What are some of the myths that organizations carry about human capital? A few examples:
- If you educate employees, they will just leave the organization and take the training — and education investment — with them.
- Organizations should invest in high-potential employees because they are most likely to be high performers in the future.
- Tuition assistance benefits are used mostly by current degree holders to get advanced degrees.
There are many more myths that we will examine in future columns, but for now, let’s tackle those listed above. At the Bellevue University Human Capital Lab, we are conducting impact analyses with a number of clients, including The Home Depot, Convergys and Verizon Wireless. Many of the conclusions here are based on that client work.
The first myth involves the relationship between education and retention. The existence of the myth is likely based on personal anecdotal information, which has been generalized to all employees in all instances. But the issue is not what one employee did. According to my work in the Human Capital Lab and other research, including an article titled “You Paid for the Skills, Now Keep Them” in the 2004 Academy of Management Journal, education investments actually make it more likely that the employee will stay. That said, there is evidence that investment in graduate degrees may increase the likelihood of turnover, but one might consider that tuition assistance as a benefit is most often targeted to those who already have an undergraduate degree.
When it comes to deciding to whom to allot development resources, the most widely used approach is to invest in “high pos.” These are employees who have a demonstrated track record based on prior performance. Holding a degree is routinely used as evidence of past performance. But according to research by the Korn/Ferry Institute, which cites a 2005 Corporate Leadership Council study, more than 70 percent of high performers were not initially “high potentials.” The Korn/Ferry report found that such high-performing employees “had limited success at the next level due to shortcomings in their ability, aspiration, motivation or engagement.”
The bottom line is that past performance records may be less predictive of future performance. It is more likely that behavioral factors such as learning agility, aspiration, motivation and engagement have more influence on future performance. The challenge to the firm is how to identify the employees who have the required behavioral characteristics that lead to future success.
On the other hand, when a current employee enrolls in a course, it is a real-time indication of aspiration, motivation and engagement. It is highly likely that current behavior and motivation are much more critical to predicting future performance.
The last myth in this column involves the question of which employees take advantage of the tuition assistance benefit. The answer to this issue is important for two reasons. In the current political environment, there is considerable pressure to reduce tax benefits to the wealthy. The exemption of the first $5,250 of employee benefits from federal income taxes is a hot issue. If, as the myth assumes, those already with a degree are benefiting from the tax exclusion, it looks like a special benefit to the relatively well off. If, on the other hand, tuition assistance is used mostly by those without an education, it has a totally different political implication. In the latter situation, the benefit is for the disadvantaged; in the former, it is but another “giveaway.” So who actually uses these benefits is an important public policy issue.