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NATIONAL FORUM OF EDUCATIONAL ADMINISTRATION AND SUPERVISION JOURNAL

VOLUME 26, NUMBER 3, 2009-2010

PERFORMANCE PAY FOR TEACHERS

Pamela Wells

Rebecca A. Robles-Piña

Sam Houston State University

ABSTRACT

Performance or variable pay is common in the business world. However, in the business

of education, the opposite is true. As has been the case for about a hundred years, most

public school teachers are paid a fixed salary based on years of experience and degrees

held. There is significant pressure from politicians, business leaders and reformers

within education to implement performance pay for teachers, as evidenced by a number

of programs currently being implemented across the country. However, there are few

empirical studies to support this movement. This paper explores the available research

on performance pay for teachers with the goal of evaluating the impact that

performance pay has on teacher recruitment, retention and, ultimately, on studentachievement. In addition, recommendations are made for future quantitative research.

Introduction

n the business world, increased compensation is often the result of

successful performance. Most professional employees have the

opportunity to receive merit or performance pay, where financialremuneration is based at least in part on the employees’ level of

success. In their most recent annual research, Hewitt Associates found

90% of the 1,007 large companies surveyed provided what they called

a variable pay plan (Kanter & Lucas, 2007). Although economistsmay espouse the benefits of performance pay to increase productivity

in the free market system, widespread use of performance pay for teachers is relatively rare. According to the National Center for

Education Statistics, during 2003-2004 only 7.9 % of the public school

districts in the country provided performance pay incentives to reward

“excellence in teaching”. Ninety-two percent of public school teacherswere paid based on experience, credentials and/or degree held (U.S.

Department of Education, 2003-04). The current predominant single

salary schedule method was begun in the early 1900’s and has

I

11



12 NATIONAL FORUM OF EDUCATIONAL ADMINISTRATION AND SUPERVISION JOURNAL__________

continued relatively unchanged to present (Odden & Kelley, 1997). A

salient question arises - if performance pay is so well established in the

world of commerce, why is it not more widespread in the business of education?

Throughout the United States and in many other countries,

reformers in politics, business and in education promote performance pay for teachers. A Joint Platform for Education Reform issued by the

United States Chamber of Commerce and the Center for American

Progress (February, 2007, Better Teaching section, ¶2) called for statesand districts to:

“Reform pay and performance structures to improve startingsalaries; reward teachers whose performance contributes to

substantial growth in student achievement [italics added];

attract and retain effective instructors in subjects experiencingteacher shortages, notably math and science; draw effectiveeducators to high-need schools/ and fairly and efficiently

remove ineffective educators.”

In addition to pressure from business leaders, the issue of performance

pay has even arisen during the current presidential election.

Republican candidate John McCain supports merit pay based onstudent test performance. His opponent, Barack Obama, also supports

individual teacher merit pay but not based on student test results

(Carter, 2008).

Performance pay systems are an international phenomena as

well, having been implemented to varying degrees of success in

England (Mahony, Menter, & Hextall, 2004), India (Podgursky &Springer, 2007b), Israel and Kenya (Lavy, 2002). The research on

performance pay, although neither extensive nor conclusive, suggests

that it can result in increased teacher and student effectiveness (Lavy,2007). However, this literature review will indicate there is continuing

debate over the efficacy of performance pay for teachers.



Pamela Wells & Rebecca A. Robles-Piña 13

With growing pressure to reform public education, there is also

pressure to implement performance pay systems. Therefore, the need

to research the effects of performance pay becomes more important.As limited resources for public education are directed toward

performance pay for teachers, an important question must be asked.Will performance pay for teachers help our educational system

improve? The purpose of this study is to review the available literaturerelated to performance pay for teachers and to evaluate its impact on

teacher recruitment, retention and student achievement.

Definitions

Performance pay is sometimes called variable, merit or

incentive pay. Contrary to pay for teachers in critical fields or

compensation for additional responsibilities such as serving as ateacher leader or tutor, performance or merit pay is usually focused onteacher or student success. This success will be defined and measured

differently depending upon the context. Some performance pay

systems are based on multi-factor teacher evaluation by principals.However, increasingly the criteria are based on an analysis of

objective student performance such as results of high stakes tests.

These performance pay programs are varied and can be structured toreward individual teachers, teacher teams, or entire schools (Lavy,

2007).

Methods of Research

There is a growing literature on performance pay; however, thereview did not reveal many quantitative research studies focusing on

the effects of performance pay. Much of the literature points to a need

for further empirical studies. The research sources included on-linedatabases such as Academic Search Complete and Google Scholar

which yielded academic journals, professional periodicals and policy




briefs. Further, textbooks were obtained from the university library. In

addition, the federal online educational database, the National Center

for Education Statistics, proved beneficial.

History of Performance/Merit Pay

Performance or merit pay is not a new phenomenon, but its

past history frequently has been fraught with controversy. Performance pay distributed to schools, based on students’ grades in basic skills,

was introduced in the mid-1800s in Great Britain by Robert Lowe,

vice-president of Britain’s Committee of the Privy Council for Education. This program, “payment by results,” created a great deal

of debate, ultimately resulting in Lowe’s resignation (Pfeiffer, 1968).

In the United States, the use of merit pay by school districts was morefrequent in our earlier history. Thirty-three percent of the schooldistricts sampled by the National Education Association in 1923 had

merit pay (as cited in Murnane & Cohen, 1985).

Following the publication of A Nation at Risk in 1983, school

districts began experiments with merit pay hoping to improve student

achievement (Podgursky & Springer, 2007b). However, there were prominent educators who saw significant problems with performance

pay. One of these educators, Fenwick English, described then

President Reagan’s campaign for merit pay as “. . . a deceptive

blossom which looks sweet and pretty to the general public” (English,1983/1984, p.72).

Many of the performance pay experiments were short-lived.One such example was the Texas Career Ladder incentive pay

program implemented statewide in Texas in 1984. The program

consisted of four successive performance levels. Beginning with leveltwo, teachers were rewarded monetarily for a combination of scores

on classroom observation instruments, years of service, and the

accumulation of hours of professional development. To reach level




four, teachers were required to serve as teacher-leaders in some

capacity. However, the program ended a decade later in 1993 prior to

any teachers reaching level four (Keeton Strayhorn, 2004).Implementation of the Texas Career Ladder program led to many

conflicts between teachers and administrators relating to the fairnessand consistency of evaluation and placement on the career ladder

(Jesness, 2001). Even with attempts to establish performance or merit pay across the country, there were only 12% of the districts with such

systems in 1993 according to Ballou’s 2001 study (as cited in Figlio &

Kenny, 2007).

Political Pressure for Performance Pay

Although still proportionally small, grant programs and

statewide mandates implemented by national and state legislators areon the increase. In a review of the literature, Podgursky and Springer (2007a) identified several programs currently being implemented

across the country, including the national Teacher Incentive Fund

competitive grants (United States Congress), Governor’s Educator

Excellence Awards (Texas), Florida E-Comp, and the Minnesota

QComp. In addition to these national and state-wide programs, some

individual school districts like Denver in Colorado and Dallas andHouston in Texas have also created teacher incentive programs.

Politicians and business leaders often support teacher performance pay

as a way to improve teacher effectiveness (A Joint Platform for

Education Reform, 2007; Lavy, 2007). The significant political pressure on the federal department of education, state agencies and

school districts to implement this performance pay reform makes

research on its efficacy more urgent.




Rationale for Performance Pay

Those who call for performance pay systems have cited severalreasons for implementation. According to Lavy (2007), one rationale

was that teacher merit pay would lead to increased student performance because teachers would exert more effort to improve

their own performance if a monetary incentive is available. Secondly,supporters of performance pay also believed it would improve teacher

recruitment. A third underlying principle was that performance pay

would increase teacher retention. In the literature, all three of theseconcepts were related to increased student achievement. Lavy

described another possible benefit of performance pay implementation

- generating increased support from politicians and others who believed this is a reform that would improve education.

Teacher Effort and Teacher Recruitment

Supporters of performance pay may assume that when

monetary incentives are available, teachers will work harder to gain

the reward, thus increasing their own and their students’ achievement.The review of the literature was unable to find specific support for this

assumption. However, Podgursky and Springer (2007a) identified a

potentially different theory to predict that teachers at schools with performance pay would be more effective – selection effects. The

authors speculated that existing teachers do not necessarily become

better. Instead, because rewards are available in a performance pay

system, those with better performance may actually be drawn to therewards. The theory of selection effects and the possible impact on

teacher recruitment merits further examination.

In a study of an Israeli teacher performance pay incentive

program, Lavy (2002) found that when comparing a tournament style

teacher incentive program with a plan that provided the incentive of additional school-wide resources, the results were close in terms of

improving student outcomes, but the teacher incentive program was

much more cost effective. The tournament style program was defined




by Lavy as an incentive plan where teachers receive merit pay based

on rank order of results. The school-wide incentives included

additional resources for what Lavy called “teaching time and on-the job school staff training.”

In what Figlio and Kenny (2007) described as the first research

in the U.S. to systematically support the connection between teacher performance incentives and student achievement, they also expressed

caution because it is difficult to discount other variables’ impact on the

results. The authors indicated that randomized clinical trial studies being conducted by the U.S. Department of Education in 2008 should

provide important research.

Teacher Retention

The issue of teacher retention is particularly salient because of the impact it has on student achievement. Teacher retention is atremendous challenge for school districts. A thorough study of the

mobility of Texas teachers was conducted by Hanusheck, Kain and

Rivkin (2004). When reviewing data from the years 1993-1996, theauthors documented that on an annual basis, 6.9% of the Texas

teachers left Texas schools and another 11.3% either changed schools

within a district or changed districts. They also found evidence that because of increased transition rates (teachers moving out of the

school, district, or profession), students with lower performance are

more likely to have new (i.e., less experienced) teachers. It is

important to note that the researchers found that student characteristics(e.g. race, achievement, and income) were more important factors in

teacher mobility (from large urban to suburban districts) than were

across-the board salary increases. However, because the researchersdid not study the impact of performance pay on retention, this remains

an area for future research.

Why is teacher retention such an important issue? A study of

North Carolina teachers found that teacher experience, along with test

scores and licensure, correlates to higher student achievement,




especially in math (Clotfelter, Ladd & Vigdor, 2007). When describing

their earlier 2001 research on student outcomes, Hanushek, et al.

(2004) found that on average, inexperienced teachers do not performas well as those with more experience. The research seems clear on the

importance of retaining teachers, especially in at-risk schools toincrease the probability that students will be successful. The question

for future research is whether teacher performance pay would positively impact teacher retention.

Problems Associated with Performance Pay

Some educator groups, most significantly teacher unions, argueagainst the merits of performance pay for teachers. The two largest

teacher organizations, the National Education Association and the

American Federation of Teachers have taken positions against proposals to include performance pay experiments as part of thereauthorization of the No Child Left Behind Act (NCLB).

Some argue that the focus on performance pay obscures thereal problem, that basic pay for teachers is not competitive. Another

criticism is that fairly evaluating and rewarding teachers who are not

teaching state-tested subjects is a major stumbling block. Finally, thereare those who argue that for performance pay to be successful,

adequate and stable funding for a merit pay system must be in place,

something that many union and non-union members would argue is

not currently a political reality (Olson, 2007).

An unfavorable view of performance pay also arises in much

of the research related to the program that was initiated in Englandamid widespread criticism (Storey, 2000). The Threshold Assessment

performance pay program, described in 1998 in the United Kingdom’s

Department for Education and Employment’s Green Paper, wasimplemented by the Labour government in order to raise standards.

One such study of the program involved a series of 76 interviews of

teachers who participated in the Threshold Assessment. In this




qualitative research study, the authors found inherent problems (the

creation of anger and frustration among teachers) associated with

merit pay (Mahony et al., 2004).

Many of the various attempts at merit pay have not beensuccessful in the long term. Research by Murnane and Cohen (1985),

consistent with the findings of the Threshold study, attributed the lack of success of performance pay in the United States to internal

dissension caused by perceived inequities in distribution of rewards.

Group performance pay has been described as a potentially moresuccessful model to individual rewards (Mohrman, Mohrman &

Odden, 1996).

According to Lavy (2007), potential drawbacks or problems

associated with performance pay include: (a) measurement problems

(i.e. agreement on goals as well as fair and accurate evaluations), (b)negative effects on collegiality, (c) unintended consequences (i.e.,focus on only measurable dimensions or selected students and “game

play” [cheating]), (d) increased costs, (e) union opposition, and (f) past

failures of performance pay systems. However, the author alsoidentified some strategies for potentially overcoming these obstacles

including structuring group incentives. The author posits that by

structuring team-based incentives, the concerns about collegiality andcooperation can be addressed.

Implications for Further Research

Given the movement toward performance pay for teachers,

there is a significant need to conduct additional research to determinewhether these rewards will lead to positive teacher and student

outcomes. The teacher retention rates at at-risk campuses, determined

by a review of state data in Texas, create a compelling argument for the selection of one large school district to experiment with

performance pay for teachers as a way to recruit, reward and retain

teachers at campuses with large numbers of at-risk children.




According to this publication by The Education Trust (2008),

the Cypress-Fairbanks Independent School District (CFISD) had a27.4% teacher turnover rate at its highest minority schools compared

to 17.8% turnover at its lowest-minority schools. Comparing turnover based on poverty levels, CFISD had a 26.9 % turnover rate at the

highest poverty schools and an 18.7% rate at its lowest povertyschools. The turnover rate at its highest minority schools was 27.4%

compared to 17.8% at the lowest minority schools. CFISD has high

turnover rates in part because rapid growth results in new schoolsopening annually which increase teacher transfers; yet, seemingly

there is a connection between the turnover rate data and the level of

teaching experience at a school. When evaluating the percentage of teachers with fewer than three years of teaching experience, at the

district’s highest–poverty schools 24.5% of the teachers have less than

three years of experience compared to 12.2% in its lowest povertyschools. When comparing the schools with the highest percentage of minority students, 25.9 % of the teachers have less than three years of

experience versus 11.4% in the lowest minority schools. Given the

research results discussed earlier in this review related to teacher experience and student achievement (Hanushek et al., 2004; Cloftelter

et. al., 2007), increasing teacher retention at at-risk schools should

promote increased student success.

In part to address these issues, CFISD will begin

implementation of a D.A.T.E. (District Awards for Teacher

Excellence) grant awarded from the Texas Education Agency duringthe 2008-2009 school year. The majority of the funding for this

performance pay program will be paid to teams of elementary and

middle school teachers at economically disadvantaged schools whoteach Texas Assessment of Knowledge and Skills (TAKS) tested

subjects. A smaller amount of merit pay will be available for staff

development, teacher retention and to reward non-TAKS teachers whocontribute to the success of the campus as a whole (Jackson, 2008;

Cypress-Fairbanks ISD, 2008). I will conduct a future quantitative

study to evaluate this new performance pay program. Because there




are some district schools with similar student demographics that will

not be implementing the D.A.T.E. grant, a comparison group will be

available. The research will analyze whether teacher performance paywill impact teacher retention at these at-risk campuses.

Plecki (2000) posits that with limited resources, it is important

that government leaders and policymakers evaluate what use of fundswill provide the most positive impact on student achievement. Lavy

(2002) says it another way, “Therefore, many authors emphasize that

before the introduction of school incentives becomes the nextrevolution in schools, much more concrete evidence is needed about

the optimal incentive structure in schools and their effect and cost” (p.

1287). Most researchers support the premise that more research isneeded related to performance pay in order to evaluate the cost-benefit

ratio related to student performance.

Summary

The research on performance/merit pay for teachers showsmixed results; however, the majority of the studies represented in the

research were somewhat positive. There is tremendous political

pressure to implement performance pay, in part to replicate theoverwhelming use of variable pay in the business world. Given the

seeming inevitability of increased demand for performance pay

systems and the relative paucity of quantitative studies, it is imperative

that additional research be conducted to determine which models willhave the most positive impact on student performance. Since teachers

are the key to student success, this research is critical to both the

policy-makers and the school district leaders who are working toimprove teaching and learning in our schools.




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