Forget the Fitness Center. Spend Your Money on Education

SlocumHallUsing the recession as an excuse, organization after organization has cut out or reduced their tuition reimbursement programs and their support for additional education. But, I have not seen any company close down the fancy cafeteria and many maintain a fitness center and other perks of marginal value for retention or motivation.

At the same time, CEOs and VPs of HR complain about how hard it is to find good employees and retain them. It seems obvious to me that we need to invest more in employee education and less in other areas.

It is a strange and almost uniquely American trait to dislike learning and limit an employee’s ability to learn by not providing time or money.

In most other countries, organizations or governments subsidize or reimburse employee education to some degree. They almost all provide significant internal development even when times are tough. Toyota and many Japanese, Chinese, Singaporean, and Korean companies increase spending on developing employees during bad times because there is slack time to do so.

Moreover, American firms almost universally limit the amount of money that can be spent, they require the employee to pay back the expenditure, or they demand a minimum length of service before eligibility.

This has always seemed strange to me. Learning improves the entire workplace and cxreats more skilled workers. If everyone developed employees, losing a few would be offset by the ones you hired to replace them.

But let’s take a look at this whole concept 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, as well as 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 ongoing 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 four 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).

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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 new 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.

So in my way of thinking, organizations should encourage all employees to continue their education. They should offer internal programs and make attending them part of the performance appraisal process. If more organizations focused on promoting internally, rather than going to the outside except for entry-level people, they would have a much stronger and more capable workforce. I frequently use IBM as an example of this. It has spent billions of employee development and prides itself on allowing employees to move internally easily and often. And IBM is thriving despite a recession and despite having changed its entire business model.

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 completing 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. They may offer rotations or other opportunities for these students to contribute right away.

Companies could work with the schools and tailor degrees to their needs. They could 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 them. Most schools that I have worked with will consider these things when approached by responsible and caring internal representatives. 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 a determined and resourceful human resources group can do to lower costs and improve the quality of the education the employee gets.

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 and a more liberal approach to tuition reimbursement and on-going education, especially when recruiting new college grads, is a powerful recruiting tool. It’s a way to differentiate your organization from others.

Investing in education should be a priority and should supersede other benefits and bonuses.

Kevin Wheeler is a globally known speaker, author, futurist, and consultant in talent management, human capital acquisition and learning & development. He has founded a number of organizations including the Future of Talent Institute, Global Learning Resources, Inc. and the Australasian Talent Conference, Ltd. He hosts Future of Talent Retreats in the U.S., Europe, and Australia. He writes frequently on LinkedIn, is a columnist for ERE.net, keynotes, and speaks at conferences and events globally, and advises firms on talent strategy. He has authored two books and hundreds of articles and white papers. He has a new book on recruiting that will be out in late summer of 2016. Prior to his current work, he had a 20+year corporate career in several San Francisco area tech and financial service firms. He has also been on the faculty of San Francisco State University and the University of San Francisco. He can be reached at kwheeler@futureoftalent.org.

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11 Comments on “Forget the Fitness Center. Spend Your Money on Education

  1. IMHO, most companies view paying for training/education as paying to help a competitor get a better employee. Also,there may not be a sense of quid pro quo from employees- “If I pay for the training myself, will it get me more money/a promotion where I am?”
    I am curious if anyone can dig this up:
    What percentage of companies with 500+ employees have a tuition-refund policy, and what the typical amount is?

    Cheers,

    KH

  2. My previous employer would pay up to 5K a year for tuition/books. One course was costing me about 1400, plus another 200 for the book ( why are textbooks so expensive? ). So you could take about 3 courses a year. 5K is not a whole lot of money when you factor in what college costs nowadays. I knew people that wanted to go on for mba’s, but they too realized that you could probably only have the company pay for 2 courses a year. You would have to pay the rest yourself. So, there weren’t too many people going on for advanced degrees. They really didn’t advertise the program. United Technologies has a program where you get stock/cash of 10K when you finish a degree and they give time off during the semester for midterms and finals.

  3. Physical fitness has become very important to corporations as it helps manage their heatlh care costs. Many companies encourage their employees to devlop healthy eating habits and physical fitness,and they tie it to their health care plans, if you are fit you pay less. It’s also a proven fact the the fit person is a more effective employee. They support these efforts by supporting facilities on site for the employees convenience.

  4. Kevin- Great read. On the surface, though, you offer a false choice-either Fitness or Education. Obesity and general poor health and eating habits of many (if not most ) americans is well documented and showing very few signs of improvement. The current health care debate in the US is even skirting the undeniable elephant in the room of rising costs due to poor health “maintenance”, preventative illness and expensive medical treatment. Look at the medical perscription industry revenues for a clue as to how we address illness in america …take a daily pill( or 4 or 7 or…). I will not get on a soup box about how we spend 25% of all healthcare dollars on the last years of life expenses. It would be interesting to see how education dollars as a percent are spent by adults after the age of 30, 40 or 50 years of age? I do not disagree( read agree) with the need for life long learning and professional growth. The corporate and govt. incentives to return to school or even further develop existing or acquire new skills is just not rewarded or significantly cost-shared. To share a quip: “Good health, education and wealth are often wasted on the young!”

  5. As the resources director at a professional services firm, every day I read about current workplace trends. I often grapple with how I can integrate educational opportunities into the workplace for myself and my colleagues. I can tell you that it is much easier to promote physical fitness because of the buzz out there right now; especially since it hits a sensitive nerve for benefits managers who are tasked annually with negotiating healthcare plans – an expected employee benefit. It is a legitimate communication to the employee base that implies, “we care about you”.

    Supporting a learning initiative comes across as a larger investment of time, energy and money. This is short-term thinking and unfortunately rather prevalent. The oversight is the significant human capital investment a company can leverage long-term. Think about the powerful communication piece – “We believe in your potential”.

    I find it fascinating some rationalize that all an employee needs is a couple webinars to get up to speed on the latest and greatest. Just-in-time learning has value and its place, but alone, it is an easy out over a corporate learning strategy that includes employer-sponsored, continued education programming.

    There are forward-thinking companies who are embracing the learning organization model and creating a learning society within their walls. Some have even established corporate in-house universities. The statistics associated with their successes show above-average employee engagement and retention. One will find established avenues for internal promotions and departmental transfers that leverage existing talent and support succession planning. Their healthy revenue streams should be evidence enough for the most skeptical.

    There will always be employees who capitalize on the opportunity to learn and then leave the firm. It happens. But a minimal amount of turn-over is not always a bad thing and, if the departure is managed in a positive manner, the company may create a supportive alumni of the organization who in return refers new talent, directs business the firm’s way, and most importantly, speaks highly of the firm and the personal growth opportunities provided during his or her tenure.

    In today’s social media space where your brand, image and corporate culture are vulnerable to attacks; where persons are virally networking, tweeting and information sharing, these former employees who champion the company are worth every penny!

  6. I completely disagree. Education is at best 10 years
    behind what is happening in the world. Take SAP
    for example. Four ex IBM consultant invented a computer
    system that embraced the efficiency of suppl chain thinking.

    About 12 years later some professors at Harvard and Yale
    thought a computer system that embraced supply chain
    thinking was a good idea!

    How many more examples would you like?

  7. This article is thought provoking as I spent the weekend myself looking at my anemic training budget yet I want the best employees possible.
    I believe that many U.S. Companies are focused on short-term profitabity over long-term growth. When you consider that the average employee is there perhaps 5 years and training benefits are a)tough to measure return, b)difficult to see results physically, c)tough to gauge value to morale it’s easy to see why companies focus on programs that generate easier measurable results. Fitness is just a microcosm; other things are referral fees, 401(k)plans, performance bonuses, loans, and many more.
    I’m a huge proponent of training and push for them but often you’re arguing against something very tangible with quick results versus a budget for training that may not.

  8. I would have to disagree with Ben’s comments. I have had the opportunity to work for both public and private sector industries and believe that higher education has taken great strides to integrate “real world” experiences into training. It is rare that a university would soley rely on the “ivory tower” approach to education this this day and age. In fact, the balace of adjunct faculty out in industry combined with those who have the time to conduct research is a very effective approach to adult learner education.

  9. Kevin, Australia also suffers from the same malaise. However as a long term career recruiter I can say that, (in agreement with Keith) that many if not most employees who earn a higher level qualification such as a Masters generally start looking around for a new challenge once they graduate, so the firm that supported them loses its investment. This is partly caused by what I refer to as the “football club” mentality. The “B” team player who improves is never given the same opportunity to join the “A” team as is an outsider who joins fresh into the club from another club (and they usually move because they couldn’t make it in their old club!)Once you are labelled as a “B” team player at work, no amount of extra study will help get the “coach” to see you in a different light- hence your best option is to leave.

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