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Improving Faculty Compensation

April 3, 2009

In the 2009 list of Fortune’s “100 best companies to work for,” a university was included for the first time. It was, however, near the bottom of the list, 98th. Universities pride themselves on being progressive institutions with enlightened hiring and work-place policies. Why are universities, in reality, not such great places to work? Why is Harvard or Michigan State University not as good a place to work as a Whole Foods Market or a Starbucks?

There is considerable job dissatisfaction among university faculty, especially mid career faculty. Increasingly, they feel under appreciated and underpaid. This was even true before budget cuts began due to reduce endowment income and/or lower state appropriations resulting in increased faculty workloads. The mantra at universities these days is “leaner and meaner.”  More and more university administrators are sounding, and unfortunately acting, like nineteenth century robber barons.  They are now primarily or exclusively interested in the amount of money that the faculty generate in student clock hours (read tuition) or research grants. What particularly galls faculty in the new entrepreneurial university is that they have such little control over their own salaries after they are hired.

According to numerous surveys, the greatest source of dissatisfaction of university faculty is with their compensation (see for example Amey and VanDerLinden 2002). Aside from “benchmarking” salaries to those of their “peer” institutions and promising to try to improve the institution’s rankings in the peer group, university administrators put very little effort into improving faculty satisfaction with the policies and procedures used to determine faculty compensation. Developing better salary policies and procedures may not in and of itself make universities better places to work, but it would be an essential first step.  What follows are some ideas for improving faculty involvement in determining their salaries and satisfaction with their salaries.

Policy Choices

Compensation is only one factor that influences faculty satisfaction, and manipulating faculty salaries may only have a marginal impact on faculty performance and satisfaction, especially that of senior faculty. Nevertheless, the future of any university is highly dependent on its salary structure, and vague criteria and procedures for determining faculty salary adjustments often result in faculty conflict, confusion, and distrust (Amey and VanDerLinden 2002).

In the United States, there are significant problems with faculty salaries and the procedures used to adjust them.  With adequate discussion and consultation between administrators and faculty leaders, more effective compensation policies and procedures can be developed that will improve the satisfaction of the faculty and improve the stature of the university. Some major policy issues that need more discussion among faculty leaders and between faculty leaders and university administrators include:

(1) Equal pay for equal work. The role of the external market place. Should we pay engineers more than philosophers? Does using the external market to determine pay scales and annual raises undermine collegiality?

(2) Cost of living adjustments versus merit salary increases to base salary. Which should take precedence?

(3) Pay for performance. Linking annual salary increments to annual performance. Should merit increases be based solely on some appropriate measure of performance? If so, what is this measure?

(4) Decoupling faculty evaluation and faculty compensation. The purpose of faculty evaluation is to improve faculty performance. If current performance is linked to faculty compensation, faculty evaluations become less effective and faculty performance in the future may suffer.

(5) Multi-years vs annual merit salary adjustments. Annual merit adjustments often lead to inequities due to annual variation in state appropriations and other factors that can often be overcome or reduced by merit adjustments based on several years of performance.

(6) One-time bonuses not added to base salaries rather than merit increases to reward exceptional performance in a given year. Bonuses could be given in years when merit adjustments are not made in a multi-year merit evaluation system (see (5)).

(7) Standardizing compensation using career ladders. For example, the adoption of a standardized salary schedule like that of the University of California system.

(8) Internal consistency in compensation procedures. What should be the role of the central administration, college and department in compensation procedures?

(9) Faculty participation in compensation procedures. For example, should there be an elected departmental salary compensation committee in each department? “A successful merit pay system requires faculty involvement from implementation to evaluation.” (Amey and VanDerLinden 2002).

(10) Elevating teaching and service as criteria for salary adjustments. At research universities, it is  widely believed that teaching is not as important in annual salary determinations  as research.  Logically, faculty try to minimize their teaching loads.

(11) Non-tenure-eligible (NTE) or contigent faculty members are poorly paid in merit based compensation systems. Does salary compensation for NTE faculty need to be based on different criteria and procedures than that for tenure-track faculty? For example, giving NTE faculty a fixed amount of money as is done for promotion for tenure track faculty rather than a percentage increase in salary.

(12) Collective bargaining and faculty compensation. At comparable institutions, those with faculty unions generally have higher salaries than those that do not.

(13) Improving compensation other than salary. No or reduced tuition for family members?  Automatic travel grants? Automatic development leaves? Improved medical insurance?

(14) How to use merit pay increases to reward collaboration and teamwork. Should all members of a team receive the same merit increase? Should bonuses be used to stimulate or reward teamwork?

(15) More detailed written polices and procedures that govern faculty compensation adjustments that are widely disseminated.

Annual Salary Adjustments

There are numerous policy and procedural issues that affect faculty perception of the fairness and adequacy of their compensation. According to Hearn (1999), these include:

(1) Is the procedure for making salary adjustments understood on campus? (Is it uniform across campus? How are teaching, scholarship, and service weighed?)

(2) Are the procedures for salary adjustments equitable? (Do affected parties have a role in the process?)

(3) Are the outcomes equitable for faculty in different fields and ranks? (How much is salary compression considered? Tenure status, especially tenure track vs non-tenure-eligible or contingent faculty status? Outside markets? Gender? Race/ethnic minority?)

(4) Is the procedure congruent with university strategic initiatives and management?

(5) Is the procedure used to adjust salaries efficient?

(6) Does the procedure have adequate flexibility to respond to crises and special cases?

(7) Is the procedure assessed and evaluated regularly?

At a minimum, any rational and just compensation policy should have three essential features: (a) outcome equity, (b) procedural equity, and (c) operational efficiency. Unfortunately,  compensation policies at most universities have none of these features.


Amey, M. J. and K. E. VanDerLinden. 2002. Merit pay, market conditions, equity, and faculty compensation. NEA 2002 Almanac of Higher Education:21-32.

Hearn, J. C. 1999. Pay and performance in the university: an examination of faculty salaries. Review of Higher Education 22:391-410.

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