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  1. 1. 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 ABSTRACTPerformance or variable pay is common in the business world. However, in the businessof education, the opposite is true. As has been the case for about a hundred years, mostpublic school teachers are paid a fixed salary based on years of experience and degreesheld. There is significant pressure from politicians, business leaders and reformerswithin education to implement performance pay for teachers, as evidenced by a numberof programs currently being implemented across the country. However, there are fewempirical studies to support this movement. This paper explores the available researchon performance pay for teachers with the goal of evaluating the impact thatperformance pay has on teacher recruitment, retention and, ultimately, on studentachievement. In addition, recommendations are made for future quantitative research. IntroductionI 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 ofsuccess. In their most recent annual research, Hewitt Associates found90% of the 1,007 large companies surveyed provided what they calleda variable pay plan (Kanter & Lucas, 2007). Although economistsmay espouse the benefits of performance pay to increase productivityin the free market system, widespread use of performance pay forteachers is relatively rare. According to the National Center forEducation Statistics, during 2003-2004 only 7.9 % of the public schooldistricts 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 singlesalary schedule method was begun in the early 1900’s and has 11
  2. 2. 12 NATIONAL FORUM OF EDUCATIONAL ADMINISTRATION AND SUPERVISION JOURNAL__________continued relatively unchanged to present (Odden & Kelley, 1997). Asalient question arises - if performance pay is so well established in theworld of commerce, why is it not more widespread in the business ofeducation? Throughout the United States and in many other countries,reformers in politics, business and in education promote performancepay for teachers. A Joint Platform for Education Reform issued by theUnited States Chamber of Commerce and the Center for AmericanProgress (February, 2007, Better Teaching section, ¶2) called forstates and districts to: “Reform pay and performance structures to improve starting salaries; reward teachers whose performance contributes to substantial growth in student achievement [italics added]; attract and retain effective instructors in subjects experiencing teacher shortages, notably math and science; draw effective educators to high-need schools/ and fairly and efficiently remove ineffective educators.”In addition to pressure from business leaders, the issue of performancepay has even arisen during the current presidential election.Republican candidate John McCain supports merit pay based onstudent test performance. His opponent, Barack Obama, also supportsindividual teacher merit pay but not based on student test results(Carter, 2008). Performance pay systems are an international phenomena aswell, having been implemented to varying degrees of success inEngland (Mahony, Menter, & Hextall, 2004), India (Podgursky &Springer, 2007b), Israel and Kenya (Lavy, 2002). The research onperformance pay, although neither extensive nor conclusive, suggeststhat it can result in increased teacher and student effectiveness (Lavy,2007). However, this literature review will indicate there is continuingdebate over the efficacy of performance pay for teachers.
  3. 3. Pamela Wells & Rebecca A. Robles-Piña 13 With growing pressure to reform public education, there is alsopressure to implement performance pay systems. Therefore, the needto research the effects of performance pay becomes more important.As limited resources for public education are directed towardperformance pay for teachers, an important question must be asked.Will performance pay for teachers help our educational systemimprove? The purpose of this study is to review the available literaturerelated to performance pay for teachers and to evaluate its impact onteacher recruitment, retention and student achievement. Definitions Performance pay is sometimes called variable, merit orincentive pay. Contrary to pay for teachers in critical fields orcompensation 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 measureddifferently depending upon the context. Some performance paysystems are based on multi-factor teacher evaluation by principals.However, increasingly the criteria are based on an analysis ofobjective 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 onthe effects of performance pay. Much of the literature points to a needfor further empirical studies. The research sources included on-linedatabases such as Academic Search Complete and Google Scholarwhich yielded academic journals, professional periodicals and policy
  4. 4. 14 NATIONAL FORUM OF EDUCATIONAL ADMINISTRATION AND SUPERVISION JOURNAL__________briefs. Further, textbooks were obtained from the university library. Inaddition, the federal online educational database, the National Centerfor Education Statistics, proved beneficial. History of Performance/Merit Pay Performance or merit pay is not a new phenomenon, but itspast history frequently has been fraught with controversy.Performance pay distributed to schools, based on students’ grades inbasic skills, was introduced in the mid-1800s in Great Britain byRobert Lowe, vice-president of Britain’s Committee of the PrivyCouncil for Education. This program, “payment by results,” created agreat deal of debate, ultimately resulting in Lowe’s resignation(Pfeiffer, 1968). In the United States, the use of merit pay by schooldistricts was more frequent in our earlier history. Thirty-three percentof the school districts sampled by the National Education Associationin 1923 had merit pay (as cited in Murnane & Cohen, 1985). Following the publication of A Nation at Risk in 1983, schooldistricts began experiments with merit pay hoping to improve studentachievement (Podgursky & Springer, 2007b). However, there wereprominent educators who saw significant problems with performancepay. One of these educators, Fenwick English, described thenPresident Reagan’s campaign for merit pay as “. . . a deceptiveblossom 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 payprogram implemented statewide in Texas in 1984. The programconsisted of four successive performance levels. Beginning with leveltwo, teachers were rewarded monetarily for a combination of scoreson classroom observation instruments, years of service, and theaccumulation of hours of professional development. To reach level
  5. 5. Pamela Wells & Rebecca A. Robles-Piña 15four, teachers were required to serve as teacher-leaders in somecapacity. However, the program ended a decade later in 1993 prior toany teachers reaching level four (Keeton Strayhorn, 2004).Implementation of the Texas Career Ladder program led to manyconflicts 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 meritpay across the country, there were only 12% of the districts with suchsystems 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 andstatewide 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 implementedacross the country, including the national Teacher Incentive Fundcompetitive grants (United States Congress), Governor’s EducatorExcellence Awards (Texas), Florida E-Comp, and the MinnesotaQComp. In addition to these national and state-wide programs, someindividual 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 payas a way to improve teacher effectiveness (A Joint Platform forEducation Reform, 2007; Lavy, 2007). The significant politicalpressure on the federal department of education, state agencies andschool districts to implement this performance pay reform makesresearch on its efficacy more urgent.
  6. 6. 16 NATIONAL FORUM OF EDUCATIONAL ADMINISTRATION AND SUPERVISION JOURNAL__________ Rationale for Performance Pay Those who call for performance pay systems have cited severalreasons for implementation. According to Lavy (2007), one rationalewas that teacher merit pay would lead to increased studentperformance because teachers would exert more effort to improvetheir own performance if a monetary incentive is available. Secondly,supporters of performance pay also believed it would improve teacherrecruitment. A third underlying principle was that performance paywould increase teacher retention. In the literature, all three of theseconcepts were related to increased student achievement. Lavydescribed another possible benefit of performance pay implementation- generating increased support from politicians and others whobelieved this is a reform that would improve education.Teacher Effort and Teacher Recruitment Supporters of performance pay may assume that whenmonetary incentives are available, teachers will work harder to gainthe reward, thus increasing their own and their students’ achievement.The review of the literature was unable to find specific support for thisassumption. However, Podgursky and Springer (2007a) identified apotentially different theory to predict that teachers at schools withperformance pay would be more effective – selection effects. Theauthors speculated that existing teachers do not necessarily becomebetter. Instead, because rewards are available in a performance paysystem, those with better performance may actually be drawn to therewards. The theory of selection effects and the possible impact onteacher recruitment merits further examination. In a study of an Israeli teacher performance pay incentiveprogram, Lavy (2002) found that when comparing a tournament styleteacher incentive program with a plan that provided the incentive ofadditional school-wide resources, the results were close in terms ofimproving student outcomes, but the teacher incentive program wasmuch more cost effective. The tournament style program was defined
  7. 7. Pamela Wells & Rebecca A. Robles-Piña 17by Lavy as an incentive plan where teachers receive merit pay basedon rank order of results. The school-wide incentives includedadditional resources for what Lavy called “teaching time and on-thejob school staff training.” In what Figlio and Kenny (2007) described as the first researchin the U.S. to systematically support the connection between teacherperformance incentives and student achievement, they also expressedcaution because it is difficult to discount other variables’ impact on theresults. The authors indicated that randomized clinical trial studiesbeing conducted by the U.S. Department of Education in 2008 shouldprovide important research.Teacher Retention The issue of teacher retention is particularly salient because ofthe impact it has on student achievement. Teacher retention is atremendous challenge for school districts. A thorough study of themobility of Texas teachers was conducted by Hanusheck, Kain andRivkin (2004). When reviewing data from the years 1993-1996, theauthors documented that on an annual basis, 6.9% of the Texasteachers left Texas schools and another 11.3% either changed schoolswithin a district or changed districts. They also found evidence thatbecause of increased transition rates (teachers moving out of theschool, district, or profession), students with lower performance aremore likely to have new (i.e., less experienced) teachers. It isimportant to note that the researchers found that student characteristics(e.g. race, achievement, and income) were more important factors inteacher mobility (from large urban to suburban districts) than wereacross-the board salary increases. However, because the researchersdid not study the impact of performance pay on retention, this remainsan area for future research. Why is teacher retention such an important issue? A study ofNorth Carolina teachers found that teacher experience, along with testscores and licensure, correlates to higher student achievement,
  8. 8. 18 NATIONAL FORUM OF EDUCATIONAL ADMINISTRATION AND SUPERVISION JOURNAL__________especially in math (Clotfelter, Ladd & Vigdor, 2007). Whendescribing their earlier 2001 research on student outcomes, Hanushek,et al. (2004) found that on average, inexperienced teachers do notperform as well as those with more experience. The research seemsclear on the importance of retaining teachers, especially in at-riskschools to increase the probability that students will be successful. Thequestion for future research is whether teacher performance pay wouldpositively 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 largestteacher organizations, the National Education Association and theAmerican Federation of Teachers have taken positions againstproposals 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. Anothercriticism is that fairly evaluating and rewarding teachers who are notteaching 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 isnot currently a political reality (Olson, 2007). An unfavorable view of performance pay also arises in muchof the research related to the program that was initiated in Englandamid widespread criticism (Storey, 2000). The Threshold Assessmentperformance pay program, described in 1998 in the United Kingdom’sDepartment 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 ofteachers who participated in the Threshold Assessment. In this
  9. 9. Pamela Wells & Rebecca A. Robles-Piña 19qualitative research study, the authors found inherent problems (thecreation of anger and frustration among teachers) associated withmerit 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 lackof success of performance pay in the United States to internaldissension 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 problemsassociated 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 “gameplay” [cheating]), (d) increased costs, (e) union opposition, and (f) pastfailures of performance pay systems. However, the author alsoidentified some strategies for potentially overcoming these obstaclesincluding structuring group incentives. The author posits that bystructuring 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 studentoutcomes. The teacher retention rates at at-risk campuses, determinedby a review of state data in Texas, create a compelling argument forthe selection of one large school district to experiment withperformance pay for teachers as a way to recruit, reward and retainteachers at campuses with large numbers of at-risk children.
  10. 10. 20 NATIONAL FORUM OF EDUCATIONAL ADMINISTRATION AND SUPERVISION JOURNAL__________ 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 comparedto 17.8% turnover at its lowest-minority schools. Comparing turnoverbased on poverty levels, CFISD had a 26.9 % turnover rate at thehighest 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 highturnover rates in part because rapid growth results in new schoolsopening annually which increase teacher transfers; yet, seeminglythere is a connection between the turnover rate data and the level ofteaching experience at a school. When evaluating the percentage ofteachers with fewer than three years of teaching experience, at thedistrict’s highest–poverty schools 24.5% of the teachers have less thanthree years of experience compared to 12.2% in its lowest povertyschools. When comparing the schools with the highest percentage ofminority students, 25.9 % of the teachers have less than three years ofexperience versus 11.4% in the lowest minority schools. Given theresearch results discussed earlier in this review related to teacherexperience and student achievement (Hanushek et al., 2004; Cloftelteret. al., 2007), increasing teacher retention at at-risk schools shouldpromote increased student success. In part to address these issues, CFISD will beginimplementation of a D.A.T.E. (District Awards for TeacherExcellence) grant awarded from the Texas Education Agency duringthe 2008-2009 school year. The majority of the funding for thisperformance pay program will be paid to teams of elementary andmiddle school teachers at economically disadvantaged schools whoteach Texas Assessment of Knowledge and Skills (TAKS) testedsubjects. A smaller amount of merit pay will be available for staffdevelopment, 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 quantitativestudy to evaluate this new performance pay program. Because there
  11. 11. Pamela Wells & Rebecca A. Robles-Piña 21are some district schools with similar student demographics that willnot be implementing the D.A.T.E. grant, a comparison group will beavailable. 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 importantthat 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 thatbefore the introduction of school incentives becomes the nextrevolution in schools, much more concrete evidence is needed aboutthe 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-benefitratio related to student performance. Summary The research on performance/merit pay for teachers showsmixed results; however, the majority of the studies represented in theresearch were somewhat positive. There is tremendous politicalpressure to implement performance pay, in part to replicate theoverwhelming use of variable pay in the business world. Given theseeming inevitability of increased demand for performance paysystems and the relative paucity of quantitative studies, it is imperativethat additional research be conducted to determine which models willhave the most positive impact on student performance. Since teachersare the key to student success, this research is critical to both thepolicy-makers and the school district leaders who are working toimprove teaching and learning in our schools.
  12. 12. 22 NATIONAL FORUM OF EDUCATIONAL ADMINISTRATION AND SUPERVISION JOURNAL__________ REFERENCESCarter, D. (2008, June 6). McCain, Obama reps discuss education. eSchool News, Retrieved July 8, 2008, from http://www.eschoolnews.com/news/top-news/? i=54073;_hbguid=ef715bbc-2444-47f4-890c-06aa0d6c71c6Clotfelter, C., Ladd, H., & Vigdor, J. (2007). How and why do teacher credentials matter for student achievement? The National Center for Analysis of Longitudinal Data in Education Research. (Working Paper No.2). Retrieved July 6, 2008, from http://www.caldercenter.org/PDF/1001058_Teacher_Credentials. pdfCypress-Fairbanks ISD. (2008). Questions and answers: District awards for Teacher Excellence (DATE) Grant. Retrieved July 10, 2008, from http://www.cfisd.net/dept2/curricu/date.pdfThe Education Trust. (2008, February). Their fair share: How Texas- sized gaps in teacher quality shortchange low-income and minority students. Retrieved June 30, 2008, from http://www.theirfairshare.org/resources.dyn/theirfairshareFeb08.p df Washington, DC: Author.English, F. (December 1983/January 1984). Merit pay: Reflections on education’s lemon tree. Educational Leadership, 72-79.Figlio, D., & Kenny, L. (2007). Individual teacher incentives and student performance. Journal of Public Economics, 91, 901-914.Hanushek, E., Kain, J., & Rivkin, S. (2004). Why public schools lose teachers. The Journal of Human Resources, 39, 326-354.Jackson, K. (2008, March 13). Cy-Fair teachers can earn money based on TAKS scores. Houston Chronicle, This Week, p. 9.Jesness, J. (2001, April 4). Teacher merit pay. Education Week, 20, 37.Kanter, M., & Lucas, M. (2007). Hewitt study: While salary increase in 2008 remain modest, variable pay awards reach record high.
  13. 13. Pamela Wells & Rebecca A. Robles-Piña 23 Retrieved July 5, 2008, from http://www.hewittassociates.com/Intl/NA/en- US/AboutHewitt/Newsroom/PressReleaseDetail.aspx?cid=4287Keeton Strayhorn, C. (2004, December). The cost of underpaying Texas teachers. Retrieved June 14, 2008, from http://www.window.state.tx.s/specialrpt/teachersalary/04Lavy, V. (2002). Evaluating the effect of teachers’group performance incentives on pupil achievement. The Journal of Political Economy, 110, 1286-1317.Lavy, V. (2007). Using performance-based pay to improve the quality of teachers. The Future of Children, 17, 87-109.Mahony, P., Menter, I., & Hextall, I. (2004). The emotional impact of performance-related pay on teachers in England. British Educational Research Journal, 30, 435-456.Mohrman, M., Mohrman, S., & Odden, A. (1996). Aligning teacher compensation with systemic school reform: Skill-based pay and group-based performance rewards. Educational Evaluation and Policy Analysis, 18, 51-71.Murnane, R., & Cohen, D. (1985). Merit pay and the evaluation problem: Understanding why most merit pay plans fail and a few survive. (ERIC Document Reproduction Service No. ED270842).Odden, A., & Kelley, C. (1977). Paying teachers for what they know and do: New and smarter compensation strategies to improve schools. Thousand Oaks: Corwin Press.Olson, L. (2007, October 3). Teacher-pay experiments mounting amid debate. Education Week, 27, 1-14.Pfeiffer, J. (1968). A new look at education. New York: The Odyssey Press.Plecki, M. (2000, July 17). Economic perspectives on investments in teacher quality: Lessons learned from research on productivity and human resource development. Education Policy Analysis Archives, 8. Retrieved July 10, 2008, from http://epaa.asu.edu/epaa/v8n33.html
  14. 14. 24 NATIONAL FORUM OF EDUCATIONAL ADMINISTRATION AND SUPERVISION JOURNAL__________Podgursky, M., & Springer, M. (2007a). Credentials versus performance: Review of the teacher performance pay research. Peabody Journal of Education, 82, 551-573.Podgursky, M., & Springer, M. (2007b). Teacher performance pay: A review. Journal of Policy Analysis and Management, 26, 909-949.Storey, A. (2000). A leap of faith? Performance pay for teachers. Journal of Education Policy, 15, 509-523.United States Chamber of Commerce and The Century for American Progress (2007, February). A joint platform for education reform. Washington, DC: Author.U.S. Department of Education, National Center for Education Statistics (2003-04). Schools and staffing survey, Table 35 [District data file,] available from http://www.nces.ed.gov