TO MEMBERS OF THE GOVERNANCE AND COMPENSATION COMMITTEE: DISCUSSION ITEM

Size: px
Start display at page:

Download "TO MEMBERS OF THE GOVERNANCE AND COMPENSATION COMMITTEE: DISCUSSION ITEM"

Transcription

1 Office of the President G4 TO MEMBERS OF THE GOVERNANCE AND : For Meeting of DISCUSSION ITEM UPDATE ON UNIVERSITY OF CALIFORNIA OFFICE OF THE PRESIDENT AUDIT OF ADMINISTRATIVE EXPENDITURES SALARY-RELATED IMPLEMENTATION WORKSTREAMS 1 THROUGH 3 EXECUTIVE SUMMARY In response to the recommendations made by the California State Auditor in April 2017, three cross-functional workgroups have been working on salary-related recommendations. Additionally, a Regents Working Group on Executive Compensation has been formed by Regent Kieffer to develop a comprehensive policy on executive compensation. The Working Group established a definition of UC s competitive labor market and has assigned weightings to these market segments. Based on the direction received from the Regents Working Group on Executive Compensation, the internal workgroups for staff compensation have continued work in defining UC s competitive labor markets, and establishing methodologies for weighting the public and private compensation data, including that from the State and California State University. BACKGROUND The California State Auditor (CSA) released its report for the audit of University of California Office of the President (UCOP) administrative expenditures on April 25, The report included 33 recommendations to UCOP and seven recommendations to the Board of Regents. President Napolitano created an internal task force to ensure timely and thorough implementation of the 33 recommendations to UCOP. Executive Vice President and Chief Operating Officer Nava is the task force chair. To help organize and streamline the implementation efforts, ten workstreams were created, with the first three focused on compensation: Workstream 1: Set Targets for UCOP Employee Salary Ranges Workstream 2: Set Targets for Leadership Salary Ranges Workstream 3: Set Targets for Staff Salary Ranges

2 GOVERNANCE AND -2- G4 This item and its attachment reflect the progress of the three salary-related workstreams on the 2018 goals as of February Salary-related Workstreams 2018 Goals, Progress, and Next Steps Weighing Public and Private Sector Pay Data is a common April 2018 goal of all three salaryfocused workstreams: Develop a method for weighing public and private sector pay data when establishing salaries Workstreams 1 and 3 are additionally tasked with determining how to restructure salary ranges to make certain the ranges encourage employee Salary-related Workgroups have been meeting regularly to work through the implementation tasks. Two groups, focused on staff salaries, are comprised of compensation experts from UCOP, UC medical centers, and campuses. A third, focused on leadership salaries and structures, is comprised of campus Chief Human Resource Officers and compensation directors from UCOP and the campuses. These workgroups have been: performing an in-depth analysis of salary data, market data, and UC s salary ranges; reaching out to Association of American Universities (AAU) public and private institutions to determine how they define their competitive labor markets; the methodologies they use for including public, private, and other data; and the surveys they use for analyzing labor markets, among other considerations; reviewing data that identifies the organizations that comprise UC s recruiting and retention activity for staff and executives; engaging the California Department of Human Resources (CalHR), human resource contacts from various State agencies and California State University (CSU) to analyze their organizational structures and positions that may be potential matches to UC positions; o The organizational structures and scope of more than 170 State agencies plus CSU have been reviewed. o Hundreds of positions at the State and CSU have been analyzed to compare job duties and scope of responsibilities to UC staff positions. reviewing and updating published survey sources for analyzing and updating Market Reference Zones for Senior Management Group positions and salary ranges for staff; evaluating options for including public data including State and CSU where positions are matched and for assigning a weight;

3 GOVERNANCE AND -3- G4 reviewing and analyzing all positions at UCOP based on the Career Tracks classification to determine salary placement in the salary ranges for the CSA recommendation in Workstream 1 to ensure ranges encourage employee development and ensure pay equity; o UCOP Compensation has plotted all positions by salary grade to determine placement in each quartile of the salary range. o UCOP Compensation is reviewing promotions and assessing where compensation offers are being made to determine appropriate placement in the salary ranges in support of employee development. Regents Working Group on Executive Compensation has been formed by Regent Kieffer to develop a comprehensive policy on executive compensation. The Working Group is chaired by Regent Sherman. An independent external compensation consulting firm, Sullivan Cotter, has been engaged to provide advice, guidance, and data analysis to the Working Group. The Regents Working Group has: defined the University s competitive labor market, accounting for the different market segments and data sources, e.g., public and private higher education, general industry, and State and CSU data; reviewed the compensation practices at other public universities; defined the competitive groupings, using standard practices by aligning similarly-sized (based on operating budget) institutions; defined the groupings of UC institutions utilizing two categories based on complexity, e.g., those with health/medical enterprises and those without; and established the methodology for weighting the different sources, including how to weight public and private data sources, and the matching of Senior Management Group (SMG) positions to State and CSU positions. Market Segment Weighting Assignments were established by the Regents Working Group on Executive Compensation. The Working Group established a definition of UC s competitive labor market and has assigned weightings to these market segments as follows: A minimum weighting of 50 percent is assigned to the Higher Education sector, comprised of public and private higher education institutions of comparable size based on operating budget. Positions at the CSU systemwide office and its larger campuses are included in this category, where matches are available; and A minimum weighting of 50 percent is assigned to the other sector comprised of data from general industry as well as State agencies. Within this category, where UC positions match State positions, this data will receive a minimum of one-quarter of the

4 GOVERNANCE AND -4- G4 50 percent weight, or a minimum of 12.5 percent of the total. State data was matched to approximately 70 percent all operational/administrative SMG positions. Applying Direction Received from the Regents Working Group on Executive Compensation has allowed the internal workgroups for staff compensation to continue the work in defining UC s competitive labor markets, establishing methodologies for weighting the public and private compensation data, including that from the State and CSU. The weighting methodology for staff positions below the SMG will depend upon the number of data sources used in the matching, but will approximate the public/private data weightings described above. These workgroups will continue analyses, data gathering, and validation efforts with the CalHR, various State agencies, CSU, and other entities. The Regents Working Group will make recommendations to the Regents Committee on Governance and Compensation for review and approval of new Market References Zones for the SMG at the March Regents meeting. Key to Acronyms AAU CalHR CSA CSU SMG UCOP Association of American Universities California Department of Human Resources California State Auditor California State University Senior Management Group UC Office of the President Attachment: CSA Audit Salary-Related Recommendations

5 Attachment CSA Audit Salary-Related Recommendations Workstream 1: Set Targets for UCOP Employee Salary Ranges Develop a method for weighing public and private sector pay data when establishing salaries Determine how to restructure salary ranges to make certain the ranges encourage employee By April 2019 Set targets for any needed reductions to salary amounts using the results from its public and private sector comparison and adjust its salaries accordingly. Narrow its salary ranges. Create a plan for reallocating funds to campuses that it saves as it reduces its staffing costs. By April 2020 Adjust its salary levels and ranges to meet its established targets. Reallocate funds to campuses when adjustments to its salaries and benefits result in savings. Report to the regents on the amount of funds it reallocates to campuses as a result of implementing our recommendations. Workstream 2: Set Targets for Leadership Salary Ranges Develop a method for weighing public and private sector pay data when establishing salaries Workstream 3: Set Targets for Staff Salary Ranges Develop a method for weighting public and private sector pay data when establishing salaries Determine how to restructure salary ranges to make certain the ranges encourage employee By April 2019 Set targets for any needed reductions to salary amounts using the results from its public and private sector comparison and adjust its salaries accordingly. Narrow its salary ranges. Create a plan for reallocating funds to campuses that it saves as it reduces its staffing costs. By April 2020 Adjust its salary levels and ranges to meet its established targets. Reallocate funds to campuses when adjustments to its salaries and benefits result in savings. Report to the regents on the amount of funds it reallocates to campuses as a result of implementing our recommendations.