Corporate concepts of CEO pay are beginning to make their way into the world of traditional higher education. Stephen Pollack from a human resource consulting firm in San Francisco states “Corporate concepts are just starting to drift into academia, and they have to” (1). Recent concerns about college presidents performance mixed with the relative static nature of higher education institutes are bubbling up.
College performance has been under an increasing microscope and retention has become a larger issues. University education is expensive and some are wondering about the cost and benefit of certain programs. As universities increase in competitiveness some boards are considering using additional performance pay metrics with university presidents.
Likewise, the Department of Education is seeking to use data metrics to evaluate the success of universities in educating students for the job markets (2). The pressure for performance is rising and presidents are likely to feel the brunt of these actions. As changes in the American higher education system becomes more likely so will the compensation approaches for educational executives.
The devil is always in the details. Presidents of universities are normally not in the same stream as CEO’s of companies. Yet their performance is just as important. Universities are relatively stable and unchanging over the past decades and hence the simple salary system worked fine. Now that the system is under pressure for change some universities are seeking to change their compensation structures.
In higher education presidents have a higher responsibility to encourage learning and ensure that the university works at its optimal level. Performance compensation may be tied to retention rates, financial performance, or even scientific products but none is going to be a perfect solution. The metric mix will be what counts.
Moving the metric pendulum too far into performance is likely to create short-term decisions that can be disastrous a few years down the road. Using a straight salary may encourage a lack of overall performance as presidents will need to change with the times. Since performance metrics are new in higher education it will be necessary to engage in some compensation experimentation. Slowly including various performance metrics into the compensation package will naturally have an impact so they should be included with some caution and over a period of time to ensure performance is matching pay.