Performance-Based Compensation is Nothing New in Higher Ed
Performance-based compensation has been a hot topic in K-12 education as hundreds of districts across the country explore the strategy through Race to the Top, the Teacher Incentive Fund, and other federal, state, and local initiatives. However, some in the higher education community are also receiving attention for their compensation efforts. The University of Texas (UT) was in the news recently after their Board of Trustees approved a strategic compensation plan for the university's six health centers, 11 system administrators, and nine campuses.
Just as many K-12 organizations make graduation rates a priority, UT has made improving the university's four-year graduation rate a strategic goal of serious importance. How does UT President William Powers plan to focus university staff on that goal? A performance-based bonus. Performance will also be measured around research programs, shared services cost savings, and philanthropic efforts, according to an example plan released by the university. The plan was designed by a consulting firm that typically works with private-sector organizations.
Similar to the process in developing K-12 performance-based compensation systems, the UT Board asked questions around how measures will be selected and data validated. How will the measure selection process work?
- Chancellor meets with each eligible individual
- Conversation on performance goals and outcomes
- Chancellor review--Approve/Reject
- Chancellor sends approved goals to board
- Board review--Approve/Reject
According to the report in Inside Higher Ed, members of the UT Board's finance committee acknowledged that "there are likely to be some errors in establishing the correct metrics over the next few years, but...they were confident the plan could be used to drive the system's desired goals."
Is UT's move the start of a trend toward more higher education institutions exploring performance-based pay? Actually, this isn't a new trend at all. In a previous post on Education Week's Marketplace K-12 blog, Jason Tomassini discusses performance-based agreements between some universities and online course vendors in which the vendor does not get paid for the course unless the student passes. In addition, many for-profit and non-profit health centers have compensation systems that match key performance indicators. And, for years, university presidents have worked under contracts that base at least some pay off of performance.
With whom do you think the most popular performance-pay contracts are negotiated in higher education? Coaches, and specifically, football coaches. Many college football coaches are offered lucrative performance pay packages worth hundreds of thousands dollars in direct and indirect compensation for meeting performance goals on and off the field. This can include access to a private plane, a car allowance, tickets, golf course memberships, free health insurance, and more.
So, while the University of Texas is taking a new step in developing a performance-based compensation system for educators and healthcare professionals in their system, the higher education community as a whole is not a new kid on the block when it comes to linking pay to performance.