Despite Flaws, Starbucks’ New College Plan Breaks New Ground

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Earlier this month, Starbucks announced a new college tuition reimbursement plan to help its employees earn four-year degrees in online classes at Arizona State University (ASU). The offer is available to any of Starbucks’ 135,000 U.S. employees who work for the company more than 20 hours a week.

Noting the high-cost of college and America’s $1 trillion student debt, the media was effusive in its praise of the plan. In making the announcement, Starbucks reported that more than 70% of its U.S. employees are students or aspiring students.

After reading the fine print, however, some supporters backtracked:

  • The new plan will replace an existing tuition reimbursement program that did not require Starbucks employees to enroll in a specific university
  • Starbucks employees admitted to ASU as juniors or seniors can take online classes discounted by ASU by 42%, with Starbucks reimbursing the remaining cost of earning a degree
  • ASU will offer a 22% discount to Starbucks employees admitted as freshmen or sophomores, but there will be no reimbursement from Starbucks during these years

When these details emerged, some critics concluded the program is overly restrictive and predicted that a relatively small number of employees will be able to take advantage of it, given that they will have to pay tuition upfront and wait for reimbursement. Others dismissed it as a thinly veiled attempt to replace an expensive program with a cheaper one that, because of its focus on online education, would get a lot of press attention. Which, by the way, it did.

What was overlooked in the controversy – and what Starbucks did a poor job of explaining – is that the new plan has a compelling goal and a powerful lever for achieving it.

The stated goal of the plan is to help Starbucks employees complete college degrees – not just take college-level courses. The lever that Starbucks will use to achieve this goal is a results-based financial incentive, also known as a “pull mechanism:” Starbucks will reimburse tuition only for employees who graduate.

Here’s why I think these two elements of the plan are groundbreaking and worthy of serious consideration by other employers.

In a recent New York Times article, David Leonhardt asked the question, “Is College Worth It?“. Based on an Economic Policy Institute analysis of income data from the U.S. Labor Department, his answer was a resounding, “Yes,” with a caveat.

The analysis showed that Americans with college degrees made 98% more per hour on average in 2013 than those without a degree. Five years earlier, they made 89% more, 85% percent more 10 years earlier, and 64% more in the early 1980s.

Now, here’s the caveat. The data showed that throughout this period of time, the relative incomes of people with some college, but no degree, have stayed flat. In other words, college is worth it only if you graduate.

The message the data send is clear. Putting aside the highly publicized examples of college dropouts who became billionaires – Steve Jobs, Bill Gates, Mark Zuckerberg and a few others – college graduates have a much better chance at meaningful employment and economic prosperity than those who don’t have a college degree.

Unfortunately, too many people who start college don’t graduate. According to data from the Organization for Economic Cooperation and Development (OECD), more than 70% of Americans enroll at four-year colleges, but less than two-thirds graduate.

For me, this puts Starbucks’ new college plan in a new frame. Remember, its goal is to help its employees earn college degrees, not just take college classes. The results-based incentive of reimbursing tuition costs only for employees who graduate puts an extra sharp point on that fine edge.

There’s an expression in the coffee world – “pull the perfect shot” – used to describe the results of a barista preparing an absolutely perfect one and a half ounce shot of espresso.

Has Starbucks pulled the perfect shot with its new college tuition reimbursement plan? Probably not… already there are areas for improvement.

But it’s a bold experiment that opens the door for other employers to develop innovative ways to create new job and career opportunities for their employees, both in and beyond their companies.

It’s worth knowing that the new Starbucks college plan has eliminated two key provisions that were in the existing one. Employees are no longer required to take courses that directly benefit their job at Starbucks. And they are not locked into working at Starbucks for a specified period of time after graduating to receive the benefit.

That alone makes me feel better about spending $2 for my morning cup of coffee.

[Photo Credit: Nicola on Flickr via Creative Commons 2.0]

This article appeared on the LinkedIn Influencer page of Karen Cator on June 26th, 2013 and can be viewed there by clicking here.
Karen Cator is President and CEO of Digital Promise, a non-profit whose mission is to vastly improve the opportunity for all Americans to learn by accelerating innovation in education through technology and research. From 2009-2013, Cator was Director of the Office of Educational Technology at the U.S. Department of Education.