By BLR Founder and CEO Bob Brady
Tuition reimbursement has helped thousands of employees, but has it done anything for their companies? Our CEO looks for the benefit in the benefit.
Nothing is sacred these days. Not motherhood. Not apple pie. Not even tuition reimbursement.
Reimbursing employees for education expenses might seem like the most uncontroversial subject possible, but Dave Ulrich, the well known, well respected University of Michigan management professor recently launched a broadside against these programs.
In an article in Workforce Management, Ulrich questioned the value of tuition reimbursement and challenged employers to prove its utility and to manage it for maximum benefit, as they would any other training expense.
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According to Ulrich, employers rarely come out ahead on what can be a substantial expense. Many beneficiaries of these programs get their degrees and then move on to other employers. Worse, those who don’t leave are often resentful when employers do not recognize their shiny new degrees with promotions and salary increases.
Part of Ulrich’s remedy is to manage tuition reimbursement within cost center budgets, so managers are held accountable and it “costs” someone something. In most organizations, these benefits are bundled in with other administrative costs. As a result, no one is really responsible for them. Ulrich also suggested that employees who don’t stay with the company should be required to pay back some or all of the money spent on their behalf.
IBM recently announced a new twist to these programs. The computer services giant is creating 401(k)-like accounts that employees can use for training. (This is in addition to other company-provided education.) IBM will match employee contributions at 50 cents on the dollar. Employees can use the money for any training programs of their choice and can take the money with them if they leave. To say the least, this is new and innovative, if not revolutionary.
What We Do, What We Get From It
At BLR, we’ve had a modest form of tuition reimbursement almost since our founding 30 years ago. During that time, many employees have benefited, mostly through attendance at local community colleges, and a few have earned degrees. The expense has been significant, though not huge, and it has really benefited the workers involved.
I sometimes wonder, though, what it has accomplished for us, as a company. (And we have had situations when people have been disappointed that their degrees didn’t’ get them immediate raises. Our feeling was that they are still doing the same job and the payoff for them will come in the long term.)
On the other hand, we can point to several long-term employees who have worked for years on their associate’s and bachelor’s degrees. They are loyal, dedicated staff members who have helped us move the company forward. Their learning has helped them succeed, and the fact that we’ve helped them gain that learning has presumably bought us something in terms of loyalty. While true, anecdotally, we certainly have no data to document claims either way.
Not that we haven’t had contrary advice about this.
Several years ago, one of my peers, Terry Jukes, then president of a competing company, said almost the same thing as Ulrich. “I don’t believe in tuition reimbursement,” I recall him telling me. “It can be lot of money and it goes to just a few people. We’re better off spending that money on broader-based or more goal-oriented benefits.” Other consultants have similarly suggested that we could save money by eliminating tuition reimbursement.
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In an age in which all of us feel obligated to reduce everything to its dollars-and-cents value, no benefit is sacrosanct, but—at least so far—we haven’t considered eliminating tuition reimbursement. Inertia is part of the reason, but there is also the feeling that even if the economic benefit to the company doesn’t justify the expense, the social benefit of helping employees does.
If we “donated” the money to a charity, which then gave it out to the same people as scholarships, we’d be seen as benefactors. Maybe that’s the way it should be looked at.
I would be interested in other points of view. Does your firm offer tuition reimbursement? Do you think the benefit to the employer equals the cost? And while we are on the subject, are there other time-honored benefits that ought to be reexamined?
That’s my e-pinion (and a request for yours.) Use the Share Your Comments button or e-mail me at rbrady@blr.com and let us know what you think.
Bob:
Caveat: I do not inhabit the corporate world, nor am I human resource professional. I am an employment lawyer, and employment/HR blogger.
I know that some of my firm’s clients utilize tuition reimbursement agreements in which employees agree to repay the tuition if they resign employment or are terminated for cause before the passage of a certain amount of time. This may occur on a phased basis, e.g. if they leave within a year, they repay it all, between one and two years they repay half, and if they stay two years or more they have no obligation to repay.
It seems higher education of employees would provide a wide range of value to the organization, from none to highly valuable, depending on the “fit” between the job and the classes/major. I say this somewhat reluctantly, being a fan of a good general liberal arts education (I would still support liberal arts for certain jobs, such as those involving a great deal of writing).
I reconcile this belief in the overall value of general education with my utilitarian comment by acknowledging that a business should get something approaching measurable ROI from its tuition investment. Therefore, a tuition reimbursement plan should either include a list of approved courses or require employees to submit an educational plan in which they describe how they view the course/degree as contributing to their value to the company (which would be evaluated by a tuition reimbursement coordinator or committee). This could even be followed up by a more specific mandatory post-course essay/report on how what they learned might be useful in their job or another position to which they would like to be transferred or promoted.
Another side of this issue is the retention/turnover problem. It would appear to me that careful attention to the program could structure it so as to discourage resignation and encourage continued employment.
For one thing, an employee should have a disincentive for leaving while in the middle of taking a particular course. This would be accomplished by requiring the employee to finance the course up front with a standard student loan, subject to reimbursement upon satisfactory completion. (Which reminds me, I am from Lake Wobegon, where “all children are above average,” have never considered a “C” an acceptable grade for myself or my children, and would not hesitate to require an “A” or “B” as a prerequisite to reimbursement.)
Going further, the time frame could be lengthened, either by phasing the reimbursement itself or, as I mentioned above, by phasing forgiveness of the reimbursement.
George L. Lenard
Editor of George’s Employment Blawg
http://www.employmentblawg.com
Editor’s Note: The following comments were emailed to Bob Brady. As is our usual practice, we do not identify emailers and remove identifying information. However, with those exceptions, their comments are included in full.
JS
I have been working with my company for — years, this is first time I am receiving tuition reimbursement, obviously since I am a recipient, I will say it is definitely a plus to offer tuition reimbursement as an incentive to help with cost of tuition, especially if you have been a loyal employee like I have, I see no reason why I should not enjoy that benefit that others might have been enjoying too. I look at it this way, it is either you give it to the employees or give it to some organization who in turn may have it in a scholarship form that might be very hard to get because of the politics in everything these days. You cannot get any kind of grants without you going through hoops, so why not give it to the employees themselves. If they leave at least you have helped one more person get the education that they might have been trying to get for so long, but financially it was not feasible. Take care and hope this is used as another way of helping your best assets (The Employees). I am currently working [in HR]… maybe that is why it feels very touching to me. I am an advocate for the employees and making sure we take care of them or else someone else will.
Timely article. We changed our tuition reimbursement program from $5,000 per year to $400 per year because only 5% of our employees were using the program and of that, many then left the company once they obtained their degree. We made the program more liberal, in that people could use the money for tuition, books, journals, professional memberships, and software purchases, and the uses must be relevant to the job. The usage is up and we think we’re getting a better return on the investment.
I have seen the employee who receives tuition reimbursement leave for greener pastures. Yes. It happens, and it happens a lot.
My personal observation (and my own personal experience, too) indicates that often the person who leaves does so because their “shiny new degree” isn’t acknowledged by their employer because, well, as you put it, “they’re doing the same job.”
When this happens, it’s really the employer’s own fault. While the employee is “doing the same job,” they have grown in knowledge, experience, maturity, and loyalty to the company that paid for their classes. When the company fails to acknowledge their accomplishments with a higher salary, or bonus, or at the very least, public recognition — they are missing the opportunity to maximize the employee’s hard work and gains made. The employee feels cheated, and rightly so.
Despite the fact the employer paid the financial cost, the employee paid an equal or higher cost, in valuable time spent in attending classes, completing homework assignments — which equals missed family time, missed family events, missed children’s events, missed golf, missed you-name-it. And for what? Just to have a shiny new piece of paper that their employer doesn’t understand the value of? Employees who choose to return to school for classes, seminars and to earn degrees should be applauded, and their ambition should be harnessed to higher company goals. For an employer to overlook the employee’s hard work and dedication to better themselves in their current job performance and yes, to seek additional opportunity in their existing company — well, it’s just plain short-sightedness.
Who would you rather keep on your payroll? The employee who shows the intelligence, drive and amition to do more for their own company, who sought company tuition reimbursement to do so? Or the employee who doesn’t have such ambition, just “does the same job” and never shows any inclination to expand their knowledge, stay on top of their field, or learn a new field? They’re just “doing the same job” every day, never adding anything to it, or doing more for their employer. They’re stagnant. The employee who goes for it, now there’s something rare. Surely you’ve noticed that not all employees will take advantage of a tuition reimbursement program. The ones who have the drive, energy and ambition — aren’t those the ones you want to reward and keep?
Employers should recognize the achievement that their employee has accomplished, and the additional body of knowledge and expertise that the employee has gained and has been making use of right along, as they’ve learned it. With every class completed comes new knowledge, maturity, confidence, sensitivity, and a “bigger picture” viewpoint. The employer always gains something, if they’re willing to notice that the employee is growing and contributing more overall, even if a particular class is not “directly related” to the employee’s current job. What is gained may not always be quantifiable in terms of the dollars spent.
Think of it this way — would you rather invest dollars in the professional growth of your existing employee, and pay them a bit more when they achieve the goal (completed degree or whatever is agreed upon) — or would you rather see them leave, and then you’ve got a position to fill, perhaps with someone who will demand a higher salary than the one who just left? Will you be paying more to hire someone whose own employer failed to open their eyes and see what they had.
Though I can not quantify the benefit of providing tuition reimbursement, what we see is that people who attend college are more informed, better rounded, think more broadly and have better critical thinking skills. I had a situation where a manager could not understand why we required the handling of a personnel issue a certain way and it dawned on me that she had never taken a business law or labor law course so she therefore did not understand the potential liability to the company. Yes, she could gain this knowledge through attending a seminar, but that is done on company time, taking her away from managing her people. Advancing her education through college is done on her own time.
At a time when workers in the United States are no longer competitive in the Global workplace, why are we thinking of cutting the investment in our employees.
Is it because management no longer trusts their employees? I know that the employees do not trust management. If our employees were a copy machine, wouldn’t we spend money on a maintenance plan. Why are we so reluctant to spend money on educating our children and employees?
Very Concerned about the future of the United States Business!
Here at ___________, we offer 80% tuition reimbursement for A’s or B’s and 50% for a C. This year alone, 2 employees have completed their master’s degree, 2 completed associates degrees, and 3 others are still in the process of completing their degree (1 masters, 2 bachelors). Prior to this year 4 employees earned various degrees. In all four cases, these employees not only improved their performance, they actually were able to leverage their learning to create a significant savings. The best examples are one employee that earned their degree in graphic design presented to management the idea of bringing our design work in-house rather than outsourcing and documented the estimated savings to the company if her proposal was accepted. That initiative has saved us countless dollars and now the department has grown and is producing even more complex work than we ever anticipated. Having graphics in-house not only saves us money, it is also more efficient and saves time. Another was able to build a specialized IT department (that originator of that proposal is now a VP of IT) and one (me) made the HR department a true strategic partner.
I completed both a bachelors and master’s degree through this benefit. This education enabled me to rework our health benefit and design a plan that saved us $83,000 the first year alone – which was way less than the cost to the company for the benefit – and that is only the tip of the iceberg. Comp plan design, job analysis, human capital strategy – I do it all. There is not a day I spend in this job that both the company and I have not benefited from my education. Does it pay? You bet it does and I encourage every employee here to take advantage of it. We have been named one of the fastest growing company in our region for 14 years in a row (Fast Track 50) and won numerous other awards. I am not sure we could have done it without the talent cultivated by promoting education. People who seek learning and want to learn, I have found turn out to be top performers. This benefit draws top talent and retains it.
We are a small company, 100 employees. We offer ½ tuition and fees up to a maximum $750 per year, so we cap the benefit. The employee is reimbursed after completion of the class (must be toward a degree or advanced degree).We have had some successes and some not so successful, but have not had many employees take advantage of the benefit.
The most recent success was an accountant who earned both her bachelor degree and masters degree while working full time with us. She felt after getting her masters that she should have a higher position, but we had nothing available in our small company. However, we were able to move her to a new controller position in a subsidiary company, so it worked well for both us and the person. We have had others that took advantage of the benefit and then left us for various reasons, so we really did not get a good payback on our investment.
I generally agree that it is a nice benefit, but only benefits select employees, and so I’d rather spread those benefit dollars elsewhere. However, it has typically only cost us $750-1,500 in any given year so there would not be much to spread. So, we will likely keep the benefit as it is for now.
Interesting thought and challenge regarding tuition assistance programs. It is one that many of us have long thought about.
It seems to me that two questions must be asked:
1. Where does a TA program fit into the larger picture of employee and thus organizational development?
2. To what degree is the recipient vested in the learning outcome?
If the TA program is to make a difference (in the bottom line of the organization), whether in the private or public sector, there must be clear linkage between the expenditure and the organizational need or interest, e.g., development of skills or knowledge that enable ……, developing (growing) employees to assume new roles or responsibilities, etc.
At the same time, the learning experience must be really owned by the employee. That may very well mean that cost sharing, clear performance management expectations, contractual commitment, etc.
If the answer to the above two questions is, “We just want to help the employee”, then all that is required is for the organization to feel and act benevolent.
This topic has often been discussed as an “expense” to the company or benefit to employees. What I see is that this is a systemic issue. More and more companies are looking for candidates with the minimum of an undergraduate degree. If a large percentage of organizations are paying for tuition, then the pool of qualified and educated individuals within the workforce increases. The system benefits. We need to be less concerned about the cost to the individual company since when they lose an employee, they will now draw from a more educated workforce. Another company has often paid for that education.
If more and more companies stop education reimbursement, we will decrease the number of potential employees who will have as a foundation to their experience, a minimum of an undergraduate degree. That impacts the system! A popular saying from 20 years ago was, “What happens if I pay all this money for tuition reimbursement and my employee leaves?” The response was, “What happens if you don’t and the employee stays?” We need to remember this and remember the often short sighted nature of cost containment.
You are so right! It is a lot of money going to a few workers that generally leave after obtaining their initial or advanced degree.
So many are disillusioned that a piece of paper will get them a huge raise, rather than the work that they are (or aren’t) actually performing. In the accounting field you end up with clerks having a degree, still performing clerical functions. Yet they think the degree should entitle them to a higher salary. In some cases it boils down to an entitlement attitude – they automatically expect it rather than deserve it based on their performance and contribution to the company.
We have tried to get the employees to commit to stay with the company for a set period of time (1 – 2 years) if we pay for training or additional schooling, and most are offended that we even ask. Their attitude is that they need the training to stay current with their jobs, so it’s our obligation to educate them. When it is presented to them as “If you don’t keep current with your schooling & training you won’t be able to perform your job & we will then need to replace you.” Their attitude slowly changes.
I think if you look at it on the micro level Mr. Ulrich has a point. It is difficult for the individual company to cost justify the investment with a specific return. However, on the macro level I believe that the upgrading of the education level of the population serves to improve the overall quality of the workforce upon which we all rely. I am reminded of the school districts in retirement communities that couldn’t get increased funding for schools. The older residents argued that they shouldn’t pay taxes for schools because they had no children attending. But when you broaden the question to where will the doctors come from to maintain your health or the accountants come from to monitor your wealth, or the lawyers come from to protect your rights, you realize that everyone has a vested interest in better education. It may be true that once employees get their education they may move on, but there may be other degreed employees that you may have hired who received their degrees from some other company’s tuition reimbursement program. In the end, we are better served to support such programs.
Tuition reimbursement is an important benefit that brings value to our society as a whole. I can personally attest to the value my company obtained from providing me with tuition reimbursement.
I went to school part time for — years. I worked for my employer for — years. Who knows if I would have stayed there much beyond my first few years if it had not been for the reimbursement program. After working there for about — years in a low paying position that required little skill, I started my bachelor’s degree program. Within — year I was able to move into an entry level position in a different job/department related to my degree. I regularly applied new knowledge to my job and was given two promotions over the course of the — years. Ultimately I was a well-rounded professional with a high contribution level to my employer and was in one of the senior positions within my department.
Within a year of earning my degree, I unfortunately decided to switch careers and left my employer. Did my employer lose? No way. They had a high quality and dedicated employee for — years. For — of those years they developed a competent professional with greater input and involvement than had I remained in my original position. And while they paid almost all of my tuition, they also kept me relatively underpaid for the positions I held despite the promotions. For the most part this was a win/win. I appreciated the contribution to my education and accepted the fact that I could work elsewhere for more money. I worked hard to earn my degree and I believe I obtained a much greater education than had I gone to school full time because of the ability to apply what I was learning as I went. My employer benefited every step of the way while maintaining a valuable employee.
When I left the organization, I pointed out during my exit interview that regardless of my decision to switch careers, they were willing to risk losing me because they acknowledged I was worth more than I was earning and could easily have been leaving for financial reasons. (Personally the lower pay scale enabled me to make the choice to change careers because had I been earning more I may not have been able to financially justify the switch – but that’s another story.) I went on to work for another organization for — years before moving to my current employer of — years. Both of those employers have benefited from the expenditure of another company. But its not much different than benefiting from the experience gained at a prior employer. And I’d guess that if Mr. Ulrich did the research he would find when it comes to tuition reimbursement it all comes out in the wash. One company’s loss is another’s gain but it all comes around and goes around.
I just read your article on tuition reimbursement and the theory by Dave Ulrich that it is a possible waste of money for companies. I can speak from personal experience and tell you that had I not gotten my degree, I wouldn’t be writing to you right now. I started working about — years ago for a smaller company. I went to college with the company’s tuition reimbursement program and finished my degree in 2005. It was at this time that _______ acquired my organization. ___ is very big into degrees. Had I not had my degree, they would have let me go.
I personally feel loyal and dedicated to the company that has invested time and money into my career. But it isn’t just the tuition reimbursement, it is also all of the other training and coaching and challenges that the company present that allow employees to flourish and thrive in a work environment. Those who earn their degree and then leave to go to other companies are lacking in other areas. Most studies will tell you that employees who are challenged and appreciated will stay with the organization and those who aren’t will leave. It is a poor managers belief that money is the reason for the departure. Tuition reimbursement is a highly regarded benefit in my organization and I doubt we will ever see it go away.
I appreciate you letting me voice my opinion. Thank you.
As the HR manager for our company I administer the tuition reimbursement program. The policy for the program is that employees take course that help them in their current job or one they might want in the company in the future. We have had only a few use it for degree completion and then only the course that could be reasonably seen as contributing to company well-being were awarded. I agree that there is a certain “lock in” of the employee, to stay until the degree is gotten, but since we don’t have a lot of people in a degree program it doesn’t not apply well to us. We also pay for some courses “up front” in order to get employees to take certain courses or make it easier for those with tight budgets to get training now and not have to be reimbursed if they pass the course.
For years I worked for a company that did not provide education benefits of any kind. I was young with small children and I could not afford the cost. For the past — years I have worked for a company that does pay. It is a golden handcuff for me. I encourage all our young trainees to start working on [a relevant degree] now while they are young. The increase in knowledge is wonderful for them, and for the company. It is also great to have a designation beside your name!! I am now — years old and still going to school. I just passed a very hard exam and I am proud of myself. It also gives me more self confidence.
I have long had mixed feelings on this issue. In today’s world, we need to understand that tuition reimbursement is an enticement that is increasingly meaningful to high performers that a company wants to retain in this emerging talent war, especially in the post-Boomer segment of the working population. Companies do need to understand though that tuition reimbursement is an employee benefit, not necessarily an employee-development cost, since much of the learning isn’t necessarily connected directly to achieving company goals. I’ve always thought that a condition of receiving tuition reimbursement ought to be the requirement that the recipient do something as a follow-up to share the relevant knowledge gained with others in the company in some fashion. As well, any class projects should be linked to an action-learning assignment within the company. These would attain a greater bang for the buck. Plus, isolated knowledge is not as beneficial to the company as is shared learning applied to a company issue.
Good points all around. Truly appcdriatee.
Much of what you say is true, but it is not the program that is at fault. Oft times, employers send their employees off to school with nothing more than a signature authorizing the expense. Instead, these programs could well benefit the company by meeting with employees beforehand to determine how the class can be used to further company goals. For instance, a course in instructional design could be used to develop a training course for the company. A management class could be used to develop business acumen or strategic initiatives. An engineering course could be used to develop new processes for the company. In addition, there is the benefit to having access to university resources such as professors, equipment, and software that a company may not otherwise have. As for the expected promotion, if the employee has been using course work to further business goals and increase profitability, then by all means give a promotion. Many companies, however, ignore the accomplishment and keep their employees doing the same old thing. Lack of recognition leads to dissatisfaction on the job. Dissatisfied employees leave.
My school district will pay a percentage of the costs of courses that enhance your present position or fill a shortage area. However, you must remain with the district for 3 years after receiving the final reimbursement check or you must pay back any funds that don’t have the 3 year span of working for the district.
I think this is fair. If they are paying, they should receive the benefits of the education they are financing…
I’m not even applying for these benefits because I do not want to be tied to the district if there is a better opportunity for me elsewhere when I complete my [degree].
In response to your article on Tuition Assistance, I’m attaching several sources of articles or studies that you might find interesting in relation to your last article regarding Tuition Assistance.
http://www.ceridian.com/myceridian/connection/content/1,4268,13448-60425,00.html
http://www.workforce.com/archive/feature/23/71/79/237183.php
http://www.talentmgt.com/viewpoint/2006/July/189/index.php
http://books.google.com/books?id=sh0VzEQRGwMC&pg=PA22&lpg=PA22&dq=tuition+assistance+roi&source=web&ots=Kqq0FpZpuM&sig=44CLEDWH1KCcO_Zf5lAUTDtA_aw#PPP1,M1
http://www.linkageinc.com/company/news_events/link_learn_enewsletter/archive/2005/07_05_value_tuition_echols.aspx
http://www.linkageinc.com/company/news_events/link_learn_enewsletter/archive/2005/pdf/07_05_article_reprint_The_Value_of_Tuition_Reimbursement.pdf
http://www.talentmgt.com/recruitment_retention/120/index.php
http://www.hrmreport.com/pastissue/article.asp?art=25660&issue=145
http://www.corporatelearning.com/
http://www.nber.org/books/CAFE/flaherty2-8-07.pdf
http://www.nber.org/books/CAFE/manchester7-31-07.pdf
http://www.ddiworld.com/pdf/ddi_retainingtalentabenchmarkingstudy_es.pdf
http://learningexecutives.com/?p=28
http://www.nvcc.edu/alexandria/business/Summit/02-emptuitionassistance.htm
Thanks for the opportunity to respond. If you have time, let me know what you think. Even experts in various fields of science make errors in calculations, occasionally. Without reading the whole article of David Ulrich, I don’t know if he has made one or not. But, as you can see, there is mounting evidence of the value of Tuition Reimbursement programs.
In college and graduate school you learn facts that help you do your job, but you also hone your analytical skills and develop the discipline to study for hours. Even classes that are unrelated to your major (our your job) can improve focus.
I came across a Canadian study once and if I remember correctly, it estimated a 7-15% increase in productivity for each year of education. While it was written to justify the nation’s subsidizing of higher education, it’s pertinent to organizations as well. If you’re willing to accept a number provided by a blanket study in a similar industry, it wouldn’t be very difficult to calculate the ROI and set limits on tuition reimbursement.
If you’re finding it difficult to place a dollar value on the job an individual performs, use the estimated increase in productivity to predict savings in terms of staffing. In this case, you could estimate (roughly) that for every 10 years of higher education paid for, you’ve saved yourself one employee. If your average employee makes $30,000/year then reimbursing up to $3,000 in tuition expenses per employee per year couldn’t hurt based on productivity alone.
If you weigh this against turnover rates for those employees who have utilized tuition reimbursement vs. those who haven’t you might be able to prove you’re benefiting even more.