How tuition reimbursement programs affect organizational return on investment

¶ … Organizational Benefits of Tuition Reimbursement

Tuition reimbursement has been a mainstay in employee compensation packages in contemporary American professional business organizations (Compdata, 2011). Its rate has declined somewhat since the onset of the current economic recession, but continues in most organizations (Compdata, 2011). On one hand, tuition compensation has traditionally been regarded as one incentive to increase employee retention, but unless it is managed carefully, it can actually provide opportunities promoting turnover, especially in organizations where there are insufficient openings at the level of newly-graduated employees. Nevertheless, where tuition reimbursement programs are properly managed, they can provide a positive return on investment. Some of the factors that organizations should consider carefully in conjunction with tuition reimbursement programs that add value to the organization include stricter eligibility criteria and requirements that employees taking advantage of those opportunities remain with the organization for minimum employment periods following the award of their degrees and pursue courses of study that are maximally beneficial to the organization, such as bachelors degrees in business and communications.

Understanding the Perspective of Employees

Career Advancement Opportunities and Career Earning Potential

From the perspective of employees, tuition reimbursement programs offer a tremendous opportunity to advance their careers and increase their earning potential (Compdata, 2011). In general, achievement of a bachelor's degree is statistically associated with the lifetime difference of nearly one million dollars over the course of a typical professional career as between employees with a college degree and employees without college degrees (Compdata, 2011). Additionally, the ever-increasing cost of tuition in American colleges has put the goal of continued education beyond the reach of many employees unless they have some form of significant financial assistance.

Corresponding Benefits to the Organization

Knowledge, Skills, and Abilities and Fundamental Assumptions

From the perspective of the organization, the most direct benefit of employee tuition reimbursement programs is that it promotes the increase in the knowledge, skills, and abilities of employees. Ideally, providing educational opportunities for employees improves their proficiency at work and allows every employee to rise to the highest level of contribution within the organization (Pattie, Benson, & Baruch, 2006). However, that presumes that employees will pursue educational degrees that are relevant to their current employers, such as degrees in business and communications with obvious benefits to virtually all business organizations (Locker, 2006).

Communications proficiency across al media, but especially in writing, is invaluable in professional business and better educated employees represent their organizations better externally, even at the same relative level of technical competence and operational performance (Andrews & Higson, 2008). Not all courses of undergraduate study necessarily provide a positive return on investment for the organization, and none provides less benefit than degrees sought specifically in preparation for a career change to a new employer or to a different industry altogether. The return on investment for organizations also presumes that there will be sufficient openings for all of those employees at employment levels that correspond to their increased abilities. That is because there is no benefit and only un-rewarded costs associated with every employee who leaves the organization shortly after completing the undergraduate degree that the organization helped make achievable. Therefore, most importantly, that expectation presumes that employees will not use the tuition reimbursement programs of their current employers as no more than a tool to prepare for a different career altogether that they intend to pursue elsewhere immediately upon their achievement of their degrees.

Recommendations

When tuition reimbursement programs are properly designed and managed, they can provide substantial return on investment for employing organizations, by improving skill levels, external ambassadorship, and upward mobility within organizations while simultaneously increasing recruiting success and retention rates. When they are improperly designed and managed, they become unnecessary additions to overhead without benefit and they can actually increase employee turnover instead of increasing retention. Even when employees do not leave the organization, the relative benefit of the program also depends on the relevance of the courses of study pursued by employees.

Therefore, it is recommended that this organization implement a tuition reimbursement program but with strict guidelines for eligibility, selection of course of study, and (especially) minimum mandatory periods of continued employment following the award of the degree. More specifically, it is recommended that employee eligibility for participation in the program be predicated on the achievement of sufficiently high objective performance review levels or on the recommendation or approval of their immediate supervisors. Further, it is recommended that the courses of study included in the program be limited to business and communications degrees unless alternate degrees are approved by supervisors in conjunction with input from program coordinators.

Finally, and most importantly, it is recommended that return on investment for the organization be increased by imposing mandatory minimum continued terms of employment with the organization following the achievement of the degree and that the organization's staffing needs be considered as factors in the approval of employee eligibility. Ultimately, where properly managed, the tuition reimbursement program can benefit recruitment, retention rates, employee competence and efficiency, external representation or ambassadorship of the organization, and maximize the contribution of every employee to the organization.

References:

Andrews, J. And Higson, H. "Graduate Employability, 'Soft Skills' Versus 'Hard'

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Compdata Surveys. "2010 Compensation Data Banking and Finance." (February 7,

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Flaherty, C.N. "The Effect of Tuition Reimbursement on Turnover: A Case Study

Analysis." National Bureau of Economic Research Working Paper No. 12975

Locker, K.O. (2006). Business and Administrative Communication 2nd Edition. Boston,

MA: McGraw-Hill.

Pattie, M., Benson, G.S., and Baruch, Y. "Tuition Reimbursement, Perceived

Organizational Support, and Turnover Intention among Graduate Business

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