Unintended consequences of a Well-intended Pay Policy After the several months’ work by a consulting company and the university’s human resources team, a new policy was drafted which included performance-linked bonuses deemed highly favorable to the university’s lecturers. The consulting team performed a series of formal interviews with Lecturers and administrative employees to gain a better insight to the situation. At the end of the two-month period, they provided a detailed report proposing change to the current compensation plan to combat turnover. The consultants suggested that performance-based pay scheme with generous bonuses be introduced and that all administrative staff should sign a new contract with the university. This is because, per the consultants’ findings, most employees were worried about the career prospect at this university, since their salaries have not changed in the past 4 years, and there was little sign of promotion. It was also brought to the notice of the consultants that the HR department had been having a hard time recruiting new teaching faculty for many years, which might be attributed to the fact that the HR department was obliged, under current pay policy, to minimize the cost when recruiting new staff in each recruitment category. To address these issues, the HR department was recommended to invest over Gh¢10,000,000 Ghana cedis to finance overall payment raise for all full-time lecturers in a bid to provide a salary package well above the market average. What is noticeable is that the policy entails a sophisticated bonus plan, which involves three criteria, i.e. tenure at the university, rank of position, and the amount of administrative service one performs, Specifically, during each academic year, each Lecturer is paid, at first, 5% less of their annual salary. However, at the end of each contract period (typically ranging from 3 to five-years) they will receive the previously deducted 5% of their salary, in addition to bonuses. For example, Mr. Antwi is a Senior Lecturer (i.e., “high” in rank) on a five-year contract. He has worked in the university for 2 years, and he is serving currently as the chair of the Teaching Excellence Committee (i.e., extra service responsibility). If he signs a new five-year contract, then, per his new pay scheme, he is going to have 5% of his income held up (which is to be returned at the end of his five-year contract, if he did not quit the job). Consider another example. Ms. Yandago, an intermediate Lecturer without any administrative responsibilities, has already worked at the university for 12 years (at the end of her fourth three-year contract). Under the new compensation plan, if she renews her contract and continues to perform satisfactorily, she is expected to receive extra 4% of the entire income she made during the three years, plus 3 times 5% of her income for 2021, which is her best evaluated performing year. The previously deducted 5% of her annual income will also be paid back. At the end of Ms. Yandago’s new three- year contract, she can expect a bonus worth roughly 27% of her annual income. Many Lecturers, without knowing the details of the new compensation plan, thought that they would be forced to work under stricter supervision and that they will be penalized if their performance falls short of the new requirement. Questions abound as to how they will be evaluated. Some Lecturers worried that the university may prompt them to do more research. In Ghana, publishing in SCI or SSCI-indexed journals is becoming the new norm at major public universities, and individuals working at private universities, at least Lecturers, had previously not been required to publish much research. Mr. Banda, a Senior Lecturer from the economics department, felt there must have been some confidential information that was not disclosed, “I feel that I am being betrayed. The management clearly doesn't trust us. If they really want to raise our pay, why did they keep it a secret at the beginning?” In the defense of the new compensation plan, however, some senior managers stressed that generous bonuses were involved, and the top recipients would receive a large amount of money, one third more than what he or she would make in one year. And this would show that the university really valued the employees. The introduction of the new plan prompted some Lecturers to quit their job or to further dissociate themselves from their job. For example, Mr. Laweh, a Lecturer from the university’s Architecture school, remarked that he had been hoping for a payment raise almost every year, but now decided to start his own business, and would only teach on a part-time basis. QUESTIONS Discuss the likely reasons for decreasing employee morale and the rise of turnover?
Unintended consequences of a Well-intended Pay Policy
After the several months’ work by a consulting company and the university’s human resources team, a new policy was drafted which included performance-linked bonuses deemed highly favorable to the university’s lecturers. The consulting team performed a series of formal interviews with Lecturers and administrative employees to gain a better insight to the situation. At the end of the two-month period, they provided a detailed report proposing change to the current compensation plan to combat turnover. The consultants suggested that performance-based pay scheme with generous bonuses be introduced and that all administrative staff should sign a new contract with the university. This is because, per the consultants’ findings, most employees were worried about the career prospect at this university, since their salaries have not changed in the past 4 years, and there was little sign of promotion. It was also brought to the notice of the consultants that the HR department had been having a hard time recruiting new teaching faculty for many years, which might be attributed to the fact that the HR department was obliged, under current pay policy, to minimize the cost when recruiting new staff in each recruitment category. To address these issues, the HR department was recommended to invest over Gh¢10,000,000 Ghana cedis to finance overall payment raise for all full-time lecturers in a bid to provide a salary package well above the market average. What is noticeable is that the policy entails a sophisticated bonus plan, which involves three criteria, i.e. tenure at the university, rank of position, and the amount of administrative service one performs, Specifically, during each academic year, each Lecturer is paid, at first, 5% less of their annual salary. However, at the end of each contract period (typically ranging from 3 to five-years) they will receive the previously deducted 5% of their salary, in addition to bonuses. For example, Mr. Antwi is a Senior Lecturer (i.e., “high” in rank) on a five-year contract. He has worked in the university for 2 years, and he is serving currently as the chair of the Teaching Excellence Committee (i.e., extra service responsibility). If he signs a new five-year contract, then, per his new pay scheme, he is going to have 5% of his income held up (which is to be returned at the end of his five-year contract, if he did not quit the job). Consider another example. Ms. Yandago, an intermediate Lecturer without any administrative responsibilities, has already worked at the university for 12 years (at the end of her fourth three-year contract). Under the new compensation plan, if she renews her contract and continues to perform satisfactorily, she is expected to receive extra 4% of the entire income she made during the three years, plus 3 times 5% of her income for 2021, which is her best evaluated performing year. The previously deducted 5% of her annual income will also be paid back. At the end of Ms. Yandago’s new three- year contract, she can expect a bonus worth roughly 27% of her annual income.
Many Lecturers, without knowing the details of the new compensation plan, thought that they would be forced to work under stricter supervision and that they will be penalized if their performance falls short of the new requirement. Questions abound as to how they will be evaluated. Some Lecturers worried that the university may prompt them to do more research. In Ghana, publishing in SCI or SSCI-indexed journals is becoming the new norm at major public universities, and individuals working at private universities, at least Lecturers, had previously not been required to publish much research.
Mr. Banda, a Senior Lecturer from the economics department, felt there must have been some confidential information that was not disclosed, “I feel that I am being betrayed. The management clearly doesn't trust us. If they really want to raise our pay, why did they keep it a secret at the beginning?”
In the defense of the new compensation plan, however, some senior managers stressed that generous bonuses were involved, and the top recipients would receive a large amount of money, one third more than what he or she would make in one year. And this would show that the university really valued the employees. The introduction of the new plan prompted some Lecturers to quit their job or to further dissociate themselves from their job. For example, Mr. Laweh, a Lecturer from the university’s Architecture school, remarked that he had been hoping for a payment raise almost every year, but now decided to start his own business, and would only teach on a part-time basis.
QUESTIONS
- Discuss the likely reasons for decreasing employee morale and the rise of turnover?
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