Costs and New Hires

Over coffee with a former colleague the other day, I heard an interesting story. A school we both know has negotiated the exits of several of its senior faculty. By negotiated, I mean paid them something to resign. I also mean implicitly threatened them with termination (it's a right-to-work state) and negative references. The reason? Replacing them saves about a quarter of a million dollars a year, and even with the payouts, the school is better off in about six months.

This is a tricky situation for schools. Senior staff can be expensive and replacing them with, for example a 5 - 10 year veteran can present a financial motivation. Additionally younger staff may have more energy or more time for events and student activities, thus presenting an different motivation.

In these cases, most of the replacements were internal promotions, thus saving recruitment costs on lower salaries, thus saving payroll and salary costs, who were in turn replaced at the chalkface by new graduates saving even more on salary and payroll. Three of these new hires were strategically targeted for their music prowess and so could build and reinforce the school's new band and orchestra initiative at effectively no additional cost.

The school may, I mean may, suffer some short-time damage in terms of losing some institutional knowledge and of faculty feeling loyalty will not be rewarded. The former can be addressed; the latter will not last.

So is this a good thing for a school to do? I am not sure that the school had any choice. 

The bottom line is that any school must be run as a business, and the bottom line is the bottom line. To survive, any organization must increase its income and/or reduce its expenses. For a school, raising fees is always best avoided so the alternative is in the area of salaries which are often 90% of a school's budget. 

Time will tell if this was a wise course of action. I suspect that if this is the only thing going on, then they will be fine. However, if this is a sign of other financial issues, then the time may be one of a slippery slope.

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