Organizations' Investment in Education.

• Author: Nodoushani, Omid

INTRODUCTION

Organizations are increasingly recognizing the fundamental role education plays in supporting the future of businesses. Simultaneously, education not only benefits employees but it can advance organizational goals and the overall well being of society. Becker (1962) was first to recognize the value of this employer/employee benefit as skills acquisition whereas skills are acquired through education and on-the-job training. Traditionally, employees would invest in education by investing monies in tuition; books and supplies while employers would invest in on-the-job training. In return, employees would acquire better skills and expect higher wages as a result of improved productivity. Employers would also benefit from their employees improved productivity and increased performance (Bae, 2014). Now, however, companies realize the win-win value of investing in education. As such, there are many large companies who have created a strong commitment to education because of the long-term benefits such as Nestle, Chevron, Hess, and United Technologies Corporation.

Although the national unemployment rate (as of July 2016) remains at 4.9 percent, it is down from 7.9 percent in 2013 (National Conference of State Legislatures, 2016). At the same time, the National Center for Education Statistics (NCES) statistics shows an increase in postsecondary education. According to NCES's data, "In fall 2015, 20.2 million students are expected to attend American colleges and universities, constituting and increase of about 4.9 million since fall 2000" (NCES, College and University Statistics, 2015). Both the lower unemployment rate and the increase in postsecondary education positively impact employees, employers and their communities.

This is bringing education to the forefront of most discussions. These statistics and facts should be concerning to all organizations as they affect the future of organizations and the economy as a whole. If there were less people graduating, there would be less of a pool of job applicants for businesses to hire from. This limits the workforce and the growth of companies, industries, and the economy.

THE BENEFITS OF INVESTING IN EDUCATION

Economists have long believed that an investment in education is a significant foundation for economic growth. An article published in The Guardian emphasizes the benefit of education to organizations and communities, "providing all children with primary education, and raising learning standards would have transformative and far-reaching impact for both local communities and businesses" and "for every $1 invested in education, there is a $53 return to a company at the start of employment" (Brown & Asibey, 2013).

Organizations are investing in education in many different ways such as using core assets, social investments, philanthropy, and through partnerships and collective action. When investing through any of these areas, getting the investment right can have tremendous impact. It can help lead the organization to long-term business value, including growth of consumer base, a better talent pool, positive customer perception, and an increase in collaborative and productive relationships with local, state, and national government (Planning for impact, 2014).

Director-General of the United Nations Education, Scientific and Cultural Organization (UNESCO), Irina Bokova, said in a presentation at the UN Global Compact Leaders' Summit in New York in September 2013:

Investment in education is a win-win, benefitting both learning and business. The private sector is not simply a donor, the private sector is a partner, and a key one that can play an important role in anticipating what skills are needed to drive growth in today's economies. (Increasing business engagement, 2013) The fact is that organizations are focused on the development of having an educated workforce. A more educated labor force is more mobile and adaptable, can learn new tasks and new skills more easily, and can use a wider range of technologies and sophisticated equipment (including newly emerging ones). It is also more autonomous and thus needs less supervision, and is more creative in thinking about how to improve the management of work (Dickens, Sawhill, & Tebbs, 2006). The benefits of having a more educated work staff increase for everybody and not just in the organization where the employee is working. These benefits spill over into communities and the economy as seen in a progressively competitive international marketplace.

HUMAN CAPITAL THEORY

As previously mentioned, there are a number of benefits to employees who pursue postsecondary education including acquisition of better skills, increased productivity and higher wages and/or earnings. While some employers offer a tuition reimbursement incentive, not all companies offer that benefit. For employees to make that financial or time commitment there needs to be a return on their investment. Most often this return on investment includes learning of new or better skills, opportunities for promotion and opportunities for on-the-job training (Bae, 2014). Finally, educated employees are often less likely to be unemployed than their colleagues without further education (Becker, 1993).

Employers who invest in human capital understand the financial benefits to be gained. Traditionally, human capital is often measured through an employer's...