Value of benefits
divided by
Costs
ROI = Benefit – Cost
Cost

15.
Challenge
Estimating the
value of the benefits

16.
Direct Use Benefits
• Cost savings – the “free” stuff
• Free or low-cost access to equipment,
programs, meeting rooms, etc.
• Access to trained professional
librarians

17.
Identify a Competing Service
• Establish price of competing service
• Identify library’s annual volume or use
• Multiply to establish value of annual
benefits

18.
ROI 2.80:1

19.
Challenge
What is the value of an item in a collection?
• Purchase price
• Purchase price + processing costs
• Discount the purchase price to 20 – 25 %

20.
Challenge
• Difficult to identify all services
• Difficult to establish a value for some
services

21.
Generate Revenue
Ask the library user to:
• Estimate revenue generated
• Estimate costs saved
Library then calculates totals

22.
Estimate Time Saved
Ask library customer to:
• Estimate time saved
• Multiple by hourly salary (plus
benefits)
Library then calculates savings

23.
Economic Impact Analysis
Compares local/regional economic activity
of the library
to the local/regional economic activity
without the library

24.
Economic Impact Analysis
• Salaries for library employees plus
supplies/services purchased locally
• PLUS the multiplier or ripple effect
• The resulting data is entered into a
input-output econometric model

25.
A Destination
Major libraries and museums will attract
visitors from out-of-town. These visitors
spend money on:
– Car rentals
– Hotels
– Restaurants
– Tours
– Etc.

26.
Seattle Public Library
$16 Million Dollars Annually

27.
Carnegie Library of Pittsburgh
$9.8 to $15.6 Million
Annually

28.
Ripple Effect

29.
Return on Capital Investment
Valuing the physical assets of the
library, including
– Land
– Buildings
– Furniture
– Equipment
– Collections

30.
$193.4 million ROI =

31.
Indirect Use Benefits

32.
Nonmarket Valuation
• Stated preference methods
– Consumer surplus
– Contingent valuation
– Attribute-based methods
– Paired choice comparisons
• Revealed preference methods
– Travel cost models (Environmental quality)
– Hedonic models (Property values)
– Defensive behavior models (Offset effect of
exposure)

33.
Consumer Surplus
Monetary value consumers associate
with a good or service in
excess
of any costs they incur to get it
Data collected using a survey

34.
Contingent Valuation
• Economic method of evaluation for non-
priced goods and services
• Looks at the implications of not having the
goods/services
• Identifies the cost to use alternative
sources of information, should people
choose to do so

35.
Contingent Valuation
Exercise
Willingness-to-Pay (WTP)
Willingness-to-Accept (WTA)

36.
Willingness-to-Pay (WTP)
Suppose that no libraries had ever existed
and taxes for libraries had never existed.
How many tax dollars or fees would your
household be willing to pay annually
to create and maintain your library
as it exists today?
$ __________

37.
Willingness-to-Accept (WTA)
Suppose that in the next election the ballot
contained an option for closing all public
libraries.
The budget savings would be used to lower
taxes.
How much should the yearly tax saving be
in order for you to vote to close the libraries?
$ _____________

38.
Contingent Valuation Questions
• If there were no library, what would you do
to obtain the information on this visit?
• How much time and money do you think it
would take to find & use an alternative
source?
• How far would you have had to travel to
use this other source?
• Please estimate the additional costs of
using this other source.

39.
Contingent Valuation
Challenges
• Depends on ability to pay
• Whose money? Yours or mine
• Immaterial goods (info) are undervalued
• Values influenced by the “warm glow”
effect
• Are values suggested (multiple choice)
• WTP & WTA produce different results
• Telephone survey is long, costly

40.
Library Valuation Studies
Country National State Regional Individual Total
Australia 1 1 2
Germany 1 1
New Zealand 1 1
Norway 1 1
South Korea 2 2
UK 2 2
USA 7 8 19 34
Totals 5 7 8 23 43

41.
ROI in Academic Libraries

42.
Drexel University

43.
University of Pittsburgh ROI
• If the library’s journal collection (print &
electronic) were not available, faculty
would use 250,000 hours and $2.1 million
to find alternative sources for the articles
• It would cost the university 4.38 times
the cost of the current library journal
collections for the same amount of
information gathering to be carried out

44.
University of Illinois, Urbana-
Champaign
Connected citations to resources
in
the library’s collection to
successful
grant proposals, and the income
the
grants generated

45.
ROI may provide us with calculations that
seek to document a financial relationship
between action and benefit, but too often
in the library community these studies are
poorly constructed, ineffectively
executed, and naïvely communicated.
And in the final analysis, do not respond
to the legitimate questions being raised
by our administrators and funders, and do
not advance the academic library as a
critical factor in institutional success.
James Neal

46.
• Comprehensive assessment of the library
• ROI of the journal collection & readership
• ROI for support of teaching & learning
• ROI of digitized special collections
• ROI of eBooks
• Value of library commons
• Bibliography

47.
Bryant University – Faculty
Access
Article ROI = 3.2:1
Book ROI = 3.5:1
Other publications ROI = 3.2:1

48.
Syracuse University – ROI
4.49:1
Faculty Students
Economic
In Person $13.6 $23.1
Remote 19.0 14.5
TOTAL $32.6 $37.6
Environmental
Remote access $1.6 $3.7
Read not-printed 0.1 0.7
Social ? ?
TOTAL $34.3 $42.0
(Millions of Dollars)

49.
Journal Collections & Reading

50.
ROI for Support of Teaching &
Learning
Perceived Benefits –
• Savings …
– Of own time
– Of own money
– Of other resources – printing, copier
• Improvements …
– Teaching
– Course-related materials
– Student performance

51.
ROI of Digitized Special Collections
User
• What is the value to a user in terms of
time and money spent?
Prestige
• What is the prestige to the institution
for high visibility digital special
collection?
Development
• What value accrues to the

52.
ROI of Digitized Special Collections
Environmental
• What is the value of the environmental
savings from limited physical access to
unique and often fragile material?
Scholars
• What value accrues from the role of special
collections in attracting graduate students?
Collections
• What is the value of digital collection in
attracting additional special collections?

53.
ROI of eBooks

54.
The Commons

55.
ROI = 26:1

56.
ROI in
Public
Libraries

57.
ROI in Public Libraries
• Value of direct use benefits usually
determined by consumer surplus method
• Value of indirect use benefits determined
by contingent valuation estimates
• Value of nonuse benefits determined by
contingent valuation estimates

58.
State of Florida
Total annual investment in Florida’s public libraries was $449 million
Total economic returns (direct and indirect) was $2.9 billion
For every $1 invested the library returned $6.54 in direct benefits
Using input-output model called REMI to measure indirect benefits:
• For every $6,448 spent on public libraries, 1 Job was created
• For every dollar spent on public libraries, Gross Regional Product increased by
$9.08

59.
Suffolk Cooperative Library System
Benefit-to-cost-ratio methods to measure direct benefits:
Total Value of library services Tax dollars supporting service:
$509,415,038 $131,647,566 = $3.87 : 1 benefit/cost ratio
For every $1 invested the library returned $3.87 in direct benefits
Using input-output model called RIMS II to measure indirect benefits:
• Library generated $26 million in goods and services
• Library enabled local earnings to increase by more than $50 million
• Created more than 1,200 jobs for the local economy
• Total multiplier effect of SCLS spending = $232 million.
•

60.
Carnegie Library of Pittsburgh
Consumer surplus method used to estimated direct benefits.
Library is the most visited regional destination
Indirect benefit estimates suggested that:
• Library provides some 700 jobs
• $63 million in economic output is attributable to the library
• $75 of benefits for every resident of the County
For every $1 invested the library returned $3.00 in direct benefits
$5.50 of benefits if only local tax dollars are considered.

61.
Philadelphia Free Library
Literacy
Learn to read and acquire working skills totals $21.8 million
Workforce Development
Locate job opportunities and develop career skills totals $6 million
979 people found jobs in one year ($30.4 million in earned income)
generating $1.2 million annually in wage tax revenue for the city
Business Development
Develop or enhance their own businesses total $3.8 million
Value to Homes and Neighborhoods
Homes within ¼ mile of a library are worth $9,630 more than other homes
These homes produce an additional $18.5 million in property taxes
Economic value of library services that help Philadelphians:

62.
Charlotte Mecklenburg Library

63.
Library Use Valuation Calculator

64.
Priceless

65.
Victoria Public
Libraries ROI = 3.56:1

66.
Economic value
= 36% higher than budget
Economic benefit
= $ 4.24:1
Economic activity
= $ 2.82:1

67.
New Zealand V+LM
• Market price proxy
• Replacement cost
• Opportunity cost

68.
ROI in Public Libraries
• Largest number of ROI studies
• Single library study, libraries with
branches, & group of public
libraries, state studies
• ROI ranges from a low of 1.02:1 to
31.07:1

69.
Social Return on Investment
Models
Expected Return =
Benefit X Probability of success Cost

70.
• How are outcomes or benefits estimated?
Over what timeframe?
• How are outcomes or benefits monetized?
• How are costs calculated?
• How are risks and uncertainties accounted
for?
Social Return on Investment
Models

71.
• The inconsistent use of language
• The lack of common measures in the
social sector
• The lack of quality data on social
impacts, outcomes, outposts, and cost
• The lack of incentives for transparency
• Unintended consequences
• Inadequate utilization
• The cost of measurement.
SROI Challenges

72.
ROI in National Libraries

73.
British Library
ROI = 4.4:1

74.
Australian National Library
ROI =
2.0:1

75.
New Zealand National Library
ROI =
3.50:1

76.
National Library of Norway
ROI = 4.0:1

77.
New Zealand Parliamentary Library
ROI ranges
from

78.
Latvia National Library
WTP 3.88:1
WTA 9.96:1

79.
ROI Challenges
Lack of consistency in methodologies
limits the ability to replicate research,
compare valuation results, and
apply the research findings

80.
Value of Benefits
• Materials for adults 35%
• Staff interactions 30%
• Materials for children 20%
• Information technology 15%

81.
Library Valuation Frameworks
• Marketing – promote communication
between libraries and their
stakeholders to affect the future state
of a library
• Evaluation – Describe the current state
of the library and predict its future
state

82.
ROI
Strengths
– Average ROI of $4:1 to $6:1
– Wide variation in establishing a service value
– Different user groups receive different levels of
benefits
– The value of a library will vary over time, as users
and uses change
– The consumer surplus method (or the shortcut
method) has been used successfully by a number of
libraries
– Multiple methods lead to increased confidence in the
results

83.
ROI
Weaknesses
– Assigning value for indirect (intangible)
benefits is problematical
– Comparing ROI studies is impossible
– Variety of methodologies leads to variation
in results
– Policy-makers are uncertain of how to use
the results
– May involve large surveys (and costs)
– ROI for small libraries may not be so good

84.
Not only must a ROI study
consider dollars and cents
but it must also
make dollars and sense

85.
A great resource http://microsites.oii.ox.ac.uk/tidsr/welcome

86.
What to do?

87.
Good Assessment is Good
Research
• An important question
• An approach to answer the
question
• Data collection
• Analysis
• Report

88.
Problems with Library
Assessment
• Some studies correlate library use and
retention, but no causative links
• Strength of correlations is weak – at
best
• Problem with almost all existing library
research are the small sample size
• Only a handful of research has been

89.
“While satisfaction and service quality
measures like LibQUAL+ demonstrate
librarians commitment to user feedback,
they do not focus on the outcomes of
interaction with library services and
resources.”
Megan Oakleaf

90.
Library Assessment
• Inward looking
• Focuses on collections and
services
This needs to change ….

91.
Collaboration

92.
Layers of Data
Library Data
Circulation, Logins, Downloads, Reference,
Instruction, …
Demographic Data
College, Level, Major, Gender, Ethnicity, Age, …
Performance Data
Cumulative GPA, ACT score, CLA score, ….
Other University-wide Data
Student Surveys, Faculty Surveys, Alumni Surveys, …

93.
Privacy
Use student IDs to match records from
one data set to another and then
Strip the student ID number from the
combined record
Work with Office of Institutional Research
&
Institutional Review Board

94.
• WCET project – data mining
• 6 institutions + 10 more (Phase 2)
• Analyzing 640,000 student records &
more than 3 million course records

95.
Next Steps
• Clearly understand the goals and
concerns of top campus stakeholders
• Become engaged with the assessment
process at your institution
• Partner with your campus Office of
Institutional Research
• Create a library assessment plan
• Conduct “big picture” research

96.
Next Steps
• Collect new data (individual students)
• Find “new” (& existing) data sets
• Combine existing data sets (library data &
student information systems – registrar’s
office)
• Use assessment management systems or
a metric management system (LibPAS)

97.
Past Future
Focus
Structure
Change
Outreach
Decision
making
Measures of
Success
Building &
maintaining
collections
Engaging students &
faculty
Internal silos University priorities
Incremental Transformational
Top down
Periodic
Shared
Deliberative
Traditional Impact

98.
Library Value
• How integral it is to the community
• How well it supports learning and
teaching
• How well it supports research

99.
Communicating Value

100.
What your
library
does well
What your
customers
value
Value Proposition

101.
• An offer, not a demand
• Not what you value
• Only valuable perspective is the
customer’s
• Valuable in a competitive environment
The Value Proposition

102.
Or
The
promise that a library makes to its
customers about what they can
expect
to receive in return for their time,
their effort, their loyalty, and
especially their dollars.

103.
The library needs to …
Focus on customers
and whatthey want and need
as well as
how they want and need it.

104.
Economi
c
Value
Benefit
Value
Direct
Indirect
Nonuse

105.
Stories + Stats =

106.
Is the value in the glass, the wine
or the savoring?

107.
The financial crisis is looking even worse,
but you will pleased to know that the
director reports that the library performance
went up a half a point on the
“library goodness scale” last week.
Michael Buckland

108.
Joe@JoeMatthews.Org
www.joematthews.org
Joe Matthews
Library Consultant

109.
Cornell University Library Value
http://research.library.cornell.edu/value

110.
The value is in
the worth,
not in the number..