ACADEMIC AND ADMINISTRATIVE STAFF COMPENSATION REVIEW

Transcription

1 Texas Woman s University ACADEMIC AND ADMINISTRATIVE STAFF COMPENSATION REVIEW Final Program Recommendations February, 2013 Copyright 2013 by The Segal Group, Inc., parent of The Segal Company and its Sibson Consulting Division. All Rights Reserved

2 Executive Summary Objectives, Findings and Recommendations Program Recommendations Faculty Program Recommendations Staff Roadmap for Prioritizing Recommendations Appendix Copyright 2013 by The Segal Group, Inc., parent of The Segal Company and its Sibson Consulting Division. All Rights Reserved

3 Executive Summary Objectives Key objectives for the Academic and Staff Administrative Compensation Review are: Develop a compensation philosophy that accurately reflects the goals of Texas Woman s University (TWU) for attracting and retaining qualified faculty and staff Evaluate current compensation processes, models, policies, and practices for both faculty and staff against effective market practices and the new compensation philosophy Recommend changes to compensation policies and practices for both faculty and staff that align with the desired compensation philosophy and institution goals Specifically, For Faculty Salary increases for promotion and tenure All or nothing approach of elevating faculty to 90% of market within one year Methodology for using CUPA-HR salary survey(s) Feasibility of faculty salary inequity pool Feasibility of one-time stipends to recognize and reward extraordinary accomplishments For Staff Methodology for collection and use of salary surveys Role, value, and placement of internal equity in salary survey process Alignment between salary structure and career advancement opportunities 2

4 Executive Summary Assessment Findings The assessment identified four key themes, which served as the basis for the program recommendations. 1. There is dissatisfaction and mistrust of the current compensation system among faculty and staff resulting from: A limited Compensation Philosophy, focused primarily on competitive position Lack of overall understanding of policies, practices, and processes Absence of increases in a number of years 2. The current pay philosophy of targeting 90% of market does not align with the Institution s current talent needs or strategic direction of the University for both faculty and staff 3. On average, TWU is paying competitively against its current definition of market, which is defined as 90% of the market average for both faculty and staff. However, the differences in comparison markets between Faculty and Staff, and the competitive assessment methodology add to the mistrust and dissatisfaction 4. Current pay policies are fairly rigid and tightly centered around specific market data in order to prevent perceived favoritism and abuse of the system. However, Current market data is not robust enough to support this process Pay decisions are relatively centralized, contributing to mistrust Desire for performance based pay differentiation is blocked by lack of clear performance criteria and ineffective or non-existent performance management processes 3

5 Executive Summary Program Recommendations The summary recommendations are based on findings from the assessment and on effective compensation practices in higher education. Specific details for these recommendations are provided in the following sections of this report. Compensation Philosophy Finalize an overarching compensation philosophy for the Institution with variations in competitiveness, classification, job and compensation structure for both faculty and staff based upon strategic significance and impact to optimize available financial resources Prioritize and implement program recommendations beginning with a shared understanding among University stakeholders about TWU s compensation philosophy Faculty Compensation Program Develop a comparison group of institutions that is relevant for TWU in terms of institution type, size, and academic program and target pay at the median of this revised market Group disciplines paid similarly in the market and develop salary ranges for discipline groups in order to recognize real differences in the market and manage internal equity Progress faculty through the ranges based on merit. Use the salary ranges along with internal equity, market competitiveness, and performance to inform increases for promotions Begin addressing pay inequities in the short-term by conducting regular equity reviews and establishing an equity pool. Design and implement an outstanding contribution rewards program, following the equity adjustment process and implementation of the Salary Range Program based upon the compensation philosophy 4

6 Executive Summary continued Program Recommendations Staff Compensation Program Develop a comparison market that is relevant and specific to different job types at the Institution. Collect market data from a breadth of organizations through published salary surveys Develop a salary structure(s) for all staff at TWU with midpoints based on the market median of the revised market data Establish guidelines for setting starting salaries within the salary structure in order to provide managers with some flexibility to make pay decisions. Progress staff through the salary grades with merit increases based on performance Map University jobs to clear career paths that help staff prepare for growth opportunities and set accurate expectations about career advancement at the University Equip managers with the tools to understand the compensation and performance management programs and communicate the programs to their staff Detailed recommendations for the faculty and staff compensation programs are provided in the following sections of this report. 5

7 Specific Recommendation Details The following sections for Faculty and Staff include detailed recommendations followed by an integrated implementation roadmap. The Faculty and Staff recommendations describe Best practice examples Specific recommendations and examples for TWU A multi-year roadmap for implementation integrates the two sets of recommendations While this report focuses on design recommendations, it is important to recognize that even the best compensation program design can fail if implementation does not take into account communications and a change management strategy In order to provide context for the recommendations contained in this report, the following pages illustrate how an effective compensation program will support TWU in fulfilling its educational mission and help create a strong employment value proposition for faculty and staff This report is designed to illustrate what an effective compensation program looks like as well as provide a roadmap for implementing the recommendations. 6

8 The Compensation System The recommendations in this report focus on career progression, compensation program design, pay mechanisms and program administration The draft compensation philosophy serves as the framework for our recommendations and is provided in the Appendix. Career Progression: Classification structure/career level Reporting relationships Job levels/families Job/work design Titles Job Structure Job Analysis and Evaluation Job documentation Evaluation factors Internal versus external emphasis Evaluation process Institutional Strategy Compensation Strategy Integrated Compensation System Outcomes Compensation Philosophy: Vision Internal/external valuation Comparison markets Program model Link to performance Communication/ openness Pay governance Pay Delivery Pay Mechanisms Pay progression Pay opportunity linked to level and performance Variable or incentive pay Salary Structure Program Design/ Administration Salary levels and ranges Control mechanisms Link to the market Structure movement Pay administration Strategic compensation program to achieve institutional goals Foundation for all human resources initiatives Employee engagement Open/transparent system A successful compensation system has several essential program components all of which work together for a holistic approach. 7

9 The Employment Value Proposition Affiliation, Career, Benefits, and Work Content are important intrinsic and extrinsic rewards that should be aligned with Compensation to drive employee attraction, retention, and engagement. Affiliation The feeling of belonging to TWU and sharing institutional values Compensation design may emphasize competitiveness, equity, performance, etc., but is only one element Compensation Employment Value Proposition Work Content The satisfaction that comes from the work you do The value and competitive advantage of health, retirement, and tuition benefits Benefits Career Long-term opportunities for progression and advancement 8

10 Executive Summary Objectives, Findings and Recommendations Program Recommendations Faculty Program Recommendations Staff Roadmap for Prioritizing Recommendations Appendix Copyright 2013 by The Segal Group, Inc., parent of The Segal Company and its Sibson Consulting Division. All Rights Reserved

11 Best Practices in Faculty Compensation Effective faculty compensation programs include the following best practices, which support market competitiveness and internal equity of faculty pay: 1. Compensation decisions are informed by sound market data that is based on a relevant and repeatable comparison group of institutions and survey sources. 2. Salary ranges are established by grouping disciplines together that are paid similarly in the market in order to maintain internal equity among and within departments, while also recognizing real market differences. 3. Salary ranges are used to inform starting salaries so that less experienced faculty are not paid above more experienced faculty who are meeting performance expectations. 4. Opportunities to differentiate pay based on performance and contribution are provided, and faculty progress through the salary ranges based on an assessment of performance criteria and performance expectations. 5. Guidelines for promotional increases are established in order to provide some flexibility for individual pay decisions while also equalizing recognition for similar contribution among faculty. 6. Salary ranges are updated regularly based on trends in the market over multiple years and multiple disciplines. Specific recommendations and examples of application for TWU are provided on the following pages. 10

12 Summary of Recommendations for Faculty Compensation Based on our expertise and best practices found in Higher Education, Sibson recommends the following for the faculty compensation program at TWU: 1. Market Assessment Develop a new comparison group of institutions similar in type, size, and resources to TWU Continue to use CUPA-HR as the primary survey source but supplement with other surveys as needed and as appropriate Match TWU faculty to specific CIP codes in the data and vet with Deans in order to get an accurate view of compensation in the market 2. Salary Ranges Develop salary ranges by grouping like disciplines together both in terms of similar market data and similar internal relationships at the University (e.g., group disciplines in the same department together) Target the midpoint of the range at the market median but set the range minimum at about 90% of market median Use the salary ranges to set starting salaries and manage external and internal pay relationships Update the ranges based on trends in market data over 1 2 years for multiple disciplines in order to reduce market sensitivity of specific discipline codes 11

13 Summary of Recommendations for Faculty Compensation continued 3. Pay for Performance Progress faculty through the ranges based primarily on merit increases Determine increases for promotions/tenure based on relationship to salary range as well as individual factors Implement stipends or rewards for outstanding contributions with specific guidelines for eligibility and awards 4. Address Internal Inequity After updating the compensation program based on revised peer group, determine extent of pay inequities and conduct regular (bi-annual) equity reviews. Key considerations for equity reviews are discussed on page 21 Begin addressing pay inequities by establishing and implementing a pay equity pool that addresses compression and other pay equity issues Prioritize refining the compensation program and updating market data first and then address equity and implementation of an incentive program Sibson recognizes that TWU will not be able to implement all of these recommendations immediately. The roadmap section of this report helps prioritize recommendations and provides interim steps such as distributing an equity pool to move towards market equity over time The following pages illustrate how these recommendations can be implemented. 12

14 Selection of the Comparison Group In order to select a comparison group of institutions that is relevant and defensible, Sibson recommends using a filtering process to identify institutions that are similar to the University in type, size, and resources. ALL NATIONAL HIGHER EDUCATION INSTITUTIONS Filter 1: Institution Type (Carnegie Classification, Public/Private) TOP OF THE FUNNEL 1. Select institutions of similar type based on Carnegie classification and public/private status. Filter 2: Size (Operating Budget or Student FTE) Filter 3: Academic Programs Filter 4: Individually Added / Removed Comparison Institutions 2. Select institutions with a similar operating budget and/or student populations, as this parameter includes institutions with comparable resources. 3. Select institutions with similar academic programs or status such as programs of distinction or institution rank 4. If necessary, specific institutions may be added or removed based on specific criteria not identified in the filtering process such as geographic proximity Typically, institutions resulting from the filter methodology are included in the comparison market group. 13

15 Comparison Group Recommendations Sibson recommends applying the following filters to develop a relevant comparison group for TWU: 1. Institution Type Carnegie classification of Doctoral/Research Universities Include both public and private institutions since TWU is an independent public university and competes for faculty with both public and private institutions 2. Institution Size Operating budget between about $50,000,000 to $250,000,000 Student FTE about 7,000 to 17, Academic Programs Institutions with similar caliber programs Similarly ranked national universities 4. Individually Add/Remove Add specific institutions in Texas An assessment of TWU s current faculty comparison group of 63 institutions against the institution type and size filters is available in the Appendix. 14

16 Selection of Salary Survey Sources Survey Source Pro Con Recommendation CUPA-HR National Faculty Salary Survey Association Surveys Provides data by rank and discipline Can select specific comparison group of institutions Relevant data for specific disciplines or programs Sometimes provide other qualifiers on data (e.g., doctoral vs. nondoctoral) Sometime provides clinical, adjunct, or non-tenure track data Clinical and adjunct faculty data not available 1 Some institutions do not participate Usually not possible to select specific comparison institutions Creates inconsistent methodology among programs/departments AAUP Data available for every institution Data not shown by discipline CompData Faculty Survey Custom Surveys Survey is new but may provide some useful data by faculty rank and department Can include specific, relevant institutions Can target specific programs or disciplines Requires large amount of resources Data not guaranteed Not easily repeatable Continue to use CUPA-HR as primary data source for building/updating salary ranges Use surveys to validate and/or supplement CUPA-HR for disciplines/programs/schools in which faculty are particularly difficult to match or hire Recommend referencing AACN survey for nursing Use to provide a cross check for market specific data collected Data may be used to provide a cross check for other surveys Avoid dependence on custom survey unless necessary 1 The 2013 CUPA-HR NFSS reports tenure and non-tenure track data separately. Non-tenure track is reported as primarily teaching or primarily research. 15

17 Development of Salary Ranges EXAMPLE SALARY RANGES BY RANK Ranges help manage market competitiveness along with internal equity Market Median Pay ranges may vary by discipline Base Salary Maximum Pay for Rank Market Median Minimum Pay for Rank Market Median Minimum Pay for Rank Assistant Professor Associate Professor Full Professor Minimum Pay for Rank Pay within a range is usually determined by multiple factors such as time in rank and performance Associate Professor and Full Professor may not have range maximums, as faculty may stay in the rank indefinitely Accounting for market differences by discipline is shown on the following pages. 16

18 Grouping Disciplines with Similar Market Pay Salary factors 1 provided in the CUPA-HR survey can help identify disciplines that are paid similarly in the market Salary factors for TWU s most frequent faculty disciplines are shown in the table below. The shading illustrates salary factor differences among disciplines and potential discipline groupings based on the factors Groupings should be verified with actual discipline-specific market data for TWU s newly defined comparison group Salary Factors 1 from CUPA-HR Faculty Salary Survey Discipline Professor Associate Professor Assistant Professor Business, Management, Marketing, and Related Support Services Computer and Information Sciences and Support Services Area, Ethnic, Cultural, Gender and Group Studies Health Professions and Related Programs Biological and Biomedical Sciences Public Administration and Social Service Professions Social Sciences Library Science Physical Sciences Family and Consumer Sciences/Human Sciences Foreign Languages, Literatures, and Linguistics Mathematics and Statistics Psychology Philosophy and Religious Studies Education Parks, Recreation, Leisure and Fitness Studies History General Visual and Performing Arts English Language and Literature/Letters Salary factor is defined in the CUPA-HR survey as the ratio, for a given rank and discipline, of the average salary to the average salary across all disciplines. 17

19 Sample Salary Ranges for Discipline Groups The table below represents sample salary ranges by discipline groups. Ranges recognize significant differences in market data among some disciplines but promote internal equity by disregarding small differences between specific disciplines. Arts & Humanities Sciences Health Sciences Nursing Business Min Mid Max Min Mid Max Min Mid Max Min Mid Max Min Mid Max Approx. % of Market 90% 100% 110% 90% 100% 110% 90% 100% 110% 90% 100% 110% 90% 100% 110% Median Assistant Professor $47,700 $53,000 $58,300 $58,500 $65,000 $71,500 $54,900 $61,000 $67,100 $58,500 $65,000 $71,500 $85,500 $95,000 $104,500 Associate Professor $56,700 $63,000 N/A $64,800 $72,000 N/A $66,600 $74,000 N/A $67,500 $75,000 N/A $98,100 $109,000 N/A Professor $78,300 $87,000 N/A $94,500 $105,000 N/A $85,500 $95,000 N/A $90,000 $100,000 N/A $115,200 $128,000 N/A Discounts can continue to be applied to ranges for clinical or non-tenure track faculty 1. 1 Data in the 2013 CUPA-HR faculty survey for tenure vs. non-tenure track faculty will help provide guidance on appropriate discounts. Note: These ranges are not meant to represent differentials on prior page. TWU should pull new market data prior to creating salary ranges. 18

20 Using Salary Ranges to Set and Manage Pay $ Salary Range $$ Approximate % of Market Median >1.10 Assistant Professor Years in rank represent the relatively limited period of time Assistant Professors are typically in the rank before moving to the Associate level. 0 3 years 3 6 years 6+ years Associate Professor Associate Professors are not required to move to Professor and may remain in the rank for a longer period of time. 0 4 years 4 8 years 8+ years Professor Full Professors can remain in this rank until retirement. 0 5 years 5 10 years 10+ years YEARS IN RANK Starting salaries for faculty consider factors such as prior experience, years since terminal degree, and internal equity. Most will begin near the lower end of the range assuming limited experience elsewhere Movement through the range is determined by multiple factors such as expectations for time in rank and performance (teaching, research, creative activities, scholarship, etc.). Progression typically occurs through annual merit increase opportunities based on these factors Market adjustments are made to the range on an annual or bi-annual basis. Individual faculty members may receive market adjustments for significant market movement in order to maintain relationship with the range but primary vehicle for individual increases is merit While Sibson recommends TWU target the market median for the midpoint of the salary range, newer faculty will be paid below the median and more experienced faculty may be paid above. 19

21 Pay for Performance Guidelines for Promotion/Tenure Increases Managing faculty pay through salary ranges instead of specific market data points reduces the false precision associated with the current practice of adjusting faculty salaries to the discipline specific market point at time of promotion Instead, Sibson recommends the guidelines below for considering both internal and market relationships when making promotional increase decisions As it may take some time to fully implement a new pay system, the flexibility of these guidelines will enable the institution to begin to correct inequities over time through promotions Criteria Significance of promotion (i.e., significance of requirements that must be met for promotion review) Performance compared to expectation Current salary relative to midpoint of range for promotional rank Current salary relative to others in rank with similar experience, performance, and general discipline Moderate Effective High High Modest Increase 3% 5% Assessment of Faculty Member Moderate Increase 5% 8% Significant Exceptional Low Low Significant Increase 8% 10% 20

22 Pay for Performance Stipends/Outstanding Contribution Awards Most incentive programs for faculty provide rewards for securing grants or contracts, especially ones that help fund the faculty member s salary and/or program, which means the bonus is determined by the amount of increased funding brought in by the faculty member Effective incentive programs have three main components: Clear definition of eligibility for awards including who is eligible and what counts for the reward Group of peers and/or academic leadership that reviews and makes determinations about the rewards Clear definition of awards mechanisms (i.e. lump sum awards, non-cash incentives such as parking, etc.) Current pay equity and market competitiveness must be addressed first for any pay for performance program to be effective. 21

23 Pay for Performance Developing a Faculty Reward Program Steps for establishing an Outstanding Performance Stipend include: 1. Define desired performance criteria, which might include: Teaching Scholarship and other creative activities Service Grants and contracts Other 2. Identify reward mechanisms Lump sum award amounts Non-cash incentives (i.e. lab/office space, parking, etc.) 3. Develop guidelines and process 22

24 Pay for Performance Draft Guidelines for Reward Program Eligibility All campuses, colleges, and schools will participate in the program. All full-time tenured and non-tenured faculty will be eligible. Academic Leadership Review and Award The Dean s Council (including the Provost) will be responsible for reviewing and calibrating final award of Outstanding Performance Stipends. Stipend Selection Criteria/Process The Outstanding Performance Stipend is a discretionary award in that Colleges are free to determine the specific criteria and amounts to be used to award outstanding performance stipends to individual faculty. There is no entitlement to an outstanding performance stipend and Colleges have full discretion in establishing criteria and stipend dollar amounts within these general guidelines. Stipends may be granted based on any of the following criteria, or other criteria as established at the College level and approved by the Provost: 1. Sustained performance exceeding expectations 2. Participation in a special project or program requiring exceptional effort 3. Contributions to a climate enhancing diversity 4. Contributions in the form of suggestions that improve student learning and engagement 5. Contributions to exceptional research leading to the generation of new knowledge 6. Participation on a team that exceeded expectations 23

25 Pay for Performance Guidelines for Reward Program Minimum/Maximum $250 minimum/$2,500 maximum; however, stipends of less than the minimum may be awarded when necessary to address funding inconsistencies. In no case may stipends of less than $200 be awarded without the approval of the Provost. Stipends will be in the form of a one-time payment Communication to Employees Each College will be responsible for communicating with faculty regarding the operation of the program within that unit. Individual faculty will be officially advised of receipt of a stipend through a letter sent by the Dean Timing Outstanding Performance Stipends may be awarded on a one-time basis throughout the defined performance period. Faculty may receive more than one stipend during that time frame, provided that the total amount received does not exceed the $2,500 maximum. Colleges wishing to have the stipend award process remain for a specific event may select a more limited and specific time frame or date, within the time frame noted above, for selection of recipients and awarding of stipends 24

26 Internal Inequity Compression/Equity Adjustments Compression and equity adjustments to the base salary are intended to alleviate issues that arise when the market for entry salaries is higher than those paid to more experienced faculty. Equity adjustments correct for systematic inequities in compensation that can be shown to be inconsistent with the historical performance of a group of faculty Salary adjustments for this purpose should not be awarded in the absence of a pay equity study of salaries for faculty A pay equity study should include a review of all faculty based on the following parameters 1 : Salary Gender Race Highest degree Completion date for highest degree Years since highest degree at time of hire Date of hire Current rank Date of promotion to current rank Contract length Discipline Adjustments should be made effective at the beginning of a new fiscal year (September 1) unless it is a special exception granted by the Provost 1 Paychecks: A Guide to Conducting Salary-equity Studies for Higher Education Faculty by Lois Haignere 25

27 Internal Inequity Draft Guidelines for Compression/Equity Adjustments Proposals for salary adjustments shall be made to the Provost s Office in the spring, in advance of the fiscal year in which they would become active The Provost must approve all salary adjustments Provost Office will establish a pay equity pool in the event that this cannot be funded at the University level, funding must come through savings in the College s existing budgets 26

28 Executive Summary Objectives, Findings and Recommendations Program Recommendations Faculty Program Recommendations Staff Roadmap for Prioritizing Recommendations Appendix Copyright 2013 by The Segal Group, Inc., parent of The Segal Company and its Sibson Consulting Division. All Rights Reserved

29 Best Practices in Staff Compensation Effective staff compensation programs are based on a clear compensation philosophy and include the following best practices: 1. Pay positioning is set at a level that enables the institution to compete for staff within an appropriate comparison market. 2. Market data is collected from a breadth of relevant organizations both inside and outside higher education with whom the institution competes for talent. 3. Regular collection and evaluation of market data follows a repeatable, efficient process that can be aided significantly by the use of a market data tool. 4. Market-based salary structures are used to manage market competitiveness and internal equity of compensation. 5. Pay guidelines associated with the salary structure enable flexibility for determining starting salary and progression through the range based on individual factors including skills, experience, and performance. 6. Significant differences in cost of labor among geographic locations are reflected in the salary structure or pay practices. 7. Career paths are clearly outlined to provide staff with realistic expectations and understanding of job and development opportunities at the institution. Examples of these effective practices and recommendations for TWU are provided on the following pages. 28

30 Summary of Recommendations for Staff Compensation Based on the best practices outlined on the preceding pages, Sibson recommends the following for the staff compensation program at TWU: 1. Market Assessment Conduct a market assessment for staff using effective market pricing practices including benchmarking against multiple survey sources that include higher education and general industry data Consider purchasing or subscribing to a technology tool that will help manage survey submissions and organization of data to increase efficiency and ability to work with multiple data sources 2. Salary Structure Once market data is collected, validate the current Classified structure to ensure it is competitive and jobs are assigned to levels appropriately. It is likely that this structure may require some significant adjustments Develop a salary structure for Professional & Administrative staff based on the median of the market data. Level any non-benchmark jobs into the structure based on an internal evaluation 1 Use the new salary structure ranges and guidelines to allow for some more flexibility in setting starting salaries for new hires Progress staff through the salary grades based on performance and through merit increases 1 Note that many institutions have one salary structure that covers both classified and professional staff. 29

31 Summary of Recommendations for Staff Compensation continued 3. Career Structure Develop job families for staff positions and map career progressions within each job family Align the career paths with the salary structure Develop career standards and progression criteria for career stages and levels at the University Sibson recognizes that TWU will not be able to implement all of these recommendations immediately. The roadmap section helps prioritize recommendations and provides interim steps such as identifying staff requiring market increases. 30

32 Effective Market Pricing Practices Effective market pricing includes the following: 1. Data Sources: Select quality, credible sources that have at least ten organizations reporting data for any data point that is selected. Job descriptions should contain the core functions of the job in order to understand whether the match selections are appropriate. Data should be organization weighted (not incumbent weighted) and reported in percentiles (not averages). 2. Match Selection: Select matches based on the content of the job, not the title. A match is appropriate if approximately 75% of the job content and requirements align. More than one match should be used per job (to form a market consensus) if possible and only one match per source. At least 60% of incumbents in a variety of departments and levels should be matched to provide enough credible data for developing a market-based pay structure(s). 3. Geographic Adjustments: Geographic differentials may be applied to account for differences in labor market by location. Geographic adjustments are generally based on cost of labor rather than cost of living. 4. Market Competitiveness: Select data at the market percentile that aligns with TWU s compensation strategy (e.g., target pay at the 50 th percentile of the market). This may be different for some jobs such as functions for which it is particularly difficult to hire talent or that are critical to the strategy of the University. 5. Benchmark and Non-Benchmark Jobs: Not every job at TWU will have a match in the market. We call jobs with market matches benchmark jobs and jobs without market matches non-benchmark jobs. The University should benchmark at least 50-60% of its jobs. Non-benchmark jobs are leveled into the compensation structure based on an internal valuation process that compares the nonbenchmark jobs to benchmark jobs. 31

33 Developing Comparison Markets An appropriate comparison market includes institutions and/or organizations with whom the University recruits talent from, loses talent to, or competes with for talent The organizations with whom TWU competes for talent may not be exactly the same as TWU, but the type of talent they attract may be similar The following chart provides an assessment of what factors are important when creating a comparison market by types of roles at the University Comparison Market Characteristics Type of Role Similar Size and Type Geographic Location Higher Education Senior Administrators Directors, Managers and Professionals Non-Exempt Very Important Somewhat Important Not Important Recommendations for comparison markets in the draft Compensation Philosophy shown in the Appendix reflect this assessment. 32

34 Survey Sources Since some staff jobs are specific to higher education (e.g., Financial Aid Counselor), while others are found outside higher education (e.g., Accountant), it is important to use multiple survey sources that reflect all the types of organizations with whom TWU competes for talent. SAMPLE SURVEY SOURCES Publisher CUPA-HR CUPA-HR Towers Watson Towers Watson Towers Watson Towers Watson Towers Watson Towers Watson Towers Watson Towers Watson Towers Watson Mercer Mercer Mercer Metroplex Website Survey Title Administrative Compensation Salary Survey Mid-level Administrative & Professional Salary Survey HR Personnel IT and e-commerce Middle Management Office Personnel Professional Administrative Professional Specialized Supervisory Management Tech and Skilled Trades Top Management Financial Accounting and Legal Human Resources Information Technology Metroplex Compensation Database Higher Ed General Industry Most surveys provide specific industry or geographic cuts of data that can be selected based on the specific comparison market for the type of role. 33

35 Using Multiple Survey Sources EXAMPLE MARKET CONSENSUS (Data in $ Thousands) University Position Survey Survey Title Weight Adjustment 25 th Percentile Survey Base Salary 50 th Percentile 75 th Percentile Programmer Survey 1 Programmer III 1 0.0% $79.5 $88.9 $98.8 Survey 2 Systems 1 0.0% $57.1 $61.7 $65.4 Programmer Survey 3 Programmer 1 0.0% $68.2 $79.0 $85.5 Market Average $68.27 $76.53 $83.23 University Average $70.10 $70.10 $70.10 University as % of Market 103% 92% 84% University job leveled into the salary structure based on the consensus of the 50 th percentile ($76.53). Note that any effective market pricing technology tool will house multiple surveys and calculate the consensus automatically. 34

36 Geographic Differentials Cost of Labor reflects the differences in salaries in a location based on the talent market, while Cost of Living reflects the cost for housing, groceries, etc. in a certain location. The two are often related but can be quite different Geographic differentials are generally applied to market data when the cost of labor in a particular geographic location is significantly higher or lower than the location of the market data The table below shows the cost of labor and cost of living in Denton, Dallas, and Houston relative to the national average While the cost of living is significantly higher in Dallas and Houston, the cost of labor is not, which suggests a geographic differential does not need to be applied to salaries for jobs in those locations. However, TWU may decide to offer a cost of living differential if it is finding it particularly difficult to hire or retain staff in Dallas and Houston Location Cost of Labor 1 Cost of Living 1 Denton, TX 103.2% 99.7% Dallas, TX 104.2% 113.0% Houston, TX 104.9% 110.8% 1 Cost of labor and cost of living data is sourced from the Economic Research Institute Geographic Assessor database and reflects the average of data points at the $30,000, $60,000, $90,000, and $120,000 salary levels. Data is as of January 1,

37 The Purpose of a Salary Structure Effective salary structures: Help manage pay within the University by providing compensation guidelines and ranges for pay Maintain competitiveness with the external market Ensure internal equity among compensation for jobs and individuals at the University Allow for flexibility to adjust pay based on the external market for the job, as well as an individual s skills, experience, and performance Simplify, streamline, and reduce the burden of salary maintenance and administration (e.g., job re-evaluation) Increase transparency of pay decisions at the University Increase understanding of compensation management among directors/managers/supervisors Sibson strongly recommends TWU develop a salary structure for Professional & Administrative staff in addition to Classified staff. The following pages provide examples of types of salary structures. 36

38 Market-Based Structure Example Narrow Structure with Narrow Pay Ranges Band Structure Graphic View Influence of Market on Determining Band Structure Below Minimum Above Maximum $ Minimum Midpoint Maximum Maximum 50% Characteristics 30+ grade levels are common 10% 15% midpoint to midpoint progressions 50% salary range spreads Compensation managed to midpoint Design Considerations Less flexibility in administration of structure Needs to be maintained more frequently due to market changes Career growth focused on vertical movement through the structure Structure Most Effective in Environments with Standardized work A strong vertical hierarchy Unionized or highly structured environments Career growth occurring through vertical moves A very stable competitive environment 37

39 Market-Based Structure Example continued Broad-banded Structure with Wide Pay Ranges Band Structure Graphic View Influence of Market on Determining Band Structure Below Minimum Above Maximum $ Minimum Midpoint Maximum Characteristics 5 8 broad bands 30% 50% midpoint to midpoint progressions Salary range spreads from 80% 100% at lower levels to 100%+ for mid to upper levels Compensation managed within zones or market reference points Structure Most Effective in Environments with Diverse employee segments A non-hierarchical organizational structure 80% 100% Design Considerations More flexibility in administration of structure Structure does not need to be updated as frequently Allows for more differentiation of employees within band Career growth focused on lateral movement through a band, with band-to-band movement possible, but uncommon A dynamic competitive environment Extensive lateral career growth opportunities 38

40 Market-Based Structure Example continued Blended Structure Band Structure Graphic View Influence of Market on Determining Band Structure Below Minimum Above Maximum $ Minimum Midpoint Maximum Characteristics grade levels 15% 30% midpoint progressions Range spreads of 50% 75% Compensation may be managed to internal control points (zones or reference points), taking into account market pay for each individual job 50% 75% Design Considerations A relatively simple structure with less frequent maintenance and reevaluation of grading of jobs required due to flexibility built into the structure Allows for increased flexibility in cross-functional job movement Allows for balancing pay for both the job and the person, rather than to an inflexible control point Structure Most Effective in Environments with Some jobs with standardized tasks and activities and others with more diversity of responsibility Mixed competitive environments stable for some jobs and dynamic for others A somewhat hierarchical yet complex organization An organization that requires some structure but also wants the flexibility to manage compensation from a systematic standpoint Sibson recommends that a blended structure would be most appropriate for TWU. 39

41 Alignment of Salary Grades with Job Families and Career Paths JOB FAMILIES GRADES 14 Business Administration/ Finance Academic and Student Services Athletics Campus and Office Support Chaplain Development/ Institutional Advancement Facilities/ Operations Building a career structure around job families helps set employee expectations about career progression. 40

42 Developing a Unified Career Structure for the Institution SALARY GRADES CAREER STAGES Grades A B C D D2 11 D B3 C2 8 7 B2 C1 6 5 A3 B1 4 A A1 Career Levels Developing career stages and levels that span job families encourage movement both within and among job families at the Institution. 41

43 Proposed Career Standards Career Stage B Career Level B1 B2 B3 Training/ Education/ Experience Competencies Organizational/ Technical Skills HS diploma or GED required Associates or Bachelor's degree may be required Specialized skill training/ certification may be required 0 2 years of experience in area of responsibility Professional Knowledge: Possesses working level of professional skill and/or knowledge in a specific area Dependability: Conscientious, thorough, and reliable when performing and completing job tasks. Completes work in a timely manner; meets commitments with minimal oversight Attention to Detail: Demonstrates responsibility for, and handles accurately, the details associated with one s work Accountability: Accepts personal responsibility for outcomes Information Seeking: Keeps abreast of current developments, trends, and competitive offerings in the industry Utilizes working knowledge of tools (e.g., computers, software applications or databases, mechanical equipment) to complete job function effectively Operates tools under standard situations and performs basic maintenance Bachelor's degree required Specialized skill training/ certification may be required Generally 2-5 years of experience in area of responsibility Professional Knowledge: Possesses intermediate level of professional skill and/or knowledge in a specific area Accountability: Seeks and accepts personal responsibility for outcomes. Critiques own performance and learns from mistakes Information Seeking: Keeps abreast of current developments, trends, and competitive offerings in the industry. Identifies information that is needed and where to find it Innovation: Provides creative / novel ideas to improve the organization Influence: Employs facts and data to establish viewpoint and influence decision makers Utilizes intermediate knowledge of tools (e.g., computers, software applications or databases, mechanical equipment) to complete job function effectively Operates tools under some non standard situations, may repair some tool malfunctions, and acts as resource to train others in use of tools Utilizes basic financial and accounting knowledge to develop or track budgets or expenses Bachelor's degree required. Advanced degree may be preferred or required for some job areas Specialized skill training/ certification may be required Generally more than 5 years of experience in area of responsibility Professional Knowledge: Possesses advanced level of professional skill and/or knowledge in a specific area. Serves as expert and resource to others Information Seeking: Keeps abreast of current developments, trends, and competitive offerings in the industry. Strives to know more about subject matter and its impact on the institution s goals Innovation: Provides creative / novel ideas to improve the organization. Establishes well reasoned steps for implementing the ideas Influence: Persuades, influences or gains the support of others based on skills, knowledge, and personal credibility. Influences others to take action Planning: Prioritizes and organizes actions, resources, and other people to achieve targeted objectives. Sets timelines for completing projects effectively and efficiently Utilizes advanced knowledge of tools used by the function (e.g., computers, software applications or databases, mechanical equipment) to increase effectiveness or efficiency of work. Develops or improves upon tools to increase effectiveness or efficiency of work Utilizes basic financial and accounting knowledge to develop or track budgets or expenses Salary Grades Representative Titles Relevant Training Admission Counselor Associate Graphic Designer Safety Specialist Financial Aid Advisor Advanced computer/software Introduction to budgets/financials Certification courses in area of specialty Librarian Internal Auditor Web Designer/Developer Environment/Health/Safety Specialist Advanced computer/software Project management Certification courses in area of specialty Project Engineer Senior Web Programmer Major Gifts Officer Staff Psychologist Intermediate accounting/budgets/financials Advanced project management People management 42

44 Developing a Salary Structure with Market Data TWU s draft compensation philosophy states that the compensation program will balance external market competitiveness while providing for flexibility dependent on the value of jobs to the organizational model of the University External market data provides the foundation for constructing a salary structure as shown below Benchmark jobs are assigned to the salary grade with the grade midpoint that is closest to the market median for the job ILLUSTRATIVE GRADE Benchmark market medians are a typical reference point for building salary ranges in a market-based structure Minimum Midpoint Maximum 43

45 Leveling Non-Benchmark Jobs Benchmark jobs are assigned to salary grades primarily based on their market value. Assigning non-benchmark jobs to the salary structure involves a comparison to benchmark jobs within the same job family or to jobs within the University that have similar skill requirements and job scope. Typically, jobs are compared internally by considering: Knowledge and Skills: The formal/informal expertise needed to perform the duties of the job on a day-to-day basis Example: Accounting rules, standards, and procedures Impact: The impact that a job has on key organizational imperatives Example: Financial health, academic quality, or effectiveness of services provided within the Institution Scope of Responsibility: The breadth or range of the job s operational influence within the Institution Example: University-wide scope, division, or department 44

46 Managing Pay for the Job and the Individual The salary structure and grade ensure that the compensation range for a job is competitive with the market The individual s skills, experience, and performance determine the actual salary for the position within the grade Job Role, Responsibilities, and Skill Requirements Knowledge, Skills, Experience, and Performance + = Pay Opportunity Salary Grade + Position in = Grade Recommended Base Salary 45

47 Setting Pay within a Grade Once a market-based salary structure is developed, the following guidelines can be used for setting starting salaries for new hires by evaluating where they are on the continuum Many institutions set a policy that new employees can only be hired in Quartile 1 or Quartile 2 of the salary grade SALARY GRADE RANGE Minimum ¼ Mark Midpoint ¾ Mark Maximum 1st Quartile New to job and field, has little or no direct, related prior experience On steep learning curve, building both skills and knowledge as well as ability to handle job responsibilities 2nd Quartile 3rd Quartile 4th Quartile Performs all aspects of job effectively and independently Experienced in the job and possesses required knowledge and skills Consistently exhibits desired competencies to perform job successfully Seasoned and proficient at building job responsibilities Expert in all job criteria Has broad and deep knowledge of own area as well as related areas Depth and breadth of experience in the job at TWU, specialized skills and significant value Serves as expert resource and/or role model/mentor to others in similar jobs or to other areas Performs some/most job responsibilities with increasing effectiveness Possesses all/most of the basic knowledge and skill requirements, but may need to build upon them through experience May still be learning some aspects of job or developing expertise to handle them more independently and effectively Consistently exhibits many or most desired competencies to perform job successfully Once an employee s starting salary is set, they progress through the range based on performance through merit increases. 46

48 Executive Summary Objectives, Findings and Recommendations Program Recommendations Faculty Program Recommendations Staff Roadmap for Prioritizing Recommendations Appendix Copyright 2013 by The Segal Group, Inc., parent of The Segal Company and its Sibson Consulting Division. All Rights Reserved

49 Prioritization of Recommendations Sibson recommends the following priorities from program recommendations for faculty and staff: Faculty 1. Refine and confirm the draft compensation philosophy including target pay positioning 2. Develop the comparison group of institutions and conduct a market assessment using CUPA-HR data from the new comparison group 3. Develop ranges for faculty and begin using the ranges to manage faculty pay and promotions 4. Identify gaps between current pay and minimum or expected placement in range based on years in rank 5. Set funds aside as available for an equity pool to close the gaps and begin applying available funds to those paid farthest below market 6. Confirm guidelines and process for administering outstanding contribution awards Staff 1. Refine and confirm the draft compensation philosophy including target pay positioning 2. Refine comparison market definitions, secure survey sources, and conduct market assessment 3. Use market data to evaluate Classified salary structure and develop Professional & Administrative salary structure 4. Assign benchmark and non-benchmark jobs to structure(s) and identify gaps between current pay of staff and structure ranges 5. Set funds aside as available to close the gaps and begin applying available funds to those paid farthest below market 6. Develop job families and map career progression within job families at TWU How would TWU realistically prioritize the recommendations? 48