Performance Pay Comes to Campus

If they want a raise, leaders across the University of Texas System are going to have to perform for it.

Under a plan approved by the Board of Regents last week, salary increases for presidents, chancellors and other executives at the system level and at individual campuses and university hospitals will be contingent on meeting several short-term and long-term targets.

Sample targets included in the proposal included improving the 4-year graduation rate and increasing donations.

Approval of the plan comes one year after the system approved Chancellor Francisco Cigarroa’s “Framework for Advancing Excellence,” which seeks to improve productivity and accountability across the system through nine broad policy goals.

Cigarroa told system regents that the incentive pay plan represents “putting a toe in the water” to see if it will help advance the goals in the Framework, according to the San Antonio Express-News.

The plan also has the support of Texas Governor Rick Perry, who has previously called for greater efficiency in higher education and sought to encourage universities to operate more like businesses.

“It helps create a climate that encourages people to do their best,” says Perry spokeswoman Lucy Nashed. “That’s something that he’s all for.” She adds it’s too early to say whether he would encourage other state colleges and universities outside the system to adopt the incentive pay plan.

While it’s unclear how many other public universities use a similar system, a survey this year by executive compensation consultants Yaffe & Company suggests that just over one-third of presidents at private universities have some of their pay tied to performance. That represents an increase over previous years, the firm’s founder and chief executive officer, Rian Yaffe, tells Inside Higher Ed.

It comes as universities are increasingly being scrutinized on the basis of performance.

A growing number of states have tied state higher education funding to performance targets, and some campuses have even provided incentives for students to meet graduation targets, or other goals, according to Daniel Hurley, director of state relations and policy analysis for the American Association of State Colleges and Universities. The University of Houston, for example, provides students up to $3,000 for staying on track to graduate in four years.

Whether that’s a good thing is another matter.

Andy Brantley, president and chief executive officer of the College and University Professional Association for Human Resources, says its appropriate for campuses to be focused on meeting performance targets and relatively common for some consideration of performance to be included in presidential contracts. “Having clear performance metrics is absolutely essential for any organization,” he says.

But a focus on performance targets, particularly those tied to graduation rates, has some concerned about lowering academic standards.

And Rich Novak, senior vice president for programs and research at the Association of Governing Boards thinks that incentive pay could create a divide between campus leaders and faculty. If incentives are awarded on top of base pay, Novak said he wonders whether they are even necessary.

“You already pay presidents good salaries,” he says. “I don’t think presidents need incentive pay to do their job.”