Incentives for Choosing Faculty in State Universities: How Some State Universities Are Destroying Themselves

Before working at U.S. universities for more than twenty years, I spent twenty years in the Union of Soviet Socialist Republics (USSR). Having this experience, I find it disturbing that the incentives that state university administrators face in the U.S. resemble more those faced by bureaucrats in the USSR than by managers of private companies in industries where incentives are similar to those in the free market.

States reward universities for graduating more students, regardless of the quality of those students. As graduating more students does not directly benefit most professors, some university administrators work hard to hire professors who are more likely to comply with administrator preferences and reward professors who do.

One category of professors who are less likely to be compliant with unwarranted administration demands are stronger professors who can find other good job opportunities if necessary and, thus, can take more risk at their current jobs. In the Finance, Insurance, and Law Department of Illinois State University (ISU), where I currently work, the process for avoiding stronger candidates for professor positions and relying more on the department head preferences has long traditions. Moreover, some professors prefer such hiring strategies: they like to work in departments where their expertise looks good compared to their colleagues.

When I first served on a hiring committee at ISU (about ten years ago), we were told that each of the five committee members had to review all job candidates and choose a small number of candidates for further consideration. My suggestion to divide the candidates among the committee members in our initial screening, so we can examine each candidate more carefully, was rejected as inconsistent with “best practices”—we should treat each candidate the same way.

In finance departments, it is common to receive significantly more than one hundred applications for a tenure track professor position. Job candidates have research papers, and there is quite a lot of information about these candidates—one can read their papers. However, reading papers takes a lot of time. Having to review more than one hundred candidates by each committee member leads to a very superficial examination of the candidates.

For universities, the first stage interviews were at conferences or, more recently, on Zoom. Some schools interviewed more than twenty candidates. Our department chair thought that about ten candidates were enough. During the interviews, most of the time was spent on telling the candidates about ISU and asking the candidates very standard questions, making it hard to eliminate some unacceptable candidates. Next, three of the interviewed candidates were invited to on-campus interviews. As some candidates to whom the school was willing to make job offers did not accept them (usually the better ones), our choices were even more limited.

At first, I thought that the blind following of “best practices,” where those practices clearly were not the best, was due to incompetence. Finance people were not necessarily good at hiring. With time one thing became clear: chairs use “best practices” to benefit themselves.

The assignment process to the hiring committee was designed to give the chair more control. In addition to serving on the committee, the chair appointed one of the four remaining members. The most recently hired faculty member (who usually did not have tenure yet and was more dependent on the chair) became another committee member. This made it likely that most of the members would agree with the chair.

Moreover, the hiring process in our department was not transparent. Those outside of the hiring committee had little information about what the committee did. Even committee members were not informed about what administrators did outside of the committee. The hiring committee just made a recommendation about hiring. Faculty was not informed about the job offers the school made, unless those offers were accepted.

When we got a new chair of the department a few years ago, the process became even worse. We still followed “best practices” when that served administrators, but we clearly violated those rules when that was what the chair wanted.

The new chair of the department rejected my repeated suggestions to divide the initial screening of the candidates among the committee members as he claimed that would mean not treating all candidates the same way. However, the chair saw no problems in letting one of the candidates whom he previously hired as a non-tenure track professor to give a presentation of his research paper less than two months before his job interview at ISU.

The research paper presentation was arguably the most important part of the job interview. The candidate’s paper presented before the interview was similar to the one presented during the interview, so he had already heard some of the questions we had about his research. Other candidates did not have such presentations in our department before their job interviews—so much for caring about equality. I informed the dean about this, but the dean did not express any concerns. Complaining to the provost office about problems in our department also produced no positive results.

These procedures exist elsewhere. However, they used to be popular only in more corrupt countries. Unfortunately, what gets rewarded does get repeated. As long as incentives remain the same, we can expect only further deterioration of state universities.

Dalia Marciukaityte

Dr. Marciukaityte previously she served as Humana/Mike McAlister Endowed Professor at Louisiana Tech University. Her business experience is with Strategic Management Group and Merrill Lynch.

She was born and raised in Lithuania, when it was still part of the Soviet Union. Her B.S. and M.S. degrees in management are from Kaunas University of Technology, Lithuania. She moved to the United States to study at Drexel University and the University of Pennsylvania. Her Ph.D. in finance with a minor in economics is from Drexel University.

Dr. Marciukaityte has published articles in Financial Management, the Journal of Corporate Finance, the Journal of Financial Research, the Financial Analysts Journal, the Financial Review, the Journal of Business Research, the Journal of Behavioral Finance, and other journals. Her research interests are in government regulations, market competition, corporate finance, and behavioral finance. She has taught Financial Management, Financial Markets, International Finance, and Financial Econometrics, working with undergraduate, masters, and doctoral students.