Faculty watches bottom line

July 2, 1999

A small college near Boston has turned into a national model for a new way of setting faculty salaries in the United States: profit-

sharing.

A salary formula for faculty at Wheaton College, hammered out with the help of economics professors, links any increase in salaries to growth in the college's resource base - mainly its revenues, endowments and enrolments.

The solution has brought administrators and academics back together after a period of tension.

"It broke down traditional labour-management positioning and has created an atmosphere where everybody feels they are on the same side and have a vested interest in seeing the institution do well financially," said Edwin

Merck, Wheaton's vice-president for operations.

The saga began in 1993 with a plan to address the college's financial problems by raising more money and cutting costs, and spending more on the buildings and grounds - but not on salaries, which were far lower than at comparable institutions.

Faculty at the small college near Boston staged demonstrations to proclaim their lack of confidence in the administration and refused to help with fundraising and student recruiting.

"It was a bad time," says Kirk Anderson, a professor of French and president of the campus chapter of the faculty union. "A lot of faculty felt the administration was not being on the level with them."

Administrators derided the annual complaints about pay as the "spring whine". Research showed that faculty salaries at Wheaton were, in fact, 4 per cent below those at nine comparable institutions - but that its resource base was 31 per cent lower.

The revelation gave faculty more understanding of the college's financial problems. "That helped to promote trust," Mr Merck said.

As the resource base improved relative to the other colleges, administrators agreed salaries would increase by the same margin, giving faculty an incentive to pay more attention to the school's financial well-being. After more negotiation, it was promised that annual raises would never fall below the rate of inflation, eliminating some element of risk.

Wheaton's trustees were sceptical, so it was agreed the plan could be rescinded after three years. In the first year of the agreement the college's resources actually fell, and faculty salaries dropped even further below those of comparable institutions.

But in the second year, the resource base improved, and salaries went up more than 5 per cent. In the third year, Wheaton closed on its competitors, and faculty reaped a windfall: an 11 per cent raise. The plan was extended for a second three-year period, and this year pay went up another 8 per cent.

"The reaction has been very, very positive," said Mr Anderson. "There's no mystery to that. We've had two years of big increases. Morale is better because the faculty feel that they have a stake."

Mr Merck added: "It worked so well not just financially. It worked in terms of what it did for the community."

Now faculty, administration and trustee groups and delegations from other universities are visiting the campus to study the plan for themselves, and Mr Merck plans to leave to work as a consultant.

Still, giving faculty a profit motive has some critics. "It's a balancing game like everything else," said Mr Anderson. But he and his colleagues will resist any efforts to save money by such measures as increasing class size or accepting only students who can afford to pay without assistance.

"I don't think the Wheaton faculty are going to accept those sort of things," he said. "I don't think they're naive about it, but these issues have always been there. I would rather accept 5 per cent less pay and have 10 per cent better students in my classroom, and I'm not the only person who feels that way about it."

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