CWU Market Definition Report

Faculty Senate
Market Definition Report - May 2000

Executive Summary

The Senate Ad Hoc Market Definition Committee was charged with addressing three basic questions as a result of an issue raised in the 1998-99 Faculty Salary Equity Study regarding salary compression. This summary poses each of the three questions, offers a brief response, and presents recommendations.

1. What is the definition of market as it applies to faculty salaries?

Market Definition

2. Do, or should, these definitions apply to the university culture?

The committee believes that market forces should be applied in the future through a clear and equitable process. In the absence of a salary policy, market forces have been applied inconsistently; this practice has had a negative effect on faculty morale. Central Washington University should establish an explicit faculty salary administration policy that among other things addresses market forces. 3. How can these market definitions be applied or implemented in university hiring practices?

Recommendations:

As a guiding reference to achieve a short-term solution to this immediate concern, the committee recommends that the mean CWU faculty salary be raised to the CUPA mean by using a percentage adjustment for rank and discipline.

The committee further recommends that a two-year time-frame be set to achieve this initial goal.

Thereafter, the committee recommends that a true merit process be developed that results in significant advancement as opposed to the mini-steps currently used for merit.

To achieve a long-term solution, the Market Definition Committee recommends that a salary administration board be created to develop and administer a faculty salary administration policy. Included in that policy should be significant step promotions for longevity, merit, and promotions in rank. The CUPA data should be used as a guiding reference in establishing salary ranges for faculty in the various ranks and disciplines. In addition, other market forces may need to be considered to attract and retain quality faculty.

The most important and significant characteristic of any eventual salary policy should be that it is made public, easy to access, and based upon an available formula. All faculty need to know that they are being treated fairly and that salary adjustments are being made in a consistent and rational manner across the university.

Introduction

In November 1999 the Faculty Senate created the Ad Hoc Market Definition Committee. The impetus for creating this committee came from various quarters. In the general recommendations section of its report to the CWU president, the NASC accreditation team pointed out that faculty salaries had become a source of various problems and officially recommended that the issue receive immediate attention. Also, concerns brought to light by the 1998-99 Faculty Salary Equity Study regarding salary compression added momentum to the formation of this group.

In creating this committee, the Faculty Senate tried to choose its members to reflect as broad a range of professional and philosophical thinking among the faculty as possible.

The committee members were:

Joshua Nelson, Faculty Senate Chair Elect, Market Definition Committee Chair

College of Arts and Humanities

Lois Breedlove, Communication
Keith Lewis, Art

College of the Sciences

Michael Braunstein, Physics
Terry DeVietti, Psychology

College of Education and Professional Studies

Lad Holden, Industrial & Engineering Technology
Connie Roberts, Administrative Management & Business Education

School of Business and Economics

Karen Adamson, Accounting
Peter Saunders, Economics

Library

Daniel CannCasciato

Ex Officio

Mark Lundgren, Director, Institutional Studies

The committee was charged with addressing three basic questions:

What is the definition of market as it applies to faculty salaries?
Do, or should, these definitions apply to the university culture?
How can these market definitions be applied or implemented in university hiring practices?

Market Definition

Early on in the committee's work, the following market definition was created. This definition served to guide the committee's response with the remaining two questions.

Market Definition: "The forces that determine the compensation required to attract, hire, and retain those faculty necessary for the university to accomplish its mission."

Currently, Central Washington University has no explicit policy concerning the impact of market on faculty salaries. However, the current salary differences between faculty disciplines across the university indicate that market considerations are used to establish faculty salaries. The lack of such a policy undermines CWU's mission through the resentment, sense of entitlement, misunderstanding, and mistrust which is generated among faculty.

Furthermore, the current state of affairs does not adequately address the fact that genuine market forces are associated with faculty salaries. This deficiency has created, for instance, failed searches due to lack of candidates for faculty positions that are necessary for CWU to accomplish its mission.

CWU can draw from a number of external examples (see University of Pennsylvania Faculty Salary Policy, Appendix A) and internal rationales to justify the establishment of a market-driven faculty salary policy. A strong precedent for establishing a market-driven faculty salary policy at CWU exists in the formation of the CWU Administrative Exempt Salary Plan; this plan was generated by the administration and approved by the Board of Trustees (May 14, 1999). The policy uses College and University Personnel Association (CUPA) market data to establish salary ranges. This salary administration plan, incidentally, was used to adjust administrative exempt salaries in 1996-97 and 1997-98 to make them more nearly in parity with CWU's peer institutions than are current faculty salaries. The Administrative Exempt Salary Plan is included in Appendix B.

Models of Possible Faculty Salary Market Policies

The committee evaluated a broad spectrum of possible models for establishing faculty salary ranges. A brief summary of each of the models follows. One example of the cohort model, the CUPA model, is explained in great detail because it relates directly to the committee's recommendation for a short-term solution.

Free Market Model

The fundamental assumption of the Free Market Model is that CWU is competing for faculty with the private sector as well as other institutions of higher education and that this market places significantly different values on different disciplines. The market can be addressed by analyzing and applying labor statistics in setting faculty salary ranges. Application of this model will result in salary variations based on faculty discipline. The model also allows for significant variation in salaries among faculty due to rank and merit.

Assumptions:

There are many employment opportunities in the private sector or government for numerous academic disciplines, such as accounting, business administration, economics, etc.

Therefore, those academic professions which compete with the free market are affected by the salaries prevailing in the private sector or government.

There is an opportunity cost of working at the university. That opportunity cost is the salary differential between the market salary and the university salary.

In order to attract qualified applicants for academic openings, the university must take into salary consideration this opportunity cost.

It is also true that direct comparisons between academic jobs and private sector jobs can not easily be made because benefits associated with academic jobs may not exist in the private sector. Such benefits may include job satisfaction derived from teaching and research, academic freedom, longer vacations, etc.

Given point number 5, it seems appropriate to use some sort of a discount rate when using private market jobs as a basis for academic salaries.

Small Liberal Arts College Model

The fundamental assumption of the small liberal arts college model is that CWU is competing for faculty who each perform fundamentally the same role (teaching, research, and service) in the accomplishment of the university's mission. Because this role is independent of faculty discipline, this model suggests that faculty salaries should be independent of discipline. The market can be addressed primarily through simple allocation of all available salary funds without regard to discipline. The model allows for variation in salaries among faculty primarily due to rank and merit.

Cohort Model

The fundamental assumption of the cohort model is that CWU is competing for faculty among a cohort of like institutions; upon addressing market forces, the cohort has found that certain disciplines demand higher salaries in order to accomplish the university's mission. This market can be addressed by analyzing and applying salary data from CWU's cohort institutions in setting faculty salary ranges. As a result, variations in salary by faculty discipline are inevitable. The model also allows for significant variation in salaries among faculty due to rank and merit. The CUPA Faculty Salary Benchmarks are presented as an example of the cohort model and offer reasonably reliable and valid data on which to base immediate salary adjustments.

CUPA Faculty Salary Benchmarks

Faculty salaries at universities are often compared on the basis of averages computed across academic disciplines and faculty ranks. These comparisons of overall average salaries can be misleading. A university may achieve a high overall average salary simply because it has disproportionate numbers of faculty in the senior ranks or in high-salaried fields such as engineering or accounting. Another institution may pay relatively high salaries to faculty in each rank and discipline, but have a low overall average salary if it has few senior faculty and few programs in the high-salaried disciplines. Thus, a clear understanding of faculty salary compensation requires salary benchmarks that do not confound rates of salary compensation with variations in the distributions of faculty ranks and disciplines.

The CUPA provides just such a set of salary benchmarks for comprehensive universities. (Oklahoma State University also collects faculty salary data by rank and discipline, but only for institutions granting doctoral degrees) Every year CUPA conducts a survey of faculty salaries for which more than 200 comprehensive universities report data. CUPA then produces a report of mean faculty salaries computed separately by faculty rank and discipline. A comprehensive institution can compare its own average salaries by rank and discipline to the CUPA benchmarks to determine how well its faculty are paid compared to faculty across the nation of the same rank and discipline.

CUPA classifies faculty disciplines using federal Classification of Instructional Program (CIP) codes. Although CUPA does not collect data on all academic disciplines, major academic disciplines and many specialized disciplines are included in data collection. At Central Washington University, only the Administrative Management and Business Education (AMBE) department does not fit straightforwardly into a CUPA category.

Table 1 and Table 2 use CUPA mean salaries for comprehensive universities as benchmarks against which to gauge the effects of the 1999 adjustments to tenure-track faculty salaries that were made after adjustments for promotion in rank. These adjustments include a 3% raise for all faculty and additional adjustments for compression and equity paid to roughly two-thirds of the tenure-track faculty. The tables display the deviations of CWU salaries from CUPA benchmarks by rank but not discipline. Nevertheless, CUPA benchmarks have been applied on the basis of both rank and discipline. Thus, deviations from CUPA benchmarks take into account disciplinary differences in salaries, but are averaged separately by rank as well as for the entire faculty. (The CUPA data for 1999 are not yet available. AAUP data are not reported by discipline, but they are the best data available at the moment on changes in faculty salaries. The CUPA benchmarks are inflated separately by rank.)

In order to keep attention focused on the effects of the 1999 salary adjustments, only the salaries of continuing tenure-track faculty are included in the data displayed in the tables. Table 1 displays CWU salaries for the 1998-1999 academic year (after promotions), the corresponding CUPA mean salary benchmarks collected in the fall of 1998, and the deviation of CWU salaries from the CUPA benchmarks. Table 2 displays CWU salaries after the 3% general salary raise and the adjustments for compression and equity. The adjusted salaries went into effect in the fall of 1999. The CUPA benchmarks in Table 2 are inflated to compensate for the average salary increases at comprehensive universities between fall 1998 and fall 1999 as reported by the American Association of University Professors (AAUP) salary survey. (The CUPA data for 1999 are not yet available. AAUP data are not reported by discipline, but they are the best data available at the moment on changes in faculty salaries. The CUPA benchmarks are inflated separately by rank.) For full professors and associate professors, the AAUP reports a 3.4% increase in salaries at comprehensive universities. For assistant professors the increase is 2.7%. The deviations displayed in Table 2 represent the differences between the adjusted CWU salaries and the inflated CUPA benchmarks.

The data displayed in the two tables show that CWU salaries are considerably below average for comprehensive universities. However, the 1999 salary adjustments did narrow the gap between CWU salaries and CUPA benchmarks. When salary deviations are averaged over all disciplines and ranks, unadjusted CWU salaries were $6,497 below the 1998 CUPA benchmarks. Following the 1999 salary adjustments, CWU salaries are $5,781 below the inflated CUPA benchmarks.

Data for AMBE faculty were excluded from these calculations. Procedures for deriving AMBE benchmarks from CUPA data have not yet been established. The CUPA data for 1999 are not yet available. AAUP data are not reported by discipline, but they are the best data available at the moment on changes in faculty salaries. The CUPA benchmarks are inflated separately by rank.

The salaries of CWU's full professors are farthest from the CUPA benchmarks. The unadjusted salaries of full professors were $9,580 below the 1998 CUPA benchmarks. Full professors' adjusted salaries remain $8,597 below the inflated CUPA benchmarks. Associate professors' unadjusted salaries were $5,014 below the 1998 CUPA benchmarks, whereas their adjusted salaries are $4,815 below the inflated CUPA benchmarks. In contrast, new assistant professors' unadjusted salaries were only $701 below the 1998 CUPA benchmarks, and the adjusted salaries for new assistant professors are $126 above the inflated CUPA benchmarks. Salaries of continuing assistant professors, however, have not reached parity with the CUPA benchmarks. They were $2,257 below the 1998 CUPA benchmarks, and remain $1,705 below the inflated benchmarks.

These data exemplify the usefulness of CUPA mean salaries for benchmarking faculty salary compensation. CUPA benchmarks have two major advantages over the percentile benchmarks reported by the Washington Higher Education Coordinating Board:

CUPA benchmarks take into account the variations of faculty salaries across ranks and academic disciplines.

CUPA data can be used to compute deviations in dollars from salary benchmarks. A dollar deviation value is more intuitively meaningful than percentile differences.

However, comparisons to CUPA benchmarks must be made with some caution. CUPA means are derived from data on a large number of faculty drawn from a large set of comprehensive universities, permitting the reasonable assumption to be made that many potential sources of distortion are "averaged out" of the CUPA means. But serious distortions might be present in the mean salaries calculated by rank and discipline for a single university. This is because disaggregation by rank and discipline at a single university may not leave sufficient numbers of cases upon which to calculate statistically stable and representative means. Care must be taken to check for "outliers" (e.g., a former top administrator with a correspondingly large salary) which can severely distort the mean salary for faculty in a given rank and discipline.

Moreover, CUPA does not collect data on the average years in rank of a faculty. If a large fraction of the faculty in a particular rank and discipline have been recently promoted, their mean salary should be expected to be correspondingly low in comparison to CUPA benchmarks because the CUPA benchmarks would be derived from faculty with longer average service in rank. Nor can the CUPA data measure the performance of faculties in different disciplines and ranks.

In general, it should not be assumed that all faculty at an institution should have salaries at the same point in relation to CUPA means. Differences in years in rank and faculty performance should be evaluated in applying CUPA benchmarks, and the mean salaries at an institution should be carefully scrutinized for distortions due to outliers.

Pragmatic Considerations and Recommendations

The urgency of this issue and its impact on faculty morale caused the committee to divide its recommendations into short-term solutions and long-term considerations.

Short-Term Solution

As a guiding reference to achieve a short-term solution to this immediate concern, the Market Definition Committee recommends that the mean Central Washington University faculty salary be raised to the CUPA mean using a percentage adjustment by rank and discipline.

The Committee further recommends that a time of two years be set to obtain this initial goal.

Thereafter, the Committee recommends a true merit process that results in significant advancement as opposed to the mini-steps currently used for merit.

Long-Term Recommendations

The Committee recommends that a salary administration board be created to develop a plan for faculty compensation. Included in that plan should be significant step promotions for longevity, merit, and promotions in rank.

The CUPA data should be used as a guiding reference in establishing salary ranges for faculty in the various ranks and disciplines. In addition, other market forces may need to be considered to attract and retain quality faculty.

The most important and significant characteristic of any eventual salary policy should be that it is public, easily accessible, and based upon an available formula. All faculty need to know that they are being treated fairly and that salary adjustments are being made in a consistent and rational manner across the university.

APPENDIXES

Appendix A. University of Pennsylvania Faculty Salary Policy

Appendix B. 1999 CWU Administrative Exempt Salary Plan