Use Tuition Assistance Wisely Lest Competitors Profit

 -  9/22/11

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Too often, the only attention given to tuition assistance programs is the administration — function, process, reimbursement tracking — housed in HR/benefits administration. However, unlike other employee benefits, it is a learning initiative and provides a solid foundation for developing employees and future leaders.

Most tuition assistance programs are not managed for the support and success of talent management initiatives, but companies should get talent managers involved in the ownership of the value, cost and ROI of employee education. After all, organizations that aren’t supporting, guiding and grooming their employees can bet the competition is ready to pluck them up.

If an employee participating in a tuition assistance program leaves, how does it affect an organization? Let’s say a company has just paid for an employee’s MBA program of more than $40,000 and that employee gets recruited by the competition — that money has been wasted from the organization’s perspective. Further, cost analysis shows the money to replace an employee is about two times the employee’s salary. If said employee earned $50,000 a year, the lost investment quickly rises to $140,000. Multiply this figure by at least 100 employees and the amount lost can be millions of dollars. Moreover, an employee’s increased performance is now being given to a competitor.

Most companies let employees pick their own college or university to attend without providing them with any information. Although this sounds gallant, it is not in the best interest of an employee’s career or a company’s ROI. There are more than 4,000 institutions of higher education, yet employees do not have a central resource to search for the degree programs they offer, locations, online programs, tuition rates, admission requirements, etc., for proper selection. Thousands of regionally accredited schools offer options for adult learners that will save time and money to complete a college degree by being able to use their work or life experiences that equate to college-level learning. Employees can gain credits through testing, portfolios, licenses, certificates, on-the-job training, etc. The average college course costs about $1,000. If 100 employees miss out on one of these opportunities, the company’s tuition assistance programs budget has just lost $100,000 of tuition savings.

Another possibility is for companies to have training pre-evaluated for college credit. That way, any employee completing that training can have direct, portable credit issued for transfer to any regionally accredited college or university. Many colleges and universities will evaluate training, but only apply that credit to their degree programs; few will offer this option and let the credits be transferred to any college/university that employees are attending. Again, if only 100 employees completed training that could have been awarded college credit, but was not, the company has just wasted another $100,000.

Now, let’s add it up: $140,000 for lost MBA employee, $100,000 for employees not picking the right education opportunities, $100,000 for employees not receiving college credit for their life/work experiences, and another $100,000 for not receiving college credit for training that has already been paid for by the company’s training budget. The total can be very significant every year.

That said, true “management” of tuition assistance programs can only happen if talent managers view tuition assistance programs as an investment in the future of a company.

Here are some changes that need to occur to keep the company’s tuition assistance programs’ dollars in-house:

• Talent managers should work directly with a list of present and past users of tuition assistance programs and use these employees to fill positions rather than going outside the company for hires or temps. Give these employees a lateral move, preparation for promotion, more flexible work time, or other perks and compensation — it’s still less costly than losing an educated employee to a competitor.

• Use employees in the tuition assistance program while they are attending school. Education funding increases employee loyalty while they are attending school and a few years after. Involve learning employees in new projects, loan employees to other departments or divisions, and recognize and use their new talents. Using them instead of costly contract workers can help keep them around.

• Update and target tuition assistance programs policy to support business goals. Don’t use boiler-plate policies. Do more internal benchmarking than external benchmarking. Most “punishment paybacks” for employees leaving a company really don’t deter attrition. Most new-hire companies will pay that “penalty fee” as part of a signing bonus.

• Reward employees for the use of earning credits through life/work knowledge that reduce the cost for the degree. Spotlight graduates and achievers in the company newsletter or magazine.

• Special data should be tracked of all tuition assistance program users. This is very different from the data most companies collect that only pertains to the reimbursement functions and process. Past graduates should be tracked to see if they are still with the company and talent leaders should determine lost costs and find ways to correct them.

• Offer educational planning tools which help employees and their managers learn, search and compare degree programs. Having the right employee learning at the best-fit college or university will significantly reduce costs and assure employees complete their degree in the fields of study important to the company’s business goals.

Talent managers who don’t already need to use tuition assistance programs in a more strategic way to accomplish talent management goals. This can help reduce costs, increase performance and keep top talent in-house.

E. Faith Ivery is president of Educational Advisory Services Inc. She can be reached at editor@talentmgt.com.