If there is one thing the lords of Wall Street and their most hapless victims agree on these days, it is that there was a disastrous misalignment between the incentives of bankers and traders and the interests of their clients and shareholders.
It should not be so surprising that much of the failure of our public schools can be traced to a similar misalignment, a key difference between the two being that while Wall Street's compensation structure encouraged reckless risk-taking, that of our public schools rewards timid time-serving. Under the present system in most public schools, compensation reflects only the number of years a teacher has been in the classroom and the number of advanced degrees she has earned.
When a company can't measure its employees' productivity, it often bases pay on factors like experience and credentials that can be determined and are supposedly associated with it. The problem with this approach on education is that we know from a wide and rarely disputed body of research that years of experience and degrees obtained are simply unrelated to a teacher's effectiveness in the classroom. Yet we pay teachers only on the basis of factors unrelated to whether their students actually learn.
Performance pay is an attempt finally to align compensation with academic outcomes. Performance pay can and does take various forms, and it's more than likely that a program's design is instrumental to its effectiveness.
The wide variation in types of performance-pay policies means that some programs might have a large impact on student proficiency while others might not be effective at all. For example, which performance indicators will monitor and appraise employee performance? Should receiving a cash award depend on meeting a set goal, or should it be enough to do somewhat better than one's peers? Who should be included in a pay-for-performance system? How often and in what form should bonus awards be distributed to school personnel?
Consider New York City's School-Wide Performance Bonus Program. It provides bonuses of $3,000 per union member to participating schools that make enough progress on the city's accountability metric, which takes into account student performance and improvements in the state's math and English exams; more positive answers from students, parents and teachers to questionnaires on school conditions; and an external evaluator's assessment of the school's learning environment.
When an eligible school performs well enough to receive a bonus, a committee within the school distributes the bonuses among teachers and staff as it sees fit. Since most schools choose to distribute the bonuses somewhat evenly among employees, the bonus program is best thought of as a group incentive program. American Federation of Teachers President Randi Weingarten has endorsed the bonus program as a model for the rest of the nation.
Other performance-pay policies are different from the School-Wide Performance Bonus Program. Some provide bonuses directly to individual teachers rather than all teachers in a school. Some policies focus exclusively on standardized test scores, while others do not consider them at all. Instead of providing direct bonuses, the Teacher Advancement Program, which operates in several school systems across the country and which President Obama has called a model, creates career ladders for the best teachers, who are promoted to mentoring positions with higher pay and greater responsibility.
The components of these policies matter greatly because each one assumes something different about the way that teachers and schools operate. If teacher motivation is of the greatest importance, then rewarding individual teachers is likely to be the way to go. But if it is more important for the better teachers to nurture the ones who are starting out or struggling, then group-incentive programs are preferable.
Standardized test scores are our most objective measure of student proficiency, so they are sure to play a role. But we might also want to adopt other measures of effectiveness, since test scores are imperfect and can be manipulated by teaching to the test or outright cheating. This is an area of considerable scholarly interest, and we expect firm answers to the issue of relative effectiveness sometime soon.
The current compensation system for teachers is so obviously ineffective that it has few remaining defenders. We need a different approach, and performance-pay offers an attractive new framework. But we now need to focus on the details. That we have a lot to learn about how to structure these programs is a strong argument in favor of both patience and experimentation.
Marcus A. Winters, a senior fellow of the Manhattan Institute, last week released Part One of a paper, co-authored with Vanderbilt University professor Matthew G. Springer, on the success of New York City's performance-pay program.