- 13 Aug 2020
- Managing the Future of Work
How Guild democratizes employer-sponsored education benefits
Rachel Carlson: In our world, we don't get paid upfront, we only get paid each semester as the students successfully complete their term, retain at the company, and retain in school. And so that's the crux of our B Corp certification and our business model.
Joe Fuller: Employers spend tens of billions of dollars annually on education benefits. Guild Education has established a successful model helping workers take advantage of those often underutilized benefits. The consequences: employers attract better workers and help build their skill base. Workers transition to better jobs. Post-secondary institutions earn badly needed revenue. Since its founding in 2015, the Denver-based B Corp has come to work with many large corporations, including Discover Financial, Disney, and Walmart. What does the new normal of Covid-19 mean for Guild, its customers, and their employees? What’s the future role of employer-sponsored education benefits in building America’s workforce?
Welcome to the Managing the Future of Work podcast from Harvard Business School. I’m Harvard Business School professor and visiting fellow at the American Enterprise Institute, Joe Fuller. I’m joined today by Rachel Carlson, a co-founder of Guild Education and its CEO. Rachel will lay out for us the changing role of employer-sponsored education and the impact it’s having on the strategy of Guild Education’s clients. We’ll also discuss how the coronavirus is affecting companies’ thinking about the future of talent development. Rachel, welcome to the Managing the Future of Work podcast.Carlson: Thanks so much for having me.
Fuller: A lot of people will have heard of Guild but they won't know much about its history or what inspired you and Brittany Stich, your co-founder, to launch Guild. Could you just give us a little of that background?
Carlson: I had spent early years after undergrad working in education consulting, a short but deeply meaningful experience in the Obama White House after working on the campaign, and then time in the community college space. And Britt had spent time in Teach for America and then also joined the same organization with me where we were working with community colleges. But we were shocked to learn that the average community college was graduating 5 percent of first-time, full-time freshmen—and how devastating that was, knowing that we shut down high schools that have 70-, 80 percent graduation rates. It started with thinking about how do you connect school better to work, which is something we now do deeply at Guild. How do you get finances off the table? Telling students that it's only $2,000, it's only $4,000, was wildly insensitive in a world where the average American had $400 in their checking and savings account. And that you needed far more robust coaching and advising, particularly because so many of these students were walking with a sense of shame about their ability as learners, given their K-12 experience and the fact that half of them had tried college before. And so, those three ingredients—connecting school and work, solving for finances and robust wraparound services were the ingredients that we saw x-factor improve graduation rates. And then we went and started trying to figure out, okay, what are the schools that are deploying those tools and resources? And how do we help them connect with the 88 million Americans who need it?
Fuller: I am interested in that transformation because you eventually moved to focus on employer-sponsored educational benefits and that's a distance from opening the semester at a community college. How did you come to focus on employers—especially given the fact that employer education benefits were pretty notorious for being underutilized, not very widely embraced by employees and often difficult to access?
Carlson: We both were at Stanford Business School and doing our joint degrees in education as well, and spent a bunch of time talking to the the schools that have 70-, 80 percent graduation rates, particularly for low- and middle-income students. Time and time again, the biggest problem they named was the Google and Facebook monopoly on acquisition or duopoly, if I'm being specific. And what we learned was that over 30 million of the Americans we wanted to work with were working for the Fortune 1000. So, we actually thought about the employers, first as a channel partner—how could we displace the enormous $5,000 to $15,000 per-student costs being spent on Google and Facebook ads—and use the employer as a partner to get to know those students? In that work, the employers started saying to us, "Hey, we love what you're doing, we love that you're helping connect our employees to better schools, but we'd actually love even more if you took over our tuition reimbursement programs and made it more successful."
Fuller: And what did you do to make them more successful? What kind of changes had to be implemented?
Carlson: We pioneered a model called tuition assistance, which simply says that the employee no longer has to pay up front and wait to be reimbursed and instead defers the balance onto the organizations, the higher ed institutions. We built that network and we built the payments models so that the workers no longer had to pay upfront. And instead, we could bill directly between employers and universities, and that blew open the door for participation in a tuition program for low- and middle-income employees, when historically, usage of tuition reimbursement is white-collar, white male.
Fuller: Rachel, when a company partners with the Guild to provide these educational benefits, does it change the population that's engaged in the education benefits, making use of it either in terms of gender or other forms of diversity?
Carlson: What we found is that when you adopt our model of tuition assistance you see significant increase in adoption amongst women, amongst parents, amongst students of color, as well as other underrepresented minority groups within the company disposition. And so, it's been important work that we found them now have partnered with many of the D and I [diversity and inclusion] leaders within our corporate partners, because we believe this is an important initiative, and that transforming tuition reimbursement into a more equitable benefit is an important thing to do.
Fuller: Something that we've consistently found in our research here at the Managing the Future of Work Project is that companies have policies like expecting the student to pay up front and be reimbursed, that they're rooted in history, and they have some logic to them, but they have systems effects that the employers are oblivious to that actually undo the very benefit the employer was seeking to gain through offering the policy. You see that in care economics and care benefits. You see that in things like degree requirements as well.
Carlson: Absolutely, and it is often unintentional. And so, a big piece of the work we've done is we do ROI studies with all of our partners. We have our own team that can run them in-house. And then we've also worked with third-party nonprofit organizations who can run their own and validate that work independent of us and the employer. And that's so critical because like care economics, or really any complex benefit, there are intended and unintended consequences.
Fuller: Some employers are nervous about that, of course, because what they really care about is completion of a program. And they don't want to pay for someone to initiate a program that does not have a pretty strong incentive to complete that program. How do you respond to that criticism?
Carlson: Yeah, with data. So, we did a number of studies and looked at what is the dropout rate between the middle of the term, when we know that somebody has enrollment verified and the university has billed the tuition, and the end of the term. And we found that the retention rates were in the high nineties and that when an employee ended up opting out of the program, it was often because of the same reasons why they might have to leave a job because of family illness or a particular situation.
Fuller: How do you link the curriculums being offered with job opportunities, advancement opportunities for the learner, so that this doesn't just build their basic skills, but gives them some prospect of upward mobility, either in the organization or, if they're to leave the organization, elsewhere?
Carlson: For many of the companies we work with, it's a great outcome to have employees retain with them for two, three, four years. The way we think about it is the program simply needs to pay for itself and we structure it that way. What that enables employers to do is to say, "Hey, here are the catalog of opportunities that will help you advance within our company. And also, here are other opportunities that we believe are relevant for in-demand jobs that may or may not be at our company today." And so, we do a lot of work—not just with the HR team, but with the learning and development team and the business operators—to understand what is the digital transformation happening within their company? Where are the high-growth jobs, and most importantly, what does it look like for someone to move from the entry role into the market roles that come with family-sustaining wages and middle-class careers?
Fuller: Mm-hmm (affirmative). Guild's a very unusual company because it's a unicorn and it's a B Corp. Now most of our listeners will know what a unicorn is—a company with a billion-dollar valuation that's not public—but I think a lot of our listeners won't really know what a B Corp is. Could you talk a little bit about that?
Carlson: Sure. So, a B Corp is an organization that has been certified by the B Corporation as having a double bottom line—your profit and loss statement, but also your social impact. And then, elevated above that is a PBC, which is a public-benefit corp[oration] certified through a state organization, like a Delaware, which has also adopted the components of their social impact into their charter. And this was organic to Guild's initial business model. As I mentioned earlier, the place where we were able to create value was by displacing the enormous amount of money spent on Google and Facebook ads and instead spend those dollars on coaching, advising, and technology that helped the students be more successful. But part of our B Corp charter—and what has helped us win top 10 percent B Corps in the world and that recognition—is that our business model is even further aligned to our student impact. And we do that by only getting paid when our students are successful. So, the universities only pay us term-over-term, whereas they pay Google and Facebook totally upfront for, say, a lead. But if that student's not successful they can't call Google and say, "Hey, I'd like to be reimbursed. That student wasn't a good fit for the program you advertised to them." In our world, we don't get paid up front. We only get paid each semester as the students successfully complete their term, retain at the company and retain in school. And so, that's the crux of our B Corp certification and our business model.
Fuller: So, Rachel, maybe you could help us envision the path of a learner in a company that's supported by Guild. How do they get directed toward a specific program? How's that program validated? What other type of support is provided to maximize the chances of their completing the program?
Carlson: The learner’s journey starts with the company sharing details about the education program. We tend to think really strategically with companies about how they want to highlight this program and how to connect core business challenges and business opportunities. So, that's part one. And so, a learner comes to the customized site that is built for their company and explains what their company's education programs and opportunities are. They take a variety of quizzes and assessments to figure out what type of learning might be suited to their career goals and opportunities, and then they're working with a coach along that way to figure out how they might want to engage in their education and when. And timing is also very important here, because for a working adult, there are times where adding school makes a lot of sense and times when it doesn't. Then, once a student finds the right school and program, they apply through our system. We connect them with the university that they've chosen, and that makes us quite different because there are no real higher-ed marketplaces today that give a learner a coach and the opportunity to compare and contrast different schools and figure out which one meets their learning needs and their career aspirations most appropriately. And then, the student also has a coach that then works with them from day one through graduation day. And Guild really sits as the layer that powers their learning experience in partnership with their company. But the student is attending the classes, working with the faculty from their home institution. They are a regular student from that school. They get a degree from that school, but they get a whole lot of additional wraparound support from Guild and the employer.
Fuller: So, Guild is providing each learner with access to a coach that's a Guild employee, that's helping ensure that that person understands how to engage the educational resource that they've chosen and help them maximize the chances that they'll complete the program successfully.
Carlson: Exactly. And we've seen that we've been able to lift the completion and retention rates with all of our institutions by doing that for this population. And a big part of that coach is really being at the intersection of their school, their work, and their personal life, and thinking about how to manage the balance of those three and being an unbiased partner in that work.
Fuller: Based on your now pretty rich history of supporting learners, what are the four or five things that crop up that are most disruptive and most commonly have to be overcome to successfully complete a program?
Carlson: Sure. We've gotten better and better at this over time. Early days, conflicts between shift schedules and classes were very common for the majority of America's frontline population. They have an irregular shift schedule, unlike maybe the nine-to-five that you and I practice, or the eight-to-six. And so, for those workers, we've done a lot of work with our universities and learning providers to make more flexible schedules, evening and weekend, competency-based programs that move at your own pace. The next addition is when those conflicts do arise, having the coach be able to help the student have conversations with either their faculty or their managers, to make sure that they can stay successful. Additional topics include how to incorporate what they're learning at work into what they're doing at school or vice versa. And that really is enabled by experiential programs and the schools we work with that create a lot of space for project-based learning and work-based learning. We also do work on credit for training. So helping workers receive prior learning assessment or credit for the learning that they're doing in the workplace as elective credits. Also just staying in touch on the pacing of their education, on thinking about how to plan for those systems and then creating resilience and a partner so that when the bumps in the road come—because they inevitably do—how do you have someone who's in your corner and they’re helping you navigate the three most important things in your life, school, work, and personal life—but recognizing that unlike an 18 year old, school doesn't come first, and that's okay.
Fuller: Is the objective for most of the learners degree completion or is it to gain specific skills and competencies that will articulate themselves into a better job prospects, either in their current employer or in the outside labor market?
Carlson: Yes, and. And the reason I say that is we have a lot of survey data that says the conversation that we've all been having in higher-ed or echo chambers, or in the media that basically position workforce development in opposition to higher education, rings really hollow to the 88 million Americans we serve. As they see it, they want the opportunity to improve in their job, to take guidance from their company, to learn at work, and they don't want to believe that doing so means they have to sideline the connection between the American dream and the degree or credential that is validated as a part of that dream.
Fuller: Let's shift the focus a second to the educators. Educators have been spending an increasing amount of time and effort trying to engage with employers to develop programs that employers will find attractive, in part because as we know in the college age population, the demographics are turning negative and there are fewer available students to enroll in traditional programs. And the safety valve of international students filling seats in traditional programs has been, if not turned off, certainly constrained. How does Guild work with the educator to ensure relevance, to provide feedback both positive and negative on their programs, to build the case that Guild is an attractive conduit for them to additional students?
Carlson: And we work primarily with their leadership team, as well as their faculty organizations to think about how do we better support the working adult learner? The demographics are indeed in our favor, which is that there are more and more folks who want to learn well past the age of 22, and we're in a lifelong learning economy, and that requires adaptation. But we get pretty resounding feedback from the faculty that these students are engaged. They are active learners, and in some ways they're more ready to learn than maybe that 18-year old that they sometimes interface with. And so, I remember six months into the launch of Walmart hearing from one of our university presidents who said, "I'll be honest, some of my faculty were skeptical. There is a judgment about the worker that sits in a Walmart store and whether they were capable of upper level higher education, and boy, have these students blown us away." But our students mix in with their typical B2C [back-to-college] student populations. You're having all of those folks together in the same classroom, which is really valuable—and valuable for the learner. But what we're constantly just trying to do is create a tighter feedback loop between the employment sector and the education sector. And so, we're creating opportunities as frequently as we can for those two organizations to cross-share, and that's the kind of thing we use our conferences and our events and our convenings for.
Fuller: Now we're recording this podcast in June 2020. So, we're beginning to see just very tentative emerging from the Covid-19 economic shutdown. The shutdown, of course, has displaced a very large number of workers who would be in your core population you're trying to serve, whether they've been furloughed or laid off, or their employer has already decided not to reopen. What are you seeing in the marketplace and how are you responding to that? How it's going to influence what Guild does next?
Carlson: Sure. So, we've always viewed our work as working across the employer entity to think about the four core problems that they're trying to solve within their human capital strategies. They've got recruitment challenges, retention challenges, up-skilling agendas and transitions. And those transitions are sometimes internal and sometimes external. And so, we are almost maniacally focused on those external transitions right now. Meaning, how do you help companies that are facing the brutal reality of displacing large populations of their workforce? And how do you do that in a way that that would be classified as an ethical off-boarding experience? And we believe that up-skilling and reskilling should be a part of ethical off-boarding, rather than simply giving you a career website or an upgraded technology platform to find a job. We believe we should be doing those things and helping you think about whether you're capable to move into a higher paying job by earning a small amount of additional training or education that prepares you for a better job of the future, so that you're not going to be displaced again in three months or three years by jumping into another low-wage role.
Fuller: Right.
Carlson: So, we're working with companies to do exactly that and recently launched a product Next Chapter that focuses exclusively on those transitions.
Fuller: Well, let's talk about Next Chapter for a second, because that's a new initiative of yours and it is designed to build those bridges for people to move on into a more promising career situation after being off-boarded. How are you thinking about that? And what are the types of skills you see that the population you're serving most need to get on one of those pathways to a better future?
Carlson: Yeah. We had been working with companies for a few quarters who were not anticipating Covid, but were anticipating a recession of some sort in 2020 or '21. And they had been saying, "Hey, I fthere's a way to include an education benefit in that off-boarding plan, we'd love to do so." Meanwhile, our friends at Entangled were working on a product that looked at ethical off-boarding from a jobs marketplace, and jobs perspective. How do you have a more empathetic conversation with someone who's just been displaced? And how do you use technology to help them better understand, rather than jumping from the exact same low edge job they have to another one? How do you help them understand the competencies and skills that they have today that could help catapult them into the next job, and a more sustained career? And so, we brought our two technologies together. We acquired Entangled, but even prior to that, we were using a business development partnership to layer the jobs marketplace that they built with our education marketplace and building it for the worker. And we've seen tremendous outcomes from that, in that it's not just relevant for Covid. We believe it's going to be relevant for the jobs of the future that are at risk of adjustment or displacement or total overhaul due to automation and technology. And so, we believe we're laying the groundwork for something that'll really help the current low-income population be better prepared for what we believe is the economy of the future.
Fuller: Rachel, you mentioned Entangled. Maybe you could tell us a little bit more about that. That's an acquisition you just made of a company that has a history of innovation in this space and actually has acted as a venture capitalist historically in the education space.
Carlson: Entangled is an incredibly cool business model. That was a studio model, meaning they had a team that was looking after innovative ideas and opportunities to create business propositions and products. They had a consulting entity that helped fund the ongoing activity, as is common in most studio models. And then, you're right, they had a ventures team that was investing in their early stage businesses that they were launching, as well investing in other companies, including Guild. They were one of our first investors six years ago. And so, we have a long relationship and friendship with the Entangled team. The thesis that ultimately led to us acquiring them was first the work on Next Chapter, and the fact that they were approaching it from a jobs marketplace while we were approaching the work from our education marketplace, and our realization that both were needed for workers who had lost their job. But also, their consulting and solutions team happened to be near mirror-image of what we were seeking to build both for our employers and for our universities.
Fuller: Well, certainly in our research at Harvard Business School, what we're seeing is that companies of all sizes, particularly larger companies, which you focused on, are absolutely, uniformly saying that they're going to be moving to a more AI-supported, and more automated, both decision making processes, and operations that Covid has changed the investment logic on some of those choices and that they're going to be more aggressive in the type of digitalization, and automation that they deploy. Which certainly suggested a different type of skillset is going to be needed by people on the front line.
Carlson: Absolutely. I fear that we are going to not have a V-shaped recovery, let alone a U-shaped recovery. I believe this is a W. And I think we're in the bottom of the first dip. And then I believe that many companies are going to activate those automation agendas, which we know have been in development for the last couple of years. And so, I think that's going to be the second dip. And I think if we don't create systems for resiliency for our frontline workforce, we are going to have a far worse situation than what we saw in other economic recessions, because we will have a large group that has been hit twice—first by Covid and this recession, and then by the incremental pain that will come with automation. And if we don't create ways to help folks be prepared for a knowledge economy, and for these jobs of the future, I think our society is going to be in a very tenuous position.
Fuller: So, to prevent that W, Rachel, what are the types of skills that, if you were to pick out a few major ones that you really want to put in the fore of helping people get to this next chapter, as your program is called?
Carlson: As we thought about it, I think there are a few key areas worth highlighting. The first would be the nuance within capital “T” technology. I'll admit that we've all rolled our eyes when we've heard about the eleven-hundredth “teach your truck driver to code” program, because that's not an effective matching of competencies. But I'll tell you that teaching truck drivers how to work alongside drones is actually a really great competency mapping. And it's a nuance behind the capital “T” technology that teaching everyone to code isn't actually the whole solution here. There is an enormous amount of work about “how do we learn to work alongside automated technology?”
Fuller: Right.
Carlson: And if the world is going to include one where my packages are now delivered on my front step by a drone, someone who spent years not only navigating their truck, but also repairing it, is the type of hands-on job experience that might be really applicable to repairing that technology when it breaks. So, that would be the kind of example, from a technology perspective. I also think people management and process management isn't going anywhere. We know that technology is really great at answering specific questions that can be hard coded into the base. But what technology is not capable of is the situational awareness that allows you to ask and answer questions that are ambiguous. And we know that that is the crux of people management, project management, process management. And that's something that so many of our frontline workers are fully capable of, but have not been formally trained in. So, that's another field. And then, more broadly, I think the skill of being a learner is one we don't talk enough about. But it's a bit meta. But we are in a lifelong learning economy, and you and I could maybe perfectly predict the type of learning we'd want to create for our learners today. But that might change in five to 10 years. So, actually developing lifelong learners is perhaps the most important thing we could do.
Fuller: Are there technologies that you're beginning to see show up that affect the learning experience of students that you're excited by?
Carlson: Yes. I would say there's pockets of very innovative, discrete technologies that enhance experiences, whether that's virtual reality to better teach programs like the trades, whether it's discrete within particular domains like math or science. I'd also highlight that I think some of the most innovative work is happening within competency-based programs in general. We believe that competency-based learning is an important part of the learner future. As is cohort- and social-based learning that happens virtually. And I think we're going to see an accelerant of a lot of that in this Covid landscape.
Fuller: It is exciting to think how we can take elements of a social media model and turn it into things that can support learning. We know that, that can support behavioral change related to health conditions that are affected by lifestyle choices. So, perhaps there are ways to create more sense of colleagueship and alignment using technology. And, of course, there's also improvements in virtual reality products.
Carlson: Absolutely. Our students have incredibly robust community groups. And I sometimes think about how much better our students actually see, know, and interact with one another than I did in my largest lecture halls when I was an undergrad. And I think that's something that gets overlooked a lot in the online learning landscape, is how intimate it actually is. You are sitting in the front row with your faculty, with your classmates. And that community can then be fully immerged in an online environment, versus the campus. And for a working adult learner, for whom they're alternative on a campus is getting in a public transportation, heading to a community college, going for a few hours, missing work, or having to juggle their schedule and childcare, and then getting back on the bus to head home. A virtual learning experience is actually both more communal, and more convenient.
Fuller: And that community can become part of the support system that encourages people to complete and to find additional opportunities.
Carlson: Exactly.
Fuller: Rachel, it would seem evident that government, at both the state and federal level, is going to be thinking about how to improve the job prospects of this very significant number of people that have been dislocated, and improve their capacity to learn and to engage in lifelong learning as we've been discussing. Are there particular changes, or enhancements, or innovations you'd like to see in government policy that would accelerate that trend?
Carlson: Sure. So, at the basic and most obvious level, giving employers more opportunity to support their employees' education, is a no-brainer. And one that many of us agree on, and we're just hoping Congress can act on. But right now, that limit is capped at $5,250. It was structured there in the eighties. It has not been adjusted for inflation and companies are willing to do more on behalf of their workers. So, we think it's a fairly bipartisan outcome.
Fuller: So, when you breach that cap, does the benefit become taxable? Or what's the effect of that cap?
Carlson: Yeah, it becomes taxable to the employee. It can still be expensed for the employer. So, you're not giving up huge corporate taxes by making the adjustment. And this employee base, as mentioned, is lower-income, very small marginal tax rate. And so, it has a pretty low impact from a scoring perspective from the CBO [Congressional Budget Office].
Fuller: So, it's not that the government is risking losing major revenues if that limit were raised.
Carlson: Right. And the upside we can chart the ROI [return on investment] that comes from helping a worker move from a low-wage to medium-wage job and the tax base that grows with that. So, it more than pays for itself.
Fuller: Any other changes that you'd have on the top of your list?
Carlson: Yeah. So, that's our bread and butter. More broadly, I'm really hoping to see a world where there's more funding that both puts funding in the students' hands. I worry quite a bit about programs which are so decentralized into states and local communities that they cover enormous amounts of overhead, and administration rather than dollars that go directly to the student. But we're hoping to see more innovation in funding shorter-term programs. Right now, so much of Pell Grant funding is tied directly to long-term degree programs.
Fuller: Mm-hmm (affirmative).
Carlson: So, there's room for innovation there. And then room for just thinking creatively about funding more nontraditional programs. And we see a lot of engagement and enthusiasm there, both from folks who think about it from a Department of Labor's perspective, as well as Department of Education.
Fuller: It certainly seems that the traditional paradigm of getting a degree through hours in the classroom, residential education, all of that is going to be under immense stress, both because of the economics of higher ed have become so tenuous, but also given the urgency of providing people opportunities that will benefit them in tangible economic ways, not just in terms of the development of their intellects.
Carlson: Couldn't agree more. And Michael Horn is now, fortunately, on our team, and I take so much guidance in his framing around, what are you hiring college for, and thinking about it from the student's perspective. I think we lump a lot into higher education. We lump in this notion of the coming of age experience, which is what the 18-year-old is hiring their college for. That includes the residentials, the dorms, the frat parties, the football games, versus stripping it down or unbundling the education experience to think about the component parts. Most of our workers are hiring school for the learning, the skills, and the credential. And so, I think higher ed is going to have a real reckoning related with unbundling that business model and having to think through those component parts. And I think policy needs to follow by also thinking about those component parts differently.
Fuller: So, Michael Horn, the leading author on education issues who co-authored an important book with my late and, not embarrassed to say, great colleague, Clayton Christensen, on disrupting education. Well, Rachel, thanks so much for joining us on this Managing the Future of Work Podcast. We've watched Guild and its growth and impact, and in working with companies, with admiration and excitement. And we're looking forward to the next chapter of Guild.
Carlson: Thanks so much for having me. I really appreciate it.
Fuller: We hope you enjoy the Managing the Future of Work podcast. If you haven't already please subscribe and rate the show wherever you listen to podcasts, you can find out more about the Managing the Future of Work project at our website, hbs.edu/managing-the-future-of-work and sign up for our newsletter.