1. UMSYSTEM.EDU 11 University of Missouri Staff Compensation October 6, 2009 University of Missouri – Kansas City Betsy Rodriguez Vice President for Human Resources

2. UMSYSTEM.EDU 2 2 People Excellence Synergy UM System Human Resources Strategic Plan 2009-2013

3. UMSYSTEM.EDU 33 Vision University of Missouri is recognized as having a positive, inclusive, high performance culture based on cooperation and respect and where the work environment reflects a community that promotes work/life balance, values unique contributions, and allows individuals to make a difference through their service.

4. UMSYSTEM.EDU 44 Mission People First: To provide strategic guidance for the implementation of best practice human resource management that enables UM excellence and values our people as its primary resource.

5. UMSYSTEM.EDU 55 Critical Focus Areas Fully engaged workforce (people first) Effective processes Excellent service to customers Strategic resourcing

6. UMSYSTEM.EDU 66 People First: Total Rewards System Total Rewards System is driver of people strategy- --making possible a diverse, high quality, engaged, and productive faculty and staff Compensation and rewards must align with and be part of university/campus strategic plans Total rewards sends a message to (prospective and current) employees Effective use of Total Rewards System resources requires philosophy, strategy, planning, analysis, and accountability And investment!

7. UMSYSTEM.EDU 77 Philosophy/Strategy Question If we value people first, why do our budgets always begin with mandates such as utilities, maintenance, and insurance? Why isn’t compensation the first ‘mandate’? Compare people assets to physical assets – we’ve deferred the ‘maintenance’ and that is causing structural problems.

8. UMSYSTEM.EDU 88 Additional Questions Can faculty and staff explain their salary level, esp in relation to similarly situated colleagues? Can faculty and staff explain their career path, and the compensation changes that accompany promotions? Can we reward longevity (seniority) and also pay for performance? How important is internal equity? How much value do we get for the cost of benefits?

9. UMSYSTEM.EDU 99 Consequences of Below Market Salaries Higher turnover, and the associated greater cost of training new faculty and staff Longer time to fill positions and the costs of extended vacancies in key positions Filling positions with 2nd and even 3rd tier candidates as top-tier candidates accept positions at organizations that provide higher levels of compensation (and the longer-term implications this has for the University's image, ability to draw students both within and out-of-state, impact on development and research funding, etc.) Lower morale and associated reduced productivity

10. UMSYSTEM.EDU 10 Total Rewards Framework: Compensation Begins with philosophy (to mirror our vision): Examples… To provide total compensation that attracts and retains high quality faculty and staff, and that rewards (seniority?) high performers. To be competitive within appropriate occupational peer groups for high performing faculty and staff with programs that focus on recruitment and retention. To be at the competitive average by campus, with a core set of centers of excellence that are leaders in their fields.

11. UMSYSTEM.EDU 11 Total Rewards Framework: Compensation (con’t) Includes a strategy: e.g., Where are we now? – see next slide Where do we want to be? What needs to be done? How is it funded? How much focus on salary and benefits vs other ‘rewards’?

12. UMSYSTEM.EDU 12 Total Rewards Framework: Compensation (con’t) Is defined by a set of Objectives and/or Core Values: e.g.– for Salary: Salary ranges will be established based on appropriate markets Initial compensation will be within the established ranges, based on experience and skills– with consideration for internal equity Compensation changes will be based solely/mostly on merit Merit will be determined by college/campus established metrics Differentiation and decision making regarding high vs. low performance Metrics will consider all areas of performance critical to university mission Salary structure will manage employee growth and development Faculty promotions will include a flat dollar amount or a % of salary All employee groups will be treated equally for annual increases (regardless of market position? Regardless of funding?) Objectives lead to building and communicating salary STRUCTURE

13. UMSYSTEM.EDU 13 Quick detour to review current structure

14. UMSYSTEM.EDU 14 Salary Data: Hourly Employees Hourly employees Total payroll $233 million + benefits $49.8 million Service/Maintenance & Skilled Trades Titles such as Police Officer, Child Care Assistant, Food Services, Custodians, Power Plant Operators, Electricians, Pipefitters Approximately 2,150 employees Majority are union eligible positions (about 20% are union members) Meet and confer for annual agreement, nonbinding Average hourly rate = $14.50 (range from $8 to $31)

15. UMSYSTEM.EDU 15 Salary Data: Hourly Employees Hourly employees (continued) Office administration / Support Titles such as Administrative Assistant, Office Support Staff, Fiscal Assistant Approximately 3,320 employees Average hourly rate = $14.50 (range from $7.25 to $35.00) Technical Titles such as Research Technician, Optician Assistant, Broadcast Technician, Reactor Operator, Computer Operator, Hygienist Approximately 2,050 employees Average hourly rate = $16.75 (range from$8.00 to $39.50)

16. UMSYSTEM.EDU 16 Salary Data: Hourly Employees Salary Market Data – Hourly Employees Compared to local/regional markets Note: Columbia IS the market for many positions Union salary structure is discussed during annual ‘meet and confer’ Union salary structure is a step system by which employees in same title with same length of service receive same hourly pay

17. UMSYSTEM.EDU 17 Salary Data: Salaried Employees Salaried employees Total payroll $772 million + benefits $165 million Professional Titles such as Programmer / Analyst, Attorney, Psychologist, Accountant, Engineer, Chemist About 4,100 employees Average annual salary $50,400

18. UMSYSTEM.EDU 18 Salary Data: Salaried Employees Salaried employees (continued) Administrative / Manager / Executive Titles such as Farm Supervisor, Ticket Manager, Admissions Director, Placement Director, Coach, Provost, Chancellor, President About 1,900 employees Average annual salary $79,000

19. UMSYSTEM.EDU 19 Salary Data: Salaried Employees Salary Market Data – Professional, Administrators and Executives Sources: Salary.com and other purchased or generated market databases Administrative work varies across many industries (e.g., agriculture, entertainment, sports, retail, finance, print, power generation, restaurant, resource management, housing, research, healthcare, student services)

20. UMSYSTEM.EDU 20 Salary Data: Salaried Employees Salary Market Data – Professional, Administrators and Executives (continued) Maintaining competitive pay across these industries is constant balancing act as each industry moves in response to economic conditions and labor markets Large salary differences across industries lead to issues of ‘fairness’ and ‘equity’ among university employees (e.g., typically student services have lower market salaries than finance) Assess markets and salary needs within Occupational Group(s) Exception: Senior Leadership and strategic valued position are often individually compared to market

21. UMSYSTEM.EDU 21 Salary Peer Comparisons: Staff Do not have complete data on every staff position compared to market Need to do significant work to develop accurate market comparisons (due to title inflation and other considerations) Selected 150 titles—salaried only for comparison

22. UMSYSTEM.EDU 22 79.6% of mkt 91.9% of mkt 90.8% of mkt 89.7% of mkt 79.9% of mkt 69.5% of mkt MKT UNIV Salary Peer Comparisons: Staff Staff by Select Occupational Groups

23. UMSYSTEM.EDU 23 Salary Increase History: Faculty and Staff

24. UMSYSTEM.EDU 24 Total Rewards Framework (con’t) Is defined by a set of Objectives and/or Core Values: e.g.-- for other Compensation: Compensation programs will be flexible to meet individual, department, and campus needs Total Rewards considers issues beyond salary and benefits– total value proposition

25. UMSYSTEM.EDU 25 Total Value Proposition What are other reasons/programs beyond traditional compensation (salary and benefits) that attract and retain faculty and staff? What do employees value? Faculty: Environment/culture, collegiality, academic freedom, recognition, shared governance, collaboration opportunities, gifted/high performing students, lab space/equipment, professional travel, work/life balance, etc.

26. UMSYSTEM.EDU 26 Total Rewards Framework (con’t) Must be based on Analysis Our current staff compensation structure is decades out of date!

27. UMSYSTEM.EDU 27 Total Rewards Framework (con’t) Concludes with Accountability: Require annual performance evaluations to justify annual salary changes Provide market data to decision makers Hold decision makers responsible for ensuring compensation objectives are met, or there is a strategy to get there Ensure faculty and staff understand the compensation philosophy, strategy, objectives

28. UMSYSTEM.EDU 28 Cost of Salary Changes Cost of salary increases: $638m operating (state) budget Each 1% increase = $8 million 2% salary increase would cost $16 million How to pay for increases? Tuition: 1% comp increase = 2% tuition increase Other:  Increases in revenues  Decreases in expenses (e.g. reduction in work force, program closures, efficiency savings, vacancy savings) Do we allow variation by campus?

29. UMSYSTEM.EDU 29 Quick Review of Benefits

30. UMSYSTEM.EDU 30 Comparator Institution Benchmarks Hewitt Associates Relative Value Study Employer Paid ValueTotal Value IndexRankIndexRank Retirement117.93 rd 77.615 th Retirement*101.17 th 77.615th Pre Retirement Death-Group Life107.77 th 91.210th Long Term Disability143.94 th 107.98 th Dental85.312 th 93.012 th Preretirement Health98.910 th 102.88 th Post Retirement Health-prior to age 65161.93 rd 127.52 nd Post Retirement Health-age 65 and higher88.48 th 103.19 th All Post Retirement Health116.38 th 110.76 th All Benefits (Including Tuition)106.36 th 92.313 th All Benefits (Including Tuition)*98.511th92.313 th *After 7/1/09 pension plan amendment

31. UMSYSTEM.EDU 31 Summary Observations of Benefits UM offers a competitive array of benefit programs that are currently slightly below the average of its peer group UM, strategically, assumes risk through self-insurance when appropriate UM employees, through premiums/contributions bear a significant portion of the cost of providing UM benefit programs

32. UMSYSTEM.EDU 32 Summary Observations of Benefits UM employees, at the time of purchasing health care services bear a significant portion of cost for services rendered Areas of significant deviation from the average of the peer group include: Above average Employer Paid Value of Long Term Disability Base Plan Employer Paid Value of Post Retirement/Pre 65 Medical Benefits Below Average Employer Paid Value and Total Value of Dental Benefits

33. UMSYSTEM.EDU 33 Summary Observations of Benefits The 7/1/09 change that requires employees to contribute to the pension plan has resulted in a decrease in UM’s ranking among peer institutions in both the pension and overall categories The majority of peer institutions continue to offer subsidized post employment health care benefits UM is unique in offering a defined benefit plan as the primary pension plan avenue

34. UMSYSTEM.EDU 34 History of Actual UM Contribution Rates % of payroll