Salary deflation

In its December 2001 edition, The Art Newspaper ran a feature about US museum directors' salary levels, showing these to be, on average, 2-3 times higher than those achieved by their highest paid peers in the UK. The large US institutions now pay their chief executives packages worth close to half a million dollars (including benefits in kind such as living accommodation), whereas their highest paid counterparts on the other side of the Atlantic are currently offered a maximum of £120,000 - the equivalent of $180,000 and the salary at which the directorship for the British Museum was advertised last year.

US directors' onerous fundraising responsibilities could be seen to justify a large part of this transatlantic differential, although as artsjournal.com reported last year, US museums themselves have been finding it difficult to recruit even at these salary levels. The pool of candidates capable of marrying subject expertise with management and fundraising skills and prepared to accept the demands of boards and donors is limited. Attempts over the last decade to widen the pool by recruiting from the business sector have had mixed results.

The Art Newspaper's transatlantic comparisons did serve to highlight that, in the global profession that senior-level museum management has become, securing and retaining talent inevitably means having to compete in the recruitment market. The same applies to leading players across the cultural sector (opera houses, orchestras, festivals etc.). The implications of this in terms of institutional funding requirements are clear.

Raising an extra $50-100,000 towards a better-endowed directorship should not be an insurmountable task for most boards. In fundraising terms, it is a straightforward proposition (with naming opportunities attached), and even public funders might accept that they need to pay for excellence at top level.

Unfortunately, the issue of the appropriate remuneration of the director is only the tip of an iceberg that has been forming below the water line: deflation across the entire salary scale of museums and most other cultural institutions. For three decades now, salary progression in the UK museum sector and the cultural sector as a whole has lagged behind not just the economy itself, but also most parts of the public sector, including education and health - which have been much more effective in arguing their case in the public arena.

Making an equally strong case for museums is not an easy task. For a start, there is very little, if any, statistical data to go by. In the UK, neither the oddly named Re:source nor its predecessor the Museums & Galleries Commission have been collecting data systematically in this area - and neither have the museums themselves (through, for example, the National Museum Directors Conference). So what we are left with are anecdotes and unverified figures sporadically quoted in the press. A couple of examples:

·   The average museum professional's salary in the early 1970s was equivalent to 88% of a graduate teacher's. The comparative figure has now dropped to 72%. [1] The comparison is even more telling when set against the widening gap that education itself has experienced vis-à-vis other parts of the public sector such as health - with academic salaries relative to GPs quoted as having dropped from 77% to 57% over approximately the same period. [2]

·   The Association of Graduate Careers Advisory Services quotes the 'typical salary of curators aged 40' as being £18-24,000 - which set against the average London house price of £175,000 gives a multiplier of 7.3 times.  This compares with 6.7 times the average salary economy wide [3] .

·   A senior curator of a major national museum recently remarked that his pre-predecessor lived in a Bloomsbury town house, his predecessor in a (still large) north London home, whilst he himself could just about afford a terraced house at the far end of one of London's tube lines. His younger colleagues are probably stuck in flat-shares or studio living well into their careers.

The situation is of course exacerbated by the now exorbitant cost of living in world cities such as London - but then many of the leading institutions of the world are located in such cities.

What happened?  Simply put, much is attributable to 'Baumol's disease' - named after William Baumol pioneering insights into the economics of the arts in the 1960's: in contrast with most sectors in the post-industrial economy, the technological revolution of the past 20-30 years produced only marginal gains in productivity for cultural institutions. A museum still needs as many curators, warders, or conservators as it did 20 years ago, and a symphony orchestra still needs 20 violins, 2 oboes, etc. to perform a work of a certain duration that cannot be produced more efficiently. In the private sector (and parts of the public sector), increased labor productivity drove salary progressions, which in turn drove the general rise in standards of living. The cultural sector, however, took on new functions in the same period (visitor services, education, marketing, finance, etc.) that meant additional rather than fewer staff.

At the same time, the main source of income - grant in aid - has at best progressed in line with inflation, and in most cases it has declined in real terms. The financial squeeze hit all expenditure categories, with salary being the single biggest one (generally accounting for some 60-70% of recurring costs of operation). So for a few decades now, institutions have relied on a pool of people prepared to forego salary progression in line with the general increase in the cost of living. In those areas where new functions had to be filled from outside the sector (finance or fundraising, for example), this was more difficult to achieve - leading to internal wage discrepancies in salary scale and a further squeeze on traditional jobs (curators, for example), as resources had to be freed for new posts.

For how long can this process continue before it starts eating into the very fabric of the organization? Probably not for very long, and the signs that all is not well have been showing for some time. The corrosive effects of 'salary deflation' are manifest in a number of ways - across a range of institutions, large and small:

·   Employee profile: as the opportunity cost of working in the sector increases, staff is increasingly made up of singles, persons with better-paid partners, or those with private income - that is, people without family commitments or with external sources of funding;

·   Staff turnover: often, the only way to progress in salary terms is by changing employer. While staff turnover is, in principle, a healthy phenomenon, too frequent changes - in particular at middle and senior management level - are disruptive and costly in human resource terms - and not just financially. The ability to retain key talent over long periods is essential in a sector where the recruitment pool is limited and where the principle of continuity forms part of the very essence of the institution. Almost invariably, successful institutions have been characterized by the long-term tenure of a strong leader and his/her team. 

·   Staff loyalty and commitment: over time, low levels of compensation impact staff morale - individually and collectively. Few are those who in the long run cope well with a hand-to-mouth lifestyle, in particular once friends and peers in other professions can more easily translate their professional success into financial reward, or when child education, health and the specter of old age provision come onto the agenda. The fact remains that, by and large, our society sees remuneration as an indicator of personal ability. Strength of character (and more) is required not to be affected by the steady erosion of relative purchasing power, with all the implications for individual 'pursuit of happiness'. Organizationally, the price for this state of affairs is a decline in quality of work, motivation levels, and general institutional commitment. Where this occurs at management level, it quickly pervades the organization.  Think of the old Soviet adage: "They pretend to pay us, we pretend to work."

·   Management control: the erosion of staff commitment directly affects the running of the organization. Other than through a 'reign of terror,' how can senior management or boards effectively apply a 'carrot and stick' mechanism to employees who increasingly see themselves as subsidizing the organization? All too familiar in this context is the creation of 'fiefdoms', within which individuals or groups of employees operate according to their own agendas and priorities with little or no regard to the wider institutional agenda. To a large degree this explains institutional inertia, and the inherent difficulty for new leadership of breaking it. Equally problematic in terms of institutional leadership, the nursing of employee loyalty implies sharing ownership of the institutional mission through an arduous process of internal consensus building. 

At worst, organizations end up with low morale and productivity and a staff pool that, in cost-benefit terms, starts looking very expensive! In the context of a salary bill that still accounts for well over 50% of an organization's budget, the inability to extract value is a serious issue.

Where then will the next generation of high caliber middle and senior management come from, if staff are increasingly asked to subsidize their employer by way of forgone income (and, by extension, life style)? And this at a time when institutions operate in an increasingly complex and demanding context, and where the social standing of areas that have traditionally attracted people to the sector - scholarship, curatorship, etc. - has declined.

Are we fast reaching the point where only those without families, or with partner or private sources of income will be in a position to afford a career in the cultural sector? And what implications does this have in terms of equal opportunity, ethnic diversity, etc.? And will this ultimately affect the ability of institutions to respond to public and policymakers' expectations that they be inclusive organizations, firmly embedded in and reflecting the wider social context?

These are important questions for today's senior managers, boards and public policymakers. And they need to be addressed now, when there is still time to prepare the handover from the present generation of cultural managers to the next.

Already, history of art and other subjects that traditionally led to careers in the sector have seen a substantial drop in student numbers. This may partly be the result of wider socio-cultural trends, but it also reflects the sector's poor career prospects.

What can be done?

·   First, establish the facts: without reliable data the argument lacks credibility. In this respect, the sector needs to learn from education and health, which have been much more successful in arguing their cases;

·   Recognize the problem: it is time that the issue of under-investment in staff compensation be explicitly recognized for its pernicious effects on organizations and, by extension, the ability of the sector as a whole to fulfill its obligations;

·   Build this into an analysis of long term funding requirements: corporate plans need to make provisions for rising compensation levels;

·   Revisit compensation structures: where increasing cash remuneration is not an option, there must be more imaginative ways to renegotiate the contract between staff and institution that takes account of non-monetary motivational factors - for example, free time, in the form of sabbaticals, prolonged maternity/paternity leaves, etc., or simply shorter working weeks - but in a way explicitly linked to individual performance rather than enshrined as an acquired right.

Change is, first and foremost, the responsibility of boards and policymakers. Ultimately, it means owning up to the fact that the price tag attached to 'high culture' - however expressed - is inexorably rising and will continue to do so.  This makes the need for strong, compelling and well-articulated advocacy - at institutional and sectoral level - all the more important.

Magnus von Wistinghausen

mvwistinghausen@aeaconsulting.com

AEA Consulting LLC

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