Mission Based Compensation and Flexible Pay: The Challenge Confronting Boards, Heads and Teachers

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Mission Based Compensation and Flexible Pay: The Challenge Confronting Boards, Heads and Teachers

Most independent schools have moved now from individually negotiated salary decisions, often inherited from prior heads, to public school type lock step lane and track scales. Almost all international schools have had such systems adopted from the US public school model years ago.

Do these systems even work? Why do we keep them? What is their purpose? Why do boards challenge these systems and why do many teachers seem to prefer them over other compensation schemes?

I. Teachers’ Goals

From confidential one-on-one interviews with over 70,000 teachers worldwide, Littleford and Associates has found that teachers value the following in this order:

Their colleagues
Their students
Opportunities for growth and promotion
The Administration

Seldom do teachers include the school’s mission in this list.

This is what 70,000 teachers say they most want from a salary system in this order:

Fairness or equity
Predictability of future earning power
Preservation of collaborative teaching
Opportunity for growth and promotion
Ability to influence future earning power
Competitive compensation

There are no surprises here. It is also not surprising that very few of them would mention “mission based compensation” as desirable because the concept is largely foreign to them.

Ironically the same predictability of future earning power that leads teachers to want, and be comfortable with scales undercuts their other valued goal of wanting to influence their future cash compensation. Other than not surviving another year and therefore not advancing on the scale, the step system represents no risks UNTIL one is frozen at the top. Many scales stop at 20 steps but some have as few as 8 or as many as 50.

II. Board Members’ Goals

What do boards want a school’s salary system to look like? Most individual trustees have a limited view of how the school’s salary system functions even though they have overall fiscal responsibility for the budget. In most cases, salaries and benefits make up 75 to 85% of the budget. One of the reasons that trustees have so little knowledge about the salary system is that still nearly 50% of the salary systems in the US today are discretionary or individually negotiated. But even if a board member can see the school’s “scale”, that often does not convey any real message about all the extra salary system “add ons”, special arrangements, titles, stipends, and extra duties that supplement it.

However, philosophically, most board members ideally would like a salary system to do the following:

Deliver limited resources in a rational and fair way
Deliver compensation in the most efficient tax smart way
Reward the best performers with the most pay
Send a message to the weak performers to improve or leave
Serve as a recruitment and retention tool

It is also helpful if board members can explain and defend the salary system to critical parents if necessary. This is easier to do if it has elements that make sense to them from a business or professional perspective.

III. Head of School’s Goals

What do heads of schools, want from a salary system? Most would prefer one that is noncontroversial, not overly complex, yet fair and competitive enough to attract and keep the best teachers available. Most would also admit that they desire a salary system that minimizes complaints from teachers and board members, thus allowing them to do their “real” job.

Naturally, heads feel caught in the middle between trustees’ goals in a salary system and what teachers want and are accustomed to in a salary model.

Most heads, in moments of candor, would tell you that they do not want to make the difficult discretionary value judgments inherent in the old fashioned negotiated teacher salary decisions. On the other hand, they also do not want to design the kind of effective, substantive evaluation process that would provide a sound and credible basis for performance pay. That might conflict with evaluation systems designed for “growth and development” (the ones that teachers prefer), not for promotion or retention decisions.

IV. Mission Based Compensation: The Potential to Satisfy All Parties

All forms of compensation, whether in the form of positions of responsibility, extra-curricular roles, decisions about placement on the salary scale, workload reduction or administrative promotions involve judgment. How can we translate those judgments and decisions into a salary system that satisfies the goals of the head of school, faculty and board?

While many seem to want to avoid the term “performance based pay”, if one compares above what heads, boards and teachers most seek in a salary system there are some common themes: fairness, pay for a job well done, competiveness, and understanding the rules of the game.

Is this not essentially “performance based pay”? Yet how can a school develop a system that everyone can embrace?

Step I: Consider the Current Environment

  1. The health of the school/faculty culture
  2. The current level of trust in the administration
  3. The age/experience level of the faculty and what that means in terms of their attitude towards change and their financial security

Step II: Consider the Current Salary System and the Message It Sends

  1. How or why did the current salary system evolve? Understanding the history, lore and incidents that resulted in the current situation is the key to building a new one.
  2. Is there a philosophy of compensation that grounds the current salary system? If not, start HERE to define what the school most values in its faculty
  3. The competitiveness of the absolute level of pay and benefits
  4. The salary delivery SYSTEM
  5. Is there evidence of compression, i.e., between steps? Among certain segments of the steps?
  6. What age group/experience level is benefiting most from the current system?
  7. How does the faculty PERCEIVE the fairness and competitiveness of their present pay and benefits?

Step III: Consider How ALL Attempt to “Beat” the System

  1. Stipends, positions of responsibility, extra pay, titles and tutoring are a way to “beat” the system. How widely are they used?
  2. How often is an administrative title and extra pay used to get around the scale?
  3. Are all these “extras” combined with workload reductions? If so what is the real cost?
  4. What is the definition of a full time job, and has it been going down over time?

Step IV: Explore and Set the Stage for Change

  1. Ensure there is a process that establishes trust and a dialogue with faculty
  2. Ensure the involvement of key board members
  3. Ensure that “saving money” is not the primary motive
  4. Guarantee no preconceived outcome
  5. Allow “grandfathering” in the old system for those who want the status quo

At all times during this process, a successful outcome will depend upon whether or not the faculty feels valued. While many teachers cannot name either their own gross annual salary or retirement asset, and while most would rank overall quality of life, physical setting, colleagues and students above money in importance, teachers do need to earn a respectable living and discipline themselves to save. Board members need to remain sensitive to this despite their legitimate argument that the longevity based scales that teachers tend to favor do not guarantee quality. Anyone who tells you that teachers “do not really care about money” will ind a powerful backlash from teachers who may agree that they do not seek “a lot” of money, but they surely want competitive pay. That is a part of how they feel valued, or not.

Boards also need to cognizant of, and honor faculty culture. Every school culture, determined in large part by its faculty and staff, is unique and changes over time as teachers and administrators turn over. While schools may want to seek out and emulate the best model salary system, all schools must view those as examples only and adapt them to their own cultures in response to a structured dialogue on this topic.

In the future, this consultant sees a variety of exciting and innovative options that represent a potential win-win for schools and teachers in terms of flexibility and financial sustainability. Among them are bonuses tied to performance or retention; bands, ranges and ladder salary systems; fewer stipends, positions of responsibility and costly workload reductions; a more rational definition of a full time job; and greater equity.

Littleford & Associates has assisted over 1500 schools worldwide with exactly this kind of analysis. Each of these schools has designed their own more rational, culture based outcomes, but these outcomes met with the satisfaction of the teachers, administrators AND board members involved in the process.

John Littleford
Senior Partner