Welcome to MBA Podcaster, the only broadcast source for
cutting edge information and advice on the MBA application process.

I’m Heidi Pickman.

Tuition bills for MBA programs are in the tens of thousands,
if not reaching well over six figures.Wouldn’t
it be great if someone else paid for your MBA.Well it might not be as hard as you think.
Many companies have existing programs for
funding MBA’s and even if your company doesn’t have a program, it is possible
to convince your boss that she should pay for your MBA. This podcast is all about “Getting Your
Employer to Fund Your MBA.”

Some of the questions we’ll address include:

Why would a company fund your MBA?

Does it make a difference if you work at a small company or
a large company?

Many companies have tuition reimbursement programs,
fellowships and other means to finance their employees MBAs, and if they don’t
how can you convince your company to pay for your MBA?

There’s no such thing as a free lunch, so what will having
your employer pay for your MBA cost you – if it’s not money?

And will Uncle Sam charge you anything?

Do economic hard times mean that continued education
benefits are going by the wayside?

Let’s get this last issue out of the way, because it’s not
really an issue.

John Gianvittorio works for Raytheon and attends UCLA’s Anderson School in its fully-employed – part-time
program at night.

“You know Raytheon’s been hit the same as everybody else,
but I haven’t seen any signs that they’re slowing down on funding the
continuing education. In fact, over the past couple of years since I’ve joined,
it’s been growing and it still seems to be growing.”

Nicole is a financial services executive who went to a top
10 school. She says the economic crisis had no bearing on her situation.

“Because it was executed at the very senior level, they
could still sign off on these dollar amounts without it being that
significant.You’re talking about
$100,000; it’s a lot, but not that huge in the scope of things.  This is a long term investment, so regardless
of the current economic situation, if you’re willing to invest it now, it’s
because you believe it’s going to pay off in the future five years, six years
out.”

Nicole isn’t her real name, but she asked to remain
anonymous because she works for a large company with 60,000 employees that
doesn’t have an institutionalized program that funds MBA students. And
she’s the exception to the rule.

“There was no program. There is no program in place to do
that.It’s a one off thing, which is
part of why I’m keeping it confidential because it was something the president
kind of said ‘I’m doing this for you because you’re a special case. I’m making
a special exception, but this is something we’d like to institutionalize.  I personally thing that’s a terribly
idea.I think it’s a great program to
institutionalize for a certain subset of people, but that wasn’t the way it was
in this organization.”

In her case, her company offered to pay for her MBA because
they wanted to  hold onto her.

“It’s something that I floated as a possibility to my boss
indirectly. I guess once I tendered my resignation and let them know that
I got into the school that I wanted to, that I was going to leave, they said
well what if… we were to pay. My immediate boss said what type of a contract,
what do you have in mind, what does it look like, what does it cost, how have
you se en it done in other firms – make us a proposal because we’re open to
it.”

I asked Nicole to tell me why her company offered to pay –
in 25 words or less.She did it in 10.

“I did good work and we had a good relationship.”

She must have done REALLY good work and had a really good
relationship with her boss. But it is not uncommon, especially at higher levels
for companies use tuition reimbursement as a benefit to hold onto good talent.

If your company doesn’t have an institutionalized tuition
program, what’s the best way to go about convincing your boss that the company
should pay for your MBA? Nicole mentioned the obvious of doing really good
work, and she has some more advice.

“The second thing is to provide the structure for them, let
them know what it would look like, frame it for them in the context of what
competing institutions, or even in terms of what alternative types of
organizations, do. In my case, they had no idea how this stuff works, or
that it even existed. It’s kind of amazing for a company that big to not know
about this stuff, but it’s not well known. And the third piece [of
advice] is being really clear on what you would want to do when you came back
and the value you would add after that…. [Be] able to say here’s why I’m
going, here’s what I’m going to learn, and here’s how I will be more valuable
and this is specifically the type of role or the track I want to be on
afterwards, so that they understand, [that] this makes sense to invest in and
they’ll be someone I can plug into a particular role or path when they come
back. Otherwise it’s very hard to envision that for you, to expect them to be
able to picture what their org is going to look like two years from now and how
you might fit in and how that might make sense.”

Yvon Le Renard had the value-added argument down pat.  He is in the part-time executive MBA program
at Kellogg / Hong Kong University of Science and Technology. He convinced
his company Alcatel to pay for his MBA with very specific and solid arguments
for his boss about how an MBA will broaden what Le Renard can do for the
company.

“The industry is changing drastically. The telecomm
industry used to be run by North American and European companies. This is
no longer true, so there will be a lot of Chinese competition, here in these
regions [Asia]. The second reason is that most
of the research and development used to be done in North America and Europe internally, which is no longer true. We’re
doing a lot of R&D in these regions, we’re doing a lot of external
innovations or R&D as well. And this is an area that I really, really
wanted to understand well. How you can grow externally by partnerships, JD’s,
acquisitions and not only internally and how you can drive and change your
company from European centric to Asian centric, where the growth is going to be
in the next five years.”

Alcatel does have a program for recent graduates who join
the company, but not for mid-level executives such as Le Renard.  He said patience is a must when arguing your
case.

“That was basically a 3 month negotiation. This is not something
happening overnight.Initially I asked
for 90% sponsorship and I was willing to put 10% and we end up at 50-50.  From the scope as well as program, a lot of
HR wanted me to attend a lot of internal program that they have, which is kind
of a mini-MBA, but I said this is not appropriate for what I want to do, so I had
to argue and defend myself.”

Alcatel and Nicole’s 60,000 employee financial services
company are large companies without tuition reimbursement programs.  What about small companies? 

Jay S runs a small technology firm.  His firm employs 85 employees, 10 of which
are managers.As a small businessman, he
has to be consistent in what he offers to one employee over another.  And in his company, there’s not a lot of
turnover and there’s not a lot of room for growth.

“For me if there’s a person who’s already an executive in
the organization, they want to get their MBA, I have to think twice.  We’ve kinda shied away because it seems like a
lot of people are just looking to get their MBA so that they can get a
management job and they’re really not looking internally. There’s probably a
good reason in that there’s not a lot of opportunity internally. We have
management positions, but they require more than an MBA with say sales
experience.”

He says his company needs someone who has particular
knowledge of their management area.

“I can’t just say, ‘hey get your MBA, I’m going to pay you
$5, 6, 7,000 or more’ so that you can turn around and apply for a job that I’m
not going to hire you for because you don’t have the experience for the
vertical market management positions. I already have a marketing manager.  There’s not that many positions in our small
company.”

In other words, Jay wouldn’t likely offer tuition
reimbursement to a sales person who wants to switch gears and go into
marketing, because even though an MBA would give them the marketing tools, they
would lack experience. But tuition reimbursement is not out of the question.

“If they came to me and said, ‘Look I really appreciate the
organization. I love the organization. I want to excel in the organization. What
can I do to help myself better prepare myself to grow within the organization.’
First, you let the employer tell you. They may come back and say ‘what do you
think you could do?’ And that’s when you would respond, ‘maybe I could get my
MBA. I’d be willing to do that if you guys could help me. ’  That’s like letting someone else tell you
what you wanted to hear.”

So whether it’s a large or small company, you need to make
it clear to your boss how getting an MBA will benefit the company.

Many companies have an institutionalized tuition reimbursement
program of some kind.Hewitt Associates
surveyed almost 1300 employers and found about 88% of them have a formal
program in place.

These structures vary by company, so it would be impossible
to generalize, but there are several things to look for when you go to your
human resources specialist.Many tuition
assistance programs require you to pay for your classes, books and supplies up
front and apply for a refund.Sometimes
you have to work, sometimes you don’t, sometimes you’ll need to keep up your
grades and sometimes there’s a backend commitment.

Let’s hear from a few different students on what their
companies offer.

Yoichi N. works in the financial industry, so would like to
keep his company and last name private. He goes to school part-time and
works full-time. His company has a few programs that will pay for MBA’s, but
employees need to have one year invested in the company before they are
eligible.

“For anyone that works full time, they basically have what
they call tuition reimbursement. It has to be an MBA program or some type of
accreditation. The company will pay up to 90% or $10,000 whichever is
less.”

And Yoichi must keep up his grades.

“When I started, they said [they required a] ‘B’ average,
but they’ve actually lowered their requirements to having a ‘C.’ If you don’t
get anything better than a ‘C’, you’re not going to get reimbursed for that
class. But in a graduate school program… getting a ‘B’ is not very
hard, so it’s a fair deal for being reimbursed and you actually learn something
from it.”

The 90%/$10,000 tuition reimbursement benefit doesn’t
require any back end commitment. Yoichi says his company has another
program.

“They will pay the full amount if you commit at least 3
years after, but I’m not sure if I want to commit 3 more years.”

Another person I talked to is taking advantage of a
full-ride to B-school. Karla Krause   worked for Dell for four years before she
enrolled in the MIT Leaders for Global Operations program with full backing
from Dell.

“Dell sponsors one a year.�
It’s pretty well known throughout the company and people aspired to be
that one person.It used to be an
application process and now it’s actually the managers assessing talent within
their organization. You have certain requirements to get into this program
anyway. You have to have an engineering undergrad and have had at least two
years experience and you have to be able to get into MIT in order to be
sponsored. So there are some considerations. It’s more Dell looking internally
at who they think has potential and who could really gain skills that are
needed at Dell and come back and be a valuable contributor once they’ve
finished Sloan.”

And there are strings attached.

“I knew by accepting Dell’s sponsorship I am contractually
obligated to go back, but I wouldn’t have signed the contract had I not wanted
to go back to Dell. I definitely had a great experience at Dell in the 4 years
prior to coming here. I could pay back the sponsorship contribution and choose
to go somewhere else, but I’m planning to go back to Dell.”

Remember John Gianvittorio (jee ann vit or ee oh) who works
for Raytheon and attends UCLA’s Anderson.

His company Raytheon doesn’t offer tuition reimbursement to
just anyone.

“This particular program that I’m in where it’s engineers
going for MBA’s is competitive program.�
Most of the continuing education that they fund is somewhat competitive.
It’s pretty standard in our industry that most of the big companies fund some
kind of continuing education and it’s usually on a competitive basis.”

Applying for the assistance doesn’t mean you’ll get it.  Gianvittorio explained what kind of applicant
his company is likely to help with tuition.�

“They’re typically looking for people that are in some sort
of leadership position already and that have potential to grow in those
positions. And they usually look for a certain amount of work experience.  I’ve been with Raytheon for 4 years and I’m
in a functional management role. I think those kind of basic qualifications [are]
what they’re looking for.”

And like many others, he has to maintain a B average and owes
Raytheon 2 years after he finishes his degree.�
He says Raytheon’s program is common in his industry.

“For those of us that work in aerospace, they seem to be
pretty equal in the policies.I have
heard a couple of students who work for smaller companies that did have some
pretty strong demands, particularly commitments that they owe after they
graduate.There was one who was required
a nine year commitment after he graduated from his degree. That’s a pretty long
term commitment.”

Other industries that often offer tuition reimbursement
programs include technology, management consulting and finance.  But as we heard from Nicole, her big finance
company didn’t have a structure in place, which gave her more freedom regarding
the conditions of tuition reimbursement.�
She laid out for us the terms she negotiated.

“They would pay for program expenses, tuition the whole
thing.I was obligated to return to them
for 2 years after I graduated. Should I be laid off based on their decision anytime
in two years, then the full two years would be forgiven at the time of the lay
off.Should I be terminated for cause,
then I would owe them back a prorated portion of whatever I hadn’t earned back
over those two years.It was structured
as a forgivable loan over two years which would be forgiven in monthly
increments throughout the 24 months following when I started.”

And wait, there’s more.�

“I had them guarantee a salary at or above the median for
the graduating class for the previous year.”

Not everyone is able to negotiate such a great deal.  And not everyone wants to.  Some tuition reimbursement programs might
have too many strings attached

Jennifer Powers is the Manager of Marketing and Business
Development for the City of Brampton, in Ontario, Canada.
As a single mom of three, she decided to enroll in an online MBA program at Athabasca University and pay for her MBA herself.

He employer offered up to ½ of the $50,000 in tuition that she
incurred, but she would have had to stay for five years. When she crunched the
numbers it didn’t make sense. She was earning the same amount as an MBA would
have made and she was confident she could improve upon that elsewhere.

“I can make up the $25,000 in one year of working on the
side, so it wouldn’t have made any sense for me to tie myself up for five years.
You receive your MBA and really is there any where to grow within that
organization?No where that I was really
interested in.The only area in
government that I was interested in was economic development.  The only position higher than me was the
director position and he wasn’t retiring any time soon. I was doing my MBA so I
could get ahead so I could look at other career options.  I knew that if I had taken any assistance from
the town that I would be legally obligated to stay there for a period of time,
but morally, I would fell obligated to stay, so I decided against that option.”

She decided the $25,000 in assistance wasn’t worth the time
commitment she would have had to give to her employer.  She also wanted flexibility in her studies.

“Another important reason was I didn’t want them to
influence any of the projects I worked on, either.  For example, for my final applied project,
I’m doing it on the spa industry and I think if I had accepted the financing
that they would have said well we would like you to do a study on economic
development, which would have made sense.�
And I probably would have felt obligated to do that, but that’s not
really where my passion.They in a sense
dictate a little bit about what courses you should be taking.”

Powers also advises that you shouldn’t forget about the tax
consequences like one of her colleagues who had his employer pay for his MBA
did.

“He was really surprised at the end of the year when he did
his taxes just how much money that added onto his yearly income. He ended
up having to pay a lot of money in taxes. Although I’m paying for it myself and
I have to come up with the money, there are really great programs for student
loans. I’m able to get a very good tax return, which I then apply
directly onto the student loan.”

You don’t want to be surprised on April 14th, right before
final exams, so calculating the tax consequences of having your employer pay
for your MBA is very important. I checked in with Lynda Boman, the
principal of Boman Accounting Group in Silicon Valley, who told me what the
current law about educational benefits and taxes.

“There is a portion that can be treated as a tax free fringe
benefit and that’s the golden thing. It’s what you really want…. But
what it requires is that the employer set up a [written] plan…. If the plan
is in place, then every year a qualified employee could receive up to $5,250 in
benefits that are totally excluded from wages. ”

Bowman stressed the importance of a written plan.

“A lot of fringe benefits hinge on who qualifies, because
the I.R.S. wants to make sure that the majority of the people are eligible for
those benefits. That it’s not just designed for highly compensated individuals
or the owners of the company.”

But most MBA’s are more than the allowed $5,250. Boman says
that you still might be able to avoid paying taxes on benefits that exceed that
amount, but you need to be careful.

“Then the portion over that amount could be deemed taxable
unless the employer can show that it is a working condition.  So that if you’re taking a course that’s related
to their job or it’s part of their working condition requirement, then that
portion can be excluded from taxable income as well.”

Phew.

So, let’s recap.

Work hard and do good work.

Explain to your boss how getting an MBA would be value-added
for your company.

Assess both the benefits and commitments of your company’s
tuition reimbursement program, if they have one; know your post-MBA opportunities
and make sure to talk to your accountant.

Thanks to all of my guests. Thank you for listening.

For more information, a transcript of this show or to
register for your bi-weekly MBA podcast visit
MBAPodcaster.com.

Join us on Twitter, Facebook and YouTube to get the latest
news and insight in the world of business school.

This is MBA Podcaster, I am Heidi Pickman.

Thanks for listening and be sure to tune in next time when
we explore another topic of interest in your quest for an MBA.

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