SALARY SETTING TIME

By Walden Degner

My least favorite board meetings are those that include a discussion of staff salaries, particularly the director's salary (chief executive officer). The paramount factor in my mind is a desire to be fair; to arrive at an amount, by board consensus, that properly ranks the director within his or her peer group, and takes into account his experience and performance, local conditions and inflation.

Now let us analyze the above statement more closely, and bear in mind that we are dealing with intangibles. Thus, the purpose of this discussion is not to secure a mathematical answer, but to illuminate the subject so we will be more prepared for the next salary discussion.

Supply And Demand

Who are peers? Obviously, from a park district board's viewpoint, the director's peers are the directors of other park districts. Should commissioners concern themselves with what other districts are paying their directors? Absolutely! In many areas, including the Chicago metropolitan area, the movement of staff from one district to another is common. In many instances, employees can change employers without facing personal obstacles, such as relocating a residence. Have you noticed (as I have) that, frequently, a departed employee's replacement receives as much or more in salary than his predecessor? To me, it isn't good business, particularly when we consider costs associated with "down time" during the new employee's orientation.

Are there peers in other units of government? Does your director have authority and responsibilities comparable to your local police chief or school superintendent? Should you care that the mayor of a nearby city gave her personal secretary a 26% raise to $48,000 per year and a minor department head was increased to $57,000 per year? I think we should, because all of these salaries must reflect what their "bosses" regard as the value of their employee's services to the community. So, when you give your director an "extra nice" raise, you may be increasing the salary expenses for all of your neighbors, also.

Value Determination

Experience and performance are regarded here as linked together. It is presumed that more experience will improve performance but you must be the judge as to whether that has occurred. Did your board establish some goals and objectives for the year? Were they measurable and reasonably attainable? How many were met? What salary would you pay for an average performance, say if 60% of goals were met? How much more does above average performance rate? Or excellence: 95% of goals met? Or, once a year, does your board meet to discuss your director's performance in generic terms and arrive at a "reasonable" salary.

Certainly, local conditions which affect a director's salary are not limited to economics. Some board members may be fearful of media treatment, and subsequent public reaction. My observation indicates that the media will duly print your new staff salaries, couched in such terms as to imply they are excessive, but then, barring other major offenses, will subsequently endorse the incumbents for re-election. In other words, the "heat" may last one week. The voter's memory is even shorter. Why, then, should commissioners place large credence in public reaction?

Should the local unemployment rate affect your decision? When suffering high unemployment, the demand for leisure services, as with hobby and liquor store sales, will probably increase. Your staff may then be more valuable than ever. Should current private sector "hard times"be quoted to reduce our staff's salaries? If so, we should also be prepared to quote private sector "good times" during strong economic periods.

How about the financial health of the district? Is there a limit on what you can pay without expecting your director to type and sweep the floors? Does your board have the "Harvester Syndrome," e.g. you are in terrible financial condition and on the verge of bankruptcy, but staff will be more than generously compensated first? Now if your director resigns, you can probably easily get fifty applicants for the job. How should this affect your salary decision? Will the

Illinois Parks and Recreation    40      November/December 1982

potential savings (let's say $5,000 to $10,000) really be cost effective?

Cost Of Living (Inflation) Adjustments

What size salary increases are justified due to inflation as measured by the U.S. Department of Labor's Consumer Price Index (CPI) or other measures? The trade unions have been very effective in securing automatic increases related to the CPI. But the U.S. Department of Labor has said on many occasions that a principal factor in CPI increases is the above average rise in the cost of medical care. Now think, doesn't your district provide medical insurance for your staff? So you have already absorbed that portion of the CPI increase. Would you agree that a $30,000 per year employee has no greater essential living expenses than a $10,000 per year employee. Perhaps the cost of discretionary items (Beta-maxes, vacation travel and restaurant dining) should not be included in cost of living adjustment. The position taken here is that increases in the CPI affect the higher salaried employee less than a lower salaried employee.

What salary would you pay for an average performance, say if 60% of goals were met? How much more does above average performance rate?

The Palatine Park District recognized this in 1975 when it adopted a schedule for applying decreasing percentages of the annual CPI increase to its entire range of salaries. The schedule is adjusted periodically. In effect, our cost of living formula provides approximately the same number of dollars for cost of living increases for all employees each year.*

Of course, there are numerous methods which address cost of living increases. Federal employees received a CPI related increase on October 1, 1981, of 4.85%. Discussion of this subject with several area school board members indicate that the raises granted to administrators bear a negligible relationship to the CPI. Their principal considerations are what other school districts are paying and the degree to which district goals have been met. However, this approach disregards the existence of peers, with similar responsibilities, in other units of government.

Conclusion

I have tried to present in a readable way some of the factors we might take into consideration when recommending salaries. Many of us can expect to be actively involved with salary decisions for several more years. I would appreciate your reaction to these comments. If sufficient responses are received, I will construct a follow-up discourse, and try to refine the salary process. Please respond to: W. O. Degner, Palatine Park District, 250 E. Wood Street, Palatine, IL 60067.

* Author's note: If you would like a copy of the schedule, the Palatine Park District will supply it on request.

ABOUT THE AUTHOR:
Waldon (Wally) Degner, a member of the Palatine Park District and a former member of the IAPD Board of Directors, is an employee of the Collection Division of the Internal Revenue Service, where he often has been called upon to analyze the financial policies of small businesses. He was elected to the IAPD Board in 1977 and has served as a Vice President and as Chairman of the Conference, Honors & Resolutions, and now serves on the Constitutional By-Laws Committee. He and his wife, Janet, have two sons in colleges and a daughter in high school.

Illinois Parks and Recreation    41       November/December 1982