Professors at U. of Michigan Question Administrators’ Extra Pay

The Chronicle of Higher Education, April 25, 2014
Professors at U. of Michigan Question Administrators’ Extra Pay
By Don Troop

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Nine years ago, the University of Michigan at Ann Arbor spent less than $13-million annually on a handful of “additional pay” categories that reward employees for meeting performance goals or taking on duties outside their job descriptions. By last year that sum—which is undisclosed on the university’s published list of salaries—had ballooned to more than $46-million and included individual premiums worth tens of thousands of dollars to a few top-tier administrators, deans, and staff members.

Now a group of a dozen professors, concerned about administrative bloat, has published a manifesto of sorts on the website michiganexposed.info.With their “Open Letter to the Regents of the University of Michigan,” the faculty members hope to persuade the institution’s board and theincoming president, Mark S. Schlissel, to impose fiscal restraint on what they perceive as the unfettered growth of programs and activities. The professors, emboldened by last fall’s success at forcing Michigan to delayits “shared services” plan, say excessive pay and a “secretive bonus culture” are evidence of a system out of control.

Rick Fitzgerald, a university spokesman, rejected the use of the term “bonuses” to describe the additional compensation. He said that employees at all levels receive administrative-differential pay when they take on extra duties, and that most of the money in that category goes to faculty members, not staff members.

Dario Gaggio, an associate professor of history, acknowledged that getting bonus compensation for directing programs or taking on extra duties was a widespread practice at Michigan. “We all partake of it,” he said. But he and other professors maintain that administrative differential is intended for nonadministrators who take on administrative duties, not for administrators who are already defined as such by their job titles. The professors want a line to be drawn somewhere, Mr. Gaggio said, “and right now that line is drawn in a very strange place.”

The University of Michigan itself might accurately be described as occupying a very strange place, with its president, Mary Sue Coleman, set to retire at the end of this academic year, and its executive vice president and chief financial officer, Timothy P. Slottow, recently being named as president of the University of Phoenix. The changes at the top come amid encouraging results for the university’s $4-billion fund-raising campaign as well as a furor over a divisive plan to save millions of dollars a year by moving hundreds of staff members out of academic offices and into a centralized Shared Services Center a few blocks from the campus.

A near-revolt by Michigan’s faculty forced administrators last fall to “pause” (but not terminate) the shared-services project, an effort that Mr. Gaggio said “dehumanizes” longtime staff members by regarding them as “a bundle of tasks.” Rowan A. Miranda, associate vice president for finance, who was selected to lead the beleaguered plan, was moved out of that role and eventually accepted a post at the University of Chicago, but not before playing a bit part in the prelude to the latest chapter in Michigan’s story.

The shared-services plan was originally intended to save $17-million a year, but after it was scaled back in the face of opposition, Mr. Slottow estimated it would save at best $5-million or $6-million. In the meantime, the consulting company Accenture LLP—Mr. Miranda’s former employer—was being paid $11.7-million to manage Michigan’s Administrative Services Transformation, a sweeping package of cost-saving initiatives of which shared services is a part. As the human face of the reorganization plan, Mr. Miranda came to symbolize, at least to his critics, everything that was wrong with it.

Leaked Documents
At the height of the debate last fall, someone leaked a copy of Mr. Miranda’s salary history at Michigan—including a record of additional pay he had received—and the document began bouncing around the Internet, Mr. Gaggio said. “It contained this somewhat inexplicable bonus of $100,000 in addition to his already generous salary of some $300,000,” the professor said. Mr. Miranda taught as an adjunct in the university’s school of public policy, but that explained only a portion of his additional pay. The remainder of the bonus included tens of thousands of dollars in salary supplements and incentives.

State law does not require public colleges to disclose amounts of additional pay except through open-records requests. But Mr. Miranda’s salary document set Mr. Gaggio and others to wondering how many other officials were pulling in additional pay, and for what purpose. More compensation rec­ords were leaked, and the professors behind michiganexposed.info began poring over them.

Mr. Gaggio, a member of that group, filed a Freedom of Information Act request to verify the accuracy of the documents. The results confirmed the steep rise in aggregate spending over the past decade in four additional-pay categories: administrative differential, salary supplement, services unrelated to appointment, and added-duties differential. The professors did not examine 66 other additional-pay categories that they considered to be “legitimate,” such as those that describe payments to health-care providers.

The professors’ website includes two salary lists. Appendix A shows total compensation—including publicly reported pay, base pay, and seven categories of additional pay—for 85 university executives, deans, and some administrative staff members. All are identified by name. The professors say their analysis found that those individuals accounted for $3.61-million in additional pay from the university’s general fund over nine years.

Appendix B lists by administrative department or school the aggregate amounts given to employees in four additional-pay categories. It does not include pay for the chief officer of the given department and does not identify employees by name. But it shows, for example, that the chief financial officer’s department spent $457,453 on salary supplements in 2013. The professors have complained that the category of salary supplements is an overly vague bonus that can be handed out with no explanation.

The professors’ website also compares Michigan administrators’ base salaries with those at four “peer” institutions—the University of California at Berkeley and at Los Angeles, the University of Texas at Austin, and the University of Virginia—and finds that Michigan’s leaders are paid 127 percent to 141 percent more than their counterparts before additional pay is calculated. The California institutions report additional-pay amounts in addition to base salaries. Texas includes most categories of extra pay in its publicly reported salaries; Virginia requires an open-records request.

Mr. Fitzgerald, the university spokesman, did not have access to the website before its unveiling, but he defended Michigan’s practice of excluding additional pay from published salary lists, something he said was “fairly common” among public institutions. “The base salaries are what can be compared year to year, on an institution-to-institution basis,” he said. “Some of the additional pay … varies from year to year.”

He also defended paying administrators salary supplements and administrative differentials, pointing to the example of Cynthia H. Wilbanks, vice president for government relations. Last year she saw her publicly reported salary of $296,324 topped up with a salary supplement of $2,617 and an administrative differential of $55,290.

Ms. Wilbanks, he explained, previously worked as a vice president for development and a vice president for communications. Then four years ago, she became a special counsel to the president on non-research-based economic development. “That was very public,” he said. “There’s no secret about that. “

Likewise, Mr. Fitzgerald said, anyone criticizing the level of pay to administrators should remember that Michigan is a $6.7-billion enterprise with 44,000 employees. “In some cases, I’m sure these look like generous salaries,” he said, but the university is “incredibly important to the state of Michigan,” and running it requires the best talent available.

When administrators like Ms. Wilbanks take on additional duties, he said, they get additional pay. “It seems smarter to tie that to those specific duties and not bake it into the base pay for her position of vice president for government relations,” Mr. Fitzgerald said. Otherwise, he said, the next candidate for the post would come to expect the same level of base compensation.

Base pay for employees in the chief financial officer’s department is about half of what they would earn anywhere else, Mr. Fitzgerald said. But the workers can increase their pay significantly by meeting certain performance goals.

Bonuses Spread
Raymond D. Cotton, a Washington lawyer who specializes in presidential contracts, said such bonuses are becoming increasingly acceptable in higher education and throughout the nonprofit world. “We now have a majority of business people on these boards, and they have brought their business ideas with them, including performance bonuses,” he said.

While reporting full salaries was a fine goal, he added, colleges must consider the other issues involved in both hiring and retaining top talent.

“Does the public have a right to know? Yes, they have a right to know. But if that right to know interferes with the ability of the University of Michigan to compete effectively” against other institutions, he argued, then the public might be served better by not having access to the full salary data. “If there’s some serious reason why someone needs to know, let them file a FOIA request.”

Stanley J. McKnight, president of the human-resources consulting firm Stan McKnight & Associates, advises governing boards to err on the side of transparency. He outlined three components of successful compensation in higher-education hiring: The compensation plan must be externally competitive, or you can’t recruit. It should be internally equitable, meaning that administrators shouldn’t be getting raises disproportionate to those of faculty members. And it must be accountable to stakeholders, whether they are students, the public, or the board of trustees.

“It’s very important that these things be transparent,” he said, “and it would be quite extraordinary if bonuses paid out of general funds are not.” Violating that principle, he said, would raise some issues of accountability.

Correction (4/28/2014, 12:36 p.m.): This article notes that the additional payments at Michigan were excluded from employees’ publicly reported salaries and originally suggested that the University of Texas at Austin followed the same practice. A Texas spokesman says, however, that the university includes most categories of extra pay in its publicly reported salaries. The article has been updated to reflect this correction.​

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