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Tuesday, February 04, 2014

Rethinking Faculty Compensation

I wanted to bounce off a Faculty Lounge post by my colleague Jeff Redding, and particularly a comment to the post by recent guest prawf Nancy Leong.  Jeff had posted about buy-outs, and Nancy "raise[d] the larger question of what faculty compensation should look like more generally."  Nancy suggested: 

For example, we might imagine an alternative compensation model in which faculty base salaries were much lower and less differentiated by seniority, and a larger percentage of compensation came in the form of merit pay determined by teaching effectiveness, scholarly productivity, and service to the institution. The buy-out incentives would be quite different in that model.

Nancy's idea raises a host of interesting issues -- I've broken out a few of them below.

  • Tenure Contracts and Reductions in Pay:  What if a dean told the faculty: "All faculty base salaries for next year will be 60% of their current levels.  We are also cutting 10% off the current pool.  The remaining 30% will be distributed according to merit, with three merit pools for scholarship, teaching, and service."  My sense is that a lot of people believe this would violate tenure contracts.  But I'm not sure why.  I suppose that a significant enough cut would constitute a constructive discharge.  But I've seen some people say that a 0.000001% cut would violate tenure contracts.  That seems baffling to me, but maybe I haven't read the contracts closely enough!  I'd appreciate thoughts from folks who might know better.  
  • The Pros and Cons of Merit Pay: My example above not only imagined a cut in overall pay; it also imagined what could be a significant redistribution of faculty compensation.  It would depend on how aggressive the dean is -- things could look pretty much the same, or the dean could give huge bonuses based on scholarship, teaching, and/or service.  Even more aggressively, a dean could say: "All tenure faculty will get a base pay of $50,000, with merit pay to be recalculated annually."  That would eliminate the effects of seniority and past performance from the system.  The immediately obvious critique is: "Wow!  That's a lot of power to give to the dean!"  And as a labor law guy, I chafe at giving management that much discretion.  On the other hand, it would be much more of a "pay for performance" system.  And perhaps an innovative group of faculty could follow the Munger, Tolles lead and have all faculty vote on each other's salaries.  That would eliminate the dean problem, but it would add to the problem discussed next.
  • The Politicization of Pay.  The reason most schools will stick with the status quo is that it's a lot easier than having to decide from scratch.  The time spent debating a new system, as well as the emotional costs of getting up in the face of your colleagues about what they take home each month, may overrun any benefits from a new compensation scheme.  And that's assuming there's reform!  It is perhaps more likely that any reform efforts would end in failure, with the reformers weakened and unlikely to easily jump to another school.  However, as any good crit would tell you, the status quo is not "neutral."  It is political as well.  Fencing off faculty compensation from discussion, because it's "vulgar" or too personal, is a political move designed to protect those who benefit from the status quo.  And as the outside forces of change grow stronger, those boundaries around the status quo are more likely to break down.
  • The Politics of Faculty Hiring and Firing.  Based on data about the entry-level job market, many (most?) schools are "cutting" faculty costs by not hiring.  With class sizes largely going down, it makes sense to shrink faculties.  But how faculties are shrunk is also a political issue.  The path of least resistance is to not hire, rather than fire. But that means that a huge swath of people who would normally be entering the academy are not.  Tenure and other job protections help senior workers but can harm junior workers -- just look at the American auto industry.  In my view, tenure itself is a politically-fraught aspect of the law school universe, even for law profs themselves.

I blogged last year about cutting salaries as a way of reducing costs as part of my series on reforming legal education's finances.  I wrote more generally about cutting labor costs here.

Posted by Matt Bodie on February 4, 2014 at 01:59 PM in Life of Law Schools | Permalink

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Setting the percentages would be problematic. If the school wanted to keep the current implied weightings for scholarship/teaching/service it'd have to make them something like 90/5/5. I imagine that'd be a bit of public relations disaster.

Posted by: brad | Feb 4, 2014 3:28:11 PM

Brad, if you think that's how compensation really works at most law schools, well . . . I think you are living in a fevered dream, my friend.

Posted by: Matt Bodie | Feb 4, 2014 3:35:33 PM

Interesting post -- thanks Matt. At my school the weightings are explicitly 40-40-20 in our annual performance evaluations. That seems like a reasonable ballpark to me.

Posted by: CS | Feb 4, 2014 3:42:53 PM

True, that's not the status quo which is instead a horrible idiosyncratic mess that has to more to do with the intra-faculty animosities during the Reagan administration.

But I think if you asked tenured faculty members what the numbers should be and promised them confidentiality, that's what you'd end up with.

Posted by: brad | Feb 4, 2014 3:44:34 PM

Sorry for the spam, but I hit post early.

I was going to continue by saying, that I infer those attitudes based on hiring decisions I've observed. The entire discussion is about either scholarship or intangibles like personality. No one ever goes looking for old teaching evaluations.

Posted by: brad | Feb 4, 2014 3:47:32 PM

Others can correct me, but my understanding is that the UC system works on a version of this proposal. At least, a friend who works at UC-Davis in a non-law department explained to me that he has a base pay rate, and that as the years have gone by, his raises have been in the form of at-risk money. Every few years, even post tenure, he is formally reviewed, and if he hasn't hit publication targets, the at-risk portion of his salary is reduced. His salary can't go below base, but as the at-risk percentage grows larger with the years, the incentive to keep on publishing goes up. On the other hand, he says that the post-tenure reviews are not as rigorous as the tenure process, so lesser publications "count". He also says that the system leads to incentives to "pace" one's publications so as to always meet a review cycle target. He described this scheme as UC-System wide, but I would be interested in hearing from those at UC schools whether my description is in fact accurate.

Posted by: jason yackee | Feb 4, 2014 3:53:31 PM

Great post, Matt.

Two things:

1) Thoughts on Seton Hall and its recent "realignment" plan? It can't be the case, can it (?), that it is anything but a base expression of the prerogatives of tenure?

2) Be nice to our friend "brad." He describes reality at his home institution perfectly. I spent a semester visiting the University of Mars, so I can confirm . . . . .

Posted by: SparkleMotion | Feb 4, 2014 4:17:24 PM

The interesting thing, to me, is the extent to which the three categories would overlap with huge pay increases for a small number of faculty members. At every school I have been at, the best scholars have also been the best teachers (in terms of quality and student-contact hours), and often have been the most engaged in service to the institution.

Posted by: Howard Wasserman | Feb 4, 2014 5:08:32 PM

Here are two proposals, both of which are probably bad ideas but I nonetheless put out there in the spirit of brainstorming:

1) I wonder if it might be an effective reform to require salaries to be public. The norm is for salaries to be secret. And from what I hear, faculty salaries are often quite random; there's relatively little connection between salary and what most would consider merit. Making salaries public might deter shirking and pressure Deans to make salaries more reflective of merit.

2) As for what to do about unproductive senior faculty who tend to have the highest pay, here's am idea: maybe have tenure contracts include a rule that salaries automatically begin to draw down a few percentage every year (down to a certain percentage) after a person has been tenured for 30 years. Maybe the rule should be that after 30 years of tenure, salaries drop 5% a year until they reach half of their peak, at which time the salary remains the same going forward. That way, senior profs would be allowed to stay on as long as they would like, but at a much-reduced salary that reflects the likelihood that they are less productive and involved than they were at an earlier stage of their careers. Granted, this might be a little unfair to the professor who has been very productive and remains productive after 30 years. But if everyone knows that tenure has a 30-year full salary window, followed by a reduced-salary period, then it would seem that everyone has the same expectations and treatment.

Posted by: Orin Kerr | Feb 4, 2014 5:16:26 PM

I suspect that Orin's #2 would violate the ADEA, as it's predicated on the assumption that older workers are less productive.

Posted by: Rick Bales | Feb 4, 2014 5:40:09 PM

I was a law student at a top school that regularly put faculty in their 70s and 80s in front of 150 student lecture halls. The student experience is about what you would expect it to be.

Posted by: anon | Feb 4, 2014 5:54:22 PM

Thank you for this helpful post, Matt. A couple thoughts, both preliminary.

First, I think I'd be in favor of Orin's first proposal, and actually have trouble thinking of reasons not to make salary information public. What would be the argument against making that information available to various stakeholders, especially students, alums, etc.?

Second, I wonder whether a reform like the one Matt has proposed would ultimately reshape some of the behavior that Howard describes. That is, if we changed the salary incentives and everyone kept behaving exactly the same way, then I tend to agree with Howard's intuition that a disproportionate amount of the merit pool would go to the same group of people. But if compensation were dramatically restructured so that much more were based on year-to-year performance, it seems reasonable to think that faculty would respond to those incentives by improving their teaching, publishing more/better books and articles, and getting more involved with the institution in the ways most schools classify as service. All that seems like a good thing to me.

Posted by: Nancy Leong | Feb 4, 2014 8:06:37 PM

For kicks and giggles it would be interesting to see what the hourly timesheets look like for nonperforming faculty who have been teaching for years. It's hard to account for at least 40 hours a week of labor if one is not engaged in scholarship and active service to the institution/counseling with students beyond the hours one spends teaching and preparing for teaching. After all, for senior faculty teaching the same subjects year in and out, their time can't be filled with class prep. Perhaps field research on the First Amendment rights of pornographers?

Posted by: TalkingHead | Feb 4, 2014 8:47:44 PM

I agree with Rick Bales that part 2 of Orin's proposal would likely violate the ADEA, and one of the reasons we have buy-outs, is because of the ADEA which prohibits mandatory retirements (though professors were the last group phased into the ADEA protection). But there is another way to get at the problem too -- there can be a fixed amount a Professor must do. If a Professor does not publish, he/she has to teach more, which would not violate anything so long as it is applied consistently. You could also do it in reverse -- start with a base teaching of 6 classes, and reduce the teaching load for scholarly productivity. The real problem now, and it is not just among older faculty, is that everyone gets the same light teaching load regardless of scholarly activity. That just makes no sense, and I suspect many would choose to retire than teach a new course or teach six courses. An obvious problem with this strategy is that those who do not write may not be strong teachers so the students would suffer but there are some who do not write who are good teachers, and instead of teaching, you might give them a higher Committee or other Administrative Role. Anyway, there seems to be a way to ensure a consistent workload across faculty that would likely weed out some of the least productive faculty. I would also add that tying pay to teaching can be problematic -- the primary basis for doing so would be student evaluations, which are not always good indicators of teaching quality. It would also create incentives to completely cater to students in a way that might please them rather than teach them, and outside of student evaluations, it can be tricky to judge teaching quality. Peer evaluations can be helpful but not if they were the basis of faculty compensation decisions. Scholarship can be easier to measure at least quantitatively (citations, number of publications) but in a non-peer reviewed system, there is also a significant random element to placement that may not be a good basis for compensation.

Posted by: Mike Selmi | Feb 4, 2014 9:07:11 PM

I teach at a public school in a state with an absurdly broad sunshine law. Our salaries are public and the local paper takes grade pride in publishing them annually.

Contra Nancy, I am not convinced restructuring salary would change behavior, other than at the margins. Most academics who write a lot, teach well, and are engaged in their institutions do so because they want to write a lot, teach well, and be engaged in their institutions. The money makes the job desirable, but it is not the primary incentive. I doubt a new financial hammer is suddenly going to turn a mediocre teacher into a good teacher or a non-writer into a productive scholar. But maybe Nancy is right and I am just projecting my own attitudes.

Posted by: Howard Wasserman | Feb 4, 2014 10:56:36 PM

@NLeong--I take no position on this, I just offer this because you asked. The effects of salary transparency in the workplace have been studied. Here is a study and a popular magazine story about it, along with another view.

http://emlab.berkeley.edu/~moretti/ucpay.pdf

http://www.slate.com/articles/business/the_dismal_science/2010/09/how_much_do_you_think_he_makes.html

http://www.payscale.com/career-news/2013/11/is-salary-transparency-good-or-bad-for-morale-

Posted by: CHS | Feb 5, 2014 12:32:49 AM

Thanks, CHS. I agree that disclosure of salaries can hurt morale. Going about one's business feeling that you are paid well (without knowing what anyone else is paid) makes one happier than knowing that you are paid much less than your shirker neighbor. The question here is somewhat more specific, though; can disclosure of salaries lead to more merit-based pay in an academic environment? Consider two examples.

1) Let's say you're a senior professor who is the highest-paid member of the faculty, but you're pretty much checked out; you stopped writing a long time ago, and you're on auto-pilot in the classroom. In a world in which salaries are secret, expectations are low. No one looks to you to lead the faculty anymore, and you can pretty much cruise along making lots of money without anyone watching you. Will the disclosure of your high salary make you feel that you need to prove your worth? If you know that all of your colleagues look at you and think, "what makes him so great?", do you kick it back into high gear to show them that your salary is justified?

2) Let's say you're a Dean who is negotiating salaries. Like most Deans, you're a short-timer: You'll have the job for 5 years and then do something else. Imagine a member of the faculty comes to you and demands a huge raise. The faculty member isn't very good, but he knows how to make your life miserable by being a thorn in your side. If you give him the huge raise, he stops bothering you. And besides, you'll be gone in two years anyway, so the costs of that raise won't be your problem. In a world in which salaries are secret, your incentive is to give the undeserving professor the big raise to make him go away. But if salaries are public, your incentive changes. With salaries public, giving the undeserving professor a big raise will draw tremendous criticism directed squarely at you: The deserving professors will come by your office demanding a big raise, too. Knowing that the salaries will be public creates an incentive to adopt a pay scale that more approximates a meritocracy.

Or at least that's the idea. I don't know if it's right or wrong, but it seems plausible.

Posted by: Orin Kerr | Feb 5, 2014 1:00:12 AM

Yes, what you offer seems plausible. It is also the case that secret salary structures hide disparities in pay between men and women and, most likely, whites and people of color. As I said, I offered the study because it is the only empirical evidence about the effects of salary transparency that I know of.

One of the things the article points out is that our common sense suppositions about how people behave do not always hit the mark. Of course, you would not be the person in hypo one, but if you were to slide into that somehow, it is entirely likely that the embarrassment of having your high salary exposed would spur you to do better. But that is because you are who you are, or we're positing that the real you is buried beneath the "slacker you" for purposes of the hypo. Other people might not give a damn. They may not even notice they are on auto-pilot. As for the Deans, yes.
Limited terms may allow them to say" yes" to unwise things because they can escape responsibility when they cut out.

I have been in jobs where my salary was known---in the government--and when it was private--in practice and in academe. I know both. I cannot see it happening where I am now.

Posted by: CHS | Feb 5, 2014 1:44:37 AM

Thanks, CHS. I agree that such data would be fascinating to expose trends in terms of gender and race -- not only from the standpoint of overall comparisons, but in terms of comparisons of otherwise-equally situated profs.

Point taken re possible concerns with the ADEA. As I see it, the proposal is not so much "predicated on the assumption that older workers are less productive," but on the reality that after three decades of tenure, most people have long ago stopped being productive. If we hired assistant professors at the age of 20, they would be unproductive by 50; if we hired an assistant professors at the age of 70, they would be very productive when in their 70s. The problem is that assistant prof hires are almost exclusively in the specific range of about 27 to 40, so it just happens that having tenure for 30 years tends to correlate with a specific age range of 60 to 75. But then I concede I don't know diddlysquat about the ADEA, so maybe these points are irrelevant.

Posted by: Orin Kerr | Feb 5, 2014 2:22:28 AM

Requiring salaries to be public - or at least the various salary bands or scales per rank - may go some way toward enhancing accountability and reducing arbitrariness. The success of many of the suggestions relating to tenured faculty, however, would also depend on other factors, e.g. existence of a robust post-tenure review system, strong faculty governance (to ensure transparency, fairness and consistency in faculty evaluations), and Deans that understand and value the faculty contributions (be that scholarship, teaching or other service to the school) appropriate to their specific institutions. I've seen faculty derided for poor administrative ability whose scholarly abilities were far better recognized outside their home institutions than within them, for instance, and other faculty rewarded who were at best mediocre scholars and passable teachers. I'm sure it happens at other schools too.

Posted by: Former Prof | Feb 5, 2014 12:40:36 PM

Public salaries permit everyone to see which of their colleagues are paid more than they are, and to find this to be unjust and to demand equal pay.

It also permits everyone to see which of their colleagues are paid less than they are, and to convince themselves that this is righteous and just. Then if any of their colleagues suddenly catch up to them in pay, they will find that unjust and ask for an equal raise.

The result usually a no win situation for management

Posted by: Kinw | Feb 6, 2014 1:16:50 PM

Kinw: I think it is a bit dramatic to say that public salaries are a "no win" situation for management.

I will grant you, however, that management does not like the idea of public salaries. But, isn't it always the case that people (in this case management) are better off if they have an information advantage over those with whom they are dealing?

This raises a larger question: Why should what management prefers be determinative?

Posted by: Adam Smith | Feb 7, 2014 9:27:06 AM

Kinw, I'm with Adam Smith. The question is what leads to more merit-based pay, not what is easier for the boss.

Posted by: Orin Kerr | Feb 8, 2014 2:45:41 PM

Late to the party, but a quick observation from an open records state employee. Depending upon state law, university rules, and college practice, a dean may be able to hide some supplemental salary information by paying it to individuals as summer research grants or in other guises that might not be part of an official 9- or 12-month salary. If employees suspect that such is the case, it creates a significant double bind for a dean: On the one hand, the salary is a public record, creating tension and animosity, but everyone also suspects that this public salary is merely a cover for a "real" salary scale. To the extent that individuals experience their salary both in relative and absolute terms, the mix of transparency and opacity is especially toxic.

Posted by: Mark Fenster | Feb 8, 2014 7:24:43 PM

Boy do some of these comments make me grateful to be at a place where salaries are both public and essentially lockstep. At least here, that combination seems to play out great.

Posted by: Y5 Prof | Feb 9, 2014 9:36:23 AM

@Y5 Prof- So, there are no ways to compensate people at your school outside of the reported salary?

Posted by: CHS | Feb 9, 2014 9:48:50 AM

Two big things - first, at free-standing schools, the question is what changes will be made, under tremendous financial pressure? It's not a question of marginal changes, but of massive changes. As I said on another blog, going from 300 students to 200, and dropping the effective tuition by 20% means 53% of prior revenue.

Second, at schools which are part of universities[1], when a law school goes from a profit center to a loss center, what will the central administration do? I imagine that the law school administration will lose a lot of clout, both internally and in the overall university culture, since they are now begging for money. What changes could and would universities impose?

[1] Not counting the truly elite schools and universities, which will do fine.

Posted by: Barry | Feb 10, 2014 3:41:06 PM

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