Tuesday, October 23, 2007

Performance Pay Assumptions

Part 1 of 4 on performance pay. (Why Joe Torre? The Yankees blew it big time by offering a contract heavily based on performance pay.)

How is performance pay supposed to “work?” Performance pay advocates make three assumptions about how these plans will improve our schools, none of which are compelling to me:

1) Performance pay will cause teachers to try harder.

Last week, NYC Mayor Michael Bloomberg related, "In the private sector, cash incentives are a proven motivator for producing results. The most successful employees work harder, and everyone else tries to figure out how they can improve as well." Are teachers just slackers who need a juicy carrot to get them moving?

Given that most people go into teaching because of a commitment to kids, it strikes me that 1) teachers give kids their best as a matter of principle and conviction, and 2) teachers may be less likely to increase effort because of financial incentives than workers in the private sector. In econo-speak, point 2 suggests that teachers have different "objective functions" than private sector workers.

However, teachers do vary widely in their effectiveness. (See postings on measuring teacher effectiveness here.) Some performance pay supporters attribute a large proportion of this variation to something that can be changed by an incentive. But incentive plans are “capacity sorters” (i.e. they distinguish schools and teachers that already have organizational and instructional capacity from those that don't) as opposed to “capacity builders” (props to the Chicago Consortium’s Melissa Roderick for this insight). In this view, performance pay doesn’t help teachers who are struggling become better teachers. It only highlights what these teachers already know – that things aren’t going well in their classrooms.

Why not measure teacher effects, identify teachers who need more support, and fund expert teachers to provide instructional support to their colleagues – to plan with them, observe their classes, and provide feedback for improvement? This would be a higher yield investment than performance bonuses.

Of course, we can all muster examples of teachers who were dreadfully inadequate. My favorite example of late is a teacher who spent class time managing her inventory of Beanie Babies (noted in Karin Chenoweth’s Post op-ed). Ask yourself whether someone bizarre enough to spend class time organizing Beanie Babies is likely to stop doing so for $3000. I seriously doubt it.

2) In the case of school-based performance pay, it will encourage schoolwide collaboration.

If teachers in a school don’t collaborate, will a few thousand bucks melt years of bad feelings and internal rivalries? Ms. Frizzle made a great comment on this point, writing:

My gut tells me that in schools with high levels of trust and collaboration, this will work well, but that in schools with a divisive culture, it will make no difference or serve to divide the faculty even more….Once upon a time I worked in a much larger school with a fair amount of internal conflict. I don’t think dangling cash over our heads would have changed that very much…. and when I worked there, I would never have voted for a rewards system like this because I did not feel like a part of something larger than myself and did not trust my colleagues to work together towards a common goal.

For more on the role of trust in schools, check out this book by Tony Bryk and Barbara Schneider.

3) Performance pay will attract and keep better people in the teaching profession.

Will performance pay attract teachers who would not otherwise go into teaching? This argument assumes that there is a group of people out there who would teach but for their concern than their good efforts will not be rewarded financially. But relative salaries are central to career choices, and I suspect that people choose careers on the base salary as opposed to the salary plus bonus potential. In short, if you want to attract better people into the profession, you would be better off increasing base salaries.

Would performance pay keep better teachers in teaching? I don’t think so, because educators don’t leave teaching primarily because of the pay (though, as noted above, many don’t go into teaching in the first place because relative salaries are low – see this EPI study for comparisons with similar fields). By the time people have entered the profession, they already have accepted that teaching is not a bling-bling job. Many more teachers leave because they feel like they aren’t given the support to do their job well: i.e. their schools are chaotic, their classes are too big, their books are never delivered on time, there isn’t support to meet kids non-academic needs that affect learning, and there is little support to improve their own instruction. If we want teachers to stay in the profession – and we want them to teach in the most disadvantaged schools – improving working conditions would be a better place to invest than performance bonuses. (Hat tip to Leonie Haimson's analysis of the Public Agenda and North Carolina teacher surveys.)

To sum up, if performance pay advocates want to push these policies forward, they need to develop more satisfying rationales than the three reviewed above. I would love to see these folks lay out a detailed theory of change. (And please point me towards these explanations if they already exist.)


Anonymous said...

Your BFF Joel Klein has an op-ed piece in today's New York Sun on the NY plan. The change theory seems to be "only if the best teachers help their colleagues identify challenges and improve will entire schools succeed and will teachers then become eligible for more pay. This will encourage individual teachers to do their personal best. It also will encourage collaboration and teamwork, as teachers share both responsibilities and rewards." Looks like capacity-sorting to me; how does this incentive build teachers' capacity to collaborate effectively?

jack phelps said...

Thought I'd chime in here as a fan of experimenting with performance pay in education.

1. I'll disagree with two of your arguments and affirm Bloomberg's claim. First, I was an investment banker for 3 years before starting an educational technology company; 40-45% of my comp package was incentive-driven so I've some experience with performance pay in practice, and I disagree with the claim that performance pay is merely a sorter. In industry, depending on what type of position you hold and what company you work for, performance is typically geared around more than a single number, such as sales dollars. Instead, devotion to the company in other ways is typically recognized: recruitment payouts, idea/proposal payouts, and other mechanisms help incent employees to be more than just the first two lines of their job description. The NYC plan gives localized groups the autonomy to experiment with paying for different kinds of performance, which is smart.

I can see, however, that without refuting your first claims (that teachers teach because of commitment to kids, work as hard as they can -- "give their best" -- and are unlikely to be responsive to financial incentives), it's tough to argue that performance incentives are more than sorters.

I'd say that sure, your average 1st year teacher is working his or her ass off just to get the kids focused. Among 1st years, pay might be a capacity sorter. But you think that as they get married, start saving for retirement, have their own kids and family to look after--basically their own, outside set of issues--most teachers still "give their best" not just while they're required to be in class, but in planning activities, developing content, reaching out to students or parents, and even analyzing quiz results to see which questions are weak and should be thrown out? There are a host marginal efforts teachers can make outside their 47 minutes of class time (where, I agree, they probably give their best), and additional performance pay may encourage them to do so. And it's ridiculous to say that a teacher trying to retire won't work a little harder his last few years to make sure he's saved as much as possible!

2. I agree--catty people are catty, and $1 of individual performance pay trumps $10 of nebulous organizational performance pay. However, you should note two things. First, tying everyone into the success or failure of an organization can help reduce income volatility, which is a good incentive for some, and second, it can help build a sense of community in the event of success. But most importantly, specific incentives -- as I noted above, things like recruitment pay (although that's a negative-sum gain NYC schools wouldn't want to engage in) or professional development "habit-sharing" pay (much more attractive) -- can align an individual's incentives with improving the organization in ways non-core to their job functions. Again, at-the-margin activities are strong candidates for effective uses of performance pay.

3. You said, "This argument assumes that there is a group of people out there who would teach but for their concern than their good efforts will not be rewarded financially." I'd state this the other way: The argument acknowledges that effective, experienced teachers leave for better-paying or somehow more-worthwhile activities, and speculates that $3,000 may retain top-performers who would otherwise make the trip to the suburbs or into another industry.

"...if you want to attract better people into the profession, you would be better off increasing base salaries." I could be missing some aspect of your point here, but that clearly wouldn't accomplish the other things we're hoping to do with performance pay.

"relative salaries are central to career choices, and I suspect that people choose careers on the base salary as opposed to the salary plus bonus potential" I suspect the opposite: I am used to seeing--in industry--"total potential comp" figures, and being told how many people earn how much. As an aggressive dude, I tend to assume I'll be able to work hard and be a top earner, which means total comp is far more important than salary. I'm not sure what everyone else does, but I don't buy that people are blind to bonuses.

How'd I do? Great blog--keep it up!

Anonymous said...

hi eduwonkette,
How do you think this works in the private sector? Is there actually such wide variation in performance based pay?

eduwonkette said...

hi jack and anonymous x 2,

thanks so much for posting these comments - i'll comment on your comments tomorrow.


Andromeda said...

With respect to #3, I'm a teacher (in a private school in Massachusetts), and I'm seriously contemplating leaving the profession; one of my major sticking points is lack of merit pay.

It's not that I want to be paid a lot of money -- if I did, I wouldn't have gone into teaching (and private school at that). What rankles is that one of the major ways respect is expressed in this society is money, and I want to be respected if I'm good at what I do. I want to be rewarded if I work hard and do a good job. The way the system's set up, I can't. Yes, there's an intangible reward in my students' learning and enjoyment, and yes, that's meaningful, but I would also like a tangible reward. I'd like my employers to say, in a meaningful way, that they appreciate my contribution. There's not really any way to get promoted in teaching, since everyone basically has the same job, unless you leave the classroom (which is a whole other rant -- how dumb is that, that the jobs highest on the totem pole are the ones farthest from the kids?). Since I can't get promoted, I'd at least like a raise, if I deserve one. And I can't get one. And I'm really starting to think, maybe I'd be happier in a corporate culture that values me.

Roger Sweeny said...

You seem to be saying that teachers don't respond much to financial incentives.

But just about every school system pays its teachers more if they take additional education courses. Most teachers complain that these courses do little or nothing to make them better teachers.

If teachers didn't respond to financial incentives, very few of them would take any of the courses. But many, many do.

Roger Sweeny said...

Speaking of responding to financial incentives ...

Around here your pension goes up every year you teach. But after 30-35 years (depending on a lot of things) it "maxes out." Most every teacher retires as soon as their pension reaches its maximum, not one year earlier or later. Sometimes this even means leaving in the middle of a school year.

Most all teachers are in their fifties when this happens, not 60 or 62 or 65 or 68.