Vol. 1, No. 6

Report on Compensation

This past month, the Compensation Committee published its long-awaited – and much anticipated – report, which offers a general philosophy justifying a new approach by the University to its compensation system. The report contains a number of recommendations for implementing a performance-based pay system with simultaneous consideration of standards of internal and market equity. I am very impressed with the Committee's work. Its recommendation to move to a performance-based compensation system reflects the policy of the majority of first-rate universities, and I believe it also represents the sentiments of the Board of Governors. You can find information about the Committee and its work, including the final report at: http://www.missouristate.edu/president/compensation/

The Committee arrived at its recommendations after studying the scholarly compensation literature, examining prior University reports, conducting a number of open meetings as it developed its report, and providing ongoing opportunities for input from the campus community. In addition, along with the Committee, I conducted two town hall meetings to explain and discuss the report.

In this issue of Friday Focus, I want to describe the next steps I intend to take regarding the major recommendations in the Committee's final report. On April 11, I will present this information to a joint meeting of the Faculty Senate and Staff Senate for their feedback. I also invite feedback from the entire campus community. I will send the Committee's report to the Board of Governors soon, indicating my general endorsement of the report. In addition, I will present to the Board, at its May meeting, a resolution that begins to implement many of the Committee's recommendations. In order to keep the campus well-informed about this process, I want to summarize a set of specific actions that will be necessary as the University begins to change its compensation methods. In addition, I will identify those few recommendations in the Committee's report with which I do not agree and which I will either not recommend or will recommend in modified form to the Board.

1. I believe the Committee's underlying philosophy, assumptions, and principles of compensation are sound, and I will ask the Board to include them as the guiding bases for the institution's compensation system. As a reminder, the underlying philosophy that animated the compensation recommendations is as follows:

   Missouri State University System will strive to maintain a total compensation package for faculty, staff, and administrators that is directed toward attracting, retaining, and rewarding a highly qualified, engaged, committed, and diverse workforce to serve the University's students and the State of Missouri. Compensation shall be externally competitive when compared to the appropriate market, internally equitable, and based upon individual performance, qualifications required, and the complexity, scope, and impact of the work performed. Performance should be directly linked to obtaining pay rewards of sufficient magnitude to be valued. Strategically, the compensation system should, in conjunction with other human resource strategies, contribute to workplace conditions that support employees at all levels of the University in meeting or exceeding performance standards. Performance management and compensation increases will be directly linked with the furtherance and achievement of the University's strategic goals; there should be a strong correlation between the strategic goals of the University and the goals and objectives set by supervisors and their employees. Employee performance will be evaluated in relationship to achievement of employee goals and objectives.

2. The Committee recommended a Compensation Matrix as the means of operationalizing pay increases that consider performance/merit and equity simultaneously. I support this approach, but I recognize that there are many details governing its use that are yet to be decided. Therefore, I will appoint a standing University Compensation Committee to monitor the development of the matrix, evaluate its use over an initial two-year pilot period, and recommend any necessary changes in it for future use.
3. For the coming fiscal year (Fiscal Year 2007, which begins July 1, 2006), I will follow the Committee's recommendation that salary increases for the faculty be assigned consistent with the policies of the current Faculty Handbook. Specifically, for the coming year, three-fourths of the available salary pool for both faculty and staff shall be distributed as an across-the-board increase and the remaining one-fourth of the pool shall be allocated by cost-center heads on the basis of performance evaluations and/or equity considerations. Cost-center heads should be prepared to justify their salary distribution decisions on the basis of considerations of performance and/or equity rationales. In order to gather performance evaluation information for use in Fiscal Year 2007, all staff and administrators who have not received a performance evaluation in the past 12 months shall be evaluated by May 1, 2006, using the existing one-page performance evaluation tool that is provided by the Office of Human Resources.
4. For Fiscal Year 2007 only, the Compensation Committee recommended that the portion of the increase for staff that is distributed across-the-board be allocated as a fixed dollar amount instead of as a percentage increase. While I understand the principle that led to this thinking, I have decided to not follow this recommendation. I believe that faculty and staff should be treated as similarly as possible, another principle that the Committee endorsed. Therefore, for Fiscal Year 2007, the across-the-board component of all salary increments shall be determined on a percentage basis.
5. Through available processes, I will seek that the relevant sections of the Faculty Handbook addressing compensation be modified so that the performance matrix process recommended by the Compensation Committee serve as the basis for assigning faculty salary increases, effective for Fiscal Year 2008 (which begins July 1, 2007).
6. Consistent with the Committee's recommendation, I will ask the Board of Governors to discontinue the current step-and-grade system, effective July 1, 2006, and implement a three-phase transition period for staff (from now to June 30, 2008) that should allow full implementation of the Compensation Matrix for salary increases that go into effect on July 1, 2008. This transition period for staff is necessary to allow time to update job descriptions, perform job evaluations, establish pay ranges for positions currently lacking pay ranges, refine the proposed new performance evaluation tool, and train the workforce to use the new performance evaluation tool. Additionally, the Employee Handbook and the International Brotherhood of Electrical Workers (IBEW) Memorandum of Agreement must be revised.
7. Although the Committee recommended that step increases be discontinued for Fiscal Year 2007, I have decided to budget a 1 percent increase for all staff eligible for a step increase in Fiscal Year 2007. This 1 percent will be in addition to the 3 percent raise pool expected to be available for faculty and staff in Fiscal Year 2007.
8. I will provide the budget necessary during the next two years to develop, introduce, and refine the new compensation system, with a focus on its implications for staff. This period will be used to update job descriptions; perform job evaluations and place positions into pay grades and ranges; and develop a new evaluation tool and train the campus in its use. These steps will be undertaken by Missouri State University faculty (with an expertise in compensation) and the Office of Human Resources. I anticipate that this effort will result in a reclassification analysis performed on all staff positions. Consistent with the Committee's recommendation, requests for reclassifications will be suspended until the new pay grades and ranges are established.
9. As recommended, I will fund the "Data on Demand" service available from the College and University Personnel Administrators (CUPA) to help establish market salary levels and appropriate pay ranges.
10. I will ask the Provost to administer a process by which academic departments and colleges develop written procedures and guidelines for performance evaluations. Although units should have considerable flexibility in developing these procedures and guidelines so that they are consistent with the norms of the respective disciplines, they must also be consistent with the relevant University criteria for faculty performance and advancement. Each department's evaluation process must involve a Departmental Personnel Committee, selected by the faculty, to provide performance input to the department head on all ranked faculty and non-temporary lecturers. Each college must also have a College Personnel Committee, which will be charged with assisting and advising the dean in the administration of the Compensation Matrix. Membership of this committee should involve a process by which departments, using methods of their choice, forward names to the Dean, who shall appoint the college committee. The Compensation Committee makes a number of recommendations concerning the timing, documentation, and appeals of performance evaluations. I will ask the Provost to use these recommendations as the basis for further developing the faculty performance methodology.
11. The Committee recommended formation of a Presidential committee with representatives from faculty, staff, and administration, to develop a performance evaluation approach and a performance assessment instrument to evaluate the performance of all University administrators (except the President, who is evaluated by the Board of Governors). I will appoint such a committee this semester.

Among its "concluding thoughts," the Committee acknowledged that if its recommendations were pursued, Missouri State University would move from a culture of equal, across-the-board pay increases to one in which pay increases are differentiated, in part, based upon performance. Such a change is no small matter, but I believe that transition is in the best overall interest of the University and its employees. It should better align individual performance with institutional goals; it should ensure higher levels of accountability to our constituents; and it should promote greater levels of internal and external equity for University employees.

I also recognize that for any compensation system to be effective and respected, the University must also diligently pursue the priority of securing the funding that will guarantee competitive salaries. I will continue to treat that priority as a personal obligation, and I hope you see this year as a reasonable start in that direction. We have internally reallocated a portion of our operating budget to provide a 1 percent salary pool to address pressing equity problems in salaries; and for next year, we are budgeting for an overall 3 percent raise pool in addition to a 1 percent step increase pool, the last year of faculty roles and rewards, and a faculty promotions pool. (The Ad Hoc Process Improvement Committee will soon submit its report with recommendations for salary objectives.)

Thanks to the good work of the Compensation Committee and the thoughtful input from the campus community, we have an excellent set of recommendations to guide us. I have appreciated your involvement thus far and I urge you to continue to provide input as we finalize and implement the plan. It will take some time, and it will not always be easy. But I am convinced it will be worth it for the long-term future of Missouri State University.

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