Convenience

254
Part 3:
Organizing
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EXPERIENTIAL EXERCISE
Choosing a Compensation Strategy
Purpose:
This exercise helps you better understand
how internal and external market forces affect compen-
sation strategies.
Introduction:
Assume that you are the head of a
large academic department in a major research univer-
sity. Your salaries are a bit below external market
averages. For example, your assistant professors make
between $45,000 and $55,000 a year, your associate
professors make between $57,000 and $65,000 a year,
and your full professors make between $80,000 and
$90,000 a year.
Faculty who have been in your department for a
long time enjoy the work environment and appreciate
the low cost of living in the area. They know that they
are somewhat underpaid but have tended to regard the
advantages of being in your department as offsetting
this disadvantage. Recently, however, external market
forces have caused salaries for people in your field to
escalate rapidly. Unfortunately, although your univer-
sity acknowledges this problem, you have been told
that no additional funds will be provided to your
department.
You currently have four vacant positions that need
to be filled. One of these is at the rank of associate
professor, and the other three are at the rank of assis-
tant professor. You have surveyed other departments in
similar universities, and you realize that to hire the best
new assistant professors, you will need to offer at least
$60,000 a year and that to get a qualified associate pro-
fessor, you will need to pay at least $70,000. You have
been given the budget to hire new employees at more
competitive salaries but cannot do anything to raise the
salaries of faculty currently in your department. You
have identified the following options: