Fundamentals of Human Resource Management 5th Edition by Raymond Noe, John Hollenbeck, Barry Gerhart, Patrick Wright

Exercise 7

Harris County Housing Authority's Unsustainable Pay
Based in Houston, Texas, the Harris County Housing Authority (HCHA) is a governmental nonprofit corporation with a mission to provide affordable housing to its community. It manages housing for senior citizens, is developing housing options for veterans, and administers about 4,000 federal vouchers that poor families use to help pay their rent. Most of HCHA's funding comes from the U.S. Department of Housing and Urban Development. It also collects fees from private builders when it enters arrangements to develop mixed-income housing with them. Thus, to operate sustainably, HCHA must have a positive impact on its community, treat its employees fairly, and use its federal funding efficiently.
HCHA notes that the Department of Housing and Urban Development (HUD) has for several years running been named the highest-performing housing agency in its region. Despite this acknowledgment from the federal government, however, the agency recently came under fire for being too generous with its employees.
The Houston Chronicle investigated the salaries paid to HCHA executives and ran a report saying they have been paid more than executives at other housing agencies, including those in New York, Chicago, Boston, Dallas, Los Angeles County, and Cook County, Illinois (where Chicago is located). Most of those agencies administer at least three times as many vouchers and manage thousands more housing units. For salaries at HCHA to reach their high levels, they rose rapidly between 2004 and 2008.
Reacting to the outcry that followed the story, Iowa's senator Charles Grassley wrote to HUD to ask for an investigation. In his letter, Senator Grassley noted that a recently passed federal law limits the pay of housing authority employees to a pay grade of Level IV federal executive, which at the time topped out at $155,500. HCHA's chief executive, Guy Rankin, was earning $242,008, a salary the senator termed "outrageous." The agency's chief administrative officer, David Gunter, also had earnings above the new ceiling, with a salary of $220,001. Both executives had enjoyed rapid pay increases. When Rankin because CEO in 2004, he earned $99,507, and at that time, Gunter was a senior accountant earning $74,256. One reason compensation rose so fast was that employees were earning bonuses. Executives could earn bonuses as large as $84,000. Most of the agency's lower-level employees also received annual bonuses, ranging from $1,000 to more than $10,000.
The chairman of HCHA's five-member board of directors noted that HUD audits the agency's books annually and has never objected to the agency's pay scales. The agency also noted that pay levels were established after the agency conducted two salary surveys of private-sector data. According to the surveys, HCHA was paying its employees 8% to 40% below the labor market rates for their occupations. Surveys also investigated pay at other housing agencies, with the goal that HCHA would pay its own employees "slightly above" the other agencies. Sympathetic observers noted that HCHA's increasing involvement with property developers is an effective way to stretch agency dollars but requires significant financial and negotiation skills. However, Houston Representative Gene Green expressed the view that pay comparisons should have been limited to government workers. Green worried that the pay raises, coming at a time when federal employees had been doing without cost-of-living pay raises for several years, would incite budget cutting.
In an effort to improve future salary planning at local agencies, HUD has asked all the housing agencies it funds to provide it with the salaries of their five highest-paid employees. HUD plans to post job titles (without names) and associated salaries on its website. Agency boards would then have easy access to salary data, at least at the executive level. Meanwhile, the HCHA's board asked CEO Rankin to resign, and then one week later admitted that it lacked sufficient funds to pay the agreed-upon severance pay.
Based on the information given, what were the goals of the pay levels set for the Harris County Housing Authority? Which of those goals did it meet?