United Technologies Seeks Intangibles With Education Plan

By Mark Jr.

Dec. 6, 2007

Felice Gray-Kemp was within 72 hours of making a decision about several job offers when a vice president at United Technologies Corp. asked her to meet with him. She happened to work in the same building in Hartford, Connecticut, as the VP, so Gray-Kemp, a tax attorney, hopped on the elevator to go upstairs and hear him out.

    His pitch focused on one of Gray-Kemp’s primary motivations—the desire to earn another degree to advance her career.

    “He mentioned something about ‘What these other employers have, I’m sure, is great, but they don’t have ESP,’ ” Gray-Kemp says. “I thought he meant extra-sensory perception.”

    He actually was referring to UTC’s Employee Scholar Program, a comprehensive tuition reimbursement initiative that was put in place in 1996 and which finances upfront every penny of an associate’s, bachelor’s, master’s or doctoral degree. In addition, graduates receive up to $10,000 worth of UTC stock.

    When ESP was added to the other aspects of UTC she found attractive, Gray-Kemp made her decision.

    “The thought of being reimbursed or sponsored through an advanced degree was paramount in my mind,” she says. “It was a no-brainer that I was going to come to UTC.”

    Gray-Kemp joined the company in September 1998 and began her coursework for an LLM, a postgraduate law degree, in taxation in August 1999. She earned her degree from Boston University while working full time and is now assistant general counsel for UTC, which provides high-tech products and services to the building and aerospace industries.

    The company—whose subsidiaries include Carrier; Otis; Pratt & Whitney; Sikorsky; Hamilton Sundstrand; UTC Fire & Security; and UTC Power—says enhanced recruiting is just one benefit of the program for the company.

    It also aids in retention—a bonus for UTC—and promotion, which is good both for employees and for the company’s succession planning efforts. Those rates for ESP graduates are 2 percent to 3 percent higher than for their peers, according to company officials.

    Since the program’s inception, UTC has invested $626 million in ESP, a rate of about $70 million to $75 million annually. About 17,000 UTC employees have graduated over the lifetime of the initiative. About 14,000 are in classes now, or about 6.5 percent of the company’s 215,000-person workforce.

    The program is becoming increasingly popular in foreign countries where UTC operates, like Poland and Brazil. More than half of the company’s revenue is generated internationally, and 65 percent to 70 percent of its employees are based overseas.

    No matter where they’re located, once UTC workers graduate, there are no requirements placed on them to stay with the company—not even for a little while—or repay education expenses. They could leave immediately if they’re so inclined.

    One reason the program is so expansive is UTC chairman and CEO George David’s belief in the power of learning.

    “Education changes peoples’ lives,” he said during a speech in Washington last year. “It changes the way they think about everything.”

    That new outlook also can enhance their work performance. It’s not so much the degree that is earned but the earning of the degree that sets people apart.

    Gray-Kemp did not need an LLM to become the first tax attorney in UTC history to move to the general counsel’s office. But the intellectual curiosity, discipline, drive and other intangibles involved in going to school impressed her superiors.

    “To them, it was the ability to think through a problem, which going to get an additional degree helps you to do,” Gray-Kemp says. “It was about learning a way of thinking. You can position yourself to take on challenges—not to say that you couldn’t otherwise—but they’re easier to face, and excel, if you have that training.”

A part of the culture
    Donald “Scott” Richards, depot logistics manager for the F-119 engine program at Pratt & Whitney, also has strengthened his problem-solving skills by earning his bachelor’s and master’s degrees in management at Albertus Magnus College. He began an MBA program at the Connecticut school in August.

    “There’s a research method of how you go about coming to a conclusion, coming to an answer,” he says.

    His course work also has had a direct impact on his job. His master’s thesis focused on optimal contract length—a topic central to negotiations on work Pratt & Whitney does for the government.

    “It really engages you in the organization,” he says. “It gives you eyes to see some of the things that go on in the background that you may not have thought about in the past.”

    Richards began his career as a Pratt & Whitney mechanic in 1979. Since then, he has worked in several UTC aerospace businesses, including time in Brazil at International Aero Engines. He went back to school for a bachelor’s degree in 2001.

    His motivation stemmed in part from his family.

    “My daughters went to college, and they kind of inspired me to go back to school,” he says.

    He also wanted to take advantage of the breadth of UTC’s operations.

    “The ESP program has given me the opportunity to move to different areas,” he says. The company rewards performance and a person who shows some initiative, he says.

    By offering the tuition reimbursement incentive, UTC is making an important statement about its culture, according to company officials.

    “It speaks to our commitment to develop employees once they join United Technologies,” says William Bucknall Jr., senior vice president for human resources and organization. “You’re not just joining a company for a paycheck. You’re joining a company for a career.”

    Or at least they are setting off on a career path when signing on with UTC. The company acknowledges that not everyone will remain with it throughout their working life.

    In fact, the Employee Scholars Program grew out of a difficult time in UTC’s history—the early 1990s, when a recession forced the company to shutter plants and restructure by moving more work overseas.

    David saw that many people who lost their jobs were not placed elsewhere in the UTC universe. But rather than abandon them on the wayside of globalization, he wanted to help them bounce back.

    “We can’t promise you a job forever,” Bucknall says of the company’s philosophy. “But we can certainly give you the opportunity to develop yourself and be prepared for the next step in your career, even if it means you would leave UTC.”

    That kind of altruism fosters skepticism about the tuition program.

    “They have continued on with something as a benefit rather than looking at it strategically,” says Jeanne Meister, an author and consultant. “It’s an outdated model.”

    She doubts that unlimited reimbursement is effective and asserts the only way such a program can survive is when it is championed by an executive.

    “It’s an enormous leap of faith,” she says. “It’s been rolling along because it’s the brainchild of the current CEO and no one wants to mess it up.”

    Bucknall agrees that David is the force behind the initiative and has fostered the program’s success.

    “If HR had proposed that we do this, it wouldn’t have the impact that it does if the CEO proposes it and is committed to it,” Bucknall says.

    But a program that was born in the C-suite may also die there. “When this CEO leaves, the next guy will come along and say, ‘What were we doing?’ Meister says.

    UTC soon will have a chance to prove that the tuition program is bigger than David when the chief executive steps down in 2008. He will be succeeded by Louis Chenevert, the former head of Pratt & Whitney, who was named UTC president and COO last year.

    Chenevert has emphasized his support for the program. “I like to think it’s probably in the DNA of the organization now and will continue regardless of who the CEO is,” Bucknall says. “It’s not just a nice, good thing to do. There are measurable business outcomes from having the program as well.”

Tracking results
    Beyond recruiting and retention statistics, Bucknall points to UTC’s financial performance. In 2006, revenue increased by 12 percent over 2005 to $47.8 billion. Earnings per share were up 19 percent. Over the 10 years the tuition program has been in place, UTC has achieved shareholder return that is more than twice the Dow Jones and S&P 500 averages.

    A number of factors can influence financial results, which means even sterling ones probably won’t convince skeptics that generous tuition reimbursement makes business sense.

    John Sullivan, a professor of management at San Francisco State University, says that the inherent weakness in such programs is that they are usually run by the benefits office rather than by training and development. As a result, no one determines return on the educational investment, assesses whether skills required by the organization are obtained, or coaches participants.

    “This is the worst-managed program in HR,” Sullivan says. “No one does the metrics like they would in any other thing. I haven’t found anybody who’s even tried to calculate [return on investment]. There is no evidence that it’s going to help your company.”

    Another drawback is that participants do not reap the rewards of their newly acquired education, according to Sullivan.

    “At work, they get nothing, not a ‘thank you,’ not a cake,” he says. If they are trying to move up from being a secretary to an accountant, they often have to find a new employer.

    “You’re still labeled as a secretary,” Sullivan says. “The degree doesn’t turn out to be powerful until you leave the company.” At a financial firm Sullivan studied, 75 percent of the people who went back to school departed within two years of earning their degree.

    Sullivan maintains that there are “faster, cheaper ways” to learn than by entering college, such as participating in a leadership program. This route also ensures that employees take courses that benefit the company rather than wander off on their own.

    But 90 percent of the time at UTC, self-selection has resulted in employees taking courses that relate to their work, says Laura Osborn, director of learning and development for the company. So a financial analyst is likely to get a master’s degree in accounting rather than in anthropology.

    In the other cases, a divergence between curriculum and job duties may result from an employee wanting to move to another position within the company. For instance, an engineer may pursue an MBA.

    “The majority of people go for a business degree to sort of round out their skills,” Osborn says.

    They track into courses that are relevant to their career paths because “they’re passionate about what they’re going to end up working on.”

    Such enthusiasm highlights one of the challenges of managing the program—calibrating expectations. Sometimes, employees seek immediate job gratification after their accomplishments in the classroom.

    “There’s a need on our part to make sure people appreciate that more than likely because of advanced credentials and motivation, good things will happen in your career,” Bucknall says. “It’s not necessarily going to happen 30 days after you graduate.”

    But the number of people who get frustrated and leave—or take the degree and run to another company—is limited, according to Bucknall.

    “If there were a trend toward that, you can bet we’d be hearing from our business units and management that the investment wasn’t worth the return,” he says. “We don’t hear that at all.”

    The feedback they are getting from the public sector is praise. Rep. Tom Allen, D-Maine, has a Pratt & Whitney operation in his district in North Berwick. He says UTC’s education initiative sets an example for other companies to follow.

    “It’s an amazing program,” Allen says. “They have a very loyal workforce and a very good workforce.”

    When UTC helps its employees go back to school, it is also strengthening skills in the district’s labor market, which benefits all of Allen’s constituents.

    “That further training is a public good as well as a private good,” he says.

    It prepares someone like Donald Richards for whatever might come next in the churning, sometimes dangerous global economy.

    For jobs that used to be available for someone with a high school education, “a bachelor’s degree is required and a master’s degree or an MBA is preferred,” he says. “Education offers choices.”

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