October 25, 2002


TO: Frank B. Cerra, Senior Vice President, Academic Health Sciences

FROM: AHC Finance & Planning Committee
Timothy Church, Chair
Dan Feeney
Katie Dusenbery
Michael Speidel
Carol Wells
Beth Nunnally, ex officio

RE: Concerns with Process around Faculty Compensation Adjustments

As you are aware, the annual merit evaluation exercise is viewed with mixed emotion by many faculty members. It is a time when half of the faculty must be told they are “less than average” relative to their peers (or some substitution thereof). Faculty have raised concerns within the AHC about the process used for merit evaluation in some departments, the tendency to allocate merit increases to salary components other than base, and the financial security of monies distributed within the AHC. Nested in the items above are the following concerns:

The AHC F&P Committee undertook an inquiry into this topic and also met with you twice. The purpose of this memo is to follow up with you on our discussions and to provide recommendations for future improvements in this process.

Faculty must understand how merit money is distributed, how much of it is guaranteed by tenure, and how much risk there is to the rest of what is deemed to be annual salary. Clarity and improved communication around these topics are sorely needed. As part of our effort, we prepared the following attached information:

Past compliance of some AHC units with the attached principles and existing University policy has been questionable. The combination of poor process, lack of understanding, and uncertainty about future income has great potential for negative morale. Given your support for the attached principles, we believe this information should be incorporated into compensation planning that will occur during FY03 for the FY04 academic year. In this uncertain environment, clarity is of the utmost importance.

Thank you for your consideration and support.

Clear and improved communication regarding faculty compensation must be provided to faculty.

At minimum, annually, each faculty member should receive a written communication about his or her compensation that provides the following information:

The AHC Faculty Finance and Planning Committee has developed some new explanatory information for faculty that is attached:

In addition, faculty should be reminded of the availability of the following University policies and other documents:

Incremental tuition revenue and incremental O&M revenue will rarely, if ever, be sufficient to cover mandated faculty salary increases. However, it is the expectation of the Sr. VP for Health Sciences that units will use their allocation of incremental tuition and/or incremental O&M support to increase base salaries. To the extent other sources of funding must be used to fund salary increases, such increases may be to base salary or may be in the form of salary not guaranteed by tenure.

Clinical departments bear the greatest burden to fund faculty salary increase from sources of funds other than tuition and O&M. The diagram below summarizes the distinction between base and other forms of compensation and the potential mix of funding sources:

Collegiate deans will assume responsibility to ensure these principles are carried into department practice. Deans and department heads should tie these principles to the annual review process and to the process of faculty consultation required in developing the annual compensation plan. The principles and practices should be coordinated with the fiscal officers for funding implementation.

The deans’ offices will monitor annual faculty compensation adjustments to ensure that adjustments are being made to base salary consistent with the principles outlined in this document. Simple data queries could be run periodically to capture information needed to enable this monitoring. Examples of such queries include of the following: identification of any departments that do not give any increases in base salaries from one year to the next; amount of average increase to base salaries by department; timeliness of processing annual compensation adjustments; and other information as deemed appropriate.