The Top Five Problems in Faculty Pay
Imagine you are a contestant on the quiz show Jeopardy and, as unlikely as it may seem, you get to select the category of “Faculty Pay” for “$1,000.” When the answer is “compression, competitiveness, pay progression, workload, and pay fairness,” the question—as you likely well know—would be: “What are the top five problems regarding faculty compensation?”
Many institutions manage faculty pay effectively. Yet, many leaders also think their current practices need to be more contemporary and want to examine current practices to better understand and help curb the problems associated with this top-of-mind challenge. This article addresses the underlying problems commonly associated with faculty pay and suggests a proven solution for addressing them.
Problem 1: Compression
Salary compression (i.e., similar salaries despite different qualifications and/or experience levels) and inversion (i.e., higher salaries for less qualified or less experienced faculty than for more senior colleagues) are a function of market influences as well as institutional policies on pay progression. For example, compression often occurs when candidates negotiate salaries comparable to the salaries of current faculty. If they are negotiating even higher pay, inversion can result. Small or non-existent salary increases for current faculty over the past several years have exacerbated this problem. Although most institutions will pay what is necessary to bring in qualified new faculty and will try to do so without causing compression or inversion, this is not always possible. Institutions that do not regularly make market adjustments or lack a process for managing faculty pay progression will experience more significant, extensive, and costly compression and inversion issues.
Problem 2: Competitiveness
Maintaining competitive salaries for current and new faculty is not a new issue. In today’s environment of scarce financial resources, faculty and institution leaders alike are concerned about eroding competitiveness, particularly for tenured faculty and those in strategically imperative disciplines. Although many institutions—particularly those primarily focused on teaching—have been egalitarian in their approach to faculty pay, the “we all do the same job” approach is becoming less common, as more institutions struggle to balance their cultural values and market realities. Even leaders of colleges and universities committed to continuing the egalitarian approach admit that disciplines may pay differently and that failing to reflect market variations may hamper their institution’s ability to attract and retain faculty with the requisite qualifications.
Several reasons exist for discipline-specific pay differentials. Some disciplines—for instance, law, business, and engineering—have lucrative employment options outside academia. Others, such as religious studies, philosophy, and English—offer fewer options. Supply and demand also come into play, with some disciplines producing more PhDs than the market can absorb.
What constitutes an institution’s market seems to be in the eye of the beholder: national or regional; similar Carnegie classification; similar student population; academic or financial peers or aspirants. There are often differences of opinion between faculty and administration, and sometimes by school within an institution. Faculty in some disciplines may want to benchmark salaries outside academia (e.g., professional service firms in engineering or architecture for relevant faculty positions), but the challenge is how to incorporate this data into decision making. While no single answer applies to all institutions, an institution’s market should reflect its recruiting strategy, be viewed as credible with faculty, be used regularly as a reference to monitor faculty salaries, and consider the institution’s fiscal realities.
As more discipline-specific data become available, institutions must rethink the size of their defined market for benchmarking salaries. When salary data is collected by rank and not by discipline, a dozen or so institutions might be enough to get a general sense of competitiveness. However, such a small group would likely result in significant gaps when collecting discipline-specific salary data. Building a larger comparison market (at least 30 institutions) will provide richer data and will also be a stronger reflection of the talent market for faculty.
Problem 3: Pay Progression
Pay progression for current faculty is typically a function of promotional increases and annual salary increases, which frequently are across-the-board or only minimally differentiated by merit. Stipends are often used as compensation for discrete efforts or activities, such as committee participation. Small promotional increases, excessive use of stipends, and minimal pay recognition for productivity and/or scholarship over time tend to disadvantage senior faculty because their pay progression moves more sluggishly internally than the market moves externally. It is not unusual to find that the more senior the faculty member, the further his or her salary is from market value. While pay for performance is controversial in many institutions, academic and administrative leaders are increasingly maintaining that salaries must be tied to the performance and contribution of faculty. Creating the process for doing so fairly can be a challenge.
Stipends could be considered the ultimate means to pay for performance, but relying too heavily on stipends can have unintended consequences. For instance, this can encourage a narrow view of faculty responsibilities (i.e., some activities are “extras”). If stipends are used to excess and replace some or all of a salary increase amount, they can diminish the competitiveness of salaries unless communicated and systematized as total cash compensation. Overuse of stipends can also have a negative impact on retirement fund accumulation, since they often are not considered compensation for retirement plan purposes. In our conversations with academic leaders, most are expressing interest in clarifying overall faculty responsibilities, paying fairly and competitively, and using stipends less frequently but more strategically.
Problem 4: Workload
Workload expectations for faculty appear to be changing, particularly at smaller institutions. Even those that emphasize teaching are encouraging faculty to publish regularly or conduct research in their field. When faculty continue to develop in their field and are recognized by their peers, this benefits not only the faculty (individually and as a whole), but also the institution. At the same time, this may increase pressure on workload expectations. For instance, while course releases are intended to free faculty time to pursue scholarship and research, offering releases causes pressure on institutions to fill gaps in the classroom. Each solution—such as hiring more faculty, increasing class size, or hiring adjuncts—carries potentially negative implications.
Additionally, in many institutions, the proliferation and growth of online courses and programs may have a significant impact on workload, as faculty must adapt traditional courses and teaching styles to online platforms. Likewise, responsibilities for department chairs are more complex and time-consuming than in the past, yet their compensation and support has not changed much. At many institutions, faculty believe that compensation (course release, stipend, or both) does not come close to compensating the chairs for the position’s significant responsibilities and impact.
Problem 5: Pay Fairness
Compensation fairness must be viewed through an internal lens as well as an external lens. Are similarly situated faculty similarly paid? Do gender, ethnicity, and/or race play a role in pay levels? Are faculty who are contributing more to the institution and to their discipline paid accordingly?
To add another layer of complexity, multiple generations in the workplace are having an increased impact on the faculty community. What was valued in the past may not be similarly valued by younger faculty. New entrants to the profession may have very different expectations and needs from what their senior colleagues had when they were new. While junior faculty may be reticent to express their views to the same people who will be making tenure and promotion decisions, they do want to be paid competitively relative to the external market, and they want pay progression to reflect their performance. They expect that faculty who contribute more to their profession and the institution will be paid more generously than those who contribute less. They value tenure, but seem open to moving to a different institution if the opportunity and circumstances make sense.
Finally, in many institutions, faculty believe their salaries are unfair when compared to those of institution administrators. A cover article in the Dec. 5, 2011Chronicle of Higher Education compared the compensation of professors at various institutions with that of their presidents to show what the presidents earn as multiples of the professors’ salaries. While the methodology and results of the research can be disputed, such comparisons are being made in institutions across the country.
Defining a Faculty Pay Solution
While many institutions do an excellent job at actively managing faculty compensation and are able to avoid the problems discussed above, others could certainly benefit from a more strategic, contemporary approach to managing faculty pay. The title of this article refers to five problems inherent in faculty pay. However, in our experience, the single most common, over-arching problem is the lack of a clear, definitive, and up-to-date compensation philosophy that reflects an institution’s current needs.
When we meet with institutions about faculty pay, leaders raise issues of compression, competitiveness, pay progression, workload, and pay fairness as separate and distinct. Our experience suggests they are very much interrelated and must be viewed as such. For example:
- Starting salaries for new assistant professors may enable an institution to be more competitive for their first-choice candidates, but it may lead to salary compression.
- Compression may be exacerbated by small promotional increases, absence of salary adjustments for productivity or scholarship, or infrequent market adjustments.
- Market adjustments that consider only rank, and not discipline, may cause salaries for existing faculty to be misaligned with actual market trends, which in turn may lead to compression with incoming faculty.
Instead, a comprehensive compensation philosophy should articulate the guiding principles an institution will follow in administering a faculty compensation program. It should be more than a broad statement about attracting and retaining qualified faculty, and should address these essential questions:
- What market(s) will be used to benchmark salaries, and what is the desired pay position relative to those markets?
- How will discipline factor into salary decisions?
- How will faculty productivity be defined and considered?
- Will compensation be defined as salary, salary plus stipends, or salary and some type of incentive?
- Will ranges be established, and if so, how will they be used to administer salaries?
- What is the governance structure for the program?
Karen Hutcheson is a senior vice president for Sibson Consulting. She has more than 20 years of experience in compensation, performance management, and human resources consulting and specializes in working with higher education clients. E-mail: firstname.lastname@example.org.
Yelena Stiles is a senior consultant for Sibson Consulting. She specializes in compensation and performance management assessment,redesign, and program implementation for faculty, administration, and staff. E-mail: email@example.com.
Carolyn Wong is a senior consultant for Sibson Consulting. She specializes in the design and assessment of broad-based compensation and performance management systems. E-mail: firstname.lastname@example.org.