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Faculty Performance-Based Compensation

Faculty Performance-Based Compensation. Presentation to Academic Senate August 30, 2006. Current Compensation System. Current System Fixed steps within rank Evaluation upon contract renewal Every 2 or 4 years Problems Lack of timely reward Lack of continuous feedback

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Faculty Performance-Based Compensation

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  1. Faculty Performance-Based Compensation Presentation to Academic Senate August 30, 2006

  2. Current Compensation System • Current System • Fixed steps within rank • Evaluation upon contract renewal • Every 2 or 4 years • Problems • Lack of timely reward • Lack of continuous feedback • Lack of transparency and comparative evaluation • No connection to Institute budget

  3. Basic Compensation Scheme • Compensation for individual performance • Annual Institute Merit Raise Exercise • Annual Bonus Exercise • Compensation for group performance • Annual School Bonus based on financial performance of school (under RCM) • COLA is considered separately

  4. Why an Annual Bonus? • As salary increases due to past performance, there is less incentive to continue to be productive. • Salary increases are long term financial commitments. Bonuses provide more flexibility. • Bonus can be reduced in a given year in response to unexpected financial developments.

  5. Budgeting for Compensation • Principle: Compensation scheme should not increase overall faculty salary expenditure. • Solution: Use retirements to fund compensation. • If retirements occur toward the top of the salary scale and replacements occur toward the bottom, have a natural decline in salary expenditure.

  6. Current salary expenditure Desired budget for annual bonus Percent raise equal to natural rate of decline Decline if percent raise less than natural rate of decline Annual Salary expenditure Natural decline due to retirement & replacement at lower rank Years

  7. Compensation Budget at Current Salary Scale

  8. Compensation Budget if Entry Level Salary Reduced to 100K

  9. Details of the Proposed Scheme • Each school carries out a performance evaluation exercise • Assigns each faculty member a score (1 – 5) • Award of merit and bonus is based on the average of that year and previous year

  10. Bonus Scheme • Bonus awarded is the normalized productivity score multiplied by the baseline bonus percentage • Baseline percentage is determined based on the budget allocated and the productivity scores

  11. Merit Raise Scheme • Based on a sliding scale from a high percentage at the bottom of the salary range to zero at the top. • Percentage at the bottom is identical for all ranks. • Particular percentage will vary from year to year and is determined similarly to baseline bonus percentage.

  12. X% Percent raise 0% Bottom Top Salary range for rank

  13. Proposed Salary Scale Assistant Professor 100,000 140,000 Associate Professor 147,000 170,000 Professor 180,000 225,000 5% 5.9%

  14. COLA • Must be funded from some source • Pass on the cost to the customer • Reduce ongoing fixed costs • Recommend second option. • Each unit may provide COLA if it can show that it has reduced its ongoing fixed costs by at least that amount.

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