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University of MissouriStaff Compensation

October 6, 2009University of Missouri – Kansas City

Betsy RodriguezVice President for Human Resources

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People Excellence Synergy

UM System Human Resources Strategic Plan 2009-2013

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Vision

University of Missouri is recognized as having a positive, inclusive, high performance culture based on cooperation and respect and where the work environment reflects a community that promotes work/life balance, values unique contributions, and allows individuals to make a difference through their service.

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Mission

People First: To provide strategic guidance for the implementation of best practice human resource management that enables UM excellence and values

our people as its primary resource.

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Critical Focus Areas

• Fully engaged workforce (people first)

• Effective processes

• Excellent service to customers

• Strategic resourcing

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People First: Total Rewards System

• Total Rewards System is driver of people strategy---making possible a diverse, high quality, engaged, and productive faculty and staff

• Compensation and rewards must align with and be part of university/campus strategic plans

• Total rewards sends a message to (prospective and current) employees

• Effective use of Total Rewards System resources requires philosophy, strategy, planning, analysis, and accountability

• And investment!

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Philosophy/Strategy Question

If we value people first, why do our budgets always begin with mandates such as utilities, maintenance, and insurance? Why isn’t compensation the first ‘mandate’?

Compare people assets to physical assets – we’ve deferred the ‘maintenance’ and that is causing structural problems.

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Additional Questions

• Can faculty and staff explain their salary level, esp in relation to similarly situated colleagues?

• Can faculty and staff explain their career path, and the compensation changes that accompany promotions?

• Can we reward longevity (seniority) and also pay for performance?

• How important is internal equity?• How much value do we get for the cost of

benefits?

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Consequences of Below Market Salaries• Higher turnover, and the associated greater cost of

training new faculty and staff• Longer time to fill positions and the costs of extended

vacancies in key positions• Filling positions with 2nd and even 3rd tier candidates

as top-tier candidates accept positions at organizations that provide higher levels of compensation (and the longer-term implications this has for the University's image, ability to draw students both within and out-of-state, impact on development and research funding, etc.)

• Lower morale and associated reduced productivity

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Total Rewards Framework: CompensationBegins with philosophy (to mirror our vision): Examples… To provide total compensation that attracts and retains

high quality faculty and staff, and that rewards (seniority?) high performers.

To be competitive within appropriate occupational peer groups for high performing faculty and staff with programs that focus on recruitment and retention.

To be at the competitive average by campus, with a core set of centers of excellence that are leaders in their fields.

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Total Rewards Framework: Compensation (con’t)

Includes a strategy: e.g., • Where are we now? – see next slide • Where do we want to be? • What needs to be done?• How is it funded?• How much focus on salary and benefits vs

other ‘rewards’?

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Total Rewards Framework: Compensation (con’t)Is defined by a set of Objectives and/or Core Values:e.g.– for Salary:• Salary ranges will be established based on appropriate markets• Initial compensation will be within the established ranges, based on

experience and skills– with consideration for internal equity• Compensation changes will be based solely/mostly on merit• Merit will be determined by college/campus established metrics• Differentiation and decision making regarding high vs. low performance• Metrics will consider all areas of performance critical to university mission• Salary structure will manage employee growth and development• Faculty promotions will include a flat dollar amount or a % of salary• All employee groups will be treated equally for annual increases

(regardless of market position? Regardless of funding?)

Objectives lead to building and communicating salary STRUCTURE

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Quick detour to review current structure

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Salary Data: Hourly Employees

Hourly employees Total payroll $233 million + benefits $49.8 million

Service/Maintenance & Skilled Trades

• Titles such as Police Officer, Child Care Assistant, Food Services, Custodians, Power Plant Operators, Electricians, Pipefitters

• Approximately 2,150 employees• Majority are union eligible positions (about 20% are union

members) • Meet and confer for annual agreement, nonbinding• Average hourly rate = $14.50 (range from $8 to $31)

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Salary Data: Hourly Employees

Hourly employees (continued)

Office administration / Support •Titles such as Administrative Assistant, Office Support Staff, Fiscal Assistant•Approximately 3,320 employees•Average hourly rate = $14.50 (range from $7.25 to $35.00)

Technical•Titles such as Research Technician, Optician Assistant, Broadcast Technician, Reactor Operator, Computer Operator, Hygienist•Approximately 2,050 employees•Average hourly rate = $16.75 (range from$8.00 to $39.50)

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Salary Data: Hourly Employees

Salary Market Data – Hourly Employees

• Compared to local/regional marketsNote: Columbia IS the market for many positions

• Union salary structure is discussed during annual ‘meet and confer’

• Union salary structure is a step system by which employees in same title with same length of service receive same hourly pay

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Salary Data: Salaried Employees

Salaried employeesTotal payroll $772 million + benefits $165 million

Professional

• Titles such as Programmer / Analyst, Attorney, Psychologist, Accountant, Engineer, Chemist

• About 4,100 employees• Average annual salary $50,400

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Salary Data: Salaried Employees

Salaried employees (continued)

Administrative / Manager / Executive• Titles such as Farm Supervisor, Ticket Manager, Admissions Director,

Placement Director, Coach, Provost, Chancellor, President• About 1,900 employees• Average annual salary $79,000

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Salary Data: Salaried Employees

Salary Market Data – Professional, Administrators and Executives

• Sources: Salary.com and other purchased or generated market databases

• Administrative work varies across many industries (e.g., agriculture, entertainment, sports, retail, finance, print, power generation, restaurant, resource management, housing, research, healthcare, student services)

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Salary Data: Salaried Employees

Salary Market Data – Professional, Administrators and Executives (continued)

• Maintaining competitive pay across these industries is constant balancing act as each industry moves in response to economic conditions and labor markets

• Large salary differences across industries lead to issues of ‘fairness’ and ‘equity’ among university employees (e.g., typically student services have lower market salaries than finance)

• Assess markets and salary needs within Occupational Group(s) Exception: Senior Leadership and strategic valued positionare often individually compared to market

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Salary Peer Comparisons: Staff

• Do not have complete data on every staff position compared to market

• Need to do significant work to develop accurate market comparisons (due to title inflation and other considerations)

• Selected 150 titles—salaried only for comparison

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79.6% of mkt

91.9% of mkt

90.8% of mkt

89.7% of mkt

79.9% of mkt

69.5% of mkt

MKT

UNIV

Salary Peer Comparisons: StaffStaff by Select Occupational Groups

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Salary Increase History: Faculty and Staff

Federal CPI Statistics

Sept' Year

CPIGrowth Annual Growth

1999 12000 4.2% 4.00% 4.0%2001 8.1% 4.00% 8.2%2002 10.0% 0.00% 8.2%2003 11.9% 2.00% 10.3%2004 15.1% 2.00% 12.5%2005 18.2% 2.00% 14.8%2006 20.1% 2.00% 17.1%2007 23.2% 2.00% 19.4%2008 28.0% 4.00% 24.2%

Area: U.S. city average

Item: All itemsArea:

University Merit Guidelines

* 3.8% point loss amounts to a $2,000 purchasing

capability shortfall. Realignment would cost $38m.

CPI for All Urban Consumers (CPI-U) 1982-84=100*

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Total Rewards Framework (con’t)

Is defined by a set of Objectives and/or Core Values:

e.g.-- for other Compensation:• Compensation programs will be flexible to

meet individual, department, and campus needs

• Total Rewards considers issues beyond salary and benefits– total value proposition

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Total Value Proposition

• What are other reasons/programs beyond traditional compensation (salary and benefits) that attract and retain faculty and staff?

• What do employees value? Faculty: Environment/culture, collegiality, academic freedom, recognition, shared governance, collaboration opportunities, gifted/high performing students, lab space/equipment, professional travel, work/life balance, etc.

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Total Rewards Framework (con’t)

Must be based on Analysis

Our current staff compensation structure is decades out of date!

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Total Rewards Framework (con’t)

Concludes with Accountability:• Require annual performance evaluations to

justify annual salary changes• Provide market data to decision makers• Hold decision makers responsible for ensuring

compensation objectives are met, or there is a strategy to get there

• Ensure faculty and staff understand the compensation philosophy, strategy, objectives

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Cost of Salary Changes

Cost of salary increases:$638m operating (state) budget• Each 1% increase = $8 million• 2% salary increase would cost $16 million

How to pay for increases?• Tuition: 1% comp increase = 2% tuition increase• Other:

Increases in revenues Decreases in expenses (e.g. reduction in work force,

program closures, efficiency savings, vacancy savings)Do we allow variation by campus?

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Quick Review of Benefits

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Comparator Institution BenchmarksHewitt Associates Relative Value Study

Employer Paid Value Total Value

Index Rank Index Rank

Retirement 117.9 3rd 77.6 15th

Retirement* 101.1 7th 77.6 15th

Pre Retirement Death-Group Life 107.7 7th 91.2 10th

Long Term Disability 143.9 4th 107.9 8th

Dental 85.3 12th 93.0 12th

Preretirement Health 98.9 10th 102.8 8th

Post Retirement Health-prior to age 65 161.9 3rd 127.5 2nd

Post Retirement Health-age 65 and higher 88.4 8th 103.1 9th

All Post Retirement Health 116.3 8th 110.7 6th

All Benefits (Including Tuition) 106.3 6th 92.3 13th

All Benefits (Including Tuition)* 98.5 11th 92.3 13th

*After 7/1/09 pension plan amendment

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Summary Observations of Benefits

• UM offers a competitive array of benefit programs that are currently slightly below the average of its peer group

• UM, strategically, assumes risk through self-insurance when appropriate

• UM employees, through premiums/contributions bear a significant portion of the cost of providing UM benefit programs

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Summary Observations of Benefits

• UM employees, at the time of purchasing health care services bear a significant portion of cost for services rendered

• Areas of significant deviation from the average of the peer group include:

Above average Employer Paid Value of Long Term Disability Base Plan Employer Paid Value of Post Retirement/Pre 65 Medical Benefits

Below Average Employer Paid Value and Total Value of Dental Benefits

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Summary Observations of Benefits

• The 7/1/09 change that requires employees to contribute to the pension plan has resulted in a decrease in UM’s ranking among peer institutions in both the pension and overall categories

• The majority of peer institutions continue to offer subsidized post employment health care benefits

• UM is unique in offering a defined benefit plan as the primary pension plan avenue

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History of Actual UM Contribution Rates% of payroll