Tuition-reimbursement programs are not in the budgetary cross hairs at most companies. But that doesn’t mean such programs are sacrosanct.
Companies typically have shied away from measuring the bottom-line impact of tuition assistance benefits, prompting some to question their value or at least push for greater accountability when helping workers pay for college.
“We have not seen corporations cutting back on tuition assistance, but they are asking: ‘How can we more effectively spend the money?’ ” says Michael Echols, an executive vice president with Bellevue University in Omaha, Nebraska, which develops learning programs primarily for corporations.
Among companies’ priorities, Echols says, are boosting recruiting, retention and employee engagement. Companies “want to use tuition dollars on things that provide value, as opposed to just helping someone get an education.”
Tuition reimbursement accounted for about 11 percent of training spending in 2009, according to the American Society for Training & Development in Alexandria, Virginia. That was down about 1 percent from 2008.
Organizations overall haven’t scrutinized tuition assistance programs closely. According to a recent report by Oakland, Califonia-based research firm Bersin & Associates, 85 percent of companies extend tuition assistance to employees, with cumulative spending of $16.5 billion. Yet only 27 percent of those with tuition benefits measure if their programs are effective.
Bersin’s research mirrors a 2008 survey by the Seattle-based Institute for Corporate Productivity, which found 81 percent of U.S. organizations provide tuition benefits. Of those companies, only 26 percent track retention of employees following graduation, while 1 in 3 tracks professional advancement.
Those anemic results don’t surprise John Sullivan, a professor of management at San Francisco State University. Sullivan says companies tend to lump tuition with other employee benefits.
“Tuition reimbursement is the worst-managed of all human resources programs. For one thing, these programs usually lack job competencies or structured learning-management plans. For another, no one in the organization takes responsibility for measuring its value.”
The advent of corporate tuition-reimbursement programs can be traced to the post-World War II era, when companies offered to help pay for college mostly as a recruiting device. Although the benefit was a “great idea in the 1940s,” little has changed in how companies manage it, Sullivan says.
Part of the challenge stems from the length of time required—up to eight years in some cases—for an employee to earn a degree. Even then, Sullivan says, “There’s very little evidence that a college degree makes you perform better on the job.”
Still, tuition assistance programs can be appealing to companies, especially in industries plagued by high turnover. Retail chain Publix Super Markets Inc. uses tuition assistance, along with other training, to support a “promote-from-within” philosophy, says spokeswoman Maria Brous.
“For us, this investment is really about growing our own people,” Brous says.
Lakeland, Florida-based Publix runs more than 1,000 stores and employs about 140,000 people in five states. Under its tuition benefit, employees are entitled to up to $2,500 per year for individual coursework, Brous says. In addition, employees enrolled in approved college-degree programs are eligible for up to $9,000 a year. Employees receiving tuition assistance must maintain at least a C average and earn acceptable performance reviews.
Brous says it can be difficult to quantify the value in financial terms. However, she cites intangible benefits that complement Publix’s culture as an employee-owned company.
“There may not be an immediate dollars-and-cents part, but there is a benefit to us by helping them attain a greater skill level or knowledge base,” Brous says.
The frustration of employees jumping ship once they get their degree sometimes leads companies to pull the plug on tuition assistance, says Peter Cappelli, a management professor at the University of Pennsylvania. That obscures a deeper problem: lack of opportunities for advancement.
“Employers throw these people back in the same job, forgetting that the reason they got their degree in the first place was to do something different,” Cappelli says.
On the flip side are companies such as insurance provider Cigna Corp., Kansas City, Missouri, which encourages new graduates “to hunt for other jobs with the company that use their skills,” Cappelli says.
Giving new grads the chance to shine helps companies in the long run, Cappelli says. Even if it takes years to complete the degree, the employee remains with the company during that time. “That’s the cheapest retention bonus that you’ll ever pay,” he says.
Enabling graduates to apply what they’ve learned is critical, says Joe Cabral, senior vice president and chief human resources officer of Northshore-Long Island Jewish Health System in Great Neck, New York. Cabral oversees a tuition-reimbursement program that budgets about $10 million annually to help the organization’s 42,000 employees defray college costs.
All Northshore-LIJ employees are eligible for a yearly stipend that ranges between $5,000 and $10,000. Few restrictions are put on the program, although the company strives to ensure that employees take credits that dovetail with corporate-development goals, Cabral says.
On a more strategic level, Northshore-LIJ uses tuition incentives to identify top performers interested in pursuing a master’s in business administration. Under that initiative, offered in conjunction with Hofstra University in nearby Hempstead, New York, Northshore-LIJ pays the full cost of tuition. Participants are approved by a selection committee that examines performance reviews and other criteria.
In exchange for the tuition assistance, Northshore-LIJ requests that the MBA students make a two-year commitment to the company upon graduation. More than 50 employees are enrolled in the MBA program, which was launched several years ago, Cabral says.
“I would say about 90 percent of the folks that go through the MBA program stick with us,” Cabral says.
Northshore-LIJ also uses tuition reimbursement to fill key growth positions. For example, Cabral says the company prefers to hire nurses with bachelor’s degrees. But the labor market for experienced nurses remains highly competitive, so the health system uses tuition reimbursement to entice top-flight candidates—including those who lack a four-year degree.
Nurses hired with an associate’s degree have to agree to get a bachelor’s degree within five years. “We would provide the dollars for them to go back to school,” Cabral says.
As companies such as Northshore-LIJ illustrate, tuition programs have a strategic role to play in corporate training, even in a belt-tightening economy. But a question remains: Will companies change how they measure the value they receive? Bellevue University’s Echols says organizations should evaluate tuition reimbursement in the same way that drugmakers perform clinical trials, examining results before, during and after people get a degree.
“It’s not about measuring whether people learn the material,” Echols says, “but measuring whether they perform better on business parameters.”
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