Perk or Investment? Q&A with Lumina Foundation on Their Tuition Assistance ROI Studies


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Posted In: Case Studies, Workforce Insight, Workforce Research

May • 17 • 2017

Lumina Foundation Interview with Haley Glover

Supporting employee education can lead to valuable results for employers. In our recent workforce impact study, we heard from many employers who felt employees enrolled in their tuition assistance programs had higher rates of retention and promotion, and lower absenteeism. But only a small percent of employers are actively collecting evidence to understand their financial investment with these programs.

 

In the past year, Lumina Foundation and Accenture have released a series of five studies on talent investment programs which shed light on what employers are getting in return for their spending on employee degree attainment. The results have been impressive:

 

  • Discover Financial Services realized a 144 percent ROI, while employees participating in the program saw average annual wage increases of 41 percent over non-participating employees.
  • Regional Bank saw a 10 percent ROI ($700K in net savings), and workers who enrolled in the program had increased career opportunities.
  • Advocate Health Care’s program realized a 4 percent ROI for workers within the health system, and a 58 percent ROI for the company’s business and administrative workforce.
  • Cigna’s program achieved an impressive 129 percent ROI, along with increased opportunities for employees who participated in the program.
  • An unnamed large communications technology company was also studied. Its tuition assistance program resulted in 39.2 percent ROI.

 

Collectively, these studies give a comprehensive and persuasive case for considering tuition assistance not as a sunk cost, perk, or a benefit, but as an investment — an investment that brings returns in the form of a robust pipeline of qualified workers ready to move up within the organization and in avoided talent management costs.

 

To learn more about what these studies reveal when viewed together, we spoke with Haley Glover, strategy director at Lumina Foundation.

 

How do you define ROI for tuition assistance programs?

We defined ROI first as the measurement of total benefit and total cost. By total benefits, we counted across a variety of factors, like productivity and time management, but also more typical talent management costs like turnover, retention, unexplained absences, transfers, and promotions.

 

In terms of costs, we tracked not only how much companies spent on tuition itself, but also how much they spent on administration, marketing and communication fees, and educational partnerships.

 

We also did deep statistical analysis to remove factors outside of pure participation in the program that would contribute to the ROI. Things like age, tenure, level within the company, or any other factors we could imagine.

 

What do the most successful programs have in common?

 

We found quite a few examples of extraordinary results within regular practice. For example, Cigna and Discover Financial Services had a unique set of internal practices or employee utilization that led to their extraordinary results.

 

At both companies, we saw the highest returns were being generated by reducing the turnover of the frontline workforce; turnover, of course, happens a lot in the early career. Both Discover and Cigna had equitably designed and executed programs, meaning they were promoting the program to those entry-level workers and not prohibiting them from taking part.

 

Related reading: UpSkill America’s 5 Tips for Increasing TAP Utilization

 

How have these companies changed their tuition programs?

 

Both Cigna and Discover took those extraordinary results and made some incredible changes.

 

At Cigna, first, they took away the prepayment aspect of the program. They negotiated with institutions so the student never has to pay anything out of pocket. That initial cost can really derail people in the front lines who may not make much money but would like to go to college. Second, they introduced support services to help a student choose a program and institution best suited for their needs.

 

Related reading: When Effective Student Support Is Built Into an Online Degree Program

 

Third, Cigna tailored the program to fit their needs as a business. They increased the financial eligibility amount from $5,250 to $10,000 for an undergraduate degree, and up to $12,000 for a Masters degree in a field related to Cigna’s strategic needs. That signaled they were putting their money where their mouth is and providing a path forward for their workers to build a future at Cigna.

 

Discover is in the process of making some big decisions, but the first step they took was looking at where they were losing the most people: within the first year, concentrated in the entry-level workforce. They saw the results of the study, and so rather than making employees wait a year to be eligible for their program, they went to immediate eligibility.

 

Many employers treat this type of program as a pure benefit, like a health insurance program. But when you see the outcomes, it looks a lot more like an investment than an expense. That was an eye-opener for us.

 

What were the biggest challenges to getting positive ROI out of tuition assistance programs?

 

You can’t measure ROI without data, and a lot of companies don’t collect it. It’s rare for a company to have their employee attainment data on file, even though it’s generally advertised in the position description, requested on the resume, and asked about and verified during the interview process. But if a company has no concept of what its attainment rate is, it’s hard to devise a strategy to get better.

 

Another challenge is utilization. Programs with higher utilization rates and more generous reimbursements typically have lower ROI, but it’s important to find where the optimal rate is. A lot of companies are nowhere near the maximized level.

 

Finding the optimal level is really a win-win-win situation: from the perspective of the company, for the individual who is gaining more opportunity, and in society, where having more people with credentials leads to more positive outcomes.

 

Some companies may fear employees will use their learning to seek opportunities elsewhere. Do your studies provide any insight about that?

 

The research shows that’s really not true, particularly in the entry-level population. Employees who take advantage of these programs are staying with their jobs longer, and employers are promoting and transferring these employees more frequently.

 

Companies are actually feeding their management pipeline with these programs. You can’t overstate the importance of management having experience across all levels of the organization and the business. But it’s also important that your management and your entire company reflect your customers, especially as the demographics of the country and the consumer are changing.

 

There is some evidence that when you get up to the graduate level programs, you’re creating a poachable person — particularly in certain areas of the country. But by investing in that first credential, you’re creating a highly loyal, competent, and promotable individual.

 

More on this topic: How Tuition Assistance is a Powerful Lever for Your Diversity Strategy

 

What advice do you have for companies who want to invest more in tuition assistance?

 

I would start with the data that companies need to make strategic decisions. Education attainment is key to understanding the relationship between education, promotion, and transfer.

 

One of the biggest barriers we encountered was front-line employees having a hard time coming up with the dollars up front. Companies should consider doing away with the reimbursement model and going with a more tuition-assistance model.

 

The average utilization of a tuition assistance program covers between one and five percent, which makes it hard to justify the ongoing existence and expansion of the program. A lot of employers don’t market their programs well. Our research found that a solid 40-plus percent of people don’t even know if their employer offers a tuition program. Many factors go into whether students use it, but the main reason shouldn’t be whether or not they know about it.

 

And finally, how you administer the program matters. A decentralized or individually-led tuition benefit programs can actually be a big hindrance if it’s not administered with equity in mind. If your criteria are applied subjectively, or it requires a manager’s signature, you haven’t created equitable access to the program.

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Jessie Kwak is a freelance writer and novelist living in Portland, Oregon.