Pay for performance? It is a myth.

With discussions in the news about CEO pay and its rise relative to average worker pay, I thought it might be interesting to look at Universities in a similar way. There is useful data on HE executive salaries here (for the UK) and here (for the US). The US data is for public universities.

In a reasonable world you might expect a VC at a top 100 university to earn more than one in the same city that is not ranked at all. You might be wrong. League tables are fraught but they are an index and hence useful. Much as I hate seeing long discussions about whether Cal Tech or Cambridge is better and by how much, I accept that there is a difference between an unranked university and a global top 100. 

So, I spent some time trying to align some of this data with data from league table rankings (QS and THE). I haven’t had a lot of time yet so only got through the first page or so of the US data. There is some relationship between base pay and ranking it is weak (explains about 24% of the variance). However, there is a really no relationship between total pay (including incentives) and ranking.

Note: unranked universities appear as 1000. 

There are 5 US universities in the top 20 for highest paid executives which are not ranked in either league table. I do not see how this makes sense. The graph is puzzling.

Where is the time sink? There is a big one in the office near the e-mail button.

Once upon a time, as e-mail was becoming more prevalent in education, I was a whole hearted supporter. At that time, I still encountered students who had never used a computer before. This has not happened in a long time. I even wrote about how computers save time using words like “quietly turbo-charged”. I was really impressed by the productivity enhancements of e-mail. At the time I was also an early adopter of e-submission, first via email and later via something called WebCT. I loved both. I also had the opportunity to be trained to submit grades directly into a programme called banner. This was about 8 years ago. It was also in the developing world.

Now that e-submission and e-mail are no longer at the leading edge – having been widely adopted and now the status quo – I have come full circle. I think we have lost our way. Both have become ends in their own right rather than means to an end. With that comes stagnation, decline and lost productivity. Why the change of heart?

My inbox and outbox are what done it. My inbox brings in nearly 11,000 items a year. At the same time, I have been sending about 4,000. This does not take into account that many of these items might go to multiple recipients. An e-mail sent to a class (module for UK readers) of 135 students counts as one. I do not know exactly how long it takes me to consider each of the 11,000, but let’s take a conservative estimate of 15 seconds. This single activity consumes 45.5 hours. Writing emails takes longer. Depending on what I have been asked to do, a response may take an hour (or longer). Others such as routine student questions might take 30 seconds. When I recently returned from 2 days away from the university, I noticed that it took me the better part of a day to clear my inbox and during one two hour period it took me 2 hours to complete 12 emails. It is hard to say I wasn’t asked questions outside of the virtual world during those 2 hours, but that would be about one e-mail every 10 minutes. For the sake of illustrating my point use a round number of 5 minutes each. Answering emails then involves 333 hours of my time.

Together,  these two activities amount to about 378 hours. The UK work week is typically 37 hours/wk (not 40 like the US and a variety of other countries). This means we are looking at around 10 weeks of time devoted to screening and responding to e-mails. That is a lot of time. I will be honest, in the nearly two years of my current inbox there are over 500 items I have not even had the time to click on and at best I will have just scanned the title.

What is worrisome about that number (378 hours)? The academic contracts I have seen from the UK (excluding professor) are for 1575 hours of work a year.  The 378 is about 0.25 of the contracted amount. If the flood of e-mails continues to rise (it has increased on the order of 500 to 1000 items a year) I will drown. I do not think I am alone in feeling on the ragged edge of being overwhelmed by this. While I am sure there are people who receive less e-mail and perhaps manage it “better”, I am equally sure there are those that receive more and do not manage it as well.

Are these estimates extreme? Perhaps, but I think 25% of time devoted to maintaining e-resources of various types (including e-mail) is not extreme.

Given the choice, what would students and staff (and academic managers) choose? Would they all say that devoting 25% of academic staff resources to e-mail is the best use of time? I think not. Extra academic tutorials would go a long way to helping students. More fully marked assessments (rather than portfolios) would go a long way to helping students. More time available to work in lab and write grants and papers would go along way to helping the reputation and competitiveness of a University.

I genuinely believe that institutions that crack this problem will be at a very substantial competitive edge. In the meantime, I genuinely believe a vicious cycle is at work. The maintenance of e-resources and keeping up with e-mail is a drain on time which is driving institutions to implement more e-learning and e-mail based communication while lowering assessments. The more they do this the less time is available for face to face interaction and tutorials.  

A Plea for Help and Anecdotal Evidence about US University Teaching Costs

A reader was curious where the money in US universities is going. The perception is that they have huge budgets that increase faster than inflation. The problem with providing insight into this is that I am not an accountant. So this post is part plea for help part anecdotal evidence contradicting the impression. 

Plea for help: I like to consider myself a reasonably intelligent person with a reasonable head for numbers, but I really find the financial statements of many US universities too difficult to understand. There are exceptions. For example, the Massachusetts  Institute of Technology  does a pretty good job, as does the University of Washington, but many State supported Universities, I simply can’t get my head around.

So help please. The 2011/12 annual report for UCLA  is here (useful part starts on page 24). The 2010/11 equivalent for UC Berkeley is here (useful part starts on page 18). If anyone can provide the following for US State supported Universities including any substantiating links, it would be appreciated: 

      1)      Total income and expenditure

a.       Broken down by: teaching, research, and other.

b.      Broken down by State funds and other.

      2)      The total number of full time equivalent students.

Anecdotal evidence that university education costs are not increasing in excess of inflation: The first page of the University of Washington report is great. Using this as an example:

      1)      State appropriations supporting the University have declined over the period 2000/1 to 2010/11 both in terms of absolute dollars and even more precipitously in terms of dollars per student. In 2000/2001, net appropriations for operating expenses were $341.5 Million ($8,699/student). In 2010/11, the equivalent figures were $296.8 Million ($6,051/student).  

  

      2)      Overall per student cost (assuming the cost to students is the state appropriations plus tuition and fees) increased from $15,482 (2000/1) to $18,181 (2010/11). This corresponds to a yearly increase of 1.6%/year over the decade. According to the data here, the average rate of inflation over the period was in the range of 2.4%/year to 2.5%/year. 

 

       3)      The perception of increase cost relative to inflation is due to the state providing less support to education and shifting the cost onto parents and students. For example, between 2005/6 ($8,255/student) and 2010/11($12,130/student) there was an 8%/yr increase in tuition and fees (the part students and families see). However, overall the University lost substantial ground to inflation. 

This particular case is anecdotal (only one university in a very large number of state run universities). Looking at broad numbers can mask many trends and this does not take into account any changes in the distribution of out of state students. However, it illustrates a general problem of perception. The teaching mission of universities is being squeezed at the same time that cost to students and families is increasing. (Note: the UK situation is more nuanced – some subject areas are seeing an increase per student).

Any assistance with the more complex balance sheets would be appreciated.

If I have misinterpreted the UW figures or made any computation errors, please correct me.

Would You Give Someone £10,000 to Do Nothing for You

The Open University in the UK is a fascinating experiment that by and large has gone well. Your colleagues and friends may be working on OU degrees. Academics take OU courses. People in traditional industries take OU courses. I like OU because it has served people who otherwise might not get degrees. No, it is not perfect, but in my view makes the grade as a University. 

I like the University of Phoenix less. I wanted to like the University of Phoenix, but cannot. I like Kaplan Higher education less. I like EDMC less. None of these imitators lives up to OU. Why don’t I like them? I don’t like them because they are inefficient. Let’s look at the balance sheets for OU, University of Phoenix, Kaplan Higher Education (as presented by the Washington Post financial reports), and EDMC (look to the bottom right of the page). 

Let’s also make a quick stop to look up today’s exchange rate: $1.56/£1. This is relatively close to the $1.6/£1, I have used previously. 

I don’t like the US for-profits and like the OU because...

... the OU taught 246,626 students and had a net income of £453.6 Million with approximately 57% from government teaching grants. They had an operating surplus of £37 Million. This is £1839/student. For OU we have another bit of information: the 246,626 represents 86,173 full time equivalent students. Using this number, you will get £5263/student. Note: I could not find FTE information for the others. 

... the University of Phoenix taught  380,800 students and had a net income of £2,842.1 Million ($4,322,670,000). This is £7463/student.

... Kaplan Higher Education taught approximately 74200 students[i]  and had a net income of £897.2 ($1,399.6 Million). This is £12,091/student.

... EDMC taught  142,100 and had net income of £1769.9 Million  ($2,760,967,000). This is £12455/student.

Would you sign up for OU and send £2,000 (lowest estimate) to £10,000 to one of these bloated money wasters for doing nothing for you? Of course you wouldn’t.

Any questions?

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[i] Note: I find the Washington Post Financial report quite vague about the number of students. The number here may be somewhere from 5800 too low to 24,400 too high. See pages 13 and 14 of the 2011 statement. The 2012 statement was not available at time of writing.

Meanwhile Across the Pond: Advertised price is not what everyone pays.

There is much to like about the Massachusetts Institute of Technology (MIT). I have a particular fondness for MIT because, after World War II, it took my father as a student and transformed him from a rough kid from a rough neighbourhood in St. Paul, Minnesota into a Physicist. There are other reasons to like MIT, but I think prospective undergraduate students in the UK do not think enough about MIT and places like it.

The biggest reason for this, I think, is sticker shock. The price tag of 4 years of undergraduate education “ain’t cheap.” The advertised tuition and fees for MIT at present are $42,050. Ouch, and if you add to that living costs this seems well outside the “normal” idea of what UK students could afford unless they are well heeled or living off the civil lists. But there is more to the picture than this. Remember excellent but poor students get through MIT (and similar places), they have for a long time, and will for the foreseeable future. How does this work? Let’s consider some data using MIT financial reports. Because I had it to hand, I have focused on 2011 data.

In 2011, MIT had about 10,566 students. This may be a surprise. MIT is not a huge teaching factory. In fact it is about half the size of the University of Cambridge in terms of student intake. In their financial statements for 2011, MIT reported a total of $457,494,000 of tuition, but there is some fine print. Nearly half of this was discounted in cash terms. Institute funds and external sponsors provided $294,055,000 of tuition support to students. This left a net of $163,439,000. This leaves an average of about $15,468 as the cost of tuition and fees. Factor in exchange rates and you get £9,668/student.  This is not much more than the maximum fees at a UK University. 

There is more to this. Financial support of tuition is need based, so if you are from a family really struggling financially, you will pay less. If you are an excellent student and worried about a place in the UK, particularly if you are not one of the rich and privileged whose family could afford to send them to one of the feeder public schools for Oxford and Cambridge, it is worth trying. 

There is further aid for students. An additional $30,435,000 is provided to students as stipends (I think this is mostly for graduate students but I could be wrong) and $85,335,000 in salaries. Let’s do the maths. Add this all up and $409,825,000 of support is given to students in various forms of financial aid: tuition support, stipends, and salary. Net cost to students is: $47,669,000.  This amounts to $4,511/student (about  £2,819) which is LESS than the cost under the old fee regime. At present there is nowhere in the UK that comes close. 

This does not mean you can expect a free ride. If you get aid you will still have to work like a dog. If you can pay, you will be expected to. Aid or not, the education you will receive is as good as it gets. MIT really is one of the best. It really is excellent and it got there by accepting hardworking gifted students. 

MIT is not a government run institution. It is a private, non-profit organisation and can accept who it pleases. There is no special regime for “home” students (US students have access to some types of grants and loans that foreign students do not). Look at the financial reports; the majority of student financial aid comes from MIT itself ($284,030,000). And, ... for my money, I would take MIT over Cambridge. MIT is not a bastion of students with old money and privilege. It is not the playground of Etonions. It transformed my father who grew up in a neighbourhood frequented by the likes of John Dillinger and Machine Gun Kelly into a man who told NASA they could turn off the guidance system in Apollo 13 to save power, one of many who got men to the moon and brought them back safely.

Yes, I have a soft spot for MIT. But I suspect if you dig deep into the finances of places like Harvard, CalTech, Oberlin, and others like them (I took my first degree from Reed College) you will find a similar story. Many have “need blind admissions” and good systems in place to support students who need their support. Looking at this year’s information MIT provides need based financial aid to 62% of undergraduate students. Look at the data above, do the maths. If you can get in, chances are you can afford to go.