The University Record, February 28, 1994

Experimental pay program to continue

By Jane R. Elgass

Continuation of a three-year experimental one-time salary supplement program with no change in guidelines was announced earlier this month by Provost Gilbert R. Whitaker Jr. and Farris W. Womack, executive vice president and chief financial officer.

The program, which applies to both faculty and staff, was initiated last summer at the recommendation of the New Pay Committee, a faculty/administration group chaired by social work Prof. John E. Tropman.

The one-time salary supplements, normally in addition to base salary increases, are paid in cash to recipients for them to spend as they wish, Whitaker says.

“One-time salary supplements such as this constitute one of several concepts that are being proposed by various compensation experts under the general heading of ‘new pay,’” he says.

Among the units that have participated in the supplement program so far are the School of Business Administration on a unitwide basis, the School of Natural Resources and Environment, the College of Architecture and Urban Planning, and many of the business and finance units that report to Womack. Several other units participated on a limited basis.

Another approach—gain-sharing—has been operational at U-M Hospitals for two years. Under that program, each employee receives an equal “bonus” based on overall savings in operations.

Womack says the committee was asked last spring “to look into this subject and to give us advice on the applicability of this new thinking to the University’s own compensation practices.

“As one of its first actions,” Womak notes, the committee endorsed the three-year trial of salary supplements, with the stipulation that a formal evaluation would occur after the third year and before any continuation of the program beyond that time.

“We think this approach is another useful strategy, an additional one,” Wo-mack says. “It enables the University to respond to particular kinds of needs.”

Under the plan, units are encouraged to come up with additional salary funds to be used for one-time supplements. The only condition set by the administration is the magnitude of the program. There is none on the purposes for which the supplements are provided.

“These conditions,” Womack explains, “will limit the total amount that can be spent by the unit. Beyond that, each unit will be free to make the awards as it sees fit, subject only to the basic qualification that it must be based on merit.”

In their charge to the committee, Whitaker and Womack noted that “it is always appropriate for the University to review the effectiveness of its policies and procedures, but this is especially true during the period of constrained resources.

“We are asking you to examine the nature of the total compensation package received by our faculty and staff, and to determine whether there are creative new ways in which the same resources might be packaged that could better achieve both individual and University goals.”

Whitaker notes that it is “important to continue to experiment with alternate ways of compensating and rewarding faculty and staff, and this one-time salary supplement program is part of that effort. We are very pleased with the thoughtful attention paid to this topic by the committee and look forward to continuing to work with its members.”

Tropman says the continuing work of the committee is “to look at new strategies for total compensation and determine ways to test or assess their applicability to the University’s compensation program.”

He explains that in 1992–93 the Committee on the Economic Status of the Faculty (CESF) suggested to the Regents a cooperative effort to consider compensation matters.

“From CESF’s point of view, the lack of a salary program for that year was a major disappointment for faculty and staff. There were also a number of sources of dissatisfaction about some elements of pay administration, including lack of clarity about the policies that led to increments, and a sense that what is called ‘merit’ often confounded a number of dimensions, several of which were decidedly not related to any reasonable definition of contemporary merit.”

Issues being addressed by the New Pay Committee include such things as:

  • Why does there seem to be so much dissatisfaction with pay?

  • Why do we pay faculty and staff?

  • Is pay a reward or return?

  • Should we pay the job or pay the person?

  • How much pay is variable?

  • Should salary increases be specifically targeted to tasks?

    “We’re assessing the area of total compensation,” Tropman says, “and looking at both compensation vehicles and compensation management. One of the things the committee has discovered is that there is no uniform Universitywide compensation policy and many units are confused in administering elements of the compensation program.”

    Among the activities undertaken by the committee has been the reading of several books on new pay whose authors, interestingly, have U-M ties: Pay and Organizational Performance and Strategic Pay: Aligning Organizational Strategies and Pay Systems, both by Edward Lawler, formerly at the U-M and now at the University of Southern California, and The New Pay by Jay R. Schuster and Patricia Zingheim, who holds a B.A. from the U-M.

    In addition to Tropman, New Pay Committee members are Elizabeth A. Duell, assistant professor of dermatology; Robert S. Holbrook, associate provost for academic affairs; Scott E. Masten, associate professor of business economics and public policy; Chandler W. Matthews, associate vice president for finance; and Leo F. McNamara, professor of English language and literature.