Matching the market

Senior administrators draw criticism for their salaries at the University. But they aren’t unique among their peers.

by Anne Millerbernd

Despite widespread accusations of high administrative spending at the University of Minnesota, pay for the institution’s senior leaders falls in line with that of its peers.

The University’s top administrators earn average salaries below those of leaders at many other Big Ten university systems, a Minnesota Daily analysis found.

The mean base salary for University administrators in fiscal year 2013 was $340,007. Across the Big Ten, that number was about $350,000.

Administrator salaries at the University and conference-wide have spiked since the mid-2000s, far outpacing increases in faculty members’ pay over time.

The average Big Ten full professor pulled in about  $142,000 in the 2013-14 school year, according to the American Association of University Professors.

School leaders say setting administrative pay means responding to a market and scrambling to keep talented managers from forsaking public education for private-sector profits.

And while some argue that highly paid administrators preserve an institution’s quality, state legislators and experts say universities need to streamline costs and focus resources on education rather than hefty salaries.

Pay below peers’

A Wall Street Journal article published in late 2012 kicked off a wave of public scrutiny when it pointed to the University’s 10-year “spending spree” on administrative and non-classroom positions.

The piece prompted legislative critique and outside reviews of the University’s administrative spending and its salaries for nearly two years.

But a Minnesota Daily analysis of top administrators’ wages at 10 of the 14 Big Ten schools found that the way the University pays its senior leaders isn’t unique.

In fact, the average base salaries for the University’s top administrators ranked sixth out of the 10 schools.

Some state legislators who focus on higher education weren’t surprised by the University’s ranking.

Sen. Terri Bonoff, DFL-Minnetonka, who chairs the Senate’s higher education committee, co-wrote a letter soon after the release of the Wall Street Journal article, in which she asked the University for a data-centered analysis of its administrative spending. She said she didn’t write the letter to criticize the University’s spending, but rather to start conversations and efforts to check in on administrative overhead.

“I was never on some bandwagon that said the University was out of line,” she said.

Two studies conducted last year by two external consulting firms, Sibson Consulting and Huron Consulting Group, found that the University had a low manager-to-employee ratio in some areas and that it could make its network of departments more
cohesive, respectively.

To conduct its own analysis, the Minnesota Daily identified eight senior administrators from each school and requested, under federal and state open data laws, their salaries for fiscal years 2013 and 2006. The selected leaders work in areas such as student affairs, research and health services.

Of the Big Ten schools, 10 provided their data. The University of Maryland and the University of Michigan did not provide their numbers by press time. The University of Iowa said the data would require a fee. As a private institution, Northwestern University is not required to disclose base salary data.

Six of the eight University of Minnesota administrative positions that the Daily analyzed existed in 2006. Nearly all of the jobs paid less than they do now, even when accounting for inflation.

Ohio State University has the highest mean salary of the schools studied, at over $530,000.

The lowest average salary studied was about $244,000 at the University of Wisconsin system.

State Rep. Zachary Dorholt, DFL-St. Cloud, who is the vice chair of the House committee on higher education, also said he wasn’t surprised by the University’s standing among its peers.

“You can’t point the finger just at administrative bloat,” he said. “That’s part of the problem, but it’s not as big as some people are making it out to be.”

A story of the market

Though the University of Minnesota sits near the middle of Big Ten schools in average administrator pay, President Eric Kaler’s base pay of $610,000 topped that of at least seven other presidents in 2013, according to the Daily’s analysis.

Presidential base pay at the 10 schools studied ran the gamut from about $411,000 at the University of Nebraska to about $650,000 at Rutgers University. Those numbers don’t include bonuses and other compensation, which could push some presidents’ yearly paychecks into seven figures.

The University of Minnesota’s Board of Regents approved a 2.5 percent pay increase for Kaler in July, boosting his annual earnings to $784,700 this year with benefits — an amount Kaler said matches market demands.

“I think there’s no doubt it’s a large salary,” Kaler told the Daily in July, “but we’re in a marketplace.”

Many legislators and higher education experts say the market has been the undercurrent driving significant administrative salary increases throughout the past decade.

Salaries for University officials depend on factors like work experience, education and the going rate for similar positions at other schools, said Patti Dion, director of employee relations and compensation in the Office of Human Resources.

“Our goal is to try to be competitive with our peer institutions,” Dion said, “which certainly includes the Big Ten.”

The University’s process for setting compensation includes offering rates comparable to its peers’, according to a 2013 presentation to the Board of Regents.

Regents review salaries for the school’s senior leaders annually. They declined multiple requests for interviews through a University spokesman.

Board Chair Richard Beeson provided an email statement that says the regents compare the school’s salaries to those at peer institutions “to ensure that the University is both competitive and appropriate.”

Officials say high administrative salaries serve to keep top talent out of the private industry, but others contend it is an
outdated argument.

In the late 1990s, college graduates could easily enter the private industry and earn top pay, Dorholt said.

“The opportunities were there,” he said. “The economic growth was so intense, and it was growing so fast.”

Higher education institutions responded by trying to match those salaries for talented employees, he said, and the same strategy continues today.

But Dorholt said that strategy is no longer valid because college graduates can’t easily garner a job in the private sector anymore.

Many schools, however, still operate under the idea of wooing candidates away from industry.

The University of Illinois system, for example, bases salaries on comparisons with at least three different peer groups, including the Big Ten, said Randy Kangas, the school’s associate vice president for planning and budgeting.

“There is a market for the best and brightest of all things … so either you’re going to meet the competition, or you’re not,” he said.

To ensure that his university pays administrators competitively, Kangas said the school not only looks at peer institutions but also at private schools, some of which compensate presidents with millions of dollars.

Administrators in Illinois haven’t faced much backlash about any of their employees’ salaries, he said. But as the school searches for a new president, he anticipates public criticism over the salary it will offer.

“That number is going to be a very large shift upwards,” he said, “but … if you’re going to go to the marketplace, you’re going to get what you pay for. And if you want to go after the best people, it’s going to be expensive.”

Admin-faculty pay gap

Gaps in pay between administrators and faculty members have grown in the past decade, said Samuel Dunietz, research and policy analyst for the American Association of University Professors.

The University of Minnesota ranked eighth out of the 14 Big Ten schools in terms of full professor pay in the 2013-14 academic year, according to data from the AAUP.

The average salary for full professors at the University was a little more than $136,000, compared to the conference-wide average of almost $142,000.

Like most other schools, the University’s rankings aren’t identical across faculty categories. It ranked 10th in average pay for associate professors and ninth for assistant professors.

At some schools, a faculty member’s field of study could lead to them making more than an administrator.

The University of Illinois at Urbana-Champaign, for example, has strong engineering programs, Kangas said. That means the school has to pay professors in that field differently to keep them around.

“Faculty are driven by, as much as anything, their market segment,” Kangas said.

While administrative salaries have increased in recent years, faculty salaries took a hit during the recession, Dunietz said. They’re starting to bounce back, but inflation has erased most of the gains.

But the distinction between faculty and administrator pay is a complicated issue, State Rep. Dorholt said.

“There are definitely admins that get paid for not much, and some that aren’t paid what they’re worth,” he said. “So it’s a little bit of a mixed bag. But overall, it’s very frustrating to see how that evolved.”

‘It’s not a business’

In the face of sharp disparities between climbing administrator salaries and stagnant faculty pay, experts and state legislators say the opportunity to create knowledge should satisfy school employees, rather than securing a bulky paycheck.

“For what we do as faculty, we are adequately compensated,” said University of Minnesota Faculty Senate Vice Chair Eva von Dassow. “This is not work on which we become rich. That’s not why we embark on intellectual pursuits.”

Instead, tenured faculty members should be paid enough to meet living expenses, she said, adding that assigning a salary to a tenured faculty member’s position isn’t a good way to value their work.

Experts say the same goes for senior leaders.

Higher education administrators should choose their jobs because they have a passion for research, knowledge and overseeing those activities, Dorholt said.

“If people are being lured out of higher ed simply to make more money, then my guess is they weren’t really interested in being in higher ed,” he said. “Those positions belong to people who have a passion for educating people and for learning.”

Dorholt said the goals and approaches of private-sector companies often involve serving shareholders and making a profit. Higher
education institutions instead aim to further human understanding, he said.

“It’s not a business,” Dorholt said. “It’s an institution — very different things.”

Dunietz said investing in faculty members and the relationship between instructors and students should be a priority for higher education institutions, rather than spending money on administrators and non-academic positions.

Despite a need to pay administrators enough to keep them from moving to private industry, Bonoff said, schools should streamline costs unrelated to learning.

“We just can’t afford to have a broad swath of management,” Bonoff said.

Kaler announced plans last September to cut $90 million in administrative overhead by 2019, and University officials have successfully dropped more than $15 million in spending already.

Bonoff said there’s still more to do, but the University is well on its way to cutting administrative costs.

“You don’t turn around a ship that’s as big as the University of Minnesota on a dime,” Bonoff said.