The University Record, November 22, 1999

Faculty Perspectives

Compensation Policy Guidelines

By Scott E. Masten, Professor of Business Economics and Public Policy, and former chair, Committee on the Economic Status of the Faculty (1998–99)

Reproduced here is a proposed set of Compensation Policy Guidelines for Faculty and Primary Research Staff developed last year by the Committee on the Economic Status of the Faculty (CESF) in consultation with the Office of the Provost. In the spring of 1998, following several years of study and discussions with faculty and administrators, CESF produced a set of compensation policy recommendations that were subsequently unanimously endorsed by SACUA and the Senate Assembly. Over the course of the following year, CESF and the Provost’s Office entered a new round of discussions aimed at shaping those recommendations into a statement of principles satisfying the concerns of both faculty and the administration. The statement printed below is the result of those discussions.

The impetus for CESF’s efforts to develop a compensation policy for the University was the desire of many for greater transparency and consistency in the compensation process. Our own experiences and conversations with colleagues indicated that many faculty do not know how their compensation is determined or the factors that affect their compensation. And, indeed, there appears to be no standard practice: An informal survey by CESF of salary decision-making in schools and departments across campus revealed wide variation in compensation procedures and practices among units. A primary objective of CESF in developing the guidelines was to reduce some of the mystery surrounding compensation decisions—and, thereby, the incidence of mistakes and misunderstandings between faculty and administrators—by encouraging each unit to disseminate a written description of its policies and practices with respect to compensation.

The second aim of the guidelines is to reinforce the integrity of the compensation process by delimiting the legitimate uses of compensation. While endorsing the need of administrators for discretion and flexibility in setting salaries, the guidelines also call for those who exercise such discretion to be held to the highest standards of responsibility and accountability. This means, in particular, that compensation decisions should be free from bias and discrimination and should not be used to punish or to discourage faculty from undertaking unpopular research or expressing views contrary to those of administrators.

The University has obviously operated and survived without an explicit compensation policy. So why the drive to adopt one now? One likely factor is the increased size and complexity of the University, which has placed greater distance between central administrators and ordinary faculty and left the former either unable or unwilling to review the actions of deans and department heads for conformance with academic norms and the interests of the broader institution. At the same time, the proportion of faculty compensation that is both unreported and “at risk”— that is, payments that supplement (or substitute for) a faculty member’s regular academic year salary and are therefore both excluded from the University’s published salary figures and susceptible to year-to-year adjustment in toto—has been growing, providing administrators greater flexibility both to reward and, through the removal or withholding of such payments, to punish on an annual basis. Decentralized organization and administrative discretion in setting compensation are not bad in and of themselves. The simultaneous expansion of discretion and reduction in the accountability of those who make compensation decisions, however, have increased the desirability of adopting an explicit reminder of the principles that guide compensation decisions at the University of Michigan.

Over the coming months, SACUA and the Provost’s Office will be soliciting reactions to the proposed guidelines from faculty and deans for consideration by an ad hoc committee of faculty and administrators charged with reviewing the policy. Faculty who wish to express views on the proposed guidelines are encouraged to send their comments to the committee members who were nominated by elected faculty governance: W. Ensminger, Professor of Pharmacology; D. Malamud, Professor of Law; and G. Keenan, Assistant Professor of Nursing.

Compensation Policy Guidelines For Faculty and Primary Research Scientists Compromise Version Developed by the Committee on the Economic Status of the Faculty in consultation with the Office of the Provost

Preface. This document describes compensation policy guidelines for consideration by the Schools, Colleges and Divisions of the University of Michigan (hereafter referred to as Units). The purpose of these guidelines is not to impose uniformity in compensation policies among Units but rather to articulate a set of widely-shared principles for the determination and communication of faculty compensation decisions, to which individual Units can refer in fashioning compensation policies and procedures that conform to the circumstances and customs of the Unit and academic disciplines.

Two features of the Guidelines deserve emphasis:

1. Under the Guidelines, deans and other designated administrators retain full and ultimate authority and responsibility for compensation decisions. The faculty and administration jointly recognize that deans and others responsible for faculty compensation decisions must retain the discretion and flexibility to set compensation both in recognition of the diversity and subtlety of faculty contributions to scholarship, teaching and service to the institution, and in response to market conditions.

2. The aim of the policies enumerated in these Guidelines is to improve communication between faculty and decision-makers regarding the basis for compensation decisions and, thereby, to reduce the incidence of mistakes and misunderstandings and enhance confidence in the coherence and integrity of the salary determination process.

Purposes and Uses of Compensation

The function of compensation at the University of Michigan is (i) to attract and retain outstanding faculty and (ii) to reward faculty for their teaching, research and other relevant contributions, such as service to the University, profession and community. Moreover, it is essential to the integrity of the institution that compensation decisions be free of bias and discrimination and that compensation not be used to subvert academic freedom or the autonomy of the faculty in those matters directly assigned as their responsibilities by the Regents’ Bylaws.

Policies

1. Non-discrimination. Salary policy is subject to the nondiscrimination policies of the University, which prohibit discrimination by race, sex, color, religion, creed, national origin or ancestry, age, marital status, sexual orientation, disability, or Vietnam-era veteran status.

2. Openness. The compensation policies and procedures of each Unit should be written, public and accessible, enabling faculty to know how compensation within that Unit is determined. In particular, each Unit should distribute to its faculty, updated as appropriate, descriptions of the factors (such as scholarship, teaching and service) considered as components of merit and the process through which merit assessments are made, including the role that market and equity considerations play in assessing merit and determining compensation. The statement should also identify those officially responsible for final decisions as well as other parties who contribute to the decisions.

3. Consistency. Factors affecting salary determinations should be applied in a consistent fashion to all faculty in the Unit.

4. Peer review. Academic peer review is based on the premise that a single individual can possess neither the expertise nor all of the information necessary to evaluate reliably and accurately the many contributions of a diverse faculty. To promote reliability and accuracy in compensation decisions:

A. Peer evaluations of faculty performance should be conducted annually. Such evaluations may be performed by the Unit’s Executive Committee, that faculty committee charged with making recommendations regarding appointments and promotions, or another committee or group of knowledgeable faculty specifically designated for the purpose of faculty performance and salary review. Peer assessments may take the form of summaries, numeric or categorical ratings, salary recommendations or another suitable form and, depending on the established procedures of the Unit, may be communicated to the dean or other appropriate administrator either as a single, collective recommendation or as the separate recommendations of the individual reviewers. University practice, in conformance with state law, is to make such assessments available to the faculty member on request.

B. Annually, following the determination of salaries by the appropriate decision-maker, the faculty members responsible for conducting peer reviews should review actual salary decisions in relation to their merit assessments and for overall consistency and equity. Discussions between salary decision-makers and peer reviewers about salaries may take place at this time. Members of the faculty body charged with conducting peer reviews are encouraged to report to the faculty summary information (such as averages, ranges, correlations, etc.) on performance reviews and salary assignments.

5. Communication. Decision-makers responsible for determining compensation should provide, at appropriate intervals or at the request of the individual, an evaluation of the individual’s performance as it relates to the merit criteria employed by the Unit and the faculty member’s compensation. Specifically, in addition to peer evaluations, decision-makers are encouraged to provide (i) an assessment of the individual’s performance in relation to the merit criteria employed by the unit, (ii) an explanation of the relation between that assessment and the individual’s compensation within the context of the overall salary structure of the unit, and (iii) other types of relevant information that would contribute to the faculty member’s understanding of the rationale for his or her salary. A description of what a faculty member could do to improve performance evaluations and his or her compensation is likely to be particularly helpful.

6. Accountability and disagreements. Ultimate authority and responsibility for compensation decisions rest with deans and other designated administrators. Consistent with overall University policy, however, individuals charged with that responsibility are expected to be scrupulously fair and consistent in the application of that discretion. In cases where the faculty member believes that factors other than judgments of professional competence entered a salary decision, a faculty member may request a review through the Unit’s Grievance Procedure.

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Footnotes:

1An important but unresolved question is the application of these procedures to clinical, adjunct and other nongoverning faculty who are not, in general, represented on Unit Executive Committees and whose duties often differ from those of regular faculty. One suggestion would be the creation of representative advisory committees for nongoverning faculty within units to perform the functions of the peer review committees in these recommendations.

2In Units where the separate recommendations of the individual reviewers are communicated to the decision-maker, the identity of reviewers is not to be linked to specific evaluations. Although individual Units may set their own policies, it is expected that requests to see peer reviews will be made after salary decisions have been communicated rather than during the salary determination process.

3CESF and the Provost’s Office have discussed the issue of whether a dispute concerning salary determination can be grieved under the several faculty grievance procedures. Discussions on this issue need to continue, but there is agreement that, in cases where factors other than judgments of professional competence significantly affect the decision, the matter may be grievable.