Assessing the Business Impact of External Degree Programs

» Posted by Jeanne Meister  » Posted on 12.03.07

Published July 2004

Corporate America spent $10 billion in 2003 on tuition reimbursement programs. Yet according to research firm Eduventures, only 2 percent of companies surveyed actually calculate a return on investment (ROI) for these programs, and only 45 percent have any controls in place over how tuition dollars are spent.

Why such a low level of attention to the return on tuition reimbursement spending? One reason is the perception of tuition reimbursement as an entitlement—a cost of doing business in order to gain an edge in recruiting, hiring and retention. A second reason is that tuition reimbursement has been a hidden cost, often managed by the human resources department. However, a number of CLOs are now managing external degree programs along with their corporate training programs to ensure proper integration of offerings. As these executives feel increasingly pressured and become increasingly sophisticated at tracking the impact of their programs on business results, spending on external degree programs will also be increasingly analyzed from an ROI perspective.

One company that stands out for its in-depth measurement of the return on its customized degree and certification programs is Masco, a Fortune 200, Michigan-based manufacturer of home building products.

Masco has worked with a number of external universities, including Eastern Michigan University, which helped Masco develop a customized MBA. The program focuses on strategic issues such as working with big-box retailers, determining the impact of various builder consolidation scenarios, maximizing e-business and recommending a more effective enterprise order-management system.

Gary Yezbick, director of operational services at Masco, believes strongly in measuring ROI from such customized, university-based programs. First, projects focused on reducing the cost of goods sold or avoiding capital are carefully tracked and monitored in the Masco Leadership Program. Second, he establishes feedback mechanisms and focus groups to see how participants in the program are affecting the company’s performance. “We constantly hear corporate executives and line-business unit presidents talking about the positive impact this program has on the company,” Yezbick said. Dan Foley, Masco’s vice president of human resources, affirmed this. “Our operating companies have begun to rely on our corporate-sponsored programs for high-potential talent as a primary means for building organizational capacity,” he said.

Yezbick and the company also assess the impact of the program on such critical areas as employee retention and advancement. After the first seven years of the MBA program, Yezbick examined nearly 100 employees who either were enrolled in the program or had completed it already. He found they had roughly the same voluntary turnover rates and a greater likelihood of earning a job promotion than the company’s 2,000 stock-eligible employees. (See Figure 1.) Even though the MBA group had a proportionately larger number of high-potentials than the other employee segments, their relative propensity for job promotions is still high.

The experiences of companies like Masco point to the groundwork that all learning executives must be laying now so they’re ready to answer the question: “What business benefits does our company get from our external education programs?” Masco shows, both as a leadership-retention magnet and as a proving ground for cost-saving ideas, that properly planned and executed partnerships with university executive education programs can more than pay for themselves. More importantly, they can help create high-performance businesses.

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