The Impact of Productivity-Based Incentives on Faculty Salary-Based Compensation

Abstract

In Brief In industry and academic anesthesia departments, incentives and bonus payments based on productivity are accounting for an increasing proportion of a total compensation. When incentives are primarily based on clinical productivity, the impact on the distribution of total compensation to the faculty is not known. We compared a pure salary-based compensation methodology based entirely on academic rank to salary plus incentives and/or clinical productivity compensation (i.e., billable hours). The change in compensation methodology resulted in two major findings. First, the productivity-based compensation resulted in a large increase in the variability of total compensation among faculty, especially at the Assistant Professor rank. Second, the mean difference in total compensation between Assistant and Full Professors decreased. The authors conclude that this particular incentive plan, primarily directed toward clinical productivity, dramatically changed the distribution of total compensation in favor of junior faculty. Although not analytically investigated, the potential impact of these changes on faculty morale and distribution of faculty activities is discussed. IMPLICATIONS: Academic anesthesia departments have provided faculty compensation in the form of rank-based salaries. Gradually, some departments have provided incentives and bonus systems. The authors’ department (University of California, San Francisco) found that adding incentives and bonus payments, mostly based on clinical productivity, induced increased variability in total faculty compensation and narrowed the financial difference between assistant and full professors. The potential impact on the mission of the department is discussed.