There's an interesting article at CNN.com about the large number of faculty being recruited away from UW-Madison: this past year, the number of faculty receiving offers from other schools doubled over what it was 5 years ago. Some of the schools described as "poachers", which is perhaps not the best term, are other large public universities.
The article traces the problem to a salary freeze on what were already lower-than-average salaries compared to professors at peer institutions (but not lower than my full professor salary at a peer institution, UW-Madison professors may be cheered to know!). Budget cuts also resulted in fewer funds for teaching assistants, research labs, and other essential academic items.
In Wisconsin, the state legislature and the university responded by coming up with a retention fund to help keep 'top' faculty, and that seems to have had some success. I think that's great. My university wrote a lengthy and eloquent document about how important it is to retain top faculty, but put no $$ behind it. At the risk of sounding greedy, I will say that it is hard to feel too fond of a place that expects a lot of faculty but does not provide sufficient resources or respect in return. I don't need to make as much as the football coach, (or, to put it more realistically, I don't need to make 10% as much as the football coach), but I do need to make at least as much as my male colleagues who are at similar stages and levels of activity in their careers.
This monetary discussion ignores some other very important reasons why faculty leave, including the phenomenon of faculty flight causing a 'runaway' effect (pun only sort of intended). If some excellent faculty leave your department or program, including some of your most valued colleagues, and then you get an offer or two from somewhere else, it's a lot easier to leave. Decisions to leave are not just based on salary issues. How a department/college/university responds to the initial departure(s) can be very important for other faculty who are considering outside offers. When some faculty flee, those who have not yet fled wonder: Is this ship sinking or is this going to be an interesting place to spend the rest of my career?
8 years ago