1. Introduction to Sibson Market Assessment and Development of UTC Compensation Plan December 12, 2011

2. Sibson Compensation & Benefit Benchmarking In March 2010, Interim President Jan Simek launched the Compensation Advisory Board (CAB) to help guide the Universitys compensation philosophy, structure and programs. At the CABs direction, a market assessment was conducted in July 2011 by a nationally recognized HR consulting firm - Sibson Consulting - to identify gaps in pay and benefits offered to faculty and staff. 2

3. The University of Tennessee engaged Sibson Consulting to: Conduct an objective benchmarking of faculty, staff and administration compensation and benefits to the appropriate markets Perform a variance analysis comparing University salaries and benefits to the comparison markets 3

4. Summary of UT System Compensation Findings 1. Market Competitiveness While some entities have conducted some compensation benchmarking, the majority of perceptions are based on anecdotal information and most entities are not certain what the results of the competitive assessment will be However, most entities expected that some of their jobs are currently paid below market 2. Lack of Annual Increase The lack of an annual increase in recent years was frequently mentioned by focus group participants and many indicated that it had placed compensation behind the market Some entities want to distribute any increase budget available this year evenly across the employee population, while others want to use some of the budget to reward performance 3. Compression Many entities indicated that new employees are hired at market rates, which is often at or above the pay levels of current employees While the institutions often have no choice but to hire at market rates, there is some concern about potential inequities and compression among compensation levels of new and current employees 4. Comparison Markets Specific institutions for compensation comparison markets differed by entity as well as somewhat by school and discipline. However, most entities mentioned institutions that were similar in type and size as well as proximity to UT For non-higher education jobs, most entities indicated that they competed with local and regional employers in their area 5. Pay Positioning Most entities indicated that the market median or 50 th percentile was an appropriate measure of market competitiveness for the competitive assessment 4

5. UT Chattanooga Findings Attracting and Retaining Talent UT Chattanooga generally does not have trouble attracting faculty because many come for the location o Quality of life & partnerships with local industry and government that help attract faculty. o Future challenges attracting and retaining faculty as the economy improves. o Difficulty adding faculty to keep up with growing enrollment may hurt retention. o Lecturers pay is low relative to market. The University has a greater struggle attracting and retaining non-exempt and professional staff including IT staff, skilled trades, and administrative support o IT employees will often receive training from the University and then leave o Administrative support employees are able to leave and find higher compensation elsewhere o New companies in the area, as well as a large local community college, hire staff away from UTC Benefits are helpful for attracting and retaining faculty and staff. However, participants noted that the benefits no longer provide the same value as they once did, especially with recent changes to the medical plan o Longevity pay is positive o Education assistance benefit helps attract and retain o Retirement benefits help with retention more so than attraction The work culture and general friendly attitude of employees also promotes retention 5

6. UT Chattanooga Findings continued Compensation Comparison Markets and Pay Positioning Opinions on the appropriate comparison institutions for faculty differs, as different disciplines are stronger at different places o Institutions from the Southern Regional Education Board (SREB) were generally accepted as a fair comparison group o Both category 2 and category 3 institutions were mentioned as appropriate for salary comparison. UTC is classified as category 3 The appropriate comparison market for non-exempt staff is any industry within the local area. For mid-level professional staff, the appropriate market is any industry within the region Compensation Challenges New employees, especially faculty, are often brought in at market salary which may be higher than current employees. While participants indicated that UTC must often pay market rates in order to hire new employees, there is concern about salary compression. Staff compensation policies limit flexibility for managing compensation o Restriction to 8% above the range minimum for hiring non-exempt staff. o Limit in non-exempt promotions/reclassifications to difference in pay grade minimums. o If an employee leaves a position, the compensation for the new hire returns to the original amount, which is often too low. 6

7. Identifying the Appropriate Compensation Comparison Markets 7 An appropriate compensation comparison market is based on identifying institutions and/or organizations that UT recruits talent from, loses talent to, or competes with for talent. Each UT campus developed unique comparison markets that align with the talent pool or labor market for the entities and jobs at UT. While the specific comparison markets differ by entity, the same common principles guide the comparison markets for all entities Very Important Somewhat ImportantNot Important Comparison Market Characteristics Assessment Type of Role Similar Size and Type Geographic Location Higher EducationRecommended UT Comparison Markets Senior Administrators Institutions of similar type and size for higher education specific jobs (e.g., Vice Chancellor Student Affairs) Institutions of similar type and size and national not for profit employers for jobs also found in general industry (e.g., Chief Information Officer) Faculty Institutions of similar type and size Mid-Level Professionals Institutions of similar type and size for higher education specific jobs (e.g., Admissions Counselor) Institutions of similar type and size and general industry employers in the South for jobs found in general industry (e.g., Accountant) Non-Exempt Staff Local area general industry employers Since benefits are common across all types of jobs within the system, the comparison market for benefits does not vary by job and is common across the entities.

8. 8 UTC Higher Education Comparison Market For Faculty and Exempt Staff: SREB Category 2 Institutions: Four-year institutions awarding at least 30 doctoral degrees that are distributed among at least 5 CIP categories (2-digit classification). SREB Category 3 Institutions: Four-year institutions awarding at least 100 master's, education specialist, post- master's, or doctoral degrees with master's, education specialist, and post-master's degrees distributed among at least 10 CIP categories (2-digit classification) Additional top 5 comparison institutions from the Huron Peer Group

9. Aggregate Benchmarking Results (Faculty): By Rank In aggregate, faculty are paid within the competitive range of the market at 94% Professors, the rank with the greatest number of faculty members, are paid slightly below the market median in aggregate (96%) Associate Professors are paid further below the market median in aggregate (92%) Rank # Incumbents 1 % Benchmarked 2 Aggregate Annual UT Salary ($000) Aggregate Market Median ($000) UT Salary as % of Market Median Assistant Professor8092%$4,391$4,64195% Associate Professor9490%$6,097$6,61792% Professor14392%$12,220$12,79496% TOTAL31969%$22,809$24,17094% 1 Only includes data for incumbents in benchmarked jobs. Benchmarked incumbents represent approximately 70% of all regular faculty. Ranks with less than five benchmarked incumbents not shown but are included in total. 2 Number of incumbents in benchmarked jobs/ranks as a percent of incumbents provided in census. Reliable discipline-specific CUPA-HR market data does not exist for Lecturers/Adjunct Faculty. 9

10. 10 Distribution of Competitiveness to Market Median (Faculty): By Rank 1 Within all ranks, the majority of individual faculty salaries fall within the competitive range, which is defined as +/- 15 percent of market median In some cases, faculty salaries fall above or below the competitive range, which may be appropriate. Salary variances at the individual level can often be attributed to factors including, but not limited to: time in rank, scholarship, performance, contribution to the institution 1 Only includes data for incumbents in benchmarked jobs. Ranks with less than five benchmarked incumbents not shown but are included in total. Percentages may not sum to 100% due to rounding. UTC as % of Market Median 95%92%96%94% (N=80)(N=94)(N=143) (N=319)

11. Aggregate Benchmarking Results (Staff): By Reporting Entity 1 In aggregate, staff compensation falls significantly below the market median at 78% Staff compensation in the following reporting entities is significantly below the market median: COBA, Facilities, Law Enforcement, OIT Compensation in the College of Engineering & Computer Science and in University Advancement is only slightly below the market median Reporting Entity # Incumbents 1 % Benchmarked 2 Aggregate Annual UT Salary ($000) Aggregate Survey Median ($000) UT Salary as % of Survey Median Academic Administration17100%$930$1,02491% Business and Finance1478%$708$83785% College of Business Administration5100%$227$30375% College of Health Education & Professional Studies 1083%$468$58780% College of Engineering & Computer Science 1192%$831$85297% Enrollment Services10100%$367$42986% Facilities4282%$866$1,11478% Law Enforcement1393%$418$55875% Lupton Library10100%$372$44883% Office of Information Technology1983%$791$1,09772% Student Housing1689%$477$59680% University Advancement9100%$500$53094% UTC (other units)76100%$2,300$3,57864% TOTAL26391%$10,019$12,90078% 1 Only includes data for incumbents in benchmarked jobs. Benchmarked incumbents represent approximately 40% of all regular staff. Reporting entities with less than five benchmarked incumbents not shown but are included in total. 2 Number of incumbents in benchmarked jobs/ranks as a percent of incumbents provided in census. 11

12. Sibson considers pay to be competitive when it falls between 85% – 115% of the market median. Individual pay above or below this range may be appropriate based on individual experience, skills, and performance The majority of staff in the following reporting entities are paid within the competitive range: Academic Administration, College of Engineering & Computer Science, Enrollment Services, Lupton Library, and University Advancement The majority of staff in all other reporting entities are paid below the competitive range Distribution of Competitiveness to Market Median (Staff): By Reporting Entity 1 UTC as % of Market Median 91%85%75%80%97%86%78%75%83%72%80%94%64%78% (N=17) (N=14) (N=10)(N=11)(N=42)(N=19)(N=9) (N=263) 1 Only includes data for incumbents in benchmarked jobs. Reporting entities with less than five benchmarked incumbents not shown but are included in total. Percentages may not sum to 100% due to rounding. (N=5)(N=10)(N=13)(N=16)(N=76)(N=10) 12

13. Estimate of Cost Sibson has calculated estimated costs based on both market results for benchmark jobs and also extrapolated cost for jobs that were not benchmarks. On an annualized basis for UTC the estimated cost to bring incumbent salaries to average of: 85% of the market median = ~ $4 MM The market median = ~ $10.4MM 13

14. UTC Compensation Analysis Team: Vicki Steinberg, Faculty Senate Gavin Townsend, Faculty Senate Budget and Economic Status Committee Verbie Prevost, UT CAB Dick Gruetzemacher, Institutional Research Tyler Forrest, Budget Office Danny Grant, Budget Office Deborah Hyde, Business Manager, Academic Affairs Dan Webb, Human Resources Phillip Johnson, Human Resources Kelly Griffin, ERC Jean Dake, ESC Vanasia Parks, Associate Vice Chancellor, Business and Finance 14

15. Compensation Analysis Team Objectives Analyze Sibson data to assess current state of compensation among all categories of faculty and staff at UTC Through a transparent and collaborative approach, identify compensation issues, compensable factors and a general framework to describe realistic and equitable future state for compensation of UTC faculty and staff. Compile and analyze other data associated with the acquisition and retention of faculty and staff at UTC as part of the process of identifying compensation issues and informing institutional strategies for acquiring and retaining talent necessary to meet UTC strategic objectives. Using Sibson market data and other sources of information assess distribution of salaries by considering various compensable factors such as years of service with the University, years of service in particular position, performance, education, experience (at UTC and prior), certifications, etc. Develop a recommendation to the Chancellor for a multi- year compensation plan. 15

16. Analyze Faculty Salaries Work Team Gavin Townsend, Faculty Senate Budget and Economic Status Committee (Team Lead) Verbie Prevost, CAB Representative Dick Gruetzemacher, Institutional Research (or designee) Deborah Hyde, Business Manager, Academic Affairs Dan Webb, Human Resources Phillip Johnson, Human Resources Additional members from Faculty Senate Budget and Economic Status Committee Library faculty representative Thoroughly evaluate Sibson data, identifying anomalies and supplementing with additional data as appropriate. Consider salary distribution by rank, discipline, and other compensable factors (merit, service as department head, etc.) Determine relationship of faculty salaries to market. Identify compensation issues for faculty positions. Develop recommendations to address issues identified, providing equitable framework for recruitment, retention, and motivation of excellent faculty consistent with strategic objectives of University. 16

17. Analyze Staff Salaries Work Team Dan Webb, Human Resources Dick Gruetzemacher, Institutional Research (or delegate) Tyler Forrest, Budget Office Phillip Johnson, Human Resources Kelly Griffin, ERC Jean Dake, ESC Additional representatives from ERC/ESC, nominated by ERC and ESC chairs Thoroughly evaluate Sibson data, identifying anomalies and supplementing with additional data as appropriate. Analyze salary distribution by relevant staff job groupings: job families, EEO categories, pay grade, FLSA category (exempt/non-exempt). Analyze salary distribution by relevant compensable factors: years University service, experience (UTC and prior), performance, CPS or other certifications, degrees, etc. Determine relationship of staff salaries to market. Evaluate internal salary equity relative to similarly situated positions. Identify compensation issues for staff positions. Develop recommendations to address issues identified, providing equitable framework for recruitment, retention, and motivation of excellent staff consistent with strategic objectives of University. 17

18. Analyze Acquisition/Retention Data Work Team Deborah Hyde, Business Manager, Academic Affairs Tyler Forrest, Budget Office Dan Webb, Human Resources Phillip Johnson, Human Resources Laure Rodebaugh, Human Resources Review acquisition (hiring) data (time-to fill, diversity and quality of candidate pools, turn down of offers, etc.); analyze to see what impact this has on market gaps. Review of retention (termination) data; analyze to see what impact this has on market gaps. Make recommendations to rectify deficiencies. 18

19. UTC Compensation Planning Group (Tentative membership) Deborah Arfken, Strategic Planning Officer Richard Brown, CAB Chair Chuck Cantrell (or designee), University Relations Jean Dake, ESC John Delaney (or designee), Student Development Terry Denniston, Chief of Staff Danny Grant, Budget Director Kelly Griffin, ERC Dick Gruetzemacher, Institutional Research Rick Hart (or designee), Athletics Deborah Hyde, Business Manager, Academic Affairs Phil Oldham (or designee), Academic Affairs Vanasia Parks, Associate VC for Business and Finance Verbie Prevost, UT CAB Bryan Samuel, Diversity Officer (ex officio) Vicki Steinberg, Faculty Senate Gavin Townsend, Faculty Senate Budget and Economic Status Committee Dan Webb, Human Resources 19

20. Proposed Time Frame Oct-11Nov-11Dec-11Jan-12Feb-12Mar-12Apr-12May-12Jun-12 HRO meets with Executive Team to discuss Sibson Methodology and Report 10/12/11 CBO & HR Develop Committee for Data Analysis and Recommendations Committee Members review Sibson Data with CAB representatives 10/31/11 Compensation Analysis Team (CAT) evaluates data, with input from sub- teams Campus CAB Visit 12/12/11 Work Teams evaluate faculty/staff salary data Work Team compiles and analyses acquisition and retention data Development of Compensation Plan Recommendations by CAT, based on input from work teams Presentation of CAT findings and recommendations to Compensation Planning Group and UPRAC Revisions and Refinements to Compensation Plan; Final Plan approved by Executive Team Presentation by Chancellor to Board of Trustees 20

21. Where are we now? Faculty*: Professor: 96% of Market Median Overall; 25% below 85% Associate Professor: 92% of Market Median Overall; 28% below 85% Assistant Professor: 95% of Market Median Overall; 15% below 85% Lecturer: 84% of Market Median Overall; 62% below 85% Staff*: Exempt staff:79% of Market Median Overall Non-Exempt staff:76% of Market Median Overall * All values are pre-July 1 and do not reflect ATB, Equity, or Performance Increases 21

22. What have we done so far? Faculty Promotion: Since 2000, faculty member receives a 10% raise for each increase in rank. Faculty Equity Adjustments: Several faculty equity plans have been implemented in past 10 years to address compression and other equity issues. Substantial equity adjustment pool of 1% in fiscal year 2008 2010 Faculty equity plan attempted to raise faculty salaries to a target of 85% of the median of SREB3 & SREB2 universities. 2011 Faculty equity plan produced average adjustment of $1,800 Foundation Professorship roll-over: Professorships funded by UC Foundation transferred to E&G funding annually. Standard staff adjustments: CPS Degree awards Staff job audits (system-wide and campus) Staff equity plans: Total of 5 Staff Equity Plans in past 10 years to move exempt and non-exempt staff closer to market value. 22

23. Equity Plan Methodology 2009-10 Allocation Plan A pool of $490,814 was allocated to address some of the most serious compensation issues related to internal and external salary equity and salary compression. 226 faculty and staff members received salary adjustments. Staff Plan: Current salary for each staff member was compared to estimated Market Value appropriate for particular position. Salary used for comparison excluded adjustments based on CPS or degree awards, as well as 2007 merit increases. Market comparisons: Exempt staff: CUPA-HR survey data: Job content compared to the position descriptions from 2008/2009 CUPA-HR staff surveys, using SREB 2 and 3 Groups used as basis of comparison. For positions without reasonable match to surveyed positions, an estimation of Market Value was used based on regression formula derived from Hay ratings for positions having solid survey matches. Non-exempt staff: Pay grade midpoint was used as basis of Market comparison in those cases where reliable local or regional market data was not available. Salary targets: ascending market targets based on years Regular Continuous Service. Faculty Plan: Current salary for each faculty member was compared with Market Value associated with rank and discipline. Market comparisons: CUPA-HR survey data: By rank and discipline from 2008/2009 CUPA-HR National Faculty Salary Study. SREB 2 and 3 Groups used as basis of comparison. Salary targets: 85% of mean salary for rank and discipline for full time, tenure track faculty $28,500 minimum established for UTC Lecturers. (2011 Plan has raised minimum Lecturer salary to $31,000) 23

24. Challenges (Where do we go from here?): Developing comprehensive compensation plan that enables University to attract, retain, develop and motivate talented individuals to achieve strategic objectives. Defining, identifying, and validating compensable factors and appropriate weight in compensation system: o Years of relevant experience (UTC and prior employment) o Relevant education and training o Job-related certifications (CPS and others) o Market value o Job size/type (staff: pay grade and job family; faculty: rank and discipline) o Performance o Others? Defining hiring range for faculty and staff positions based on appropriate market position. (What is market competitive rate at which we can acquire talent for various positions?) Developing and uniformly implementing effective and equitable performance management and assessment system for faculty and staff. Developing consistent standards/procedures for promotions and career ladders as appropriate for job family. Succession Planning Salary Compression and inequities Funding for Compensation Plan Local market competition: Volkswagen and others 24

25. Budget – Compensation Plan Alignment Finance Work Team (In collaboration with UPRAC) Gavin Townsend, Faculty Senate Budget and Economic Status Committee (or designee) Dick Gruetzemacher, Institutional Research Tyler Forrest, Budget Office Danny Grant, Budget Office Deborah Hyde, Business Manager, Academic Affairs Dan Webb, Human Resources Year 3 Assessment Year 5 Assessment Expenditures2012-132013-142014-152015-162016-17 Cost Going Forward Program Support Strategic Planning Initiatives Compensation Plan Total - - - - - Revenues State Appropriations Special State Allocations (Compensation Pools) Tuition & Fees (and Differential) Advancement (Gifts & Fundraising) Grants & Contracts Auxiliary Enterprises Internal Reallocations Specialized Fees Total - - - - - 25

26. Compensation Resources Strategies: Additional State Appropriations Tuition and Fees---Differential Fees Planning Enrollment Growth Revenues New THEC Funding Model Support Alternative Revenues----Grants, Contracts, Development/Fundraising, Gifts Retirement Incentives and other Incentive Models to Supplement Compensation 37 ½ Hours Work Week Move 12 month Faculty to 9 months with Grant support for 3 months Program Review and Reduction for Reallocations Workplace Culture: Child Care Services via contract Partnership Free Parking 26

27. NEXT STEPS Strong Transparency and Communications Plan Engage Stakeholders Work with UPRAC and UTC Strategic Plan Develop a Multi-Year Strategy with a 5 year Assessment benchmark Comprehensive Compensation Plan including: o Cost of Living o Equity/Compression o Merit/Performance o Market-based o Targeted Emphasis on Selected Units 27

28. Closing Chancellors Comments Questions/Discussion 28