Free degrees, loyal employees

College wasn't the first thing on Katy Padgett's agenda when she graduated from high school in 1988. Instead, she stayed on as an administrative assistant at a company where she had worked as a senior.

Then, just around the time when she might have started to feel a seven-year itch, her office's parent company, Hartford, Conn.-based United Technologies Corp., made an offer to its employees that inspired in her just the kind of loyalty it was aiming for: Pursue any kind of post-secondary degree you want, job-related or not, and your employer will pick up the entire cost of tuition, fees, books, and three paid hours a week to study.

Now Ms. Padgett is brimming with enthusiasm, having recently earned a bachelor's degree that helped her step into her current job as UTC's community-relations specialist.

Her 14 years with the company is a long stretch in an era of peripatetic corporate careers. And it's largely the result of one of the nation's most generous education-assistance programs.

"Oh, you can't stop," Ms. Padgett says. "I plan to start my master's, hopefully by the end of this year."

While climbing the corporate ladder with one company is a cliché of a bygone era, many companies today are dangling advanced degrees to draw talented workers and keep them around for a while. More than 85 percent of corporations surveyed by the International Foundation of Employee Benefit Plans now offer some sort of education-reimbursement program, and the amount companies are spending on these programs is growing every year.

As a job perk, tuition assistance has long been a staple of corporate self-improvement, a way to boost productivity through a better-educated workforce. But more and more, paying for school is coming to be seen as a way to develop loyalty in a cutthroat corporate landscape.

"For many coming right out of college, if [a company] doesn't support the MBA, forget it, they won't even consider [it]," says Jane Rose, dean of the weekend program at Hiram College in Ohio.

The generosity and convenience of UTC's program has made the difference in many of its recruitment efforts, executives say. When a headhunter first suggested the company to Felice Gray-Kemp, she was skeptical. A successful tax attorney, she thought she'd end up in a competitive place like Manhattan. But when she interviewed in 1998, one of the main selling points was UTC's Employee Scholar Program.

Earning an advanced degree would be critical to her career advancement, she believed. "For tax attorneys, the holy grail of degrees is the LLM, master of laws," says Ms. Gray-Kemp. "It's very expensive, and it's a full-time program, which means you can take an unpaid sabbatical or try to do it part time and borrow $33,000."

So working for UTC allowed her to accomplish her goal much sooner than she had planned. Since the program required no minimum amount of time with the company to qualify, she didn't have to wait.

"[My interviewer] told me, the day you start working here is the day you can start going to school," Gray-Kemp says. "So by the time I got to my car in the parking lot, it was a no-brainer." She's been a tax manager with the company ever since, and should complete her LLM this year.

Despite many generous tuition-payment offers around the country, only about 10 percent of eligible employees are taking advantage of their companies' programs, say industry experts.

Back in 1995, UTC chairman George David wanted to understand why this was so. Since he had always had strong feelings about lifelong learning, the meager 6 percent participation rate at his sprawling corporation disturbed him. And as the head of the corporate parent of military hardware companies such as Pratt & Whitney and Sikorsky, he thought education was what would most distinguish his workforce.

Lee Dailey, director of executive and management education, says that "one of the reasons was that [the programs] varied in the amount of money they would reimburse people. Some reimbursed fully at 100 percent, some were at 80, and some had a sliding-scale arrangement."

Employees had to pay their tuition upfront and be reimbursed later. They also had to find on their own a program that fit into an inflexible work schedule.

UTC's answer to these problems took shape as the Employee Scholar Program, which allows any worker, salaried or hourly, to study any subject at any accredited school.

The most generous and innovative aspects of the program, however, are the awards: When a UTC worker completes an associate's or bachelor's degree, he or she receives $5,000 in company stock. For a master's, it's $10,000.

Padgett received her first stock award after completing her associate's degree in business administration and accounting. Then, in 2001, she received a second stock award for finishing her bachelor's in business management. If she gets her MBA as she hopes, her total award, in addition to a free education, will be $20,000.

Currently, about 11,500 of UTC's US-based employees are active scholars. That's 17 percent of the workforce, well above the national average but still below UTC's goal of 20 percent participation.

The workers now participating are almost evenly distributed across the various degree levels. Since 1996, when the program first started, nearly 9,000 employees have earned degrees, and the company has paid almost $275 million in school costs and stock awards.

Michael May, a manager of Advanced Cell Stack Engineering at UTC Fuel Cells, is one of the many employees who might have left UTC were it not for the flexibility of the Employee Scholar Program.

He enrolled in an MBA program the day after Mr. David announced the education cash benefit. The company had already paid for his master's degree, but as an engineer, under the previous policy he could only get a degree in engineering management.

"I actually looked at leaving the company in '91," says Mr. May. "I realized that an EM degree was not the same as an MBA.... I kind of knew that going along. But at the end of the program, I actually still wanted my MBA, because I had a lot of interest in going into senior management, going into business, going into other areas."

UTC's employee-turnover rate averages 8 to 10 percent a year, but this drops to about 4 percent for employees who've participated in the scholar program.

"There are no strings attached, no contractual bonds to the company," Mr. Dailey says. "There were some concerns initially that this might become a revolving door, where people come into UTC, take advantage of the program, get their degree, and then move on. But ... it has in fact worked the opposite."

As long as a program is accredited, UTC employees can sign up for it. A few engineers went for degrees in culinary arts, in effect earning stock awards for learning to cook. "We even paid for the knives," May says with a chuckle.

In order to fit both work and school into their lives, most participants choose universities that have cooperative arrangements with UTC. Gray-Kemp, for instance, takes most of her law classes in her office building, through a live video-conference feed. Others still go to school the way full-time employees typically have: at night and on the weekends.

"I've been recruited on many occasions," Gray-Kemp says. "But the fact that they paid to send me to school without knowing my abilities – that is very meaningful to me, and so it is very easy for me to tell the headhunters, thank you but no thank you.... For no amount of money have I been persuaded to leave this company."