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The effects of tuition reimbursement on retention and recruitment: A cross case analysis

ProQuest Dissertations and Theses, 2011
Dissertation
Author: Gary M Pyle
Abstract:
In today's uncertain economy, organizations are making the decision to become leaner, or to do more with less. The human resource (HR) department has to be very strategic in the decisions that they make when deciding to retain workers or recruit workers for key positions. In essence, as stated in an article from 1996, it is truly a War for Talent (Chambers, Foulon, Handfield-Jones, Hankin, & Michaels, 1998). The theme has not changed much over the last decade, but the incentives used to retain and recruit employees have. Tuition reimbursement is one such incentive that organizations use to retain and recruit talent. This incentive is usually part of the benefit package and has positive impacts for the employee and the organization. On the employee side, they are able to receive a no cost education, from a reputable learning institution, which may increase their marketability and self-worth. For the employer, they receive a more knowledgeable employee who can share that knowledge with others in the workplace. This study addressed the impact of tuition reimbursement on retention and recruitment efforts in two selected organizations. These companies use call centers as a basis for customer service operations. In this instance, the call center is focal point of contact with the consumer and has the greatest effect on customer retention. Call centers historically have a high turnover rate, and therefore the expenditures on benefits and retention and recruitment efforts are significant for company success. The study compared two organizations to ascertain if the effects of tuition reimbursement on recruitment and retention could be generalized throughout the marketplace

Table of Contents

Acknowledgments

iv

List of Tables

ix

C HAPTER

1. INTRODUCTION

1

Background 2

Statement of the Problem

4

Call Centers

5 Purpose of the Study 6

Recruitment verses Retention

8

Research Questions

8

Rationale

9

Organizations

10

Significance of Study 11

Assumptions and Limitations

12

Nature of Study 15

Organization of Remainder

15 C HAPTER

2. LITERATURE REVIEW

17

Employee Satisfaction

19

Organizational Citizenship Behavior

22

Development and Engagement

24

Compensation and Benefits

26

Telecommuting 28

Human Capital

30

vi

C hanging Times

32

Online Recruiting

34

Call Centers

35

Tuition Reimbursement

38

Summary

40 C HAPTER

3. METHODOLOGY

41

Tuition Reimbursement

43

Research Questions

44

Methodologies

46

Qualitative Study

47

Research Design

49

Sample

52

Setting

55

Instrumentation

56

Data Collection

56

Data Analysis

57

Data Displays

58

Validity and Reliability

58

Ethical Considerations

60

Summary

62 CHAPTER 4.

DATA ANALSIS AND RESULTS

64 Company 1

65 Participants

66

vii

Data Collection

68 Management

80 Analysis of Data

85 Analysis of Management Data

88 Findings

90 Company 2

94 Par ticipants

95 Data Collection

97 Management

110 Analysis of Data

116 Analysis of Management Data

122 F indings

125 Cross Case Analysis of Participant Data

129 Cross Case

Analysis of Management Data

134 Findings

137 Summary

143 CHAPTER 5 . CON CLUSIONS AND RECOMMENDATIONS

144 Tuition R eimbursement and Recruitment

145 Implications

146 Tuition Reimbursement and Retention 149 Implications

151 Tuition Reimburseme nt and Employee Satisfaction

155 Implications

155

viii

Recommendations

156 Conclusions

158 Sug gestions for

Future Research

161 R EFERENCES

164 APPENDIX A . CONTEXTUAL FRAMEWORK

169 APPENDIX B . INTERVIEW GUIDE

170

APPENDIX C . MANAGEMENT INTERVIEW GUIDE

171

ix

List of Tables

Table 1. Company 1 Partici pants

68 Table 2. Theme s from Participant Interviews

88 Table 3. Themes Generated from Mana gement Participant Interviews

90

Table 4. Company 1 Findings

90 Tabl e 5. Company 2 Participants

97 Table 6. Themes Ge nerated from Participant Data

121 Table 7. Themes Ge nerated from Ma nagement Data

125 T able 8. Company 2 Findings

125 Table 9. Themes Genera ted from Cross - Case Analysis

133 Table 10. Themes Generated from Cross - Case

Analysis of Management Data

136

1

C HAPTER

1. INTRODUCTION

To be successful in the marketplace, organizations try to achieve what is known as competitive advantage over rivals. Thompson, Strickland and Gamble (2005) profess

competitive advantage to be

a strategy of attracting consumers and / or workers to a company’s products or services over competitors ;

this consumer [ worker ] loyalty is consistent over time. Companies can distinguish themselves from others by paying closer attention to the needs and wants of the employees that make up the or ganization. Thus, when Drucker (2002) states that “a critical feature of a knowledge workforce is that workers are not labor, they are capital” (p . 76), it can be asserted that treating workers as an asset means taking steps to ensure the organization is c hosen over others wishing to bring that employee on board or on the hand, keeping a current worker gainfully employed.

With this in mind, management devises and implements strategies, policies and procedures that benefit employees. While on one hand increa sing the self worth of the knowledge work force, management hopes to have a happier, higher motivated and therefore more productive workforce. This will increase the competitive advantage of the organization and hopefully will not be duplicated or replicat ed by competitors (Drucker , 2002). Human r esource (HR) managers are striving to become more strategic in the

practices that they employ to retain the human capital that the organization currently

possesses. The HR function in today’s organization has much

more to do with the actual

2

business plan and strategy of the company than ever before. Therefore, the professionals are always in the process of creating and establishing alternatives to the compensation and benefit packages that are offered to employees.

HR managers have discovered that one way to keep current employees is

to offer perks that the employees themselves have suggested that they deem are important in the lifestyles that they lead (Chiavenato, 2001). Background of the Study When suggesting possible strategies , HR managers have to take into account what is good for the business as well as what is good for the worker when making retention and recruitment policy decisions. It is not just the decisions about specific employees th at are important, but also programs and p olicies

that are implemented to influence the decision for a productive and knowledgeable employee to stay and those enacted to woo away a talented individual from another firm. Therefore the HR manager must conside r the financial aspects as well as the motivational aspects of retention and recruitment decisions. The motivational aspects may include specifics like wages, benefits and educational opportunities, but it may also include such intangible aspects as company image, work climate, job satisfaction and organizational culture (Chiavenato, 2001).

One best practice or program that an organization may offer to empl oyees is tuition reimbursement. Education assistance [ as the benefit may also be called ]

is designed to assist employees in defraying the costs of outside education (Schonwetter, 2006). This benefit can vary depending on the company. Some offer complete reimbursement of tuition, fees and books. Others may offer a percentage or a flat amount given to an e mployee that has decided to continue their education outside of the workplace. Certain organizations may have criteria established as to what schools the

3

employees must attend to receive the tuition reimbursement benefit. Still o thers offer educational loa ns to their employees , regardless of the

learning institution . A stipulation of this plan is to maintain a full course load and agree to pay back the loan within the terms of the loan agreement . For master’s level courses, organizations usually require the

outside education must equate with the position that the employee currently holds , to be considered for educational reimbursement benefits, while associate and bachelor degrees may not hold the same restrictions (Jenkins, 2006). When companies offer educational assistance to their employees , they receive favorable tax treatment from the Internal Revenue Service

(IRS) . The first $5,250.00 of educational assistance is tax free when paid by employers. Employers may only claim this tax exemption when thei r tuition reimbursement plan does not discriminate against any employee and does not favor the highly compensated employee or officer of the company. Many organizations offer educational assistance for employees that does not qualify for favorable tax trea tment. In this case, the employee may be able to deduct these benefits under their own federal income tax if they itemize their deductions. These deductions are allowed only if the subjects taken enhance the job that is being performed by the employee or w hen successful completion of a course or subject of study is

mandated as a condition of their continued employment. Some types of education al expenses are not deductible, such as costs incurred when an employee is trying to enter

into a new field or

start their own business (Beam, & McFadden, 2005). Therefore it is i mportant for the employer to establish guidelines for the types of assistance that may be offered and that is allowable by law.

4

Statement of the Problem

Some employees feel obligated to give ba ck to an organization that has made an investment of time and money in them . Tuition reimbursement (TR) is a means of assist ing employees in obtaining higher education and possibly a degree outside of the workplace. Studies have shown that rewards and reco gnition (whether by public notoriety or increased pay) will increase employee satisfaction. When an employee is recognized for increasing his or her education and adding value to the organization, increased job satisfaction and productivity may follow (Nel son, 2003). In a survey of 500 companies that was completed in 2005, Johnson asked respondents if they calculated the Return of Investment (ROI) of offering tuition reimbursement. Only two percent responded affirmatively and of those companies that stated they did track the individuals taking advantage of the benefit, they also responded that they did not notice an aggregate of positive outcomes in the workplace from the group that did not participate in the program. The survey results showed that 43 % reported better job performance by those employees that took tuition reimbursement. Additionally, while 48%

of those surveyed stated that the program increased retention , 42% reported that the tuition reimbursement program increased the potential for promotion of those workers that took advantage of this benefit (Johnson, 2005). As previously noted only a small percentage of organizations

track their employees

who take advantage of the program . Employees perceive that pay increases or promotions should be an a dded benefit once a degree has been obtained. But,

these employers may not have plans for the employee once the degree has been obtained. This is the crux of the problem with offering the benefit. If employees are expecting some

5

reward for obtaining a higher degree and it is not offered by the company, the employee may seek employment elsewhere. On the other hand, the company may believe that by offering the benefit to employees, they are not obligated, nor should they be , to offer increased pay or benefits

once a degree h as been conferred. Is it worthwhile for the company to have the knowledge , they paid for , be used by another

firm ? This question bears interest to those participating in the program .

Call Centers

Call centers have been an integral part of business operations for quite some time. Miller (2005) states a

successful

call center representative must be trained well for the job, understand the expectations and limitations of the job, be allowed flexible s chedules and be offered some non - monetary types of benefits , rewards and recognition.

As White (2007) discusses, one organization that uses call centers for customer service operations had a turnover rate of over 100% for one of their locations and over 70% overall in a year’s time. In this instance, it is easy to understand how many consumers are frustrated when they must deal with what they believe are unhelpful customer service representatives.

Since it is not in the best interest of the call center to have high turnover, the retention of employees is especially

important. It is very costly to recruit and train employees. To keep costs at a minimum, HR managers have to offer benefits that employees view as valuable. In addition, as the costs of educat ion continue to rise, offering the educational benefit may entice a prospective employee into joining the ranks of an organization that offers tuition reimbursement over one that does not.

6

Most of the information that is attributed to the subject of call centers does not highlight employee satisfaction, commitment or benefits. Recent articles discuss employee performance management (Viscusi, 2007) , off - shoring (Tanoury, 2007) and customer satisfaction (Favilla, 2004), while the subject of the employee in t his working environment is overlooked. If the employee was the subject of consideration ( recru itment and retention options ) , then

satisfaction, commitment and th ereby performance , may be enhanced which could increase organizational profitability. It then stands to reason , the return of investment of a tuition reimbursement programs depends on expectancies once the schooling is completed . From the onset, the company receives benefits that outweigh the price of outside education by retaining current employees and recruiting top performers. After the degree has been obtained the organization has a choice to increase responsibilities for this employee or continue with the current employment status. Depending on which avenue the organization chooses and what the employee expects will determine if tuition reimbursement is still a viable retention or recruitment tool .

Purpose of the Study The knowledge worker of today has a greater understanding of business and can better comprehend how the work that they perform fits into the systematic flow of the organizational output. Management has the task of keeping the employees committed to their jobs and thus to the organization. As Kouzes and Posner (2002) postulate , the values of the employee and the organization have to be congruent for both sides to be successful in the employee/employer relationship.

7

Employee commitment can be based on several factors which may include , employee satisfaction with polic i es and practices of the organization and a commitment to the job and performance of that job. For the employee, commitment may mean the positive or negative beliefs that they hold about the company. Several aspects of the work environment can be considered when discussing employee satisfaction. These include satisfaction with the work, trust in management and issues with employee reward and recognition. Depending on how these issues are addressed will determine the amount of effort or commitment the employe e puts into their job. In other words, the work that the employee performs may exceed company standards and expectations by the higher degree of commitment they have to the organization. The converse may also be true. Employees may perform at minimal level s to maintain employment due to the lower commitment th ey have toward the organization. Employee satisfaction is a primary

factor that influence s the commitment level of the employee. It has been suggested that the most important aspect of employment to workers is

the compensation that they receive. While compensation is important, it is not the mitigating factor impacting the decision to continue with an employer or seek employment el sewhere. Kohn (1998) suggests that on a ranking of items that employees find important, money is not first on the list and ranks below items such as a good work environment, job security, job enrichment, and benefits offered by the employer. Tuition reimbu rsement is one of many benefits that employers offer to workers. The offering of this benefit may impact several areas of the business. T he purpose of the study is to understand the effects of tuition reimbursement on the recruiting and retention efforts o f the two selected organizations.

8

Recruitment vers u s Retention

A distinction should be made between recruitment and retention. While both deal with staffing issues, the definitions and policies used to accomplish each task are different. Recruitment prac tices enable the organization to bring new and qualified talent into the organization. Those responsible for recruiting assess the skills and abilities of individuals and try to match them with the functions of the jobs that are available. Recruiters also try to establish if those hired will fit into the culture and value system of the organization. Recruiters can be part of the HR department or an organization can decide to use an external source that specializes in employee screening and handles all of th e interviews, background checks and other administrative aspects of the hiring process (Ivancevick, 1995). Retention policies are used to ensure that knowledge workers continue in their

employment and are satisfied with the policies, values and culture of

the organization. As Buck and Watson (2002) wri te, the decision to stay with the organization usually depends on the commitment that the employee feels towards the employer. This is affected by the activities that the organization performs and the benefit s that the employee receives from being a part of that organization. Research Questions

In the study, several questions were answered

to discover the perceptions, feelings and actions of those involved with

the tuition reimbursement program

to

ascertain

if the program is a dead

benefit or a viable recruitment and/ or retention strategy. I nterviews

began with general background questions

such as job function , job title,

tenure and level of education of those involved. Dialogue was

establish ed

tha t uncovered

possible

9

explanations for perception, attitudes and behavior [ positively or negatively ]

with respect to the program. R esearch questions , formulated to evaluate

the effects of tuition reimbursement on recruitment and retention , were

as follows:

1.

What role does tuition reimbursement play in the recruitment of new employees?

2.

How does offering tuition reimbursement affect retention of current employees?

3.

What is the perceived value of tuition reimbursement to employees in call center environments?

4.

Wh at role do HR managers believe offering tuition reimbursement plays in addressing employee satisfaction issues?

Rationale

It has been suggested that organizations offer tuition reimbursement to employees as an afterthought, or as

a small and unimportant part of their benefit package (Halfond, 2008). Companies spend over $10 million annually on educational benefits and it is important that organizations have an idea where and how the money is being spent. Companies may offer education benefits of up to $5, 250 per year to an employee on a tax free basis and can reap the benefits of increased knowledge and increased employee satisfaction at the same time (Beam, & McFadden, 2005) . Halfond (2008) suggests that if tuition reimbursement programs were audited, most HR professionals would be surprised to find out exactly how and where the money is being spent. He further states that tuition reimbursement benefits are not just for educati on outside of the workplace and benefits can be offered that assist in job

10

enrichment. Halfond also affirms that all education does not have to be job related and knowledge in the arts and sciences is just as influential and meaningful as business administ ration. Th is study benefit s

the HR profession in their recruitment and retention practices and ha s a positive impact on employees. The benefits of a tuition reimbursement program can increase the reciprocity between an organization and the

educational ins titution. Tuition rates can be decreased for company employees and a relationship may be established which increases student enrollment, while enhancing the self - worth of the employee. Employees may also obtain a valuable education while reaping the benefi t of corporate commitment and social good will. It is therefore important to discover the impact that this benefit has on recruitment and retention efforts. Recent downturns in the economy and the mindset of the current workforce have also impacted the eff ect of offering the benefit. With jobless rates increasing, the study discovered

that the benefit is a valuable retention and recruitment tool. It is not just a job is that is important to prospective employees, but also the benefits that they receive.

Or ganizations

The organizations chosen for the research have been in existence for over 50 years. Together the companies do business on a national and international

scale with respect to sales and service operations. Each business prides itself on the custom er service that they provide to the consumer . Mutually, the

organization s believe that they are the leaders in their prospective industry, when in actuality they may be a close second or third in a short list of rivals. Each was chosen for the benefits tha t they offer employees and the commitment level that employees have toward these organizations.

11

The first company (Company 1)

is a call center operation with over 1,000 employees. Company 1 performs media research and uses inbound and outbound calls to est ablish consumer satisfaction with advertising, sportin g events and television programming. The company has a favorable reputation in the area and is a believer in social responsibility.

The second organization (Company 2) chosen for the study is located in the same geographical locale as the first and employs approximately 1,000 people. This organization offers products in the insurance, benefit and retirement industry. They also have a favorable reputation in the area and have been in existence for many years. Company 2 recently merged with a larger organization that has given them global exposure.

Significance of Study This study illuminate d the impact that offering tuition reimbursement has on the employee’s decision to work for a certain organization. The research discover ed that

the program is viable in recruitment and retention and the employees who participate d in the program did not expect rewards and recognition beyond the chance to obtain a higher degree.

It has b een suggested that in certain careers and in some geographical locations the jobless rate is increasing. According to the U .S . Department of Labor, unemployment

h as risen from 4.8% to 5.1% in March 2008. In the area of employment services, the category wh ere call center employment is situated, the county lost 42,000 jobs in March 2008 which is a trend that has continued over the past three months ( www.dol.gov ).

By indication, individuals that are looking for a new position or are interested in a new career

12

path may not have the opportunity to choose between several offers before accepting a new position. Employee benefits are one facet of the package

that a company can offer to a prospective new employee while adding incentive to continue employment. R eachi ng the best candidate is the primary focus in the eyes of the recruitment and retention staff.

A s a result , the organization has to be perceived as the employer of choice in the market and offer tangible reasons as to why they should be chosen over others . This c an be accomplished in many ways such as reputation, social responsibility and company culture. One of the most influential aspects of recruitment and retention is the satisfaction and commitment levels of the current employees (Landen, 2003). Organizations are trying to cut maintenance costs wherever and whenever possibl e

(Batt, 2002) . If it can be established then, that

a current program assists in the recruitment and retention of employees, the program is therefore beneficial to the organization. If the program has lost its flavor, the resources could be better allocated to other programs , which may increase and maintain a more knowledgeable and functional employee base.

Assumptions and Limitations

By ascertaining that satisfa ction and motivation of the human capital is a major contributing influence that affects production , the scope of the study suggests that tuition reimbur sement is the only factor that impacts employees. Th is assumption

also suggests that if the organization is offering a program that does not increase the self - worth and value of the human capital, the resources should be used elsewhere. Likewise, if employees are expecting some type of promotion or raise , after particip ating in such a program, the premise of the study suggests that this should be communicated openly.

13

E mployees and management are then aware of what each expects from the other in the employee/employer relationship. To uncover the effects of tuition reimbursement on recruitment and retention , beliefs were assumed about human nature

( distinguishing characteristics, including ways of thinking, feeling and acting ) , ontology (the nature of being) and epistemology

(knowledge as truth and validity) in the thought

processes of those involved with the study. A second assumption was that the employees have a desire to increase their roles and responsibilities in the organization. Moreover, that the workers have an inherent need to gain more education and increase the ir self - worth. The study also suggests that those interviewed w ere both truthful and forthright in their responses. In relation to the recruitment verses retention paradigm, a third assumption arose;

some

believe that there are inherent difference s in the two staffing processes.

Th is

assumption generated the need for exploration. A fourth assumption concerned

others that had a personal experience with a tuition reimbursement program and were curious about the results of the proposed study. In rela tion to the problem statement, the

fifth assumption

dealt with

employee motivation and employee satisfaction as the only variables . Tuition reimbursement , as a benefit, is classified as soft verses

hard , which may not be a true classification if others are completing s imilar

research . This assumption suggests

that there is a problem in the eyes of some organizations or employees, which may not hold true for others .

I n relation to the purpose statement, another assumption

was

that organizations really care a bout the cost of the program and employees truly see

the program as a benefit. Some employees may believe that this program is standard in all organizations

14

and thus should not be considered as a benefit at all. This assumption suggests

that employees have a desire to be promoted within the organization after they have obtained their degree. These employees may

believe they are more marketable and have a desire to move to other organizations to increase their self - worth and increase their salary.

Some limi tations of the study include d the methodology. First ly , with the two organizations selected for the study, the researcher did not have clear insight into company culture . This did not

inhibit the generaliz ability of the results

since perception may be more

of an indicator of success rather than true results.

Secondly, the researcher

completed

the data collection and analysis without assistance from others. This i ncrease d the time to completion. The audio tapes of the interview sessions

were transcribed by the researcher.

If a transcriber was

introduced, it may have

decrease d the validity and reliability of the data, due to the influence (intentional or non - intentional) of an additional party.

A third limitation was the number of participating organizatio ns. The original idea was to triangulate the effects of tuition reimbursement on recruitment and retention between three organizations. With the declining economy, the rise in layoffs and increase in companies closing their doors, acceptance for student re search was slim. Many organizations were approached about the study and research process. Only two accepted while the others either did not respond, declined with no explanation or declined and stated that they no longer or were considering elimination of the tuition reimbursement benefit

within their organiz a tion . No other limitations of the methodology of the study were

ascertained . Since

research is an iterative process , i tems not previously observed

Full document contains 181 pages
Abstract: In today's uncertain economy, organizations are making the decision to become leaner, or to do more with less. The human resource (HR) department has to be very strategic in the decisions that they make when deciding to retain workers or recruit workers for key positions. In essence, as stated in an article from 1996, it is truly a War for Talent (Chambers, Foulon, Handfield-Jones, Hankin, & Michaels, 1998). The theme has not changed much over the last decade, but the incentives used to retain and recruit employees have. Tuition reimbursement is one such incentive that organizations use to retain and recruit talent. This incentive is usually part of the benefit package and has positive impacts for the employee and the organization. On the employee side, they are able to receive a no cost education, from a reputable learning institution, which may increase their marketability and self-worth. For the employer, they receive a more knowledgeable employee who can share that knowledge with others in the workplace. This study addressed the impact of tuition reimbursement on retention and recruitment efforts in two selected organizations. These companies use call centers as a basis for customer service operations. In this instance, the call center is focal point of contact with the consumer and has the greatest effect on customer retention. Call centers historically have a high turnover rate, and therefore the expenditures on benefits and retention and recruitment efforts are significant for company success. The study compared two organizations to ascertain if the effects of tuition reimbursement on recruitment and retention could be generalized throughout the marketplace