Rich DeColibus: PBI Thoughts

From Rich DeColibus, November 17, 2008

In thinking about STRS's PBIs (Performance Based Incentives), it seems to me what is clashing here are two cultures. Everyone agrees on the recent facts:
(a) STRS has lost at least $25 billion over the last year (more to come) and (b) STRS has awarded its 87 investment counselors an average of $70,000 each as a bonus for superior performance. It is noted the lost $25 billion did not coincide exactly in time with the period over which the PBIs were judged, but close enough to not matter.

The justification for the bonuses comes straight from the Wall Street culture. Massive salaries and huge bonuses for most players, explained as necessary to retain highly competent and productive personnel. Lower the massive salaries, or fail to provide bonuses (very, very large in good times, merely large in bad times), and your best performers will up and quit and go elsewhere, leaving your company with lots of substandard achievers. It is well to note this cultural parable is mainly believed by those getting the massive salaries and huge bonuses. Please note, they're not deceitful; they really think they're irreplaceable, and worth every penny they earn, a leap of faith not validated by any facts I can find.

The other culture STRS deals with is public education. Here, you are supposed to work hard, in whatever capacity, to ensure the next generation of Americans has enough knowledge and wisdom to survive, and hopefully thrive, in society. Here, the average Superintendent makes less salary than the average STRS investment counselor, even if responsible for the education of 30,000 children. Here, the average teacher makes less in a year than the average $70,000 bonus the STRS investment counselors received in one check at Christmas time. Here, the average teacher is a professional, which simply means s/he is expected to do his or her very best for their clientele (the students and their parents) ALL the time, no bonus, and rarely appreciation. You do that because that's your job, you're serious about kids learning, and you'll make whatever time and effort is necessary to that end. My feeling is our investment counselors need to given the opportunity to embrace that attitude as a matter of professionalism, and STRS needs to shed the Wall Street culture as organizationally inappropriate, given the members it serves.

These two cultures are clearly incompatible in one organization. One of them needs to change. Which one? Not a hard question to answer.

Rich DeColibus

[Rich is an STRS retiree and former president of the Cleveland Teachers Union for 16 years.]