Negotiating the Presidential Contract
While negotiating compensation and terms of the employment contract for a new president can seem like a mere formality, it can also – if mishandled...
By Zachary Smith, Ph.D.
While negotiating compensation and terms of the employment contract for a new president can seem like a mere formality, it can also – if mishandled – be the source of unanticipated stress and delay in bringing a new leader on board. In a worst-case scenario, an institution may lose a candidate of choice due to irreconcilable differences over contract conditions.
Institutions and the search consultants they partner with typically provide candidates with the basic components of the compensation package as the search plays out, well in advance of the negotiation stage. The hiring institution and consulting team can learn about any sticking points or deal breakers individual candidates may have regarding compensation, benefits, relocation, and other potential barriers (such as spousal or partner accommodations) and allay them well before it comes time for contract signing. Frequent, clear, and open communication between the candidate and the search consultant early in the recruitment process is necessary to help drive down risk associated with potentially losing a preferred candidate due to failed negotiations.
At the Start of the Search
As part of preparations for conducting a comprehensive search for its next president, the board and/or CHRO/HR team should outline expectations for what it will offer the selected candidate in terms of salary, bonuses (including a potential signing bonus), fringe benefits (such as housing, car allowances, club memberships, etc.) and other key variables of the contract. This preparation requires pulling presidential compensation data from peer institutions – such as schools from within the same athletics conference, peer institutions, and/or aspirant institutions. The search consultant can help the institution think through the market rate for the role, sharing information from recent, similar presidential hires. For most public institutions, presidential compensation data is readily available and thus it can be easier for state schools to draw direct comparisons.
Some institutions will hire compensation consultants with the express goal of assembling a market-aligned but attractive compensation package. This is more common among private institutions who have less publicly available information to draw from in crafting a compensation package for their presidential hire.
One significant caveat: Presidential salaries can change markedly from one year to the next. Given that a presidential search can sometimes take up to nine months to a year to complete, an institution’s initial compensation target can become outdated by the end of the recruitment. Thus, the board and/or CHRO may need to revisit comparable compensation data before initiating final negotiations with a chosen candidate.
It’s not unusual for an institution to discover that its initial compensation range for its next president is lower than market expectations. The presidency today is a tough, often thankless role, putting additional upward pressure on compensation packages, which have expanded steadily over time. This often creates tension across campus and, particularly for state institutions, often negative public perceptions over the value proposition of how much a new leader is being paid. Boards must consider the optics of hiring a highly paid institutional leader and, therefore, often lean more conservatively when settling on an appropriate compensation package.
To avoid failed negotiations, schools need to prepare early and think of creatively to attract their candidate of choice. To enhance the elements of an offer, including things like a signing bonus, retention bonuses based on number of years in the role, performance-based bonuses, or perks like club memberships, tuition discounts, discretionary funds for new initiatives, deferred compensation, spousal accommodations, tenure (if academic qualifications are appropriate), and so on can often make a big difference.
Ultimately, compensation should not be the primary factor to attract a top candidate to the role, and the negotiation process should be viewed within the broader context of a candidate’s overall motivation for and interesting in the position. Compensation is important and must be competitive. However, campus communities will be quick to pick up on someone’s enthusiasm – or lack thereof – for the role if the preferred candidate is overly rigid on what they will or will not accept.
Closing the Deal
How can the institution ensure that final negotiations won’t get derailed? As previously mentioned, a candidate should have communicated well before this time regarding any special requests or non-negotiable factors (e.g., a given start date that aligns with their personal/professional needs). The hiring institution, supported by the search consulting team, will have communicated its responses to the candidate and willingness to comply with any special demands. Providing a copy of a “dummy” contract is important at the beginning of the finalist stage of the search so that candidates can carefully review terms and raise questions well in advance. On occasion a candidate will remove their name from consideration over a stipulation in the contract or compensation package they find unacceptable. While not ideal, in most cases this happens well before final negotiations, saving both the candidate and institution the inconvenience and embarrassment of a breakdown in the search’s latter stages.
In some situations, an issue arises at the eleventh hour. This might relate to, for example, the president’s reporting relationships, authority to hire their own cabinet members, a separation clause, or even a misunderstanding regarding moving costs or housing arrangements. The matter may be something the institution could not have foreseen, such as a sudden material change in the candidate’s personal life or ability to carry out their role. Even the most experienced, savvy candidate can get cold feet. Whatever the issue, it is imperative for the board chair or ultimate hiring authority to have hands-on, direct involvement with the candidate, so that the two may iron out potential issues together in good faith. The crucible of final negotiations can be an opportunity for these two key participants to forge a trusting, lasting relationship.
During negotiations with the chosen candidate, every effort should be made to stay in communication with other candidates whom the search committee deemed qualified and deserving of the role. It’s not out of the realm of possibility for negotiations with the preferred choice to break down and for the institution to turn to another option put forth by the search committee.
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Final negotiations over salary and terms of the president’s contract must be handled with care. It is important to come to agreement in such a manner that everyone involved – and especially the president – feels like the process was conducted with good will and a collaborative spirit. These final negotiations can set the tone for a mutually supportive relationship between the president and board of directors and for success in the new leader’s tenure.
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