Why Companies Pay for College

By Bruce Rawding MBA
Assistant Program Director for the University of Redlands

As business managers gear up to face the challenges the New Year brings, one challenge in particular comes to mind: how to attract and retain the best educated and most productive employees for their company? This task becomes particularly acute in markets where the demand for well educated employees is high and unemployment rates low.
In his paper Why do Employers Pay for College? (NBER Working Paper No. 9225), Peter Cappelli attempts to answer the mystery. Not surprisingly Cappelli finds that those employers who offer tuition assistance programs tend to attract “better quality, more
educated and more productive employees.”
This is not to say that tuition assistance programs are inexpensive – they typically are not.
Nor are such programs without risk. One risk is that employees may take advantage of the
benefits that at tuition assistance program offers and simply move on to better jobs now that they meet the higher qualifications.
However, lower turnover has emerged as a key benefit to employers and employees are
motivated to stay with their current employer until they graduate from their degree program. Such programs, that offer evening degree completion opportunities to undergraduates or graduate degrees by attending one class meeting per week can range from two to four years in duration. These programs especially in business and management, develop key skill sets employers are seeking. These include improved writing and analytical skills, quantitative skills, computing skills, and presentations skills.
Employer-funded tuition assistance programs that direct employees to schools with high academic reputations as opposed to diploma mills tend to pay for themselves. For example, Ken Coleman, currently the Campus Director for the University of Redlands, Orange County Campus recalls: “I was working for a private regional bank, responsible for computer technology and networking throughout the state. While in my MBA program, the bank allowed me to use their computer system for a class project. The project was successful and was subsequently adopted by the bank, which resulted in immediate savings in the networking and information systems management for the institution.”
Various surveys have found that most companies provide some sort of financial assistance for employees to complete their degrees or earn their graduate degrees. For example, a 2002 survey by the Society for Human Resource Management of 510 employers found that 79 percent offered educational assistance of various kinds.
Lastly, employers who are still gun shy about funding further education opportunities for their employees can enter into agreements with the latter to stay on for two or more years following completion of the program of study, thereby ensuring a return on their investment.