Episode Transcript
Speaker 1 00:00:13 Hello everyone. Today I want to talk about this massive move by CEOs, CFOs, and CHROs to educate their workforce. And it's a really, really big deal, and it's really interesting and it affects almost all of you in the HR community. First of all, if you're not aware of what's going on, let me give you the highlights. Last week, Amazon announced that they're allocating more than a billion dollars to workforce education. Walmart has been doing this for many years and has allocated many hundreds of millions of dollars in probably equivalent amount. Target does this, Disney does this, Boeing does this. All sorts of companies do this, and this is not tuition reimbursement. Tuition reimbursement is a benefit that many, many companies have that is usually applied more to white collar workers who are getting MBAs or advanced certificates. This is really an entire education benefit where companies are paying for individuals to get college degrees or professional degrees or technical certificates, and they're covering the cost of tuition.
Speaker 1 00:01:19 They're covering the cost of books, they're covering the cost of materials. So it's a really, really powerful benefit, and there are some amazing vendors involved in this. The one that we're working very closely with at the moment is Guild Education. Almost a 4 billion market cap company, which has really founded and pioneered this. Bright Horizons has a big business in this called a assist, and then there are a bunch of smaller players as well. What is it really about? There's really several important dimensions and why this is important. First of all, for you as an HR person or as a business person, these investments pay off in many, many ways. First of all, they're great for recruiting. If you're recruiting frontline workers, essential workers, nurses, retail workers, operations people, truck drivers, many of these people went to work coming outta high school because they needed the money.
Speaker 1 00:02:11 They didn't have time to go to college, they couldn't afford it. Going back to college is very, very difficult, very expensive, very risky. You know, there's a lot of college degrees that don't pay off. And so they went to work and they built a career for themselves, and they are hungry for a college education. They're hungry for the certificate, they're hungry for the degree, and they will come to work for you because of that benefit. They may or may not use it, but it means a lot to people. So it'll really help you with recruiting. The second is the upskilling and re-skilling and job mobility of your existing workers. Most people who work in the retail store at Target or at Walmart, or they're driving a truck for Amazon, they would like to do something different with their careers over time. They might have aspirations to work in tech or to work in sales, or to work in marketing or to work in finance, and they don't really know how to do that from where they are.
Speaker 1 00:03:05 Companies are investing in talent, marketplace tools, and much more internal mobility systems, but it's kind of like this problem of you don't know what you don't know. And for me, as somebody who's sort of overeducated, I come from a family where education was very, very highly valued. And a lot of the times what happens with education is you don't really know what you're going to learn, but it opens your eyes. And if there's anything that creates a great career experience for people, it's opening their eyes to opportunities and areas of work, which they weren't aware of in the past. It's inspiring to them. It's great for the company, and you can direct people into new roles through these education programs, and that's basically what Guild education and EDS does help you with that. The third reason it's important, of course, is there's an economic gap here, and this has been a frustration for me as an analyst for two decades, really, that we have this frontline or blue collar workforce around the world that are making minimum wage or less frustrated with their lives, maybe spending a lot of time commuting, and they are not really able to pay their rent.
Speaker 1 00:04:15 I forget the statistics, but 30 to 40% of the United States population has, uh, significant amounts of credit card debt. They don't have time to go to school. I mean, quit your job and go to school is like sort of a death experience. And then you end up with a bunch of debt. There's hundreds of billions of dollars of student debt out there. The federal government is, you know, debating all sorts of options for that, making community college free. And community colleges are, and many of these education institutions are great teaching institutions. My kids, one of my children, went to community college for a while, learned a huge amount there. I've taken courses in community college, which were better than the courses I took at an Ivy League institution. So we have this gap where the education industry is unable to reach people who are very badly in need and very ready to learn, but the system doesn't enable them to do it.
Speaker 1 00:05:10 However, an employer can fix that. An employer can connect this gap between the education industry and the job market. Now, the education industry has its own issues. I was just talking to the CEO of DeVry University last week to some degree. The education industry is a semi monopoly subsidized by the federal government, and they measure their results on financial revenues, student outcomes, graduation rates, but not on the earnings of their graduates or certificate holders. So they don't really understand or need to or want to necessarily improve the job market for their graduates. Of course, they would like to do that, but they don't know how. Some of the best universities and colleges and community colleges do work directly with employers. And in fact, over the years, many times I've run into situations where a healthcare organization or a retail company or somebody else has partnered with a local educational institution and they've created a direct pathway from graduation into that company.
Speaker 1 00:06:12 And that has always been a highly successful program, but you have to have the right education leaders who wanna work with the institutions, the right corporate people to partner with them. And so it's, it's a little bit sporadic. So what companies are basically saying is, we're just gonna take this on. Now, billion dollars for Amazon is not a huge amount of money for them, but it's a lot of money for most companies. So what is the ROI of this? Well, there's a huge roi. Obviously there is a recruiting issue, the retention issue, but let me just throw out a few numbers for you. Let's suppose you have a 20, 25, 30% turnover in your retail organization, which is not unusual at all. Some companies have 40% the cost of replacing those people. And let's suppose those people make $50,000 a year, maybe they make less, maybe they make more.
Speaker 1 00:07:00 The, the cost of that turnover is multiple times their salary. Now, that sounds odd, but think about it this way. You have the embedded cost of their existing skills, the customer relationships that they have built during their time working in your company, the peer relationships they've built while they're working inside of your company, the impact they're having directly on revenue through their own productivity. Because the more you work at a company, the more productive you become. Then there's the cost of looking for a new person, recruiting a new person, paying a bonus to the new person, marketing the jobs that you have, running the recruiting department, paying the recruiters, paying the head hunters, paying the fees. If you add that all up and we've done it, it can be two to three times the cost of keeping that person here. Now, if that person makes $50,000 a year, an education benefit to that person might be a few thousand to $5,000 a year at the most.
Speaker 1 00:07:57 And they won't necessarily use it completely, but they'll use some of it. So the ROI of these investments can be massive. The reason I think companies don't always do this is A, they don't understand the potential. B, until the birth of companies like Guild and Ed assist, there was really no way to do it. You had to formally sit down as a corporation and figure out how to work with various colleges on different degrees. And you know who has time for that? You know, you've got enough of your own internal training things to do, and the federal government is kind of behind this. You know, there's a federal benefit of 52 50 per year for an employee to receive these benefits completely tax free. So this is also a way of taking your compensation and payroll benefits and allocating them towards something that's very high value and tax free to the employee.
Speaker 1 00:08:49 The final point I want to make is about your own agility as a company. And this is something that has become increasingly obvious to me over the last two years. During the pandemic. Every single company is going through a transformation. If you're a retail company, you're doing distribution and online commerce. If you're a tech company, you're growing into new market, going internationally, getting into do a new industry area. If you're a bank, you're getting into crypto or uh, different types of loans or different cities or different offerings. If you're an oil company, you're getting into solar energy. It goes on and on and on. That means you're out there looking for people that are different than the people you already have. And that's an expensive and risky proposition. By the way, one of the other costs of hiring people is they don't always stay. There's a relatively low hit rate of new employees.
Speaker 1 00:09:40 That's another cost to add to the first point. So as you're going through this transformation, one of the workforce elements that's the most powerful is the people you already have. So you want the people inside the company to feel confident and empowered to learn new things and go into these new business areas. One of the ways to do that is to give them education benefits. Education benefits are not only good for the skills and knowledge and general capabilities they get in school, but it gives them a sense of agency. It gives people a sense of power. I remember my, both of my kids when they got outta school, and they both went through various different journeys to graduate. Getting outta college was like a gigantic shot of adrenaline for them. Now, yes, finding a job and finding the right career and finding the right company is kind of a risky and complex thing.
Speaker 1 00:10:30 But finishing that degree and getting that credential and feeling like you've completed something of value to yourself and your family and your society is hugely valuable in your company's culture. And these companies like Disney and Walmart and Amazon, these are great companies that really want people to feel good about their job. And so the education benefits are part of your business transformation. Now, we're gonna be doing much more on this, on posting an article on this this week. The big research we're really working on here is what we call career pathways, because what these education benefits do is they create and open up new career pathways. If you've been working in retail your whole life, maybe you never realized you could work in customer service or sales or marketing. And there's a lot of information now about how these adjacent pathways work and education benefits are a big part of this. So I wanted you all to think about this. There'll be much more to come. I would anticipate that you're gonna see a flurry of many more employers launching these programs. We are doing case studies on this on some of the companies I mentioned earlier. If you would like to talk to us about this or learn more about it, please let me know. Thanks a lot.
