How to Pay Well for Good People and Keep Costs in Check

Editor’s note: This blog is the third in a series on strategic planning for financial sustainability. The previous posts covered per-student cost analysis and how to handle rising costs and competition. We invite your comments below.

The head of an urban K-8 Catholic school recently spoke to us about his efforts to attract and retain great staff without increasing the school's operating budget. He pointed out that as the economy rebounds, teachers may get better offers from public schools or other professions, a concern shared by many independent school leaders.
Schooling is a labor-intensive enterprise. In fact, for some independent schools, labor costs can approach 90 percent of total expenses, so it isn't easy for school leaders to look elsewhere for savings to spend on higher salaries. Since the school had no other avenues to fund higher pay, together we turned to the staffing roster to explore more about how salaries were allocated and to investigate whether they could be adjusted to better attract and retain great teachers.
The first step was taking stock of the per-student costs of services. (See the previous post in the "Under Pressure" series for more on per-student cost analysis.) After that, leaders can use several strategies to efficiently focus labor resources on attracting and retaining top instructional talent. The following five strategies present options to redirect resources toward the best teachers.


Strategy 1: Keep an eye on total staff counts.

It is a common trend in schooling to add staff when the need arises, or to let staffing levels drift up over the years. But as revenues become strained, and staff salaries climb with experience, the added positions may be one reason the school can’t afford larger raises.
At the urban Catholic school mentioned, 45 percent of staff are not teaching core classes, including maintenance staff, several assistants, a technology director, athletic director, librarians, after school programming staff, enrichment staff, and others. In this case, we suggested that the school’s leader consider whether all these functions were critical, and whether some could be merged, or done differently. For example, was it possible to divvy up some tasks among existing staff so as to reduce the total head count?  Doing so would free up funds for pay raises. Reducing the school’s top leadership from three to two, for instance, could free enough funds for a $3,000 raise for each core classroom teacher.
There are times when teachers might prefer the heavier workload if it came with a stipend equal to the savings in staffing. For example, let’s say that teachers in four over-filled classrooms consider sharing an aide; an alternative use of the same funds is a salary increase equal to more than $7,000 for each of the four teachers. Some teachers would likely prefer the pay bump over sharing the aide as a means to compensate the extra workload if given the choice.
Using this approach, schools might consider whether it’s possible to eliminate a position and divide the tasks (with stipends) to the remaining staff. Staff transitions are a great time to rethink the work assignments. Could a teacher write the annual development report if given a stipend for the task? Could one serve as the athletic director? Some schools offer modest tuition breaks when students pick up some administrative hours.

Strategy 2:  Offer extra work to existing staff as a way to raise pay.

Schools might go further by being selective about how they apportion extra work so as to bring more dollars to specific teachers. At the Catholic school’s Learning Enrichment Lab, six staff members currently provide extra support to students. One option would be to reduce the Lab’s staffing by one and offer a stipend to exceptional teachers to take on extra work with qualifying students. The work might take place during a prep period or outside of school hours, or perhaps take the form of an August weeklong boot-camp for struggling readers. Either approach would raise the workload for those teachers, but it would be optional for them, and it could be well-funded. In some cases, the students’ own teacher might be best able to add those extra supports, particularly if the teacher is top tier. Where a Learning Lab position might cost $70,000 in salary and benefits, those same funds could pay seven teachers a $10,000 stipend to do extra work with three students each at an equivalent cost per pupil. 
Or, imagine a high school with a rock-star science teacher. One option would be to allow that teacher’s class sizes to drift up with the offset of a stipend to cover the extra work. If this approach would enable the school to forgo a part- or full-time position elsewhere in the department as a result, the savings could enable a sizable pay boost for the teacher. The result would be uneven class sizes, but, at the same time, more students would have access to the school’s best talent when taking a science class. And evidence from a teacher survey suggests that when faced with the option of two fewer students in each class or a $5,000 expenditure increase in cash, 83 percent of teachers prefer the pay to the smaller class.
The advantage is that using stipends means that the work gets done without an incremental benefits load (whereas filling the need with another position does require more spending on benefits). In many schools, benefits costs are outpacing salaries and other expenditures, so reducing the number of benefits-earning positions can help stabilize the budget. And, doing so may help spread the influence of a school’s MVPs over more students and programs, increasing loyalty with families.

Strategy 3: Consider per-head costs of benefits and let staff choose between benefits and cash.

Benefits are a substantial and often growing portion of labor costs. But individual faculty members are likely to value differently in-kind benefits, such as on-campus housing, free meals in the dining hall, and free or reduced tuition for faculty children. In some cases, faculty may value such benefits less than what it costs the school to provide them. And such benefits are often deployed unevenly across school faculties. Teachers with families, for example, can take advantage of tuition-remission benefits while single staffers cannot. So schools may want to explore the cash equivalent of such benefits, and check in with staff regarding their preferences for the benefits or the cash amount.
Health care, too, is an area ripe for cost exploration. Here again, a key step is to compute the dollar value of the existing benefit options and explore what any changes would mean for teacher salaries.

Strategy 4: Cover substitutes internally and share savings with staff.

Many school contracts include a fixed number of sick or personal days. While it costs teachers nothing to be absent, schools that use substitute teachers to cover faculty absences can incur costs of $100 per day or more. Where staff are willing to cover for peer absences, the upside could be a nominal year-end bonus equivalent to the savings associated with the reduced need for subs. Developing a default coverage schedule in advance of any absences that includes administrators and teachers can help keep school running smoothly.

Strategy 5: Rethink salary schedules.

The traditional salary schedule is deeply embedded in the culture of all school types. Although independent schools have more latitude over salaries than their public school counterparts, eliminating the practice of longevity pay may be unnerving to teachers, who often value some predictability in their earnings.
However, even without revising the pay scheme, there are ways to augment pay for the most valued staff. A first step is exploring how salaries vary among existing staff. A school’s librarian and P.E. teacher can be some of the highest salaried positions, as those posts rarely turn over. If those positions are key to the school’s mission and relationship with families, higher salaries in those roles might make sense. If, however, the primary goal is to attract and retain top teachers in key academic subjects (where many of the applicants may have less experience), then a pay scheme based primarily on years of experience can be limiting.
One option is to layer incremental money on to the base salary to drive more funds to the most valued staff. When resources are tight, having those extra dollars to do the layering may mean putting fewer funds into an across-the-board pay raise (which instead spreads funds more evenly among all employees). When issuing an across-the-board raise, using a flat fixed dollar increment (versus a flat percentage-based raise) can help ensure that the raise is meaningful for junior teachers. In this case, all teachers receive the same $2,500 bump, instead of a fixed 4 percent, which directs fewer dollars to more junior teachers. Another option is to free funds by relying on fewer FTEs as described earlier.
People are a school’s most important assets. For resource-constrained schools, rethinking existing spending can be a way to ensure funds work better to attract and retain staff.
The next blog post will offer strategies for increasing productivity within school offerings.

15-1221-MargueriteRoza-sm.jpgMarguerite Roza is the director of Edunomics Lab and a research professor at Georgetown University.  Her research focuses on quantitative policy analysis, particularly in the area of education finance. Recent research traces the effects of fiscal policies at the federal, state, and district levels for their implications on resources at school and classroom levels. Roza is author of the highly regarded education finance book, Educational Economics: Where Do School Funds Go?
15-1021-LucretiaWitte-sm.pngLucretia Witte is a research affiliate with the Edunomics Lab at Georgetown University. She is currently pursuing her MPP at Georgetown and hopes to found an independent school with a strong focus on travel and work experiences. Witte has taught in two independent schools and is a graduate of Phillips Academy (Massachusetts).


12/20/2015 08:41 AM
I've found this series of articles from Marguerite and Lucretia and the Edunomics Lab to be most welcome and important. Concerning this specific installment, I might quibble with a few points ( isn't the uneven distribution of some benefits the very conceptual foundation of insurance, especially medical insurance? might elements of Strategy 2 concerning stipends for larger average class sizes be combined into a more comprehensive approach to compensation?), but I write primarily to underscore their Strategy 5 which I think this whole profession has to confront in ways it hasn't yet. "May" be unnerving to teachers? Oh yeah, ask almost anyone who has tried it. Still, if you view the goals of such change being oriented to what is best for the students, the current model of teacher compensation is difficult to justify.
12/16/2015 01:09 PM
Keep in mind that well managed performing arts programs offer a unique and powerful way to reduce staffing costs. This is true in public and independent schools that offer robust music programs (both choir AND instrumental) These programs thrive on large class sizes - Up to 40:1 for middle school, and 80:1 student to teacher ratio is doable when these programs are organized professionally. In addition, if co-curricular programs are offered effectively, a small number of performing arts teachers can effectively instruct large percentages of the student body. This is why even in the midst of major funding setbacks, many public middle and high schools continue to offer robust instrumental and choir programs.

On the whole, independent schools do not offer well sequenced music programs and as a result, lose out on a powerful tool to save on staffing costs. I would add that great Arts programs help attract the most creative, dedicated, academically able applicants.

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