You are here


7 keys to managing campus compensation

Common sense solutions to equitable pay scales and compensation packages
University Business, November 2013
As colleges come out of the recession, many are now expected to make up for years of stagnant salaries
As colleges come out of the recession, many are now expected to make up for years of stagnant salaries

When the topic of higher ed salaries draws public attention, more often than not the focus is on presidents or football coaches. But behind the scenes, the real challenge for college and university leaders lies in crafting compensation practices to recruit and reward the talented faculty and staff who make up the heart of every institution.

As colleges come out of the recession, many are now expected to make up for years of stagnant salaries. Administrators also face the competition for top faculty talent, the push for greater salary equity, and other pressures.

At colleges of all types, dealing with compensation ranks among the most sensitive of management tasks. That job sometimes falls under a central HR department or is spread out among administrators in individual schools or departments that create their own pay structures.

“While pay is typically not at the top of the list of motivating factors for employees, it can lead to dissatisfaction and controversy if there is a perception of unfairness or inadequacy,” says Lynne Hammond, assistant vice president, human resources at Auburn University in Alabama. “This is especially true in times of economic unrest and diminishing resources.”

Given their importance both to individuals and the schools they serve, carefully wrought compensation plans are a must. Here are seven keys to making them as effective as possible.

Understanding common challenges

While institutions may face their own unique pressures, there are challenges that all colleges and universities face in compensation planning.

Faculty and staff salaries and benefits are the largest driver of what it costs to run an institution, says Andy Brantley, president of CUPA-HR.

Another common challenge is planning with total compensation packages in mind.

“Compensation is so much more than base pay,” Brantley says. “Benefits may exceed 30 percent of the base. And with escalating health insurance costs, the challenge is even more complex.”

Benchmark data can provide some perspective for individual institutions. “Compensation surveys conducted by third parties for higher education can be helpful,” says Les Hoven, associate vice president and chief human resources officer at the University of Oklahoma.

He advocates using closed salary surveys, in which targeted participants match their jobs to the survey benchmarks to improve data reliability. With these surveys, names of participating organizations are typically kept confidential, and, as a result, results tend to be reliable.

Information from other types of organizations can also be revealing, says Laurita Thomas, associate vice president for human resources at the University of Michigan. “It’s important not to reference positions exclusively against higher education salary data.” Using general industry surveys as well will help in more accurately gauging the larger markets in which universities compete for talent.

Adapting to institutional culture

Colleges vary greatly in how salary administration guidelines are developed and implemented. Major factors include the overall compensation philosophy of the institution, its desired position in the marketplace, and its ability to pay, notes Hammond of Auburn.

“The culture of an institution can influence compensation practices, including whether or not there is a union presence,” she says. “Salary administration practices can also vary based on whether the institution takes a centralized or decentralized approach to pay decisions.”

Some institutions allow these decisions to be made at the college, school, or unit level and will provide broad guidelines that give decision-makers a good bit of discretion, she says. Others take a more centralized approach and sometimes go so far as to provide step-pay plans or models that prescribe pay increases based on a merit matrix.

Either way, assessing organizational culture is an important part of developing an overall compensation approach, says consultant Kurt Dorschel, of Huron Education. “An institution’s point of view on competition, fairness, transparency, and nonmonetary employee rewards should all shape how compensation structures are designed, communicated, and implemented on campus.”

Living within guidelines

Once compensation guidelines have been established, they should be followed consistently by managers at all levels.

“Making an exception to a compensation plan is a huge mistake,” says Bernice Harris, provost of the Community College of Denver. “The minute that happens, even for one situation, all claims to equity and fairness are gone.”

That’s a point all senior administrators must stick to. “Buy-in from senior leaders to establish salary administration guidelines and live within them is critical to any compensation plan’s success,” says Hammond. “There will be times when exceptions need to be made for legitimate business reasons, but these should be carefully documented and should not become the rule. And senior leaders set the tone. If employees see senior administrators skirting the policies but others are held accountable, the integrity of the system is undermined, and an environment of mistrust ensues.”

“No policies or guidelines are etched in stone,” Hammond says. “But once they are in place, every effort should be made to respect them so that if challenged, pay decisions can be defended.”

Retaining flexibility

While consistency in the administration of pay is essential, no policy or guideline can anticipate every contingency.

“Compensation systems and classification are critical components but they must also provide enough flexibility to recognize and reward outstanding employees and create financial consequences for those not performing up-to-par,” says Ramin Sedehi, director of higher education consulting at Berkeley Research Group.

Many institutions have moved to merit-based systems for determining annual compensation. But in practice, many institutions are likely using a hybrid model, with some amount of a raise considered a cost-of-living adjustment and the rest being for merit.

“This hybrid practice, although it appears quite humane, does considerable damage to efforts to raise employee performance overall by weakening incentives,” he says. “On the other hand, the subjective nature of evaluations, especially if personality issues are brought into the calculation, forces managers and leaders to be concerned about very low or, for that matter, very high salary recommendations.”

Giving budget its due

Regardless of the economic climate at the time, the overall effect of changes in compensation on the organization should always be considered.

And, says Brantley of CUPA-HR, “Whatever the source of funds, the increased costs must be absorbed somewhere.”

Every compensation strategy, of course, must be coordinated with a budget strategy that supports it. Dorschel of Huron Education says that at decentralized institutions especially, many “struggle with maintaining consistency in compensation, in particular when some units have significantly more resources than others.

Compensation structures and processes need to be supported with an approach to allocating university resources that allows all units to manage internal equity and remain competitive in their respective markets.”

He adds that leaders should be wary of the risks in decentralized compensation administration. “Flexibility should be balanced with accountability, training, and oversight,” he says. “This can reduce compression, inversion, inequity, and other symptoms of a failing compensation program.”

Striving for equity

Perhaps the ultimate goal of any plan should be fairness.

“I think equity is what people want most of all,” says Harris, of the Community College of Denver. “An institution should have a thoughtful and fair compensation plan, and there should be transparency regarding that plan.”

Faculty and staff should be able to access the plan so they can understand how any given salary was determined. Brantley says being open and honest with employees shows the high ethical standards of leadership.

“Bring clarity to employees,” he says. “Raise and answer questions such as: What is our compensation philosophy? What are our practices in creating equity?”

At the same time, efforts to achieve equity in compensation should be handled separately from other salary increases, he says.

“It’s a huge demoralizer to have different performance pools for different groups of employees,” he says. “If adjustments in salaries are to be made for the sake of equity, that should not be covered as part of the overall performance increase pool.”

Making the tough decisions

When it comes to employee pay policies, there is plenty of room for disagreement. Yet administrators must embrace dealing with compensation as among the most important of roles.

“All aspects of faculty compensation are controversial to some degree, particularly within the local setting of the institution,” says Sedehi of Berkeley Research.

Demands for parity, fairness, and transparency are sometimes incongruous with needs such as market value, available funding, and competitive priorities, he adds. “Academic leaders have a very challenging job of accommodating these multiple sets of requirements, often within very tight financial parameters. This is not a job for the faint-hearted.”

Mark Rowh is a Dublin, Va.-based freelance writer.