Chances are that your company offers a tuition reimbursement program, as do your competitors. The purpose is likely to enhance employee recruitment and retention. As a CFO, you may not spend much energy thinking about such HR matters.
But according to research results released Monday, there is a measurable financial benefit from tuition assistance. For one company, Cigna, that benefit was at least 129% between 2012 and 2014 — that is, for each dollar invested, the insurer got that dollar back and saved a further $1.29 on talent management costs.
About 60% of employers offer such a program, according to Jamie Merisotis, CEO of Lumina, an independent nonprofit organization that works to increase the proportion of Americans with high-quality degrees, certificates, and other credentials. But Lumina estimates that only about 2% to 5% of such employers evaluate the programs’ economic ROI. “And very few of those share their results publicly,” Merisotis says, in what may be an understatement.
Lumina engaged Accenture Consulting to conduct a series of studies aimed at quantifying the ROI of major employers’ tuition assistance programs. Cigna volunteered its Education Reimbursement Program (ERP) to be one of the first ones evaluated, and results of the study are the first to be made public.
“If many companies have results like Cigna has achieved, and we think they do, that means tuition assistance, which has traditionally been treated as a benefit, is actually going to look much more like an investment than a cost center for these companies,” says Merisotis.
Cigna wanted to assess the impact of tuition assistance investment on both revenue generation and talent management costs. But because of the diversity of the company’s performance metrics across its workforce, it was unable to identify any revenue factors for which data was accessible for the entire population of program participants.
Therefore, the analysis focused just on the impact on talent management costs. The 129% figure includes savings related to employee promotions, retentions, and transfers.
Specifically, the research found that ERP participants were 10% more likely than other employees to be promoted. That saves money because the more senior the position, the more difficult it is to fill through recruitment.
Indeed, from strictly a cost standpoint, retaining any employee is obviously vastly better than recruiting a replacement, and the study found that ERP participants were 8% more likely to be retained than other workers.
Further, the research found that ERP participants were 7.5% more likely to be transferred internally. It’s somewhat more difficult to perceive how that translates to savings. But Karen Kocher, Cigna’s chief learning officer, notes that “transfers” include employees that retained their existing roles and also acquired new responsibilities as a result of their ERP participation.
“Say there’s a data analytics project, and we’re a couple of people shy of having all the resources we need to drive it as quickly or significantly as we’d like,” says Kocher. “Now we can align that with the people who got or are pursuing data analytics degrees. They may not have all the on-the-job expertise that others do, but they’ve got enough knowledge to put some horsepower behind that project.”
During the study period, approximately 2,200 of Cigna’s 31,000 U.S. employees took advantage of the tuition reimbursement program. The program is available to any employee with no performance-related issues.
There may be no magic to 129% as a precise savings figure, but according to Kocher, the knowledge that there’s a solid financial return could move the needle on additional investment in the program.
“Instead of just setting aside the same amount of money every year for education reimbursement, thinking of it as a benefit we’re offering because our competitors offer it, [Cigna executives] now can look at whether we want to invest even more from a development and promotability perspective,” Kocher says. “There are a lot of things to invest a dollar in, but this one now stands out more than it did before.”
For example, in response to the study results Cigna has increased the amount of reimbursement available for certain strategically significant educational degrees, certifications, and professional designations.
For more general educational programs, the company still reimburses at or slightly below the IRS deductibility limits of $5,250 per person per year for undergraduate programs and $8,000 for graduate programs.
But for the strategically more vital educational pursuits, Cigna has upped the ante to $10,000 and $12,000, respectively. Those include:
The study results should be assessed in light of the likelihood that they are, to a degree, self-selecting. In other words, highly motivated, well-performing employees may be more likely to take advantage of educational opportunities — but even if they don’t, such workers are more likely than others to be promoted.
Accenture applied multiple statistical techniques to isolate the impact of program participation, notes Natalie Sisto Means, a senior manager at the consulting firm who worked on the study. “Of course,” she acknowledges, “those don’t eliminate all factors that may come into play, like self-selection or ambition. We did strive to remove other leading factors of influence that we could identify through the statistical methodologies.”
Kocher agrees that self-selection is a factor — to a point.
“It’s not as if the characteristics that define a classic ERP participant are exclusive to ERP participants, but rather they apply to any standout performer,” she notes. But she counsels that other companies offering tuition reimbursement programs shouldn’t look at them as being only for the already-educated.
“We’ve found that some of our best results have been with our front-line employees,” she says. “The ones that gravitate toward tuition reimbursement tend to be assertive, more resilient, and … holistic in their approach to managing their time and their lives. The emphasis should be on anybody who demonstrates a willingness to be more employable and more successful over the course of their career.”
Meanwhile, in addition to increasing reimbursement dollars for certain educational pursuits, Cigna has taken other steps to increase the value of its program.
For instance, it has negotiated agreements with at least three dozen educational institutions for tuition discounts, as well as for the ability of employees to pay after completing course work or a degree program. “You can’t expect front-line employees who are making $14 to $20 an hour to pay thousands of dollars in advance,” Kocher says. “This enables more employees to participate.”
The company also launched advisory services in conjunction with the program. Employees can consult with an adviser about what degrees or certifications would be most beneficial to pursue, the best schools for those purposes, how to best organize their time, and how to organize their finances so they can pay for anything beyond what the tuition reimbursement cover. There has been “significant uptake” on the advisory services, Kocher says.
As to the program’s overall value to Cigna, Kocher says she’s fairly confident that it goes beyond the 129% ROI on funds invested in it. People who, following participation in the ERP, demonstrate higher degrees of productivity, proficiency, and speed to proficiency can be expected to exert an impact on revenue generation, she suggests.
Lumina Foundation and Accenture, for their part, are hoping to prove that point with research on other companies’ tuition assistance programs.
“We aspire to publish a study that will look at revenue from a productivity perspective,” says Accenture’s Sisto Means. “We’ve already done some analyses in that space for work forces and conditions where performance can be highly measured.”