Faculty Compensation Guidelines Study

Committee's Charge

The Faculty Compensation Guidelines Study Committee was charged in response to a series of concerns raised by the Committee on the Economic Status of the Faculty (CESF) to advise the Provost on whether it is desirable to implement a set of guidelines for determining faculty compensation in order to improve the quality, legitimacy and transparency of faculty salary determination. Our Committee broadened the agenda for study beyond the annual merit program to include a review of a variety of factors affecting overall faculty compensation, including market adjustments and retention offers.

In our discussions, we discovered that there is a great deal of ambiguity in the terms used to describe salary increase programs. Common parlance among faculty often differentiates the "merit" program from promotion increases, retention commitments to faculty with offers from other universities, and salary commitments intended to pre-empt external offers. All of these commitments, however, are intended to be based on "merit"—they would not be made were the individuals in question not highly prized as faculty colleagues. This Committee Report treats the "merit" program as an amalgam of all these critically important factors in our salary adjustments.

Current Status

The 18 units setting faculty salaries have widely varied procedures for salary setting, annual performance review, and evaluative feedback to faculty. Deans have ultimate authority for ensuring proper compensation for their faculty. Any set of principles or guidelines adopted must be flexible and adaptable to a variety of settings with evolving cultures and processes for performance evaluation and compensation.

We interpreted our charge to be to review the CESF proposed guidelines and examine existing mechanisms available within and across units that affect the compensation program and faculty perceptions thereof. We focused on what recommendations could be developed to address concerns about compensation identified by CESF, or by our Committee, and how might these agree with or differ from the new mechanisms proposed by the CESF.

CESF Compensation Policy Guidelines 1999

1. Non-Discrimination.
2. Openness. Policies and procedures should be written, public and accessible. Descriptions of factors (scholarship, teaching and service) considered components of merit should be made known, as well as market and equity considerations and the persons responsible for decision-making.
3. Consistency. Factors that affect salary should be applied consistently.
4. Peer Review.
   1. Executive Committee or another Committee should make recommendations.
   2. Committee should review the final decisions for consistency and equity.
5. Communication. Communication reflect,
   1. assessment of performance,
   2. relation between assessment and salary,
   3. other relevant information to explain rationale for salary. A description of what the faculty member can do to improve is suggested to be included in this communication from decision-maker to the faculty member.
6. Accountability and Disagreements. Follow Unit's Grievance procedures if the person feels that factors other than professional competence affect his/her salary decision.

Committee's Work

Our committee met 8 times and conducted surveys of relevant procedures and policies of all 18 units on our campus. Information was gathered from associate deans via email correspondence, telephone interviews, and the collection of written procedures regarding faculty compensation (see Appendix A and Appendix B). In addition, we invited Dan Gamble of Academic Human Resources to discuss grievance procedures and recent experiences and policies. Paul Courant, Associate Provost, met with us to provide additional background context on the issues and deliberations. Committee members, who serve on CESF currently, or in years past, discussed the background context of CESF deliberations.

Several peer institutions were surveyed to see if they had written guidelines that might be instructive for us. There was a very limited response. From the institutions that did respond the Committee did not find any practices that seemed transferable to Michigan. For example, the University of California, while merit based, also has a step scale. There is an annual across the board increase as well as a 2 or 3 year (depending on rank and years of service) merit review cycle. The University of Wisconsin has systemwide rules with respect to how much of the merit pool can be distributed to any one individual, but does not address the process for internal campus or unit review. Stanford, at the University level, gives definition to the activities of instruction, research and service, as well as definition to activities like nonstandard teaching, administrative differential and honoraria. Again, there is no delineation of process for individual academic units.

Committee member John Cross gave the Committee a comprehensive overview of the principles involved in designing merit schemes and how procedures have evolved within LS&A. Due to its size and complexity, this unit has a most elaborate administrative review of compensation decisions and procedures used by its many diverse departments.

Analysis

Each of the 18 units on campus has developed criteria for professional judgement to guide compensation procedures. They vary widely and are evolving in a local discipline or academic culture. They are largely written and open in terms of the inputs for the annual merit assessment, and fairly open with respect to how this results in salary increments (although there is wider disparity in the latter than the former). All of the procedures are comprehensive and multi-level. At the same time, it is clear that there are important procedural differences among academic units that reflect differences in the "cultures" of the various disciplines. No one model appeared to us to be unambiguously superior to the others. While every model has features designed to address the problems listed in the 1999 CESF "Policy Guidelines," we could not single out one that we could accept as a dominant paradigm for the entire University. For this reason we do not recommend the adoption of any single set of University-wide guidelines.

Our committee has uncovered a number of technical problems and pitfalls that can beset the quality and legitimacy of annual merit review programs, ranging from unreliable point systems to incomplete or out-of-context evaluations. Some of the questions we discussed pertain to the accuracy of any particular merit scheme.

For example: Does the annual report support a fair and complete evaluation of long term projects/productivity? How do high and low merit pool years affect salary? How does the variation within disciplines and in weighting criteria affect the evaluations? Administrative turnover in some units can affect the procedures used and the extent of reliance on merit schemes for compensation decisions.

The discussion of the LS&A merit program highlighted our Committee's conclusion that the design and implementation of a salary adjustment program is an extremely complex process that benefits from analysis at more than one level. It is possible that smaller schools and colleges are disadvantaged by not having access to the levels of administrative and technical review that are available to larger units.

Because of such issues, we believe that many units may benefit from having available to them administrative or management consultation that would help design and implement improvements in their systems' accuracy, quality, and legitimacy as a reflection of their merit goals.

Another set of issues that could be addressed with consultation pertains to consistency within a unit's compensation system. Several factors largely outside of merit systems per se affect salary and influence faculty merit review in complex ways. These may include: 1) retention and recruitment offers, 2) summer support and different-length time appointments (12 vs. 9 months), 3) grant funding, 4) release time, and 5) administrative stipends. All may influence the effect of merit schemes on salary. Units have attempted to account for these factors in a variety of ways, but many of the units might welcome and benefit from consultation and consideration of the desired role of such factors in a salary program.

The Deans in the schools and colleges have a responsibility to manage compensation and to deal with unique circumstances that might affect a faculty member's compensation. The Committee believes this responsibility can be carried out more effectively with support services and consultation services of the type described below. Deans must be able to use salary adjustments to respond to unique (and sometimes confidential) circumstances, new information, irregular duties, administrative tasks, service to other units, and a wide range of other special circumstances. We do not at this time feel it is necessary to recommend a set of procedures that would limit a dean's ability to manage this very complicated process.

However, each unit could well benefit from the opportunity for an open appraisal of the effect of their systems of reward for consequences on, for example, productivity over time, equity across race and gender, compression of salaries compared to comparable units in peer institutions, market offers, retention offers, etc. Associate Deans report higher numbers of counter offers being requested, but we do not know how this enters the merit scheme salary setting, other than to report the perception among faculty that retention offers create constraints on the available pool of resources for those faculty who are not "offer-shopping".

Another important factor that pertains to both legitimacy and transparency of compensation is the degree of perceptions of unfairness and/or dissatisfaction among faculty. The survey of the 18 associate deans on the processes in use in their units revealed quite low levels of perceived problems. The Committee members shared their perspectives from respective units and this suggests widely varying degrees of dissatisfaction. For example, annual surveys of the organizational climate for faculty in one unit that specifically has items about annual reviews indicate that, overwhelmingly, faculty feel the processes are fair and appropriate. However, in another unit, many faculty are not clear that the merit exercise has much to do with how pay is structured. Other Committee members reflect that there are always people who complain about salary and who will maintain the system, whatever it is, will be unfair. Some faculty may view the salary process as undemocratic while others view it as overly bureaucratic.

The committee believes that more open review of the procedures and problems as suggested above could improve the climate of opinion and lead to changes in the systems utilized by some units. The Committee recommends that the Provost make available technical consultation to the deans to address merit system design in addition to matters of implementation, including:

1. the role of peer review in the various stages of salary setting;
2. the mechanisms available when individual faculty members are concerned about their performance evaluation and/or subsequent salary;
3. the quality of communication about salary and performance by decision makers to individual faculty members and to the unit as a whole; and
4. the reporting of faculty merit/salary programs as a whole to the public at large and/or community.

Peer review occurs in every unit with respect to use of written procedures for ranking or rating the achievement of faculty. Most schools have a system of inputs to the Dean from chairs, directors, executive committees, and/or associate deans for the merit review process. Peer involvement as well as consultation in the review of procedures and factors affecting the salary program is suggested as an important first strategy for units to consider. Peer involvement, as well as consultation, are important strategies for units to use at various points in the process. The committee urges each unit to review its current processes to see where additional input from faculty could be implemented. The Committee did discuss at some length the issue of post hoc review of the deans' decisions. Most members felt that this approach, for a variety of reasons (both substantive and procedural), should not be recommended at this time.

There still remains the issue of an effective mechanism to address, post-hoc, faculty concerns regarding salary. The Committee believes that the faculty grievance procedure is not useful for the review of non-procedural concerns related to merit salary. We also doubt whether it can be effective for questions about whether procedure was followed. Few people currently use it in this manner. However, the faculty grievance procedure remains an option for a faculty member who asks for a review of to have the process by which her/his merit increase was determined for that year. With respect to equity and discrimination, some units undertake more systematic, technical multi-year reviews of the effects of their procedures and outcomes with respect to compression, market, and/or race, gender, age, etc.

Consistent with the CESF proposed guidelines, the Committee believes that communication at the individual level should be open and useful for the faculty member. He or she should be given constructive information about relative compensation and relative performance. Consultation can help deans and units in developing higher quality information consistent with the unit's goals and objectives.

The Committee is concerned about the impact of University reporting of annual salary changes. The University is required by various external agencies to report all changes in faculty compensation as salary increases. Necessarily, this combines all increases, including those due to promotions, retention commitments, and market equity adjustments. Public salary increase announcements that lump all these factors together may leave those not promoted feeling their salary increases appear "below average." We believe that, to the extent possible, the University should make clear that these publicly-required averages include special cases that come to individual faculty only rarely, and that the great majority of faculty received increases from a general pool that does not include these elements.

RECOMMENDATIONS

1. The Provost arranges a conference of deans to share knowledge and best practices and otherwise make technical consultation available to all units. Deans and chairs should be encouraged to initiate review of their units' procedures and mechanisms, paying particular attention to the CESF guidelines of increasing non-discrimination, openness, consistency, peer review, communication, and accountability of compensation⁽¹⁾.
2. The Provost should ask each Dean to develop a system for periodic review (every 3-5 years) of the effectiveness of the school or college's compensation scheme.
3. Deans and decision-makers should be encouraged to examine their communication with individual faculty members and the unit as a whole regarding the quality, adequacy and usefulness of information on relative performance and relative compensation.
4. Central administration should study and consult with units on alternative methods of reporting the annual salary program.

COMMITTEE VOTE

FOOTNOTE:

1. Our focus was on issues of compensation programs for governing faculty. The comparable procedures and policies for assessing merit of clinical faculty and research scientists may also need to be addressed.

Appendices