The primary subject matter of this case concerns a salary increase and the internal and external compensation alignment of a university. The equity-theory helps explain the conflict that exists between the faculty members.
To assist in their analysis, students are provided with a timeline of the critical events of the case and comparison compensation tables. Students are asked to answer four questions that include solutions to management issues and a recommended long-term solution. This case has a difficulty level of four. The case is designed to be taught in two class hours and is expected to require approximately three hours of outside preparation time by students.
The case depicts a business school dean's attempt to raise the salaries of seven School of Business faculty members to the 25th percentile salary level of AACSB accredited institutions. This was an important step to retain valuable employees and ensure reaccredidation in 2007. The salary proposal created an uproar among the non-business faculty at the university. They felt the School of Business professors were already among the highest paid employees at the university. To make matters worse, this situation occurred during a financial crisis as many other employees were denied raises and several employees were laid off due to budget constraints. The problem is exacerbated by the lack of a clear pay policy and by serious constraints posed by the institution budget and state funding. This case illustrates the importance of internal and external compensation alignment within an organization. The President of the university and the Board of Directors are faced with the enormous challenge of creating cohesiveness among the faculty despite their irreconcilable differences. Their actions and decisions will shape the fate of the School of Business and the overall university
Recommendation for a General Teaching Approach
This case encourages students to critically analyze several management principles including conflict management, decision-making skills, and the equity theory in an applicable, real-world situation.
This case is structured for senior level management students and should take approximately two in-class hours to complete. Questions should be graded for the specificity of the answers provided. The instructor may choose to lead an in-class discussion after the assignments are completed so that different views can be observed. The instructor can then follow the discussion with appropriate answers.
Answers to Case Study Questions:
Based on your knowledge of the Pay Equity Theory and provided appendices, evaluate the Board's decision relative to the proposed salary increases for the seven School of Business faculty and administrators by answering the following four questions:
1. Using the equity theory, discuss and rationalize the non-business faculty members' and the School of Business "Non-Greedy Seven" professors' actions toward the salary adjustments for "The Greedy Seven".
J. Stacy Adam's equity theory helps us understand why there was a controversial concern over the salary increases for the School of Business. Equity theory is based on employees' perceptions of fairness relating to their job. Using the equity theory, several non-business faculty members compared his/her input (effort, experience, education, and competence) and output (salary, recognition, rewards) to those of the business faculty members. Since they perceived the ratio was unequal, an equity tension existed. Therefore, the non-business faculty members could either choose to reduce his/her effort or strive to increase his/her output to make the relationship ratio balance. In this case, two main points can be noted to help illustrate the perceived work ratio imbalance. First, the non-business faculty members felt that the business faculty members were already overcompensated. …