Incentives for Teacher Performance in Government Schools: An Idea Whose Time Has Come

For decades, America's education establishment-especially its very powerful teachers' unions-has opposed the idea of "merit pay," or other types of incentives for excellent teaching, as a novel idea smacking of a crass commercialism that has no place in the hallowed sanctum of the classroom.

But there's no reason why human nature should respond any differently in this realm as in any other. There's nothing base in the fact that economic incentives motivate excellence in virtually every area of human endeavor. Is not the lack of incentives for performance one of the key reasons for the failure of socialist systems around the world? It could also be the key to recognizing a source of failure in our education system.

Teachers are professionals. Yet they, unlike virtually every sort of professional working in private enterprise, have no element of a performance incentive in their pay structure. Incentives work. Does not a salesperson have more reason to increase sales if he is paid at least partially by commission? Does it not make common sense that if excellence in teaching were rewarded monetarily, that teachers would be more likely to try harder?

I was educated as an industrial engineer and worked for 23 years in engineering and manufacturing management. I can testify to the motivational power of incentives-and not always of a monetary kind. Many other kinds of rewards and recognition for achievement and performance have proven to be perhaps even more effective for some individuals. After all, why do teachers put smiling faces, stickers, stars, and personal notes on school papers? Because they touch something in the human soul that makes people smile and try harder.

For the past 25 years I have taught undergraduate and graduate courses in business policy and business ethics for Eastern Michigan University's Department of Management. Here also, I have observed the power of incentives. Students are motivated when challenged to achieve by someone whose knowledge and experience they respect.

In the private sector, incentives have a long and well-thought-out structure that could easily be adapted to our public schools if the prejudice against them could be overcome. Is the job of a teacher so different from any other as to defy the kinds of evaluation that takes place every day in the private sector?

One thing is certain: In the engineering sector, if a company had a deterioration in performance comparable in scale to that which has taken place during the past three decades in student performance on tests, there would be no debate over the matter-because the company would no longer exist. Long, long before the elapsing of three decades, the conclusion would have been reached that something is fundamentally wrong with the system, the problem investigated and an appropriate course of action embarked upon.

Think about it: We would immediately launch into an investigation into the causes of failure, no buts about it. And why? Because the bottom line is at stake. Is it so difficult to understand that teachers have a bottom line, too?

Normally, when we try to judge performance, we seek to measure customer satisfaction. If we use that measure in education, we will ask the parent and future employer if they are satisfied. One measure of this would be the amount and cost of providing remedial education to high school graduates who are entering the workplace or attending college.

A 2000 study by Dr. Jay P. Greene for the Mackinac Center for Public Policy titled "The Cost of Remedial Education: How Much Michigan Pays When Students Fail to Learn Basic Skills" puts the costs, obtained by averaging five calculations, at around $600 million annually. Extrapolated to the entire nation, and the amount came to $16.6 billion nationally.

Another researcher, David Breneman, university professor and dean of the Curry School of Education at the University of Virginia in Charlottesville, also found high national remedial education costs in a separate study.

What this means is that our children aren't graduating from school with the skills and knowledge they need to succeed in the world-a failure we are paying for in far more ways than monetary. The seriousness of the problem cannot be exaggerated: It is time to try something new.

Unfortunately, rather than being able to attack the problem head on, Americans so far have only been able to nip away at the chinks in the establishment's considerable armor. One of those chinks has widened into a bona fide hole: charter schools. And it is there where teacher incentives are beginning to have an impact. I recently spoke with three charter school management companies operating in Michigan about incentives for teacher performance. Two had an incentive plan in use at all of their schools and one was experimenting with a plan.

Of course, in order to reward performance, you must have a system in place that measures performance precisely. Beacon Education Management, Inc., a private company that runs 15 charter schools in Michigan, is experimenting with a group incentive plan based upon school-wide improvement above grade level in national standardized test scores and parent satisfaction as determined by answers to a 10-question survey.

National Heritage Academies, another private-sector company that runs charter schools, conducts individual teacher assessments that employ evaluations by the school principal, performance goals in 10 different aspects of teaching, student achievement test scores, and parent satisfaction ratings of the teacher. Parent satisfaction is determined by questionnaires mailed twice each year to the parent. Based on these assessments, a Heritage Academies teacher can receive an annual merit-pay raise of up to 8 percent.

Edison Schools, a private-sector, for-profit company that runs not just charter schools but whole public school districts in some cases, goes even further. The evaluations it uses are conducted by the school principal, based on a four-point scale ranging from "does not meet expectations" to "exceeds expectations." Typically, the average teacher's annual pay increase is in the 4 - 5 percent range. In addition, at the beginning of each school year, Edison pays each returning teacher a bonus based upon student achievement, as measured by standardized tests. If a school's "report card" shows a sufficient level of improvement from the previous school year, each teacher in the school receives a bonus, typically $1,000. The school principal can receive a bonus that reaches into the $7,000 to $10,000 range, a substantial incentive that can't help but encourage top performance. Stock options are offered to teaching and administrative staff annually after one year of service, vested over a five-year period. Edison teachers also participate in a four-tier career ladder progressing to Senior Teacher and Lead Teacher. These latter two steps carry more pay and can involve some supervisory responsibilities.

Michigan is not the only state interested in performance incentives for teachers. In a poll conducted by the Public Policy Institute of California, 84 percent of that state's respondents said they want teachers paid on the basis of merit. The National Center for Policy Analysis, a nonprofit public policy research institute, has reported that performance incentives are built into many public school academy contracts in Arizona, which has over 420 operating charter schools. A survey of public school academies in Arizona conducted by the Goldwater Institute found that 16 percent give teachers a bonus if students achieve at a certain level or gain a certain percent in test scores. In addition, in 58 percent of the public school academies, teacher contract renewal-which, in most cases, takes place every year-is based on student performance. Another 10 percent base contract renewals on student attendance/recruitment and parent satisfaction.

Laura M. Litvan reported in the Investor's Business Daily that in Douglas County, Colo., teachers are offered four types of incentive bonuses: $1,000 for outstanding teachers; a group bonus for teachers in schools that set a goal and meet it that year; a bonus of $250 to $500 for teachers who complete extra training; and a $35 to $200 bonus for teachers who accept extra duties. Since the merit pay program began in 1993, average SAT scores in the county have improved drastically.

The major school employee unions often claim that teaching is unlike other professions and can't be evaluated as precisely. As a professor, I have been evaluated by my department head using factors previously defined by the departmental faculty. I have also had peer reviews based upon the same factors. I found these evaluations as reasonable, fair and penetrating-getting to the essence of my performance as a teacher-as those I experienced in my business career prior to teaching. If you are performing well in your job, you have little to fear from an evaluation, and perhaps much to gain in future pay.

Is merit pay an idea whose time has come in education? Let us hope so-and urge our school boards and unions to recognize the motivating role incentives can have for teachers. The evidence becoming available from charter schools indicates that where incentives are introduced into the school environment, teachers put forth more effort, they are happier with their jobs, and their students learn more.

Who can argue with results like that?

Robert Crowner is the Director of the Center for Entrepreneurial Stewardship for the Acton Institute in Grand Rapids, Michigan, and a Professor of Management, Emeritus at Eastern Michigan University.