Pay for Performance

Abstract:

When we talk about compensation for faculty members in universities, we talk about motivating them in terms of their performance as well as their retention. A challenge is to ensure that their efforts and abilities are measured in a fair manner. Generally speaking compensations results are based on the input as well as the outputs, however in the teaching profession; earnings are dependent more on the input rather than the outputs and it is more quality oriented as compared to results oriented. In this article, we will discuss whether pay for performance is a good measure to compensate faculty as compared to the merit or point based compensation systems.

INTRODUCTION:

Pay for Performance is one of the latest compensation system which undergoes a lot of practical challenges at this point in time. In performance pay compensation, the faculty/teachers' pay increases are tied to improvements in the students' performances measured by standardized tests or other criteria whereas in a merit pay system, individual teachers receive bonuses based on improvements in their own performances. In an education sector, especially the teaching profession, it is difficult to define and measure effort and output since the type of work (education) is complex, unique, requires continuous improvements and updation with the advancements of research and technology. All these also call for a team work, collaborative and communal culture.

Discussion

It is important to understand the basic purpose of universities if we are to propose compensation plans since objectives of any business are based on the basic mission/vision of the business. The same applies to the universities. Providing better standards of education, enhancement of knowledge and improving the quality of thought processes of students and to help them create better work opportunities for the future is the basis purpose of universities. And to achieve this, close collaboration, group think, team work and a communal culture is preferred. In such a clan culture, there is a fraternal relationship between the institution and the faculty. A shared fate, sense of tradition and style is the same. A hierarchy structures relationship in which there is a sense of interdependence, pride in membership and an extensive collegial network.

In such a culture, Pay for Performance compensation system is not aligned to meet the objectives of a university. The reason is because in a pay for performance compensation system, there is hierarchical pay diffusion and there is a greater difference in the pay (greater pay gaps).This can lead to faculty dissatisfaction. In case of pay for performance, the relationship between the organization and faculty members rests on self-interest, contractual relationship and limited interaction.

According to the scholarly article "FACULTY SALARIES AND THE MAXIMIZATION

OF PRESTIGE"

"Starting from the premise that academic institutions seek to maximize prestige, we argue that faculty gain monetary rewards for activities that confer (talk) prestige on their employing institution. The results of the empirical model are consistent with the theory that faculty members are financially rewarded for enhancing the prestige of their institutions" (pg. 661)

There is a huge risk to define the parameters to measure performance accurately in case of pay for performance compensation system because quality is quite subjective in many cases. However, if we talk about the merit-based system, a faculty member's seniority and quality of services can be measured by the type of institution he/she acquired his/her education, the field of study, Years of Experience, tenure of service (counting towards the experience), mobility and employment at a public institution.

"There are more costs associated with performance pay; you have to identify performances, measure those, and it is more complicated," the AFT's Weil said. "You have to ensure teachers it will be fair and objective; you are trying to make it objective with the many different roles teachers play."

According to article; MAKING FAIR AND PREDICTABLE SALARY ADJUSTMENTS FOR FACULTY OF PUBLIC RESEARCH UNIVERSITIES

"What is the effect of changes in compensation on faculty behavior? Hearn (1999) concluded that faculty members view salary increases as a tangible form of recognition of their own worth to the institution. Yet,

he found that salaries do not strongly influence the attitudes and performance of faculty at research institutions. He cited other research findings that rank, tenure, recognition by peers, publications, and working conditions are more important than salary once it reaches a minimal standard. Although salaries may not be a major motivating factor, Hearn did find that relative salary increases can appreciably affect a

faculty member's attitude and performance.(pg: 114)

According to the article: RECRUITMENT, RETENTION, AND RETIREMENT: COMPENSATION AND EMPLOYMENT POLICIES FOR HIGHER EDUCATION

"A challenge for the future is to merge the research needs of the university with the research talents of its faculty in order to develop the needed policies for the future.(400)

The importance of having a merit based compensation system is also evident from the following research excerpt:

"The average duration of a post-doc increased from two years for PhDs awarded in 1965 to three years for PhDs awarded between 1982 and 1992. Postdoctoral positions have become a major source of research at many universities. They are now an important component in the careers of most PhDs in science and engineering" (391)

The merit -based compensation system provides faculty a means of planning what they need to do in order to earn a specific score, which is tied to the university promotion and tenure requirements.

The importance of Merit pay system can also be seen from the following:

Article: Strategic Planning and Budgeting to Achieve Core Missions of space"

"Two other elements had a measurable effect on the success of the plan. The first involved including agreed-on departmental performance indicators in the annual budget and planning process. These measures show each department's performance compared to both the school as a whole and where school wide performance ought to be, in such areas as research funding per faculty member and research