The Current Tuition Reimbursement System in Companies is Ineffective and Inefficient
April 8, 2013 Leave a comment
It is time to look at the traditional employee benefit of tuition reimbursement (tuition assistance). The current model is ineffective and inefficient.
Tuition reimbursement programs came into use in the middle part of the 20th century and were based on the success of the post WWII GI Bill. In the decades that followed, it became viewed as a standard employee benefit, much like healthcare. Historically, tuition reimbursement has been used as a competitive benefit.
I would argue that those days are gone and the time has come to move this scattershot approach to formal learning for the employees of companies to the same secondary status that printed textbooks are becoming.
Tuition reimbursement is indeed analogous to the scattered approach of a shotgun shell. In its current format, it does not provide companies with the directed learning focus that can most effectively move organizations forward. The collective mind set seems to be that if we throw enough tuition reimbursement dollars out there – our employees will stay and the business will grow because of it.
There are 4 main reasons why the current model of tuition reimbursement is ineffective and inefficient.
- Companies usually pay list price for their employee’s tuition costs; thus, a company cannot leverage its buying power to control tuition costs.
- Employees are in open enrollment classes in a variety of colleges and universities, making a culture of learning much more difficult to develop with the a la cart consumption of courses and degrees from a pot pouri of colleges and universities.
- The challenges of managing the tuition reimbursement program are cumbersome. This includes the application process, tuition cost allocating, and collections from non-compliant employees.
- Companies cannot reasonably expect to control the quality of their employees’ courses and degrees. The quality of the content and the quality of the instructor are inconsistent. Today’s adjunct-heavy faculty staffing model by many colleges and universities can increase the risk of lower quality instruction on a company’s tuition reimbursement dollar.
While most companies have general guidelines for the types of classes and degrees covered, programs are generally administered from a transactional, not a strategic, perspective. “We were startled to find that such huge sums of money are allocated to corporate benefits with little or no measurement of impact or effectiveness,” said Josh Bersin, president, Bersin & Associates. “While the intangible, personal value of higher education is clearly very high, we see a tremendous opportunity for companies to more effectively align and manage these dollars toward strategic talent needs.”
“Most tuition assistance programs are institutional and considered to be a standard employee benefit,” said Chris Howard, principal analyst at Bersin & Associates. “Consequently, most companies do not capitalize on the potential to use these dollars to support specific talent management objectives. In fact, 27% of the companies we surveyed do not measure program effectiveness in any way.”
While many of the respondents to a 2008 SHRM study had access to tuition reimbursement benefits, they were uncertain about how their corporate culture viewed continued learning. Tuition reimbursement, in its traditional form, has created an inconsistent organizational culture of learning. Companies would be better off determining their learning needs and engaging their employees directly – not through the buckshot approach of tuition reimbursement.
In most organizations, a small set of employees use their tuition reimbursement benefit to either subsidize or completely pay for their education. SHRM confirms that surprisingly few employees are taking advantage of tuition reimbursement programs offered by their employers. They go on to suggest that the fast-paced, over-stressed culture of modern work might contribute to that.
Maybe. I would suggest that tuition reimbursement – in many organizations – is so scattered that many employees don’t think about it. After the initial, new employee orientation, tuition reimbursement is rarely marketed. In my experience, the initiative of single employees is the only marketing of formal learning in organizations. The benefit is used neither strategically nor tactically.
You will find few academic studies have looked at tuition reimbursement programs. Anecdotally, the primary reasons given by firms as to why they offer tuition reimbursement programs are recruitment and retention. However, if most organizations offer tuition reimbursement benefits, it is unlikely that there is any sustainable competitive advantage.
From an individual employee’s perspective, there is a tax-advantage value for tuition reimbursement programs. Up to a cash value of about $5,250, there are usually no taxes against an employee’s income. Effectively, $5,000-plus dollars of untaxed income.
Finally, it would be wrong to suggest that the current tuition reimbursement model is wrong for everyone. That is clearly not the case. Many have used the current model to improve their career opportunities. However, I offer readers that the exclusive use of the historical model inhibits companies from maximizing the benefit of tuition dollars.
What Could Supplement or Replace Tuition Reimbursement?
Groups of employees in an organization studying the same content would allow both for more controlled learning and better tuition cost control.
What could a new tuition reimbursement model look like for companies in the United States?
- Companies start to identify formal learning certificates, degree-building, and degree programs from local colleges and universities that will be in line with the company’s learning needs.
- Classrooms move from the university to the company location.
- Companies would re-allocate a percentage of tuition dollars toward budgeted, learning objectives focused on company needs.
- Companies would negotiate with local colleges and universities for scalable, tuition pricing for employee learning cohorts.
- Companies would negotiate for increased control of instructor quality and consistency in the formal learning process.
- Employees in these cohorts would learn with their workplace colleagues — creating new skills for a company while creating and growing a learning culture.
- Companies would internally market the learning programs that would provide the biggest return on invested tuition dollars.
- Local colleges and universities would create incremental revenue sources with limited direct costs.
I will expand on the new model in future blogs.
Details on implementing a new tuition reimbursement model at collegecohorts.com