Regents talk compensation strategy at U

Leaders want to determine the right balance between salary and benefits in pay.

by Brian Edwards

With salaries and benefits taking up the majority of the University of Minnesota’s budget, school leaders are looking for ways to better determine employee compensation.
For the past six years, the University has increased salaries and benefits — which account for 60 percent of the school’s expenses — by about 2 percent.  Members of the Board of Regents would like to study the University’s current compensation strategy in order to find ways to save money and attract top talent.   
“It’s a legitimate policy issue,” said Regent Richard Beeson. “It is something we will be revisiting throughout the year.” 
He said better-defined criteria for determining compensation is needed for guiding current employee salaries and attracting new employees while keeping costs at a reasonable level.
Employee compensation is made up of multiple parts including salary, health insurance, retirement, disability and sick leave, paid leave and additional incentives.
At a committee meeting earlier this month about pay for faculty, staff and administrators, Regent Abdul Omari said that he wanted to know more about how the University should plan for compensation, since salaries in higher education are already at a high level. 
John Adams, practice leader at consulting firm Towers Watson, presented the results of the firm’s breakdown of University compensation strategy at the meeting.
At the meeting he said growing salaries at public institutions are caused by factors beyond University control, such as market conditions.
But he said better oversight and regulation of pay structures and employee performance will shape a compensation philosophy that the University can use to reward talented and successful employees.
But determining market value for different employees has proven difficult for the University because of a lack of easily accessible information.
Possible changes in regulations and adjunct faculty and administrative compensation are all challenges the University faces, Adams said at the meeting. 
Average administrative compensation at universities across the country is growing at a rate of 4 percent per year, with positions in areas like IT and online education growing at an even faster rate.
The Towers Watson study showed a growth in incentive-based compensation, which is paid out if administrators reach a goal laid out by their employer. At seven Big Ten schools, top executives received pay for reaching goals, with most of them bringing in around an extra $100,000.
Regent Laura Brod said merit-based compensation — which is less structured — is typical in higher education, whereas incentive-based compensation seems to be less common.
As more millennials enter the job market, Beeson said it’s important to focus on what they’d prefer in compensation packages. He said the group’s focus tends to be on salary rather than benefits.
“That balance changes by the generation,” Beeson said. “The better we retain, then the better value they will have.”
Brod said she wants to challenge the traditional thinking about employee pay at the University.
“Do we have the right mix?” she said. “And what is the right mix to attract the best and brightest to the University of Minnesota?”