Independent Schools’ Next Top Model: Changing Perspectives on Faculty Compensation

Article by Donna Davis

This article originally appeared in the March/April 2015 Net Assets.

At University School in Shaker Heights, Ohio, graduating seniors participate in a tradition of sharing their “moments of truth.” Those moments may have occurred in the classroom, on the athletic field, or during an academic trip or community service project, but they all revealed to the students important insights into who they were and what they had accomplished during their years at the K–12, 880-student boys’ school.

About five years ago, that tradition prompted a teacher to ask Headmaster Stephen Murray, “When do we get our moment of truth?” Murray asked what the teacher meant. “Every year we get a contract in the mail, but there’s no context,” the teacher replied. He wanted to know the criteria used in deciding contract renewals and salary increases—in other words, what he meant to the school and what he had achieved.

That question forced administrators to face their own moment of truth. “We had a heart-to-heart discussion and decided we had to do a better job of letting our faculty know how well they are doing,” said David Wright, chief financial officer. In response, the school adopted a “broad-band” faculty compensation model that offers a career path from beginning teacher to master teacher, based not just on experience and academic degrees, but also on professional growth, extra-curricular activities and classroom achievements. Teachers joined with administrators in creating the new structure, and every current faculty member and new hire knows where they stand on the bands, how the required formal evaluation process works and what goals they must achieve to move forward.

This model is gaining interest among independent schools seeking to attract and retain the best teachers and reward them for their skill and effectiveness in the 21^st-century classroom. Adopting it means moving away from the traditional, multi-step (often 40 or more) structure that rewards experience and degrees—a structure used in 90 percent of international and public schools, according to John Littleford, senior partner of Littleford & Associates. It also means replacing another compensation approach common in independent schools—one that relies on the head or division director’s subjective decision on how to compensate faculty members. In fact, half of schools lack a published compensation mode, Littleford noted.

What has changed, say researchers, consultants, business officers and human resources directors, is the emergence of a mindset that is common in the for-profit world but sometimes resisted in the collegial culture of independent schools—one that adds the elements of performance and professional accomplishment to compensation. Hugh Mallon, president of Executive Compensation Concepts, believes that an effective compensation structure must be based on a school-wide policy statement that aligns compensation goals with evaluations of each teacher’s effectiveness. These evaluations, in turn, must be based on measurable and transparent criteria.

Part of the mindset change concerns financial accountability. Salaries and benefits can account for up to 85 percent of a school’s expenses, and a clearly outlined compensation policy and structure can help administrators and trustees manage those expenditures wisely. “Yet boards (and frankly most heads as well) have no idea of the philosophy conveyed by the salary system delivery model and what messages the benefits system sends as well,” Littleford said. “This is all accidental. It needs to be purposeful.”

Another factor involves the desire to create a compensation structure that supports two key sustainability issues: recruiting and retaining the best teachers and maintaining enrollment through measurable classroom results, Mallon said. According to a 2003 research report by the Center for the Study of Teaching and Policy, the teaching profession has become a “revolving door” in which many qualified teachers leave the field for reasons other than retirement, even while demand for their talents grows. Most former teachers surveyed said they left for careers with better salaries. Improving pay, enhancing teacher input into decision-making and offering mentoring programs for new teachers “would contribute to lower rates of turnover, in turn, diminish school staffing problems and, hence, ultimately, aid the performance of schools,” the report said.

Another attitude change comes with the new generation of teachers, said Terry Moore, executive consultant for Independent School Management (ISM). “Baby boomers were content with everyone being treated the same. New gen-ers want a defined way to grow their salaries, measure their impact at the institution and be rewarded and compensated for that. They are insisting on it.”

At his workshops on compensation models, Moore always starts by asking schools whether they utilize a defined compensation structure. “It used to be that two or three hands would go up out of 30 people in the room,” he said. Most schools seemed to rely on the head of school to decide each teacher’s pay. Today, more than half of the administrators he teaches say their schools have a structure—and a third have instituted one that includes pay for performance. The rest want to know more about that compensation model.

Looking at Broad-Banding

In the emerging broad-banding model, independent school models typically have four to five bands, starting with “beginning teacher” and ending with “master teacher” or “faculty leader.” Each band anticipates the number of years a teacher should need to advance to the next band, usually four to five years based on performance metrics and goal achievements. Within each band, the head, principal or division head evaluating a particular teacher has leeway in setting individual salaries; top-performing teachers receive bigger raises.

In the emerging broad-banding model, independent school models typically have four to five bands, starting with “beginning teacher” and ending with “master teacher” or “faculty leader.”

At University School, Wright helped design a six-band system of five years each up to 25 years, followed by bands for 26–35 years and 35-plus years.

University School teachers fill out self-evaluation forms in November/December that note their classroom, extracurricular activities and professional development goals. During December and January, academic administrators review the self evaluations and administer evaluations, along with information from Wright that includes the preliminary budget’s salary pool increase and a spreadsheet outlining each teacher’s salary, past performance data and suggested raises for teachers rated excellent, above average or average. The administrators use all that information to determine appropriate increases for each teacher within the appropriate bands. Wright then verifies that the increases are within the approved total salary pool. In February, the administrators and Murray schedule individual meetings with all 110 faculty members. The teacher gets a copy of the contract, their evaluation and the salary bands a few days before the meeting. “This is a very time-intensive process, but since salary and benefits represent 70 percent of our cost, it is time well spent,” Wright said.

“The use of many ‘objective’ criteria to determine teachers’ merit, and thus some component of teachers’ pay, improves teacher performance,” according to a Center for American Progress report, Teacher and Principal Compensation: An International Review. Schools should define those criteria, such as student outcomes measured through test scores and surveys of parents, students and graduates.

The structure requires a group of administrators trained to conduct fair, thorough and well-documented evaluations of teacher performance. Evaluation processes vary, but consultants and administrators cite the importance of regular, unannounced visits to the classroom. For example, Moore suggests having administrators who are constantly in classrooms in five- to 15-minute increments “catching teachers doing what they do so well.” With every classroom visit, the administrator follows up with an email to the teacher. The emails should point out positive observations; conversations about areas for improvement or corrections should occur face to face in private. “At the end of year, the annual evaluation is nothing more than a summary of everything that has already happened,” Moore says.

Where to Start

For schools that have no formal compensation structure, the first step should be gathering influential community members such as the head, division heads, trustees and key faculty and administrators to create a compensation philosophy that meshes with the school’s finances and mission. “Schools are required to create investment policy statements for their endowments and qualified retirement plans,” Mallon said. He recommends that they also consider establishing a “total compensation policy statement as part of the board’s governance role.”

As schools create a compensation structure, Mallon recommends that they consider the “all-in” cost of human capital. That figure includes benefits, workloads and extracurricular stipends as well as salaries. For example, a school may be paying teachers (an added) 80 to 100 percent of salary in tuition remission. “Most boards and heads who say they want to be at X percentile are talking only about cash salary,” he said. “Failing to include all-in costs means schools at the 75^th percentile could end up having the head, senior leadership team and faculty in the 90^th percentile.”

Schools also need to perform a relevant data scan, but it should include more than comparisons to competitor schools of similar size and type, Mallon said. He suggests adding comparisons based on operating budgets and expenses, size and draw on endowments, annual giving estimates and all-in costs.

Some of the data sources available to schools include Form 990s for an overview of executive compensation numbers and, for general faculty and staff, regional or local association data (regional independent school associations, NBOA’s annual Business Office Survey, regional independent school association databases and NAIS DASL). Compensation model consulting firms also have proprietary data and can customize market surveys for individual schools.

At University School, Wright researched compensation for every teacher. He gathered their resumes and other information about teaching, degrees and professional development experience. He plotted that data in comparison with several benchmark schools, with the emphasis on creating a compensation structure that put the school in the top quartile of competitor schools in Ohio—up from the medium or bottom quartile for many of the bands, especially for teachers with 15 years or less of experience. Every current teacher and new hire gets a copy of the band structure and an explanation of how the system works. The structure is now in its fourth year; the school reviews it every three to five years to maintain the target quartile position.

During the past four years, the salary band and evaluation system have improved teacher quality, Wright said. “This is a double-edged sword,” he adds. Attracting and keeping the best teachers in the country has put pressure on the limited total salary pool. Critically, Wright, the head, the evaluation team, teachers and the human resources director now have solid data on which to base compensation—and the means to identify and reward top teachers.

Donna Davis is a freelance writer based in Boulder, Colo. She has written for Net Assets since 2008.