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Friday, Jun 14, 2024

Educating the Workforce

When businesses are looking to reduce costs and increase talent in their workforce, high turnover rates may be the first thing to address. Post-pandemic, more companies began to look at offering workforce education programs to encourage staff retention and attract new job applicants.

One company that provides businesses with these programs is downtown-based InStride. It partners with academic institutes to help corporate partners set up education tracks for employees.

Chief operating officer Jonathan Lau said InStride saw a significant increase in its clients over the last three years, and that its compound annual growth rate has been above 35% over the last three years. It currently has more than 40 clients.

“(After the pandemic) we definitely saw that there’s a much deeper recognition around the need for equitable access to education,” Lau said. “The second thing is the recognition that, in general, your people matter and your business is powered by your people.”

Lau says this latter issue was demonstrated by labor shortages. Following the so-called Great Resignation period in 2021, when national quit rates soared across industries, Lau said that people were looking for companies that would invest in them and provide advancement opportunities.

InStride employees at a recent summit at the company’s downtown office.

Nick Greif, InStride’s vice president of go-to-market strategy and communications, said these paid education programs for employees can make job openings more enticing while decreasing attrition.

“The top three things that people come to us for, and talk about in their business objectives and their talent needs, are retention, attraction and upskilling,” Greif said.

InStride negotiates discounted tuition rates with its academic partners, which include Arizona State University, University of Wisconsin-Madisonand Mexico-based Universidad Tecmilenio. It then connects corporate partners with these tuition deals and receives a portion of the difference between the original tuition rate and the discounted rate. Most of InStride’s income comes from this tuition revenue, in addition to implementation fees when launching a new corporate partner and occasional add-on fees for services such as technology implementations.

Dr. Alec Levenson, a senior research scientist at the USC Marshall Center for Effective Organizations, said that a business’s bottom line is to meet production or financial quotas, adding that a committed workforce is necessary to making that happen.

“It turns out that if you treat your people like crap, then they won’t want to do the work for you that you need to make your shareholders happy,” Levenson said. “So it’s in a company’s best interest to treat their people well, but only to a certain extent. There’s a tension between paying people more and treating them nicer… and giving returns to your shareholders.”

Accessibility and attrition

Education programs through workplaces aren’t a new concept, but many of their iterations aren’t very accessible. A common type of program involves tuition reimbursement, where the employee pays out of pocket for their education and is reimbursed by their employer.

“(Those programs) tend to privilege individuals who already have a strong education background and already have wealth, which tends to correlate with white collar workers,” Greif said.

Working for an employer who pays for your education may also mean having more flexibility around your school schedule. Levenson said that the difference between an employee working for someone who pays their tuition, versus simply paying them more, means their employer is likely to be more understanding about their course load and class schedule outside of work.

Depending on the length of the employee’s educational program, the employer is buying not only tuition, but also an increased sense of security around employee retention. This retention isn’t guaranteed to last past the length of the school program, though.

Some employers have clawback provisions mandating that an employee pay back some or all of their tuition should they not complete or pass their classes or if they leave the employer before a set time period. According to Greif, fewer than 10% of InStride’s corporate partners have such provisions.

Research has shown that workplace education programs reduce turnover among participants while they are in school, but that voluntary turnover may increase after that. Levenson explained that employees are more likely to stay at a company if they’re able to apply what they had learned after finishing their education.

“Let’s say you go off and you use one of these programs to learn a brand-new set of skills,” Levenson said. “If you then go to your employers and say, “I’ve got this brand-new set of skills, which is what I wanted to learn. Can you give me a job to apply them?” If they say no, then you’re actually more likely to leave.”

But despite the benefits that paying for increased education can offer employers, some halted their education programs early in the pandemic. InStride allowed this and, for a few clients, even paid tuition costs briefly.

InStride saw a great amount of growth following this as employers looked for ways to retain their staff and prove that they valued their employees.

Opportunity cost

There is benefit and a risk with these programs: on one hand, they can provide equitable educational opportunities for workers and improve team morale, but on the other the tuition costs may be problematic when finances are tight. While education may not be cheap for the employer, neither are the financial expenditures and time requirements involved in turnover: finding a new employee, training them and integrating them into an organization.

“It’s the opportunity cost of all that, versus you paying a little bit of money on tuition,”Lau said. “It helps them not only stay, but helps them grow, and so they become a more valuable employee and a more loyal employee for you”

For jobs requiring some sort of certification or specialty training, such as a health care or technology position, there may be more job openings than there are qualified candidates. By working with an academic institution to provide certification courses, a company can upskill their existing workforce or create a better applicant pool.

One of InStride’s corporate partners is Amazon. Amazon has its own internal program, which it calls Career Choice, to pay for education, but drivers can’t use it, as they’re contract workers rather than direct Amazon employees. InStride acts as a middleman to set up an optional program for contract workers to join. Many of Amazon’s delivery drivers have recently gone public with information about the grueling conditions they often face, and while it does not make its attrition rates public, Amazon reportedly has a very high turnover rate.

Great Resignation

Beginning in early 2021, many workers quit their jobs in search of better opportunities. According to the U.S. Bureau of Labor Statistics, a record 51 million Americans quit their jobs last year. Industries with the highest resignation rates included trade and transportation, hospitality and health care. Quit levels have calmed since that peak, with only 3.9 million people quitting in January of this year versus 4.4 million the previous January.

Guild Education, based in Denver, is another workforce education program designer. Chief executive officer Rachel Romer said that the majority of employees want to move into a new role but ideally stay at the same company. Offering a clear opportunity for growth and advancement gives that company a leg up in the market.

“In today’s labor market, the power dynamics have shifted,” Romer said. “Employees are now telling their employers, “Show me a pathway to grow within this company, or I’ll show myself the door.”

Looking ahead

However, not all employees get the choice of whether or not they stay at a job. Several large companies are currently slashing their workforces, including Amazon. Last week it announced that it would lay off 9,000 employees in coming weeks, on top of more than 18,000 jobs that were cut in the fall.

Lau said that companies that have launched paid education programs have expressed positive feedback and wanted to continue them even if they were mulling or carrying out job cuts. Its corporate partner Piston Group recently expanded its program to include more degree options and greater tuition coverage, and Amazon’s education program for its drivers was launched in the fall.

“I think the reality is we’re in a market that has a tremendous amount of uncertainty and I think folks are still going to grapple with some of that” Lau said. “So I don’t think we’re immune to that, unfortunately. But I think the nice thing is we do have partners that really believe in this and continue to want to push this.”

Levenson explained that if a company was seeing a positive effect from offering workplace education programs, it may keep them going even if they’re laying employees off.

“One of the paradoxes is that even if companies cut jobs, that doesn’t necessarily mean they’re going to pull back on everything else they’re doing,” Levenson said. “Cost cutting doesn’t mean that you cut everything all at once.”

Workplace certification programs may be important specifically for health care industries, as the BLS expects overall employment in that sector to grow 13% from 2021 to 2031. That will be about 2 million new jobs over the decade, faster growth, according to the BLS, than the average for all occupations. Certification courses, such as those offered by InStride, allow companies to increase their candidate pool by producing more qualified individuals to fill the open roles.

Greif said many industries, like health care, cannot hire fast enough.

“In most industry sectors with frontline workforces, there’s two job openings for every single job applicant,” Greif said. “So they’re trying to figure out, ‘how do I differentiate myself in the market to get qualified candidates, or just talented candidates, to come in the door? And then how do I keep them, and how do I upskill them?'”

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Zane Hill Author