Bearing Fruit

Usage rates for traditional tuition assistance programs are low, so employers are tempting employees with free tuition and bonuses.

By Matt Bolch Mar 1, 2006

HR Magazine, March 2006When Lance Bartosz earned a bachelors degree in engineering from Northeastern University in Boston in 1997, he knew he wanted to keep going. I was very interested in continuing my education, he says, but I had student loans to contend with.

So in January 1998, Bartosz went to work for United Technologies Corp. (UTC), a $43.7 billion company based in Hartford, Conn., whose products include Carrier heating and cooling systems, Otis elevators, Pratt & Whitney aircraft engines, and Sikorsky helicopters. The main draw for Bartosz: UTC's employee scholar program, which allows employees to continue their education on the company dime.

I couldn’t believe my ears about how good [the education program] was, says Bartosz, now a manager at Ute’s Hamilton Sundstrand unit in Windsor Locks, Conn. He manages the Pratt & Whitney Canada mechanical products center.

Bartosz had good reason to be impressed. UTC pays for an employee’s entire tuition and books up front. The company also offers paid time off as much as three hours a week, depending on the course load to study.

And after providing all that help with getting a degree, the company also offers a big reward at the end$5,000 in UTC stock for an associates degree, and $10,000 for a bachelor’s degree or above.

Bill Bucknall, senior vice president of HR and organization at UTC, says the program is the gold standard among businesses, and he may well be right.

Although a tuition assistance program (TAP) is a standard employee benefit two-thirds of corporations offer some sort of tuition assistance, according to the Society for Human Resource Managements 2005 Benefits Survey Report only 5 percent to 10 percent of employees take advantage of such programs, according to the International Foundation of Employee Benefit Plans.

Reasons for low usage rates are numerous. Tuition has soared in recent years, making it hard for employees to pay up front for expenses a common requirement of TAP's. Employees in full-time positions have little time to take off for classes or to study. And employees may not have incentive to pursue additional education if they can't see the payoff for their hard work in bonuses or promotion opportunities.

To help employees overcome those hurdles, companies such as UTC are going beyond the ubiquitous TAP’s by partnering with universities and paying for all tuition, creating competitive scholarship programs, giving employees time off to study and providing bonuses to reward employees who reach their goals.

What do these companies get in return? Highly educated, loyal employees.

Wide-Reaching Programs

When General Motors (GM) spun off Electronic Data Systems Corp., an IT company, in 1996, the automaker knew it would need to rebuild its IT department from the ground up. With the hiring of Ralph Szygenda as the automakers first chief information officer, the information systems and services (ISS) department embarked on a journey of internal and external education that continues to this day.

A central focus is the master’s degree program in science and IT management offered to ISS employees through a distance-learning arrangement with Carnegie Mellon University in Pittsburghat no cost to the employee. The program is nearly identical to the university’s on-site program, although elective courses are based on priorities set by GM, says Karyn Moore, associate dean of mid-career programs at the university’s Heinz School of Public Policy and Management.

GM, especially Ralph Szygenda, is very committed to developing its people, especially in the information systems area, Moore says. In the first five years of the program, 60 GM employees have graduated, and a similar number of employees are currently enrolled.

As a direct result of the improved processes that students have developed through this program since 1999, GM has boosted revenue and cut or avoided costs to the tune of $200 million, says Chris Tipton, global HR director of information systems and services.

The program is free and open to all 1,950 of the ISS employees, although acceptance is staggered based on company needs and internal department budgets. During the program, which takes two years on average to complete, students participate in weekly online discussions with one another and with Carnegie Mellon faculty members. GMs internal testing division proctors the necessary exams on-site.

People understand that [the program] is not an easy thing but that it benefits both the employee and GM, says Tipton. 

The program focuses as much on management skills as it does on IT skills, recognizing that technical employees sometimes lack leadership qualities necessary to perform management duties and to get into position to move up in the organization, says Szygenda. The Carnegie Mellon program delivers that and more.

Unlike GMs specific offering, United Technologies employee scholar program covers more than degree work. Employees can study anything they want, from general studies to advanced physics, working toward a degree or just picking up the occasional class.

The employee scholar program debuted in 1996, driven by CEO George David to boost the paltry 6 percent usage rate of its traditional TAP. Since then, of the company’s 67,000 U.S.-based employees, more than 14,983 UTC employees have obtained degrees, and more than 13,500 are currently enrolled in courses, says Bucknall.

Employees who are laid off can utilize the program for a full year afterward, and workers whose UTC jobs move more than 50 miles away from headquarters are eligible for four years, Bucknall says. The program makes economic sense to the company in terms of recruitment, retention, promotion and assistance to employees in case of separation, he says. If it’s not the most appreciated benefit, it’s certainly in the top two or three.

Over the past decade, UTC has invested more than $500 million in employee education, spending the majority of funds on tuition and related costs and the rest on stock awards, which total nearly $139 million.

We don’t specifically look at ROI [for the employee scholar program], says Bucknall, but we look at our performance as a company over time.

Competition for Few Opportunities

If companies can’t provide such expansive (and expensive) programs as UTC and GM do, there are smaller and cheaper options that achieve the same goals.

For instance, Mitretek Systems, a nonprofit science and engineering firm in Falls Church, Va., with about 700 employees, selects four people annually for its scholars program. The award includes unlimited free tuition and fees at a school of their choosing, $300 per semester for books, two hours of paid leave per week per course during the semester, and any applicable transportation costs, says Audrey Kremer, the professional development principal who manages corporate wide training programs.

Those in multiyear programs have to reapply for the award, which is voted on by the corporate officers. To help ensure fairness among applicants, executives who choose the scholars try to select employees from each of the company’s three centers whose educational pursuits reflect a range of degrees.

Even though only a few employees are chosen each year, Mitretek believes the highly competitive nature of the program helps attract and retain the best and brightest employees. Criteria for the graduate-level program include professional accomplishments at Mitretek, an applicants potential for success in the program and the value of the education to the company.

The availability of regular tuition assistance and an educated, highly competitive workforce help quell any potential negative comments about who is selected, says Kremer. Sixty-five percent to 75 percent of our employees already have master’s degrees, she explains.

In addition, any employee who receives a masters degree under the company’s TAP gets a one-time bonus of $2,500, while doctoral program graduates get $4,000. Keeping good employees happy is not a huge expense, says Mitreteks Kremer of its scholars program and it’s TAP.

Breeding Loyalty

At UTC, employees are free to leave the company at any time without repaying tuition costs (as long as they pass any courses taken). But Bartosz notes the employee scholar program has bound him (and undoubtedly others) strongly to United Technologies.

Vie never been in a place where the people in charge really, genuinely cared about my development and meeting my personal goals, Bartosz says. Because of that, I feel a strong allegiance to the company. I would have to look hard to find another opportunity like this one.

He isn’t alone. Since we have been tracking data, the retention rate annually among our U.S. employee scholar program graduates has been consistently higher than for our general workforce at some points as high as twice the general workforce retention rate for UTC, says Paul Jackson, a spokesman for UTC.

The commitment is apparent from the CEO down to the manager level. Every supervisor I’ve had has been genuinely excited for me, says Bartosz, who estimates the company spent $85,000 on his higher education.

Bartosz credits the program with both his educational and his professional success. During his eight years on the job, Bartosz has earned two masters degrees from Western New England College, one in business administration and another in engineering management. And after starting as an experimental engineer, he has moved up four pay grades in the company to his current management level.

As General Motors has demonstrated through its master’s degree partnership with Carnegie Mellon, reaching out to help good employees can directly affect the bottom line. The company does not offer incentives beyond free tuition to participants, but Bala Murthy, who graduated from the program last May, already has seen tangible benefits.

It’s helped expand my circle of influence, gaining knowledge and getting what seems like real-time feedback, says Murthy, adding that the information he gleaned from course work often was immediately applicable in his job as a global program manager. Even though there have not been any promotions so far, the newly acquired skill set has made me a much stronger and more confident individual, striving to do my best, he says.

Murthy started his course work in May 2003, taking two classes a semester to graduate within his self-imposed deadline of two years. Juggling a full-time job, a family and an ambitious class schedule isn’t for everyone, but Murthy says the grueling schedule and personal sacrifice were worth it.

Learning is exciting, Murthy says. It is not just enough to acquire these skill sets and use it for personal gain. Each and every [program] graduate should be willing to coach others. That’s what sets a leader apart from a manager. 

Matt Bolch is an Atlanta-based freelance writer who has been a business journalist for two decades.

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