Mike McMahon AUSD
BOE Meetings Assessment Facilities FinancesFavorite Links

Source: The School Administrator Web Edition

Experimenting With Teacher Compensation

Innovations piloted in districts include skills-based salary schedules, school performance awards and incentives for tougher assignments

By Allan Odden and Marc Wallace


2010 Study on Teacher Effectiveness

Today’s educators are under pressure to dramatically improve student learning. Empirical research shows high-quality teachers are the most critical factor in accomplishing this goal—more so than demographic and classroom factors.

Because teacher pay is by far the largest part of most school districts’ operating budgets (often 50 to 70 percent), it is compelling to ask if those dollars can be linked to improving teacher quality and, ultimately, student performance.

Improving teacher quality means ensuring that:

  • All teachers have sufficient knowledge, skills and instructional skills to boost student learning
  • Shortages in key subject areas (mathematics, science, technology) and hard-to-staff schools (high poverty, low performing and geographically isolated) are eliminated
  • School systems do a better job of recruiting, developing, placing and retaining their teacher work force

States and school districts are restructuring teacher pay systems to enhance teacher quality based on these three elements, including raising teacher pay levels, creating performance-pay structures and even paying bonuses to teachers when student performance improvement goals are met.

A New Era

During the 1990s, states and local districts began experimenting with new approaches to teacher compensation. Different from traditional single-salary schedules and merit pay, these innovations included knowledge- and skills-based salary schedules, school-based performance award programs, bonuses for certification by the National Board for Professional Teaching Standards, incentives for teachers in subject-area shortages or assignments in low-performing or high-poverty schools, and signing bonuses.

Many of these approaches are being adopted across the country, portending a new era in teacher compensation. The main difference this time around is that teacher pay is not being cast narrowly as a pay issue, but rather as a strategic issue with a direct bearing on the mission and objectives of education.

Indeed, in its 2004 report “Teaching at Risk: A Call to Action,” the National Commission on Teaching and America’s Future supports overall pay raises, performance-based raises and bonuses to ensure the highest quality teachers and teaching.

Raising Pay

Many states and urban districts see low salary levels as one aspect of the teacher quality problem. For example, Arkansas, California, Iowa, New Mexico and North Carolina concluded that teacher shortages and a decline in overall teacher quality were due at least in part to salary levels that had not kept up with the market. Urban districts such as Baltimore, New York City, Long Beach and Milwaukee determined that teacher salary levels had to increase in order for them to compete for teacher talent with their surrounding suburban districts, nearly all of which paid higher salaries.

When salary increases were proposed, however, state and district policymakers faced another dilemma: Research in the 1980s showed that across-the-board raises for all teachers does not significantly improve teacher quality. To be effective, teacher pay increases must be provided through some type of market- or performance-based structure.

In a market-based structure, salary increases are used to draw in and retain teachers in areas where there are shortages, such as in high school mathematics, science, and technology and/or in hard-to-staff schools, such as high poverty or geographically isolated schools.

Districts such as Baltimore, Charlotte-Mecklenburg, Cincinnati, Houston, New York City and San Francisco, and states such as California and North Carolina provide market-based incentives for high-demand teachers. Sometimes the extra pay is permanent; sometimes these teachers start at a higher step on the salary schedule but top-out at the same level as other teachers; and sometimes they receive a one-time signing or hiring bonus.

While more research is needed to show how these relatively recent initiatives are working, they clearly target problems that need fixing.

Performance Pay

A second approach to enhancing teacher quality with pay has focused on pay for performance.

Pay for performance has two primary forms. The first uses salary increases to reward teacher performance. This approach is most frequently referred to as knowledge- and skills-based pay.

The second rewards teachers with bonuses for improvements in student performance, usually schoolwide. This approach is often called school-based performance awards.

Knowledge- and skills-based pay ties pay increases to teacher quality levels. Such raises can be driven by professional development activities, two-tier licensure, National Board certification, achievement of skill levels defined by standards-based assessments, student learning gains, or some combination of these factors. New salary schedules often replace the traditional single-salary structure based on years of service (steps) and education units/degrees (lanes).

States and school districts have varied a great deal in creating performance pay structures. Some have tried modest changes, others have adopted extreme makeovers, and still others have made more middle-of-the-road changes.

A Modest Approach

Douglas County, Colo., was the first district in the country to adopt elements of performance pay. The system, adopted in 1994-1995, retained the bulk of the district’s traditional single-salary schedule and added several knowledge and skill bonuses. Teachers were required to obtain a satisfactory evaluation in order to earn their annual years-of-experience increase, but they also had opportunities to earn one-time bonuses of $300 to $500 by pursuing new competencies such as training in a computer “office suite” or learning how to score student work to a performance standard.

The district also created an outstanding teacher reward based on a portfolio submission. This award provided an initial annual bonus of $1,000 that increased for subsequent years.

Teachers were not required to participate in the knowledge and skills bonus program, and the bonuses rarely represented more than 1 percent of the total salary budget. Nevertheless, the skill areas identified were popular with teachers and their enthusiastic response to the plan showed that pay for knowledge and skills could work.

Extreme Makeovers

Some states and districts have implemented pay structures so different from the originals that they may be considered extreme makeovers.

For example, the Cincinnati and Steamboat Springs, Colo., districts, as well as the Vaughn Next Century Learning Center in Los Angeles, based teachers’ pay increases on a standards-based teacher performance evaluation. To earn the highest pay, teachers needed to show, through the assessment, that their instructional expertise met the highest benchmarks of newly created performance evaluation systems. The evaluation system in Cincinnati was generally based on the work of Charlotte Danielson, author of Enhancing Professional Practice: A Framework for Teaching. Iowa and Steamboat Springs are designing their own systems.

The Cincinnati and Vaughn Next Century Learning Center teacher compensation systems identified 22 different teaching standards organized into four teaching domains, as well as three or four specific behavioral elements for each standard, thus covering 66 different elements of teachers’ work. Every three to five years (though annually at Vaughn), administrators collect data on each of the elements, observe classroom practice several times and determine an overall teacher performance score.

The road has been rocky in Cincinnati. After the district implemented its new program, it encountered communication and technical implementation problems. For example, many teachers had not attended the training on the new system and subsequently were unclear about how it worked. Drop-in observations rather than scheduled observations created anxiety among teachers, while the quality of the implementation by principals and assessors varied in the first years. In addition, the transition was such that Cincinnati teachers faced substantial salary decreases if their performance scores placed them on the new schedule at a category with a lower pay level.

The implementation glitches and potential salary loss led teachers to conclude that the evaluation system was not effective, even though research indicated high levels of reliability and significant links between teacher evaluation scores and improved student learning. After three years, the teachers voted out the leaders who had helped design the system and then voted down the pay system itself.

Iowa’s statewide program, also based on teacher assessment of skills but relying more on teacher participation in professional development activities, immediately faced funding problems due to the onset of the national recession in 2000. This led to significant underfunding of the salary schedule and lack of funding to develop the entire assessment system. The system continues to move forward, however, because the governor has insisted that the legislature continue funding, even at a reduced level.

The Steamboat Springs program has been delayed by three factors: inadequate funding, a delay in establishing standards and rubrics defining teacher performance (knowledge and skills), and a lack of alignment with professional development and instructional improvement strategies.

The Denver program, with a 59 percent teacher approval rating as recently as March, became the most recent teacher salary structure to undergo an extreme makeover. Rather than base all pay increases on the result of a standards-based performance evaluation, the Denver plan has multiple factors to trigger pay increases and no salary maximum.

The Vaughn Next Century Learning Center, a preK-5 charter school in an impoverished section of Los Angeles, continues its program, modifying it marginally for each of its first five years and designing a more dramatic change for 2004-2005 when it adds middle grades to its program. Vaughn uses an annual performance evaluation, based somewhat on the Danielson Teaching Framework. Research conducted by the Consortium for Policy Research in Education shows that the higher the evaluation score, the more student learning gains produced; it also indicates the teachers support the program and want it to continue. (See related story about Denver and Vaughn.)

Districts face a dilemma of whether to pursue a modest approach, as did Douglas County, or attempt an extreme makeover, as did Cincinnati, Denver and Vaughn. The modest approach is more feasible and more likely to have teacher support but is unlikely to produce significant improvements in student learning. The extreme makeover, by contrast, may lead to significant benefits, but only when it works, and so far success is principally limited to the Vaughn Charter School. That leaves yet another option—the middle-of-the-road approach.

Middle of the Road

A middle-of-the-road option might be less risky than the extreme approach and more effective than the modest approach.

Minneapolis’ new professional pay plan retains the single-salary schedule and provides teachers with several lucrative options for adding to that base, such as improving student performance, taking focused academic credits, taking content courses in subject-area shortages, taking district-provided professional development courses focused on critical skills teachers in the district need, getting national board certification and assuming additional responsibilities. These salary additions can total as much as $27,000 per teacher.

An alternative would be to retain the single salary schedule and use the scores on a standards-based performance evaluation—or participation in district-sanctioned professional development—as a basis for increasing the base salary by a percentage that rose as the teacher’s performance or skill level rose. While the district was perfecting the operation of the more complex evaluation system, the percentage increases for the performance-based add-on could be small. As the evaluation system became more smoothly operational, those percentages could increase.

A variation on this theme was implemented during the 2003-2004 school year in the 2,500-student Plymouth, Wis., school district, which has four successively higher single-salary schedules corresponding to each of four successive performance or skill levels. The district is pleased with the result, but an assessment of its impact has not been conducted, and a referendum to put more money into the new salary structure unfortunately did not pass.

Performance Bonuses

The second manifestation of pay for performance is school-based performance awards, which provides bonuses to teachers for improved student performance. States such as California, Kentucky, Florida, and North Carolina, and districts such as Charlotte-Mecklenburg, Steamboat Springs, Houston and New York City, created several versions of school-based performance awards on the basis of pre-set targets for improved student learning. When the school meets the target, everyone receives a bonus, often including support staff and administrators.

Knowledge- and skills-based pay and school-based performance awards complement each other as components of a complete strategy for paying teachers for performance. Knowledge- and skills-based pay focuses on the individual teacher, rewarding him or her for human capital value—the worth of the skills and knowledge they bring into the classroom.

School-based performance awards programs reward teams of teachers for what they have produced as a group in the way of improved student learning and achievement.

Future Forecast

These examples illustrate the huge variation in how far districts are willing to go in terms of changing the pay structure and defining and assessing teacher performance in order to improve student achievement. Despite this new strategic direction, we don’t yet know which particular structural changes will be most successful or whether a new commonplace approach, like the single-salary schedule that emerged in the 20th century, will emerge in the 21st century.

Looking to the future, we can make several observations:

  • Pay for performance is not going away. State standards-based education reforms, No Child Left Behind and budget pressures will continue to focus on improved student learning, high-quality teachers and teacher pay—a huge part of any operating budget
  • We can expect to see many middle-of-the-road variations. No single approach has emerged as the best, so we can look for more experimentation with different alternative salary structures
  • More knowledge about what works and what doesn’t will accumulate—if states and school districts encourage and then allow their innovations to be researched. As accumulated experience is documented and analyzed, we will be able to take more certain steps in designing and transitioning to true pay for performance systems
  • Pay for performance will be extended to classified and administrative staff. The logic is that support staff and administrators also contribute to the accomplishment of an organization’s mission and objectives and thus should be rewarded for their efforts

Recommended Actions

Creating fair, effective teacher compensation plans is a real challenge that requires the superintendent, the union or teachers’ association, school boards and perhaps even state policymakers to answer tough questions:

  • How radical should the change be?

  • The question demands that schools, districts and states work together to develop a clear strategy for teacher pay and develop a meaningful consensus on it among all key parties.
  • How far and how fast do we need to go in pay for performance?

  • Success requires that we set realistic goals and establish detailed game plans for the transition. Our game plan should have concrete milestones so we know how to get there and when we have arrived. The game plan needs realistic pacing. We could set mid-term goals at one level of change and longer-term goals for more radical change.
  • What is the union’s or professional association’s role in this and how do we engage them?

  • Many school districts have found it essential to engage the union and professional association leadership early on in a meet-and-confer process. This often involves using a design team composed of administrators, union leaders and members of the bargaining unit in a process of mutual study and design. By the time the design team makes its recommendation, there are no surprises at the negotiating table.
  • Is pay for performance just for teachers, or should it apply to certified and administrative staff as well?

  • Contemporary management theory advises that support staff and administrators contribute to organizational objectives, so it makes sense to extend pay for performance to them.
  • What major pitfalls do we face and what steps can we take to remove them?

  • Talk to people who have done it. Find out what they have experienced and what they would do differently a second time around. Seek guidance from those who know what works and what doesn’t.
  • How long will it take to do this?

  • No one knows for sure. The time required depends, in part, on the magnitude of the change envisioned. Substantial change in the schedule and the development of standards-based performance assessments could require a multi-year commitment: six months to one year to design, one year to pilot and pre-test, and one year to fully implement. A simple change, such as adding a performance bonus could be implemented very quickly.
  • How do we make the transition to pay for performance?

  • Experts in the field of compensation strongly agree that a skillful execution of the transition is the most critical factor determining success or failure—even more critical than the initial design. We advise educational administrators and leaders to treat piloting and implanting new pay programs as a major project. You need to set mission and objectives for the effort. You need to lay out a project plan that captures all critical paths and milestones. People and financial resources must be prepared and ready at each step in the plan.

Answer these questions correctly and you will achieve a pay system that results in the highly qualified teachers you need and student learning gains you want. Answer them incorrectly and you will have a difficult time getting a second chance.

Allan Odden is a professor of educational leadership and policy analysis at the University of Wisconsin, 1025 W. Johnson St., Suite 653a, Madison, WI 53706. E-mail: arodden@wisc.edu. Marc Wallace directs Teacher Effectiveness through Compensation, a compensation consulting firm in Lake Bluff, Ill.


Send mail to mikemcmahonausd@yahoo.com with questions or comments about this web site.
Last modified: December 10, 2004

Disclaimer: This website is the sole responsibility of Mike McMahon. It does not represent any official opinions, statement of facts or positions of the Alameda Unified School District. Its sole purpose is to disseminate information to interested individuals in the Alameda community.