The Effectiveness of Variable Pay Plans in Canadian Colleges

Abstract

This mixed methods study set out to examine whether variable pay plans for senior college executives are effective in motivating and retaining talented executives. Furthermore, it explored a variety of theories related to variable pay and assessed whether public service motivation theory applied to executives in public colleges in Canada. This study examined the breadth and depth of current practice through Phase 1 quantitative research, followed by a qualitative research phase that drew on the knowledge and opinions of seven college leaders to further explain the how and why of the quantitative results. The quantitative questionnaire was sent to 237 college executives across Canada, which resulted in 68 responses. The study offered some meaningful contributions to the literature surrounding theories pertaining to variable compensation—agency theory, reinforcement theory, expectancy theory, and public service motivation theory—concluding that the Canadian college system is most aligned with public service motivation theory. Executives who receive variable pay scored slightly higher by mean in all motivation measures—extrinsic, intrinsic, total, and retention; however, on the combined variables, the differences between those who receive variable pay and those who do not was not statistically significant. Through the qualitative interviews, executives demonstrated that some are more motivated by variable pay than others, so the results likely vary from college to college. Since post-secondary education is governed provincially in Canada, inequities exist from province to province with varied levels of government involvement in executive compensation. Overall, the researcher concluded that the colleges with variable pay will likely realize some benefit, both in terms of more motivated executives and executives who are more likely to continue in their roles, but the benefit will not be significant and will vary based on the motivations of those in the executive positions. Few, if any, will consider variable pay a deciding factor for choosing jobs but instead will consider total pay and pay equity.