Inflation: that vexing itch, that dull pain that doesn’t seem to go away these days. In my last Projections column, I wrote about inflation and tuition setting, and I’m writing about inflation again in this issue because it’s making an impact on so many aspects of business officers’ work – not least of which is the budget’s largest line item: faculty and staff compensation and benefits.

There are clear disconnects in terms of employers’ management of inflation and employees’ expectations. Companies are budgeting for higher pay for their workers, but predicted increases of just over 4% won’t match inflation, which was running at 7.1% in November 2022. At the same time, 40% of employees say they are expecting at least a 6% more in their paychecks.

We’ve already seen the effects of the so-called Great Resignation. Workers took advantage of a robust job market to seek higher pay and a chance at what they saw as better perks, including the ability to work from home. Schools like Collegiate School in Richmond, Virginia, saw a few more teachers than usual leave – not just for other teaching jobs, but for new careers. “We had math teachers who decided to be underwriters or actuaries,” reported Jill Aveson, director of human resources, in a recent conversation. “They had a good skill set they could leverage, and in some cases, they could work remotely. Those are some of the drivers that are pulling people out of education.”

No school wants to lose a great teacher, HR director or facilities manager. And as for the bottom line, business officers know it’s cheaper to retain a good employee than go through the process of hiring a replacement. The U.S. Bureau of Labor Statistics says the average job hopper increased their wage by 8% in the last year. With that metric in mind, finding ways to retain your current employees — even if it means a 5%-6% raise — makes more sense for your school’s finances and community.

Salary Increases in Context

The latest BIIS data, as of November when we are writing this piece, indicates that increases in full-time teacher base salaries surpassed the inflation rate from 2018-21, but fell behind this year as inflation ramped up. (See chart on next page.)

Kathy Ferguson, nonprofit senior audit manager at Armanino, recently urged school leaders to communicate clearly to employees the reasons and the historic context behind their salary decisions. “They see a CPI of 8.5% and think, ‘I only got a 4% increase,” Ferguson explained in a recent NBOA webinar. “This may be a time to sit down and educate the whole body and say, ‘Every year CPI has been 1-2% and we’ve been giving you a 4% increase. So, every year that’s been a little bit higher, and this year it’s been a little bit lower.”

Over the next few years, you may want to consider wage compression, that is, providing higher wages for those making less while giving more modest increases for those making more, to increase retention and make the most of the budget. Again, clear messaging to all constituents about the purpose of these efforts will go a long way toward making them successful. Schools are “high emotional intelligence environments,” in the words of NBOA’s director of human resources programs, Amber Stockham. If leaders explain that those making the least will get a higher percent raise, and that the intention to look out of all, few will protest.

But are wage hikes alone enough? Most schools can’t offer 8% increases to match inflation – nor would that approach be financially sustainable. In these times, it’s even more important to remember what all HR directors and business officers already understand – that retention and recruitment efforts need to go beyond salary.

Pulse Check

Another way to make the most of your budget is to find out what is most valuable to the employees at your school. Collegiate School started conducting “temperature checks” during the COVID-19 pandemic, and because those informal polls proved useful for decision-making, they now do pulse surveys monthly, Aveson explained. Last spring they adopted a more formal process that uses a Qualtrics survey tool.

The first query of the three-question survey is always the same: Rate your satisfaction with working at Collegiate School. “That allows us to see changes over time – maybe it is lower in May than in August when everybody’s excited to be back,” Aveson said. The second question is topical. One month, employees were asked to choose areas where the school does well and the next month the question flipped to areas where the school could do better. At the beginning of this school year, employees were asked to reflect on how well opening week went, or during enrollment season in December, to voice their opinion on benefits. The final question is open-ended, requiring a written response that expands on the month’s second topical question.

Collegiate analyzes the responses to identify themes and from there, areas where the school needs to focus its efforts.

Aveson noted other intangible benefits to the regular check-ins. “We’re a large school, and people can sometimes feel like they can get lost,” she said. “I think people appreciate having a quick way to have a voice.” The school shares the results with employees, but Aveson cautioned that the surveys don’t replace day-to-day conversations with supervisors. “It’s another tool for employees to help us understand their perspective and act on it.”

Percentage change in full-time teacher base salary compared to inflation rate

*Inflation rate as of November 2022. Source for salary data: NBOA’s BIIS data platform.

Beyond the Checkbook

Now more than ever, it’s important to take a look at incentives our schools can offer to retain faculty and staff.

Professional development opportunities could be one way to help. Paying or increasing funding for classes and other external opportunities — including degree and certification programs — is one possibility, but there are many others. Consider providing support to your controller to develop and deliver the board’s report on the audit this year or ask a faculty member to lead the school’s next in-service. Such offerings need not cost much if any money, and the payback may be considerable.

At NBOA’s North American Conference of Business Officers (NACOBO) meeting this past October, schools shared other incentives outside the compensation line that they are implementing to show support for employees. They range from relatively low-cost efforts, like gas cards, to programs that require more financial resources, including housing stipends. Other efforts include revamped benefits such as pet insurance, commuter stipends and student loan counseling, as well as increased access to senior leadership for free-form discussion.

Staff from participating schools indicated they are considering restructuring health plan premiums to better support lower-income employees and offering full-pay sabbaticals or scholarships. Others are looking at substantial awards for performance excellence. These efforts may be aided by NBOA’s MAX (Mission-Anchored Compensation) project, which next fall will deliver resources to help schools consider and adopt alternative compensation strategies.

In this era of VUCA — the atmosphere of volatility, uncertainty, complexity and ambiguity that I spoke of in the November/December Projections – it’s essential to give employees a clear message about compensation. Communication, transparency, and incentives that demonstrate out-of-the-box thinking as well as support can mean the difference between keeping or losing a top-quality employee.

Follow NBOA President and CEO Jeff Shields @shieldsNBOA.