Human Resources -- Employees 'Stock Up' On UTC's Offer

It's the ultimate college graduation gift. Any of United Technologies Corp.'s 156,367 employees worldwide who returns to school and obtains a bachelor's, master's, or doctorate degree gets $10,000 worth of company stock free -- no strings attached. Not only that, Hartford-based UTC pays -- upfront -- 100% of all tuition, fees, and charges for books and registration for those courses and gives employees up to three hours paid time off a week to study or attend classes. There also is no limit to the number of courses employees can take or the degrees they can earn. UTC's Employee Scholar Program is available to both part-time and full-time workers, and the courses don't have to be related to an individual's job. Employees who lose their jobs because the company relocates their work either overseas or more than 50 miles from where it currently is performed can participate in the program for four calendar years from the date of their employment separation. Laid-off workers can participate in the program for a year. (The only stipulation: Participants must get a "C" in each course.) Since the program began in 1996, the number of UTC employees who have returned to school and earned degrees has doubled. What's more, data suggest that the program engenders increased loyalty to the company. The turnover rate among the 7,071 employees who have received degrees has been just 4% compared with a voluntary turnover rate of 8% to 10% for the rest of UTC's workforce. Employee retention is just one way UTC has benefited from its $200 million investment -- $59 million of it in free stock -- to date. (Annual costs have tripled in five years to $59.9 million, with the value of the stock awarded in 2000 -- $19.5 million -- virtually equal to the program's total cost in 1996.) The Employee Scholar Program also has had a positive effect on morale, says Deloris Drakes, manager of financial planning and analysis at UTC's Otis Elevator Co. facility in Farmington, Conn. "The company's willingness to shoulder a social responsibility for its employees says a lot," says Drakes, who joined UTC while she was obtaining her master's degree and is now taking classes to obtain yet another degree -- this one a master's in education so she can teach at the college level when she retires. "Without this benefit, I'm not sure I'd be going back" to get a teaching degree, she admits. And, if increased program participation is any indicator, the Employee Scholar Program has had the effect that UTC intended -- that is, to help create what it calls "the best-educated workforce on the planet." The participation rate among UTC's domestic employees has increased from 5% to 17% in just five years, and the number of UTC employees who earn college degrees each year has doubled from 789 to 1,771. What's more, the number of annual participants -- 70% from salaried ranks, 30% from hourly employees -- has increased from 7,150 in 1996 to 13,449 today, including 2,130 from outside the U.S. Credit both the gift of stock -- the idea of Chairman and CEO David George -- and the paid time off for the increased participation by both long-time and newer employees. "That has induced many to go back to school," says Joe Amico, a machinist's apprentice in 1977 who obtained his bachelor of science degree in business management in 1999 and now is director of operations for the Comanche project at UTC's Sikorsky Aircraft Corp. in Trumbull, Conn. Likewise, Nils Dahl, a 31-year-old design engineer at Pratt & Whitney in East Hartford, Conn., who has a master's degree in engineering, is now working toward both a master's in computer science and an M.B.A. Participation aside, perhaps the most important thing the UTC program has done is to quiet those who argue that there are limits to what manufacturers can do to improve the skill and education levels of workers, or that paying employee-education benefits creates more educated employees for someone else. Senior Editor Michael A. Verespej covers human-resources issues for IndustryWeek.