What do you do when an employee informs you that they have just achieved an academic milestone:  a college degree, an advanced degree, or even a certification from a professional association?  After offering congratulations, do you take them to lunch, perhaps tell them to take the next day off, or do you do more?

Do you provide a specific reward for that accomplishment?  Perhaps a salary increase, or a promotion?

Many employees seem to expect that, when they receive academic or professional credentials – something that comes with a piece of paper suitable for framing – that they should receive an increase in pay, a bump in title, if not an outright promotion.  “I’m more valuable to you now,” they seem to imply.

However, if you don’t need another MBA graduate, or a senior engineer, legal counsel or whatever, should you pay extra to have one?  Should you increase your labor costs to gain something that you don’t need?

Some managers feel compelled to react with salary / title increases; they want to acknowledge the employee’s personal achievement and avoid the risk of de-motivating good people.  They especially don’t want to lose someone who is ambitious and career-oriented.  Such a loss might be perceived as a mark against their own management capabilities.

But is raising the cost structure a good business decision, or a feel-good, I-want-you-to-like me emotional knee-jerk reaction?  Do these managers have the right answer to the “why more money?” question?

If you already pay for educating your employees – through some form of tuition reimbursement – should you be expected to follow up with even more expense once the company-paid courses run through to completion?  Chances are you don’t require employees to remain with you for a defined period afterward, right?  So, technically they could use your money to prepare themselves to work somewhere else.  Where is the fairness in that?

Pricing a piece of paper

Have you asked yourself, what’s the market value of an employee with a higher education or certification level?   Compensation surveys don’t differentiate on the basis of whether employees have a particular degree or other credentials.  In some cases educational requirements are mandated before one can assume certain roles (Engineer, Attorney, Nurse, etc.).  At the end of the day what the market highlights is the common pay rate for experience, for knowing the job and being competent at performing it.

Does the market say a premium should be paid?  No.

Perhaps a promotion then?   But job grades are not typically influenced by formal education levels either, and no credible job evaluation system scores on that basis – only equivalencies.  Job evaluators recognize that, while what the employee knows how to do (job knowledge) is critical, how that knowledge was attained is less important.  The professional seasoning of life experiences does count, trumping the piece of paper.  Book learning is not an evaluation factor.

If ultimately the newly certified or graduated employee returns to the same job function, their day job, then what does the company receive for granting extra money?  If the job role remains the same, where’s the ROI to balance an increase to fixed costs?

What you need vs. what you have

If you use any sort of position control process, you should know how many heads for each job the organization needs to fulfill its mission.  When you create more heads than you need, your costs will increase but likely not your effectiveness.  So why would you pay for an extra MBA, senior engineer or legal counsel – when you don’t need them?

You can acknowledge an employee’s personal achievement without increasing your fixed costs and possibly creating disruptive internal equity concerns among other employees.  Remember that fair and balanced treatment is a perceived state-of-play, and the employees are always watching.

So offer your congratulations, take the newly minted certificate holder out to lunch, and give them a day off.  Tell them that they’re now eligible for advancement when a higher position comes available – but have a care before raising your fixed labor costs without a corresponding increase in ROI.

They may be more valuable to you – but that is for tomorrow.