Merit Pay for Faculty at Fairfield University

1
Merit Pay for Faculty at Fairfield University

• Presentation for the
• Academic Affairs Subcommittee
• Board of Trustees
• March 22, 2001

2
Faculty Presenters

• Paul Caster, Accounting Department, member of the
  Committee on Conference
• Nancy Dallavalle, Religious Studies Department,
  Chair of the Committee on Conference
• Phil Lane, Economics Department, member of the
  Committee on Conference
• George Lang, Mathematics Department, member of
  the Committee on Conference
• Irene Mulvey, Mathematics Department, Chair of
  the Faculty Salary Committee
• Kathy Nantz, Economics Department and General
  Faculty Secretary
• Cheryl Tromley, Management Department, expert on
  organizational psychology

3
Presentation Overview

• Introduction and purpose
• Merit pay from an organizational perspective
• Merit pay in practice in higher education
• Our current merit award systems
• Merit pay and our compensation system
• Budgetary implications of merit pay
• Merit pay for Fairfield An institutional
  perspective

4
Introduction and purpose

• Fairfield faculty involvement in discussions of
  merit pay.
• Various memos from AVP Grossman
• Faculty educating itself on role of merit pay
• Vote of General Faculty of 2/23
• The purpose of this presentation is to explain
  the Faculty position on merit pay.

5
Merit pay from an organizational perspective

• Change Why or why not?
• Implementation of change
• Compensation structure helps to define the
  culture of an organization
• Attention turns to tasks that are rewarded.
• Competition replaces collaboration.
• Can increase dissatisfaction, feelings of
  inequity, and lack of trust.
• Surveys show that 70 of employees in any pool
  believe they are above average.
• POINT Effective change requires a clear causal
  connection to strategic objectives.

6
Merit pay in practice in higher education

• A sampling of studies and responses from other
  institutions.
• Problems with merit pay in theory.
• POINT The faculty has an educated position
  against merit pay that is informed by current
  research.

7
ReportCalifornia State University

• Abacus Associates Report on faculty merit
  increase program at the California State system
• The Faculty Merit Incentive system (FMI)
  discriminates against women.
• In direct contradiction to the mission of the Cal
  State system, FMI awards are based more on
  scholarship and they are not related to quality
  teaching.
• The overwhelming majority of faculty oppose the
  FMI program.

8
SurveyThe University of San Diego

• The following are responses to an independent
  merit survey (n104)
• The criteria for merit pay increases are clear to
  me I know what constitutes meritorious work.
  Slightly disagree
• Cost of living increases should be separate from
  merit increases. Strongly agree
• I think USD should abandon the current merit
  process in favor of a more equitable system.
  Agree

9
Other survey results

• From the final report of the CSU Academic Senate
  merit pay task force
• Nearly all CSU faculty intensely disliked the
  PSSIs (Performance Salary Step Increases).
• Most faculty are deeply suspicious of any form of
  merit pay other than that provided presently
  through retention, tenure, and promotion.
• No one contacted, including presidents and a
  former Trustee, could clearly state the rationale
  for the PSSI.

10
Literature analysis

• From the final report of the CSU Academic Senate
  merit pay task force
• Most articles pointed out that merit pay, for
  various reasons, does not motivate
  peopleespeciallyin education where motivations
  for being in the profession were not primarily
  monetary.

11
Other institutions

• From the final report of the CSU Academic Senate
  merit pay task force
• Penn State dropped its merit system.
• Western Michigan dropped the faculty-run portion
  of its merit system when faculty threatened a
  strike.
• After consideration, CUNY chose not to adopt a
  merit system.

12
Comment Connecticut CollegeProfessor of
Psychology

• I think I can speak for my colleagues here in
  saying that if you can avoid it merit pay,
  dont do it. It has achieved nothing but
  animosity, it divides the faculty into gets and
  gets-nots, it is perceived as being unfairThere
  is a literature in industrial organizational
  psychology and in economics and management that
  shows that merit pay rarely achieved its desired
  ends and almost always causes anger and
  dissention. We do not want it here but the
  trustees and president have insisted upon it, so
  we struggle to try to do it better -- with little
  success. Note The President of Conn College
  was effectively forced to resign in the face of
  mounting faculty opposition to the autocratic
  administrative style at Conn College.
• Private communication from Prof. Joan Chrisler,
  Chair of Psychology at Connecticut College

13
Experts on merit pay

• From the final report of the Academic Senate
  merit pay task force -- Professor Ed Lawler, USC,
  a leading expert on alternative pay models
• There have been over 3,000 studies of merit pay
  over the past two decades and only 100 claim
  positive results.
• Most merit pay systems fail to have any impact on
  motivating workers to perform better.

14
Experts on merit pay

• From W. Edwards Demings 14 Points for
  Management
• 12b. Remove barriers that rob people in
  management and in engineering of their right to
  pride of workmanship. This means, inter alia,
  abolishment of the annual merit rating and of
  management by objective.
• From Out of the Crisis

15
Experts on merit pay

• Robert Heneman, a leading merit pay advocate,
  describes when not to do merit pay
• merit pay does indeed have some desirable
  features, and those who reject merit pay under
  all circumstances have gone too far. Based on
  the material presentedon the feasibility of
  merit pay, it can be concluded that those who
  endorse merit pay in all circumstances have gone
  too far...

16
Experts on merit pay

• Robert Heneman (continued)
• Merit pay should clearly not be used under the
  following three sets of circumstances
• 1. The budget is too small or economic
  conditions are too tight to allow the granting of
  large increases to good performers,
• 2. Employees value leisure, recognition, or some
  reward other than pay increases, or they prefer
  the allocation of rewards on the basis of equity,
  seniority, or some basis other than merit.
• 3. Institutional arrangements are such that
  ratings of employee performance do not capture
  performance valued by the organization.
• From Merit Pay

17
Our current merit award systems

• Tenure and promotion
• Senior scholar awards, research grants
• Sabbaticals and summer stipends
• Humanities Institute
• POINT We already have a structure that links
  faculty compensation to performance outcomes.

18
Merit pay and our current compensation system

• Research shows merit increases must be at least
  7 over COLA to be effective.
• Distinguishing market equity issues from other
  problems merit pay might address.
• Cost implications of traditional merit pay.
• POINT Merit pay cannot take the place of cost
  of living increases for all.

19
Three merit scenarios on this years salary
increment

• Current distribution 3.5 COL .1
• Salary increase COL .1 COL .1 COL .1
• faculty 5 70 25
• Average increase in purchasing power
• 3.46/pay period for professors
• 2.76/pay period for associate
• 2.32/pay period for assistant
• Total cost to the University 507,662

20
Scenario 2 Current distribution with merit
scheme imbedded

• Salary increase COL 0 COL .1 COL .12
• faculty 5 70 25
• Average increase in purchasing power for
  meritorious faculty
• 4.16/pay period for professors
• 3.31/pay period for associate
• 2.78/pay period for assistant
• Total cost to the University 507,662

21
Scenario 3 Minimum requirements for merit pay

• Salary increase COL 0 COL 2 COL 7
• faculty 5 70 25
• Average increase in dollars for 2 faculty
• 69.36/pay period for professors
• 55.35/pay period for associate
• 46.43/pay period for assistant
• Average increase in dollars for 7 faculty
• 242.76/pay period for professors
• 193.74/pay period for associate
• 162.51/pay period for assistant
• Total cost to the University ??

22
Paying for merit pay -- Budgetary implications

• Salary compression issues.
• Market equity issues in compensation.
• The direct cost of a merit pay scheme.
• The cost to the University of administering a
  merit pay scheme.
• POINT Can we afford merit pay at Fairfield?

23
Paying for merit pay Direct costs

• Following is a partial list of items in the
  budget that will be directly impacted by a merit
  pay system
• Merit compensation for approximately 55 faculty
  members (assumes 25 are meritorious each year)
• Increase in research committee budget to support
  faculty research
• Increase in faculty travel budgets
• Increase in library resources (research books,
  monographs, and journals)
• Increase in computer database resources
• Increase in faculty development costs

24
Paying for merit pay Indirect costs

• Following is a partial list of costs to the
  university of a merit pay system
• Administrative time spent determining who is
  meritorious each year
• Faculty time spent determining who is meritorious
  each year
• Cost to train evaluators
• Time and effort to provide feedback to each
  faculty member each year
• Time and cost to appeal unfavorable merit
  decisions each year
• Documentation costs
• Cost to assess the effectiveness of the merit pay
  system

25
Paying for merit pay Unintended consequences

• In addition to the above costs, we believe the
  following unintended consequences will result in
  additional costs to the university community as
  follows
• Decline in teaching effectiveness (faculty will
  be forced to refocus their energies on those
  aspects of their performance that can and would
  be measured in a merit pay system)
• Decline in service (same rationale as above)
• Faculty dissatisfaction (as seen at other
  universities that have merit pay systems)
• Student dissatisfaction (as teaching
  effectiveness and service to students declines)

26
Merit pay at Fairfield An institutional
perspective

• Compensation scheme helps define the culture of
  an institution.
• Unintended incentives buried in merit pay systems
  -- individual over institutional priorities.
• Collegiality at Fairfield.
• Downsides to faculty / administration rift over
  merit pay.
• POINT Compensation schemes must fit our
  institutional goals and objectives.

27
General Faculty Motion IFebruary 23, 2001

• IF a merit system is narrowly understood as
  "merit pay", and if "merit pay" is understood as
  a change in the allotment of the annual salary
  increase - as results from the Salary Committee's
  discussions with the administration - from an
  "across-the-board" allotment to a system whereby
  a greater percentage of the increase is allotted
  to those deemed meritorious and a lesser
  percentage of the increase is allotted to those
  deemed non-meritorious
• THEN the General Faculty asks that the Board of
  Trustees direct the Fairfield University
  administration not to develop a merit pay system.
  
• The motion passed, 93 in favor, 2 opposed, 1
  abstention.

28
General Faculty Motion IIFebruary 23, 2001

• The faculty requests that the Board of Trustees
  provide faculty with goals that any change in
  compensation being considered are intended to
  meet and that any vote on compensation changes be
  delayed until such time as faculty have an
  opportunity to address the Board of Trustees'
  goals along with possible methods of attaining
  them and their potential impact on our
  institutional mission.
• The motion was approved, 90 in favor, 1 opposed.