Over the past several months a number of contributors to various on-line chat rooms and human resource forums on the Internet have been exchanging information about tuition reimbursement polices from companies all over the United States. What is characteristic of every one of them is that they all LIMIT the amount of money that can be spent OR they REQUIRE the employee to pay back the expenditure OR they DEMAND a minimum length of service before eligibility. If you ask them why, you will be told that a degree is a “lifetime investment” that an employee can use to increase their total worth; you will be told that it is a “privilege” to have this cost reimbursed, that it helps the individual more than the company, and so on and on and on. These policies are written as if the company gets no benefit at all from the increased knowledge or skills that the employee gains. This has always seemed strange to me. Let’s take a look at this whole idea of tuition reimbursement in some depth. First of all, there is no doubt that historically a degree has made a difference in the level of the position one could attain and in total lifetime pay. And, the higher the degree obtained, the higher the status and often the pay (teachers and professors excluded). As that is still true for the most part, wouldn’t it make sense for employers to encourage employees to get degrees so that they could earn more, feel better about themselves, and potentially contribute more to the organization? Any employee who voluntarily decides to go back to school must be motivated and capable. Many of them may not have had an opportunity to go to school when they were younger for economic or family reasons, or they may have now become more mature and motivated to learn. In fact, they may be the best employees a company has as they have tons of energy, are motivated and seek to contribute more to the company. Organizations that recognize this and encourage and support the on-going development of their employees have the lowest turnover and highest productivity. And, what does this cost an organization? Perhaps in an extreme case, where an employee has to go to the equivalent of 4 years of college to get the degree, the total cost might run as high as $75,000. Roughly what a mid-level manager gets in a large national corporation in a year. Roughly what the executive search fee is for one senior level executive. Roughly what it costs to replace a $30,000 a year employee (using a standard of replacement cost equaling 2.5x salary). That doesn’t seem like a lot to me, and more importantly it seems like a fair trade. The organization gets to keep and nurture an existing employee, making them more productive, useful and loyal and avoids the need to use recruiters or search firms and then assimilate a new employee. The chance that a new employee will not succeed is high, as are the training costs. Yet, if a recently hired employee quits no one asks them to pay back the costs involved in recruiting them. Search firms may refund their fee, but more likely they will bargain to refill the position at no additional cost. Following this logic, why do we put the burden on the employee to assume responsibility for costs should they leave and require them to work for some period of time after they receive the education? Were we to be consistent, we would demand that all employees pay back recruiting costs if they leave before completing some period of service. So in my way of thinking, tuition reimbursement policies should be very liberal, open to everyone, have no maximums or caps or limits. By encouraging people to pursue degrees, a company gets the benefits of their increased skill and motivation while they are in school as well as after they complete the degree. The employee doesn’t magically become smarter or more useful to the company only after competing their studies. The skill growth is incremental and takes place over the entire time they are students. Forward-thinking organizations recognize employees at the beginning of their studies and strive to find challenging positions for them in the organization. Time spent on enforcing tuition reimbursement policies could be much better and productively spent on encouraging managers to let employees grow and develop new skills. Here are some things policy enforcers should be doing:
- Time should be spent finding ways for these employees to begin to utilize the new skills they are gaining from their education. They could develop rotation programs or in-place special projects to give these student the chance to contribute immediately.
- HR folk might work with the schools and tailor degrees to their needs. I have set up numerous degree programs with local universities and colleges that provided the employees with course content that they could immediately use on the job. Professors were encouraged to learn more about the company and about its needs so that they could tailor content and even create case studies based on the events in the company. In most of these programs, the organization assumed all the costs for the education including books, fees and tuition. If several students were pursuing the same degree, the company purchased books for them through wholesale channels and even negotiated reduced tuition fees. There is a lot that a determined and resourceful human resource group can do to lower costs and improve the quality of the education the employee gets.
- They might work out ways that student course electives could actually become internal projects that would benefit the company.
- Or, they could work to get term papers and theses written that would be of interest and use to the employee’s department or to the company.
- They might create policies that reward achievement with promotions or pay increases right away.
I am really opposed to tuition reimbursement polices that seem to be designed in a way that impedes the growth of employees by their legalistic and bureaucratic trappings. Sure, a few people will abuse the policy. Sure a few will quit right after they get their MBA and go to work for the competition. But the real question is why would they do this? Organizations that are positive, encouraging, and supportive of employees who are trying to better themselves will have lower turnover rates, make more money and have a better public reputation than those who don’t. The cost of tuition reimbursement programs is small compared to the benefit. A more liberal approach to tuition reimbursement and on-going education, especially when recruiting new college grads, is also a powerful recruiting tool. It is an area where it is easy to differentiate your organization from another. It is always easier to look at the potential downside of an issue then on its upside. But, this is one area where the upside is huge and easy to find.