Market- and merit-based adjustment of faculty salaries

We describe an exercise in trying to adjust faculty salaries at a national university in the Arabian Gulf region in order to attract and retain quality faculty. The problem is strongly constrained by policy and budget considerations and leads to two loosely related sub-problems: market adjustment and merit adjustment, which are to be achieved by means of specially sanctioned funds and available discretionary funds, respectively. We propose a methodology that addresses the former through goal programming and the latter through data envelopment analysis. We illustrate, with a small set of real data, how this approach works.