The Lone Star Foundation Conference
Public Education Reform in Texas: Comprehensive Progress Report
Austin, Texas - December 7-8, 2000

 

Advancing Teacher Quality Through Performance Pay

December 7, 2000

Harrison Keller

Project Director for Education Policy

Charles A. Dana Center

The University of Texas at Austin

 

Private companies have long used performance based reward systems to boost employee productivity, job satisfaction, and retention. Now, as Texas policymakers, business leaders, and parents continue to demand improvements in educational outcomes, and as the state faces a severe shortage of classroom teachers, there is a growing interest in performance incentives for teachers and school leaders. This paper provides an overview of key research findings related to pay-for-performance in education. It describes some of the major obstacles to performance pay in Texas that are amenable to state policy. It also outlines issues for further discussion.

All companies use compensation to attract, reward, and retain employees. By providing rewards for work, compensation makes a difference in employees’ behavior. Compensation also communicates to employees what sort of work is valued. Used strategically, compensation can be a powerful tool for influencing performance, job satisfaction, and retention. In particular, financial incentives related to job performance, if properly designed and implemented, can improve employees’ productivity and complement their intrinsic motivation.

Advocates of performance pay in education point to these lessons from business to argue that the traditional single salary schedule for teachers, which is based on years of experience and degree attainment, does not capitalize on the potential of compensation systems to support school improvement. The single salary schedule, so the argument goes, provides no incentive for teachers to exert extra effort, because all teachers are essentially paid the same. Nor does it provide incentive for teachers to collaborate with each other. This separation between teacher compensation and the purposes of schools appears to be a missed opportunity to focus teachers’ attention on achieving the educational goals of the school, the district, and the state. It may also contribute to high attrition rates, because typical salary schedules require teachers to have many years of experience before they receive significant salary increases.

Many policymakers, business leaders, and educators find these arguments compelling. In October of 1999, a group of 24 governors endorsed the idea of pay-for-performance in education at the National Education Summit. Many business groups also support the idea, including the Business Roundtable and the National Alliance of Business. In July of this year, the nation’s largest teachers’ union, the National Education Association, rejected the use of performance evaluations in determining teacher compensation amid concerns that performance pay might undermine the traditional single salary schedule and serve as a disincentive to teach more challenging students. Nevertheless, many local teacher unions, including those in Cincinnati and Denver, have negotiated contracts that include performance incentives.

Several different models for performance incentives in education are being explored around the nation. The Cincinnati program, which uses a career-ladder approach based on evaluations of teachers’ knowledge and skills, is being field-tested this school year. The Denver program is a four-year pilot that will compare three different ways of measuring teacher performance: (1) increases in student performance on standardized tests; (2) increases in student performance on teacher-designed assessments; and (3) increases in teachers’ knowledge and skills. Most of the incentive programs in place in school districts and states across the country use a combination of strategies to measure teacher performance. For example, almost 40 states, including Oklahoma, Arkansas, and Louisiana, currently offer monetary incentives for teachers who receive an advanced certification through the National Board for Professional Teaching Standards. More than twelve states, including California, New Mexico, and North Carolina, reward teachers or schools for meeting or exceeding academic objectives. And a growing number of states and school districts, including Massachusetts and the Baltimore school district, are experimenting with signing bonuses for teachers in high-need subject areas and "hard-to-staff" geographic areas.

Texas currently provides limited school-based performance awards to schools that demonstrate success in - or significant improvement towards - meeting the state’s education goals through the Texas Successful Schools Awards System. This program provides monetary awards of no less than $500 and no more than $5,000 to schools that meet a complex set of criteria. These criteria are based primarily on a measure of how well a given school’s students perform on TAAS, although a portion of the awards are presented to recognize innovative approaches to increasing attendance of parents or guardians at parent-teacher conferences. The effectiveness of the Successful Schools program is limited by three factors. First, the criteria for awards are complicated and not understood by many teachers and school administrators. Second, the monetary awards are insignificant. The program currently pays out awards to schools of less than 5 dollars per student in average daily attendance. Even the largest Texas schools can receive awards of no more than $5,000. Third, there is a significant delay between the performance for which schools are rewarded and the announcement of Successful Schools awards. Awards are usually announced and certificates are mailed out in the spring semester of the following academic year.

A very small but growing number of Texas school districts are experimenting with performance incentives. A few of these districts utilize a career-ladder structure, where incentives are based on administrators’ evaluations of individual teachers, but most incentive programs are based on school performance on state accountability measures. For example, Houston ISD provides monetary awards of between $5,000 and $7,500 to principals and assistant principals at exemplary campuses. Last year, Keller ISD hosted a "Franklin party" in which every teacher at campuses rated exemplary was awarded an envelope containing $300 in cash. Other staff members at exemplary campuses received $100. In a more deliberate approach to performance pay, De Soto ISD administrators and trustees spent over a year developing an incentive plan that financially rewards teachers at exemplary or significantly improving schools. A clause was added to teachers’ contracts pertaining to performance incentives and their distribution. This year, De Soto paid incentives equivalent to roughly 1.1 percent of teachers’ salaries.

Some Texas school districts officials may be reluctant to implement performance incentives because of bureaucratic red tape. Currently, districts can implement performance incentive plans, provided that they adopt a written plan and budget for the implementation of the plan according to numerous regulations. For example, the Texas Constitution prohibits school districts from granting additional compensation to contract employees after the contract has been finalized. School districts are also prohibited from granting additional compensation to noncontractual personnel after their services have been rendered. Thus, school district officials are required to adopt specific plans authorizing bonuses and to include authorizations for payments of bonuses in the terms of their employees’ contracts. Since many school districts utilize the same contracts year after year, this requirement may amount to a barrier to performance pay. It also restricts school districts from taking initiative to reward outstanding performance after the start of their budget cycle.

Another regulatory constraint on performance incentive plans has emerged as part of the implementation of S.B. 1128 (76th Legislature). This legislation required that in order for performance incentives to be included in retirement benefit computations by the Teacher Retirement System, a district’s incentive plan must include performance pay for classroom teachers. Thus, school district officials that want to provide incentives specifically for principals and assistant principals may feel restricted from doing so. School districts are also required to annually inform the TRS if they will be providing performance pay, adding yet another bureaucratic hoop through which school districts must jump.

A more significant obstacle to performance pay is the strong tradition of the single salary schedule. School district officials may shy away from devising performance pay plans because Texas school districts regularly dedicate almost all of their annual budget increases to across-the-board raises. In contrast, private companies tend to reserve from 1.5 percent to 2 percent of total annual budget increases for performance pay. This enables private companies to provide average performance bonuses to their professional employees of roughly 4.5 percent. But performance pay in Texas school districts typically amounts to less than 1.25 percent of a teacher’s annual salary, which may be insufficient to serve as a meaningful incentive.

Research on pay-for-performance plans in the private sector reveals that effective plans share three characteristics: (1) employees need to understand the goals of the plan and perceive the rewards as being achievable and fair; (2) the plan should reward top performers; and most importantly, (3) the plan must be closely aligned with the priorities of the organization. These findings point to three broad issues for Texas policymakers and school district officials to consider in designing performance incentives for education.

(1) Teachers must see rewards as achievable and fair. Research on performance awards in education indicates that well-designed performance incentive plans can focus teachers’ attention on campus, district, and state goals; motivate teachers to perform; and channel organizational resources, provided that teachers endorse the program goals and believe that they can achieve them. These findings suggest that developing an effective pay-for performance plan for education requires: (a) close collaboration between teachers and administrators in setting the goals of the plan; (b) clear and objective measures to determine rewards (for example, objective measures of student achievement); (c) a strong and apparent connection between rewards and high performance; (d) ongoing support structures, including financial and administrative resources to carry out the plan and ongoing professional development to help teachers reach the goals; and (e) close alignment with other organizational changes, especially other standards-based reform efforts.

For performance awards to be motivating, teachers must also believe that the rewards are worth the additional effort. Research on performance incentives in education reveal that teachers see bonuses equivalent to 3 to 5 percent of base salary as meaningful and motivating, a range consistent with performance pay programs in private companies. In Texas school districts, this would result a minimum range for performance bonuses of roughly $725 to $1,225, compared with bonuses of roughly $250 to $450 per teacher in the handful of school districts that currently offer performance pay. The methods by which rewards are paid may also impact teachers’ perceptions of performance incentives. A cash-payout model such as the one used in Keller ISD, for example, is more consistent with performance pay strategies used to reward non-exempt employees, whereas a model that includes performance pay in teachers’ contracts, such as the De Soto ISD model, more closely resembles performance incentives used for professional employees.

 

(2) Performance incentives should reward highly effective educators. In 1997, the state of North Carolina implemented a school-based performance incentive program that provided rewards to nearly 70 percent of its schools in 1999-2000. In the 1998-99 school year, the program provided performance rewards to over 81 percent of schools. Such programs are very expensive (approximately $100 million annually in North Carolina), and more importantly, are at risk of being viewed as entitlements rather than performance pay. In contrast, private companies’ pay-for-performance plans typically focus on rewarding the top 15 percent of employees, on the assumption that top performers will drive organizations’ success.

In designing performance pay programs, however, it is important to keep in mind that the effectiveness of compensation strategies varies in different kinds of labor markets. Texas is facing a severe shortage of classroom teachers. Although the precise dimensions of the shortage are unknown, there seems to be no question that Texas will soon require a massive infusion of new teachers. Last year, 83 percent of school districts reported difficulty in employing a sufficient number of certified teachers. The statewide attrition rate for new teachers in their first five years continues to exceed 40 percent. Meanwhile, enrollment in Texas public schools is growing by an average of 70,000 students per year. In such a tight labor market, many Texas school districts already find it difficult to maintain competitive salaries. In districts in major metropolitan areas, for example, employees in occupations that require similar educational backgrounds to teaching can earn average salaries more than 65 percent higher than teachers’ salaries. Given the extent of the teacher shortage, certain performance pay strategies, such as knowledge- and skills- based pay, may not be appropriate, because they would focus on too small a group of teachers. Even group-based performance pay plans may exacerbate the teacher shortage if they inadvertently diminish districts’ abilities to pay competitive salaries.

(3) Performance incentives should be aligned with the educational goals of schools, school districts, and the state. More than 35 years ago, the Coleman report and the Moynihan report implied that differences in race, income, and family background are overwhelming determinants of academic performance, regardless of what schools and teachers do. In Texas, however, the combined effects of increased accountability and equalized funding have diminished the impact of these factors on student achievement, especially in mathematics. The Texas system is designed to hold schools accountable not only for their overall performance but also for the performance of every sub-population of students. Results thus far indicate that systemic reform can be an effective tool for improving student achievement, particularly for the most vulnerable students. Systemic reform matters. And more significantly, in the context of meaningful accountability and an equitable school finance system, the Texas results confirm what parents have always known, that good schools matter.

Recent studies in Tennessee, Massachusetts, Alabama, and Texas provide considerable evidence that good teaching has a powerful effect on student learning. In the Tennessee study, researchers observed that students who were consistently assigned to highly effective teachers showed a difference of more than 50 percentile points in mean test scores over students who were consistently assigned to ineffective teachers. Using similar techniques, researchers in Dallas ISD found a gap of more than 35 percentile points in average reading scores between students assigned to three highly effective teachers in a row and students assigned to three ineffective teachers in a row. Both of these studies found that highly effective teachers could facilitate tremendous academic gains for students who previously had ineffective teachers; nevertheless, the residual effects on a student of having had an ineffective teacher could still be measured in subsequent years. These studies have also found troubling evidence of bias in the assignment of students to teachers; for example, the Tennessee study found that African American students were nearly twice as likely to be assigned to ineffective teachers.

These findings raise fundamental questions about what counts as effective teaching, and in particular about whether the conceptions of effective teaching implicit in current performance pay plans are aligned with the education goals of schools, districts, and the state. Most performance incentive programs in Texas school districts, as well as the Successful Schools program, are almost exclusively focused on how well a given school’s students perform on TAAS. Critics of performance pay in education point out, however, that private corporations do not generally evaluate professional employees by quantifiable goals such as test scores. In private industry, decisions on merit pay are mostly subjective, often based on a "360-degree evaluation," which includes evaluations from supervisors, co-workers, and subordinates. Texas policymakers and school district officials may tend to favor measures of TAAS performance because this data is more objective than evaluations of individual teachers. Memories of the failures of the career ladder program, with its reliance on subjective evaluations, are still strong. Nevertheless, it is important to recognize that there are risks associated with relying exclusively on TAAS data, because these data are limited in scope and may capture too few of the characteristics that the Texas public associates with highly effective teaching.

Texas continues to ask more of its public schools. The State Board of Education has raised graduation standards for those students who will enter the 9th grade in 2001, and the next iteration of the accountability system, which is due to be implemented in 2003, will closely align the content of state tests with the rigorous curriculum standards contained in the Texas Essential Knowledge and Skills (TEKS). Unfortunately, the pressure of higher standards and increased accountability will be felt most strongly in the subject areas in which the teacher shortage is most severe, especially mathematics and science. Performance pay can be a powerful tool for rewarding and retaining highly effective teachers. To be effective, however, performance incentives must be designed so that teachers see the rewards as achievable and fair, so that they reward highly effective teachers - without exacerbating the teacher shortage, and most importantly, so that they serve to align compensation systems and the educational goals of schools, local school districts, and the state. This last point is the most critical; even the best-designed performance incentive plans can only support and reinforce organizational goals, and only if they are aligned with those goals. Ultimately, Texas policymakers and school district officials will succeed in advancing teacher quality through performance pay only to the extent that they connect the design of incentive plans to deeper discussions about the purposes of our public schools.

Harrison Keller - Project Director for Education Policy Studies, Charles A. Dana Center of the University of Texas at Austin.

Harrison Keller
Charles A. Dana Center
512-475-9715
University of Texas at Austin
2901 N.IH 35, Ste.2.200
Austin, TX 78722

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Paper presented at the Lone Star Conference on
PUBLIC EDUCATION REFORM IN TEXAS - COMPREHENSIVE PROGRESS REPORT December 7th and 8th, Austin, Texas. Contact information for the Lone Star Foundation 10711 Burnet, Suite 333, Austin, Texas 78758 (Telephone 512-339-9771).

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