In May and June 2020, TIAA surveyed more than 150 higher ed institutions, association leaders and nonprofit industry experts to better understand what challenges they are facing, what changes they are considering, and where they most need help in the wake of COVID-19 and associated market volatility. The overall theme is that many institutions are dealing with revenue loss and the need to redirect budget dollars, which is driving cash flow challenges. They are finding ways to manage costs within and outside of their workforce, as well as through cuts in compensation and benefits.
Across institutions, approaches range from pay reductions, furloughs, layoffs and program cuts to voluntary separation and phased retirement programs. As expected, a majority of institutional leaders are wrestling with the need to both manage organizational costs while offering assistance and guidance to employees facing unprecedented personal and professional trials.
As of June 2020, the survey revealed that in the wake of volatile trends in higher ed and the broader financial market:
- 86% have or expect to lose revenue from special programs (sporting events, stadium rentals, etc.)
- 89% expect technology cost increases related to distance learning or remote faculty needs
- 80% of institutions have or expect to furlough employees
- 35% have or are considering scaling back benefits
In response to these operational and workforce challenges, some institutions have found creative ways to make up for some of their lost revenue, and many expect future trends such as:
- More online education needs (including revised operations and new technologies acquired)
- Lower costs associated with the academic workforce (e.g., more part-time faculty)
- Ongoing financial scenario planning
- Increases in technical training programs for faculty
See the discussion about these trends below:
CUTLIP: Welcome panelists, and thank you in advance for your time and your insights. I’d like to start with you Helena. How does what you’re experiencing at the University of Arizona compare to what we’ve highlighted above? How are you approaching short- and longer-term needs?
RODRIGUES: Based on the survey, it sounds like we are in good and like-minded company. It is incredibly difficult to be a leader in higher education right now—we are consuming an enormous amount of information daily, and that information is then rivaled by an equal or greater amount of uncertainty. We are having to make quick decisions, knowing they are imperfect. We know they will have to be adjusted as circumstances evolve, and may not meet the needs of everyone in our communities.
We are very much trying to approach both short-term and long-term needs thoughtfully and carefully—though admittedly sometimes during early morning or late night Zoom sessions. We formed a Financial Sustainability Emergency Response Taskforce
, led by the CFO, to consider both immediate and enduring solutions. We meet daily, including with the [university] president, and we each lead different campus workgroups. I have the privilege to lead the Workforce group focused on cost-savings that can be achieved with respect to our faculty and staff.
Looking ahead to the future, we know we have to change as a university. Change can be a bad word in higher education, but if there is a silver lining in all of the disruption created by COVID-19, it is an adjusted perspective on the need and time for change. The time is now. And I think it is possible without hurting our focus on students and delivering the best education and educational experiences possible.
CUTLIP: Randall, what about Baylor’s perspective on short-term or long-term approaches?
BROWN: As COVID-19 continues to be a real health concern, all colleges and universities will need to have a strategy in place to respond to best and worst case scenarios. In the near term, focusing on safely transitioning students, faculty and staff back on campus is a priority. Baylor University is requiring a negative COVID test prior to allowing students, faculty and staff back on campus for the fall semester. Adhering to protocols to safeguard against transmission will be ongoing throughout the fall and into the spring. Increasing the use of technology as well as incorporating hybrid instruction into the academic experience will help to mitigate the risk of exposure.
Looking a bit longer out, Baylor University has been intentional about equipping faculty with the skills and tools needed to effectively teach in an online environment. Faculty members who have been teaching online prior to COVID have provided guidance to faculty who are developing online courses for the fall semester. It is important that faculty members not only have the technical skills to teach online, but also understand how to provide the same level of care and nurturing interactions that are part of the classroom experience.
CUTLIP: Thanks, Randall. Ruth, what more are you hearing from the broad set of institutions you consult with around short-term or future requirements to manage costs?
SCHAU: Generally, short-term needs require quick responses to achieve budget requirements. In our current economic situation, this has resulted in cost-cutting options such as furloughs, retirement plan suspensions or reductions, and other budget-minded measures. In my discussions with clients, these actions are all noted as being short-term. However, the biggest question is what will the future hold. This is unknown, and it is impossible to address until we see what normal life holds for us – a new normal, or a return to something that is closer to January 2020, something closer to the normalcy we all know and love. Until we can find and identify the parameters of this future, there can’t be creation of longer-term programs, whether benefit related or employment related. We just have to wait, and as a society we are not good at waiting, so this temporary period is a bit painful to all of us. I am optimistic that the future will be better and, as Helena noted, disruption causes us to rethink, innovate and employ new techniques and ideas to overcome the challenge we are facing. When facing hurdles, the U.S. shows tenacity, and I am certain we will overcome this challenge with a new and better outcome—whatever that might be.
CUTLIP: Ruth, that’s a very positive message for us all, to remain cautiously optimistic for the future while focusing on near-term needs.
SCHAU: I try to remain positive as a period of change is tough, but with careful management, will end in a positive place. Maybe being a little more realistic at the moment, from my outside consulting perspective, this is a next-to-impossible time to fully support the broad variety of employee needs. Even if an employee is being paid by their institution without any reduction, he or she may be suffering financial hardship due to a spouse or partner experiencing layoff, salary reductions or a furlough. One suggested approach is to be overly aware and empathetic in frequent communications. Be sure to share resources from financial to emotional support as the full range may be needed by your workforce.
CUTLIP: Helena and Randall, what are some of the more specific cost management measures you’ve been discussing at the University of Arizona and at Baylor? As Ruth notes, how are you showing employees that you’re focused on their needs and being strategic in your approach?
RODRIGUES: If there is anything that I have learned in all of this, or if there is anything that has been confirmed for me over these long working days since March, is that we all experience disruption differently. We have different comfort levels with uncertainty. Emotions and frustrations fluctuate with the information overload—we cannot always interpret the data that is now a regular component of our news cycle, regardless of what network or media format we consume. This emphasizes for me the need to listen more than talk. Communication in addition to temperature checks—not of the body, but of the organizational climate—must be constant, consistent, and informative.
CUTLIP: That’s a great analogy Helena. By now, we’re all accustomed to submitting to individual temperature checks; but what about the temperature of the institution as a whole? How are you adjusting?
RODRIGUES: We immediately implemented a hiring slowdown and a pause on any job changes such as pay increases, with all exception requests requiring the review and approval of the [university] president. We also announced plans for furlough and pay reduction programs this August. Not surprisingly, those plans have proven to be the most difficult for our community to accept. We are all bravely facing incredible disruption to our lives, and who wants a pay cut while also dealing with a complete loss of normalcy and control? Yet still, we as higher education administrators must confront the reality of unprecedented financial losses at our institutions, especially as the situation may get worse before it gets better.
Employees are without question our most valuable asset, and as we consider different measures for cost savings and greater organizational efficiencies, we have to think about the impact to them. When we first transitioned to having the majority of our employees working from home, back in mid- March, we created new communication mechanisms for employees to share feedback with us regarding their experiences. We developed improved guidance and resources for working from home and managing a remote workforce including flexible scheduling and manager/supervisor training. More recently, we have been facilitating needed accommodations or modifications to return to the workplace for employees with health concerns, and support in evaluating workloads, particularly for parents and caregivers managing distance and online learning for their children. We also, of course, continue to work diligently in ensuring adequate and appropriate safety measures, along with the corresponding guidelines and directives, are in place in the workplace.
BROWN: It’s similar for me. Like many other colleges and universities, salary adjustments and benefit packages have required evaluation. Baylor University has deferred a decision on merit increases that normally take place at the beginning of each academic year to a later date. While the university has not committed to a merit increase, it has announced that a merit increase decision will be reviewed in the spring.
The Baylor Retirement Plan continues to support a competitive total compensation package that is attractive to faculty and staff. The defined contribution has been set at 10.8% of total pay for many years. Beginning in June of this year, the defined contribution was reduced to 8% of total pay. Since the Baylor Retirement Plan does not require employee contributions, it continues to be an attractive benefit for current and prospective employees. While this is not a temporary reduction, the university has announced that it will reevaluate this decision in two years.
CUTLIP: We’ve heard from several of our clients that they are either developing new or promoting existing voluntary separation or phased retirement incentive programs as a way to reduce costs.
SCHAU: Yes, these are common ideas across the higher education market. When you think about the broad needs of a workforce and the unusual situation that we have, combining health and organizational needs, the voluntary approach may be the kindest approach to balance personal and organizational desires. While we have had some crisis planning experience with the recent economic downturn in 2008/2009, there wasn’t a health concern during that time like we are currently experiencing with COVID-19.
Higher education, along with nonprofit hospitals, are generally more caring about employees than corporations. Choice, with the additional benefits offered during the separation window, should nudge those eligible to consider their personal priorities and make appropriate elections. The balance is in the perceived value of the offer—too high of a value may drive higher than desired acceptance, while too low of a value doesn’t incite individuals to take action which may result in a less than desired acceptance rate. Any voluntary separation offer should include a lot of thought on how to measure success in managing costs. That takes into consideration the estimated cost of the program, and creation of provisions on how to manage special circumstances including the exclusion of employees that are considered essential to the success of their department or organization.
CUTLIP: In this light Randall and Helena, have you considered these types of incentive programs?
BROWN: Baylor University implemented a faculty retirement planning program in 2017 for faculty members who satisfied the requirements to become official retirees of the university. This program was initially scheduled to be offered for three years. The program was reevaluated and extended for three more years. Most recently, conversations among faculty members regarding this program have changed from talking about it as a way of transitioning into retirement to a way of possibly minimizing risk of exposure to COVID.
Faculty members who take advantage of this program receive a one-time retirement planning award of $7,500, a guaranteed merit pay increase for the final committed academic years, a reduction in committee participation, and, depending on when a faculty member signs up for the program, they could be eligible for either a sabbatical in the final spring semester or a 50% workload reduction in their last year of employment.
CUTLIP: The Baylor program sounds like a very creative voluntary effort that can evolve to fit the needs of the current crisis. Have you had similar planning conversations or program ideas with your teams, Helena?
RODRIGUES: At the University of Arizona, we continue to talk about retirement incentive programs but have not made any decisions to implement anything specific this year. I do think it will be possible (and perhaps necessary) in the near future, and we will need to be creative and consider different ways for supporting those who have devoted years, and in some cases lifetimes, in service to the university.
I had a colleague who used to say, “Asking faculty whether or not they have considered retiring is like asking them if they have considered giving up.” He was very directly telling me we need to do more to help faculty prepare for life and work beyond the university. And he could not have been more right.
So, here is one opportunity, albeit in the midst of a global pandemic and financial crisis. I would like to see us consider improving our efforts toward succession planning and overall workforce planning. We need to take our strategies beyond retirement readiness workshops that walk individuals through the procedural decisions and evaluation of financial savings.
I recognize this is not a new or original idea. We have talked about this for years, and even observed some good models from other universities. Now might be our time to really do it. And I would like to see us reach more than faculty and recognize staff, who also devote lifetimes in service and are as much a part of accomplishing the mission here.
SCHAU: That’s a great point Helena, going beyond the procedural in workshops and guidance. I’ve found most employees in higher education are deeply devoted to their work. They see it as a way of life rather than just a job. Retirement readiness workshops are so focused on the financial aspects of retirement, while that is not always what’s needed to make someone feel ready to retire in life. Employers who provide potential retirees with opportunities to consider how they can modify their daily activities to offer their strengths and talents to other organizations or individuals is key. Taking time to envision the future, including thinking about and deciding on where to live and how to stay well physically, mentally and emotionally, will result in a higher chance of getting those who are ready to move on to take action now.
CUTLIP: With such broad employee engagement as a goal, how important is promoting and getting the word out on these evolving programs and ideas? What have you been hearing from stakeholders, and is it what you expected to hear?
RODRIGUES: It is critical. As I mentioned before, communicating and listening are our most important tools at the moment. Each of my co-panelists has underscored this in some way; there is no such thing as too much communication on a university campus. University initiatives are most successful when they have involved stakeholder engagement and feedback.
I think the next phase of discussing and potentially developing these programs will involve directed conversations and focus groups—sharing what we think both the benefits and limitations are and asking for honest feedback. It would be valuable, and perhaps more possible in this virtual space with which we are getting more comfortable, to ask recent retirees to join these conversations. Let’s have our former employees tell us what they would have appreciated from the university in deciding to retire.
Some of what I have heard from stakeholders includes speeding up retirement plans, prompted by a new perspective on life overall, and getting to that “bucket list” sooner rather than later. I have also heard from many leaders about looking ahead to the next year and ensuring their succession plans are in place. From faculty, I have heard mixed feelings about teaching in different modalities and embracing all the technology that comes with that.
There is new openness to adjusting their workloads, such as reduced or no teaching responsibilities, with a plan to retire that both supports their goals and the needs of the department and students.
While I see frustration with the financial circumstances that are prompting many of these conversations with our employees, I also see the loyalty and commitment to the university that is very familiar to me after 13 years here. All the more reason to ensure we provide a seat at the table with a microphone.
BROWN: I couldn’t agree more Helena, on the topic of overcommunication and a seat at the table for our employees. When developing phased retirement programs, it is important to carefully communicate to targeted groups that the program is voluntary. Informational meetings should be offered along with a clearly defined opt-in period. Targeted employee groups should be provided with financial planning resources along with access to an employee assistance program.
Oftentimes, financial insecurity and an individual’s identity attribute to a delayed retirement decision. Employees who understand that they are financially prepared to retire, or that they have an identity other than their work identity, are more apt to take advantage of early retirement incentive programs.
Conversations that I have had with faculty members who are concerned about their own health or the health of their spouse have focused on understanding the faculty retirement planning program. These individuals have mentioned that they were planning to retire in a few years anyway, but that they are interested in having a reduced workload or a sabbatical out of a desire to socially distance. Without an available vaccine and with concerns about the next iteration of the novel coronavirus, the ability to socially distance has become a motivating factor for them to consider retirement.
CUTLIP: What do you think, Ruth? Are these views consistent across larger groups of institutions you’ve talked to?
SCHAU: Yes they are. We know the development of separation window programs is confidential, so it is tough for many of our client institutions to vet ideas until after a program has been announced. However, innovative program initiatives, as my colleagues from Baylor and the University of Arizona have shared today, are a whitespace for us all to be planning around.
Part-time work may be a new, in-vogue idea as both younger and older employees may benefit from such an option. Employees may want or need shorter days or work hours due to having younger school-age children with possible or scheduled online instruction. In addition, older workers may benefit from the shorter workweek.
While reduced days or hours may not be possible for all job categories, let’s not forget that the organization can benefit greatly. Employees who choose to work on a shortened schedule may be more loyal in the long run. They may appreciate the flexibility and eventually return to a full schedule, crediting your organization with goodwill since the part-time situation allowed them to balance home and career. Alternatively, experienced workers may benefit due to less stress with a flexible work option, with the organization benefiting from their knowledge, training or other skills.
For older workers, you may call this a phased retirement, but many employees can benefit from the flexibility of lesser time at work. By the way, don’t forget the positive effect on your budget–less time equals less pay and less benefits. This could be a rare win-win situation to consider for some institutions.
CUTLIP: Well this has been illuminating, as many of our partners are wrestling with the same challenges. It’s good to see similar focus around employee planning, clear and consistent communications, as well as a guarded yet optimistic consideration of the new ideas that can come from these challenging times.
I want to thank all of our expert panelists for their time, participation, fresh ideas and for the leadership roles they play in their organizations, and the broader space. Please, don’t ever stop sharing your thoughtful ideas with us and each other.