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Since the 1990s, state governments alarmed that state universities were making college unaffordable, concerned that they weren’t focused on improving college graduation rates, and worried that they weren’t bringing more minorities into lecture halls, began offering performance incentives in order to change how universities operated. In Indiana, for example, Purdue University and Indiana University could earn $5,000 for every student that graduated with a baccalaureate degree, while the Hoosier State’s community college system could get $3,500 for every student that garnered an associate’s degree.

But so far, such incentives have not improved college completion, affordability, or minority participation. Why? Because none of the performance incentives are large enough to actually reverse the influence of the core funding streams of state appropriations, restricted grants and donations, and financial aid to students from state and federal governments — all of which either reward universities for the number of students attending their campuses or for developing programs outside of the core mission of educating students. Since state appropriations as a percentage of overall university dollars is also in decline, the incentives are an even smaller portion of the dollars garnered from state governments and a miniscule portion of overall funding. Unless state legislatures are willing to fully restructure how state universities earned their income — and stand up against the wrath of alumni among their own voter bases in the process — they would never achieve their reform goals.

This lesson from state university reform efforts also applies to the matter of current teacher performance pay efforts in elementary and secondary education. While it is wonderful to begin developing such programs, they are currently nibbling around the edges of how teachers are actually paid. The plans that have been put in place so far — including New York City’s performance pay experiment — never really touched And until teacher compensation is completely reformed, performance pay will not accomplish the goals of rewarding high quality teachers for their work, spur teachers to improve student achievement, or even change the anti-intellectual and anti-data culture that is endemic in American public education.

My colleague, Steve Peha, offers his own reasons for why performance pay has had issues in the piece below. Steve’s right about some things. But the argument that teachers are already doing the best they can and only need to be taught how to be better fails to consider the fact that some teachers just aren’t capable of actually doing the job does little for kids subjected to educational malpractice and neglect. He also overstates the opposition to the use of value-added measurement of student test data in teacher performance; surveys have shown that younger teachers agree with such use and accept the inevitability of its use in measuring how they improve student achievement. With value-added being found to be scientifically valid and largely accepted by all but hardcore opponents of school reform as useful in evaluating teacher performance, veterans will either accept it now or be forced to accept it later.

Steve also too willingly embraces the myth that teachers don’t value (and aren’t motivated by) money. Teachers may not be working for big upfront paychecks (and can’t be since that isn’t offered until late into their careers), but they do value money and are motivated to stay in their jobs even when they are burned out because of it. The fact that teachers unions and veteran teachers are fighting efforts to end tenure and cut back define-benefit pensions — two of the big long-term income streams in traditional teacher compensation — prove that the Paychecks-Doesn’t-Matter myth is just that.

The biggest problem is that Steve and most other foes of performance fail to understand the role of compensation structure in influencing the effects of performance pay. This is a problem that extends to Daniel Pink, whose book, Drive: The Surprising Truth About What Motivates Us, has become their rallying text. The reality is that everyone’s work — including that of teachers — is as much influenced by reward and how it is put together. And in education, the structure of compensation is as influential in shaping what teachers actually do as personal motivation. And current performance pay programs make this point crystal clear.

At this point, teacher participation in performance pay initiatives — including New York City’s effort and the ProComp effort in Denver — is voluntary. There is no district in which teachers are being forced from traditional teacher compensation plans into a performance-based regime. Thus there is not enough evidence to show whether performance pay can affect systemic change on a wide scale.

The fact is that most of these performance pay plans have not been around long enough to actually begin working. The New York City initiative, for example, only existed for four years; the Denver effort was only started five years ago. The only large-scale (and so far, successful) performance pay initiative that has been in existence for longer than five years is the TAP program started by Lowell Milken — and even that program is only 11 years old.

Then there are the actual rewards given by the performance pay plans themselves. When you look at the actual bonuses compared to the annual income teachers are getting (and the value of their overall compensation), you can see why the programs aren’t working. Teachers participating in New York City’s performance pay initiative only got between $1,500 to $3,000 for either improving school performance by 75 percent or meeting the performance target for each school; for a veteran New York City instructor who has seen union-negotiated pay increases of more than 23 percent in the past decade and now earns as much as much as $100,049 a year, the bonus can be the equivalent of just 3 percent of pay. In contrast, performance bonuses doled out in Corporate America can often be the equivalent of as much as a third of annual pay (and usually come along with performance-based pay raises).

This is typical for most teacher performance pay experiments: Achieve major results in exchange for miniscule dollars that don’t actually factor into the income stream of teachers who already earn a comfortable and guaranteed living. And such small bonuses aren’t going to work. The dollars (and other incentives) are often not large enough to motivate a teacher to work harder, especially if they have gotten all of their existing pay packages. Why would a veteran teacher, who already has tenure, a $1 million pension annuity, near-lifetime employment and protection from reductions in force, work harder for a mere $3,000?

The reality is that while teachers may not be the most economically-sensitive professional group, they do understand economics. As pricing of a good or service represents its value to consumers, pay assigns value of work to employers. Through the current compensation system, teachers have learned that what American public education values seniority, degree attainment, seat time and protection from economic dislocation. And current experiments in performance pay teach them that harder work for better results has none at all. This is especially true for younger teachers, who, like their peers in the private sector, no longer expect to teach for the rest of their lives.

Teachers don’t just want meaningful rewards in the form of pay; this is a reality that current performance pay experiments don’t address. The younger generation of teachers coming into the profession are frustrated that the only career path in teaching is from one classroom to another; save for TAP (which offers a path for highly-qualified teachers to become master instructors), most performance pay plans don’t offer new career path options or change the emphasis on seniority. The socially entrepreneurial among them are even more frustrated by both performance pay experiments and current teachers compensation systems because there is no reward for stepping out and developing innovative programs that can improve student achievement. Performance pay plans don’t offer grants to innovative teachers to start their own schools or own programs.

Of course, most performance pay experiments can’t offer any of this. One reason is that they are often poorly designed. The more-important reason is because they aren’t incorporated into the system of teacher compensation. So they are meaningless to veterans (who have gotten all the benefits of the system), slightly worthwhile to less-senior instructors who want more money and a meaningful career path, and unappealing to socially entrepreneurial teachers.

Can performance pay work? The positive results from TAP and ProComp so far tell us that it can. But the performance pay structures must be better-structured. The benefits must be largely enough to be worthwhile for teachers to pursue. It must appeal to the desires of socially entrepreneurial teachers. It must be part of efforts to create a more-rewarding career path that is rewarding to teachers. Most importantly, performance pay must be an integral part of the teacher compensation system. And that means restructuring how we currently structure teacher pay and performance evaluation.

The problem with traditional teacher compensation is that it has the wrong carrots and absolutely no sticks. The packages– including tenure, defined-benefit pension annuities and seniority-based privileges — reward teachers for seat time, for remaining in a job for years regardless of the quality of their work. There’s no reward to young highly-qualified teachers for good-to-great work. There’s little reward for talented veteran teachers — either in terms of bonuses or opportunities for innovation and career elevation — for top performance over time. And there is no incentive for districts to remove laggard teachers or to create environments in which good-to-great teachers get support, career opportunities, and chances to advance and improve their skill-sets.

Meanwhile there are no sticks. Current performance management systems only evaluate teachers based on scheduled observations — which are subjective, doesn’t allow principals to see teachers day to day (when they actually do their work) and often aren’t conducted anyway — instead of on objective evidence of student achievement. Since the consequences of poor performance only come during the first two-to-five years of a teacher’s career, veteran instructors are essentially insulated from scrutiny; districts only take the arduous and expensive effort to fire laggards only a teacher is so atrocious that her work (or more often, her extracurricular actions) can no longer be ignored or passed along to schools within the system.

The status quo is costly to high-quality teachers, to principals, to districts and to taxpayers. Worse of all, it subjects kids to educational abuse and malpractice. It cannot stand.

Keeping traditional teacher compensation is not the solution for improving student achievement. But the current performance pay experiments don’t offer a high-quality alternative. What is needed is a compensation structure that rewards high-quality teachers for their work immediately upon entering the profession, provides opportunities for teachers to advance themselves (and ultimately, student achievement) as creators of cultures of genius in schools, and gives chances to improve performance over time. It must include rigorous performance management, the use of student data in evaluating work, and the development of professional development that helps continue the development of good-to-great teachers. And we need the sticks (including quick dismissals and performance pay) to help weed out the teachers who shouldn’t be in classrooms from those who should stay.

At this point, all that we know about performance pay in education is that it is poorly structured and integrated into traditional teacher compensation. It is critical to continue developing performance pay and making the rewards more meaningful. And it must be part of an overhaul of a teacher compensation system that doesn’t work for anyone, especially our kids.