Pay Increase Performance Review

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					Merit Pay Systems as a Reform Measure

             Kim Luzius

              EAD 845

      Michigan State University

             Spring 2004


       Merit pay systems reward employees in proportion to their talents, skills, and

efforts (Desander, 2000). A new wave of attempts at merit pay in the field of education

function as yet another reform effort aimed toward the bottom line of improving student

achievement. A number of different components work together to form a somewhat

successful merit pay system. Yet even a well developed system tends to fall short of its

desired outcomes. The complexities of teaching and learning fail to lend themselves to

such a pay scheme no matter how detailed the plan.

Evolution of the merit pay system

       Typically, school systems use a single salary schedule to pay teachers. The

development of this schedule in 1921 helped to resolve the salary inequities experienced

by women, minorities, and elementary teachers (Odden, 2001). Years of experience

coupled with degree level determine an individual’s placement on the single salary

schedule. In general terms, the concept of merit pays refers to “…any device that adjusts

salaries or provides compensation to reward higher levels of performance” (Ellis, 1984).

Merit pay policies give employees extra compensation above the base salary for work

and contributions that exceed pre-established criteria, often which include increased

student scores on standardized tests (Ramiriz, 2001). The current emphasis placed on

educational reform spawned the revival of the merit pay system which first appeared in

1908 in Massachusetts. Under accusations of ambiguity, favoritism, and inequity, the

plan died, only to appear again during the 1920’s as a result of scientific management, in

the 1960’s with the launching of Sputnik, and again in the 1980’s after reports like A

Nation at Risk (Desander, 2000). In 1999 at the third National Education Summit, the

governors and business leaders in attendance vowed to set up competitive salary

schedules tying teacher salaries to student achievement and increase salaries for

professional development only when based on standards linked to student learning (Holt,

2001). Because these individuals view the educational transaction as a simple interaction

between teacher and student, they believe improvement results from reconstructing the

teacher by encouraging, through an incentive of more money, the acquisition of new

skills (Holt, 2001). Critics of the single salary schedule view experience and educational

attainment as irrelevant (Ramirez, 2001). Research shows that the advantage of

experience diminishes after the first four or five years of teaching, and that increased

educational attainment does not necessarily translate into increased effectiveness

(McCollum, 2001). The critics say outcomes matter most and should determine teacher

rewards (Ramirez, 2001).

       The No Child Left Behind law passed in January 2002 by President Bush requires

each state, beginning no later than the 2005/06 school year, to administer annual

standardized tests to all third through eighth grade students. These tests results help to

determine yearly adequate progress with those schools failing to make progress

responsible for the consequences. This change in the law opens the door for merit pay

systems as a way for school systems to use student test scores to reward teachers with an

increase in pay (Glenn, 2002). Laws like No Child Left Behind force schools to make

incredible gains in a short time frame. Odden (2001) argues that the current single salary

schedule conflicts with today’s reforms goals aimed at doubling and even tripling student

proficiency. Private business, however, has demonstrated the ability to raise performance

levels and many of those companies use a compensation system aligned with their

organizational strategies rather than one based on seniority. The utilization of a more

strategic compensation structure allows schools to tie teacher pay to education reform

goals and strategies (Odden, 2001).

       The merit pay system serves many purposes with an ultimate goal of improving

student achievement. Supporters believe it holds teachers accountable and provides the

necessary incentive for superior teacher performance that results in quality instruction

(Desander, 2000).

Objectives met by a merit pay system

       Merit pay or performance-related pay aims to recruit and retain employees as well

as motivate them to work at their peak performance level (Chamberlin, Wragg, Haynes,

& Wragg, 2002). A study conducted by Jacobson (as cited in Chamberlin et al., 2002)

found that school districts that paid attractive salaries to teachers in mid-career

experienced low rates of turnover. By rewarding employees for peak performance,

organizations utilizing merit pay attract a large number of individuals to their applicant

pools. Jacobson (as cited in Chamberlin et al., 2002) established that school districts in

New York offering more money than neighboring districts attracted higher quality

applicants. Eberts, Hollenbeck, and Stone (2002) studied a school that implemented a

merit system in order to increase student retention and, as a result of increased retention,

increase achievement. Another supposed benefit of merit pay systems lies in the idea that

this type of pay schedule makes employees more aware of and more committed to

organizational goals (Chamberlin,, 2002). When employees meet goals important

to the organization, they receive additional compensation. Some merit systems provide

additional compensation to teachers working in high poverty areas or in subjects plagued

by teacher shortages (Keller, 2004). The merit pay system addresses the public

perception that teachers refuse to offer up anything for a salary increase (Keller, 2004).

Voters may possibly approve a tax referendum if school districts force teachers to

demonstrate efficiency and effectiveness in order to receive increases in pay. Without

increased tax revenue, teachers can expect to receive nothing more than the standard one

to seven percent pay increase (Keller, 2004). Georgia’s plan awards teachers not only for

student achievement but also for faculty collaboration (McCollum 2000). The merit pay

plan in place in Iowa strives to improve teacher mentoring, award bonuses to schools

meeting student achievement goals, and establish rigorous teacher evaluation systems

(Hardy, 2003). Proponents of merit pay systems suggest that they meet many other

objectives as well such as:

       weakening union strength
       advertising the organization’s core values
       changing the culture of the organization
       enhancing accountability
       saving money by decreasing the number of automatic salary increments
       providing a choice as to whether or not to opt for a higher work load
       encouraging teachers to become involved in evaluations
       building community support for local schools and teachers
       enhancing job satisfaction (Chamberlin, et al., 2002)

Many versions of merit pay systems exist for those interested in this type of reform


Types of merit pay systems

       Merit systems provide employees with compensation above a base salary. Some

merit systems stand alone and supplement the regular salary schedule, while others work

in conjunction with the single salary schedule so that teachers who receive high

evaluation ratings move up the scale more quickly. Some school districts require all

teachers to participate in the merit pay system while others offer it on a voluntary basis

(Ellis, 1984). The proposed plan in Denver requires an automatic enrollment of new

teachers into the merit plan while veteran teachers have seven years to decide whether or

not to participate in the new system or remain on the current pay scale (Keller, 2004).

Merit systems of the past tended to award teachers on the basis of input criteria such as

classroom management skills, preparation of lessons, knowledge of subject matter, and

instructional techniques. Most of today’s systems use output as the foundation for

additional compensation “…whereby the degree of progress in achieving specified goals

determines the amount of benefits that the teacher receives” (Ellis, 1984).

       The ways in which employees earn additional money differs considerably. The

group payment scheme attempts to overcome the problem of individual performance-

related pay and rewards schools meeting accountability goals (Chamberlin, et al., 2002).

In Kentucky, the schools received the money and the staff voted on whether to share it

amongst themselves or spend it another way. Other plans single out individual teachers

for rewards (Glenn, 2002). Teachers in Douglas County Colorado employ an outstanding

teacher program in which teachers submit portfolios or other documentation to

demonstrate student improvement (Weil, 2000). Some school districts offer bonuses for

expertise such as National Board Certification (Odden, 2001). Incentive pay remunerates

teachers for helping the school district meet certain goals or solve specific problems

(Ellis, 1984). It includes taking on additional responsibilities, attending professional

development workshops, working at high priority locations, teaching in a subject short of

teachers, and even outstanding attendance. Teachers in the Douglas County Colorado

school district involved in a unique school based effort receive compensation for their

increased responsibilities based on individual school plans (Weil, 2000). Douglas

County teachers also earn bonuses for acquiring and demonstrating proficiency in skills

identified by the district as important. In Tennessee, teachers ranked highly effective by

the state receive a $5000 bonus if they move into one of Chattanooga’s high priority

schools. Highly effective teachers currently in those schools receive the bonus if they

remain at the school (Glenn, 2002). Students’ test score gains averaged over a three year

period determine a teacher’s effectiveness level. With differential staffing plans, as

salaries increase teachers take on additional responsibilities at each level of advancement

(Ellis, 1984). Responsibilities range from supervising beginning teachers, to assisting

peers, to curriculum development. With this type of plan individuals experience the

prestige that comes with a higher rank and more responsibilities. This prestige serves as

an intrinsic motivator. Differential staffing also helps lessen the likelihood of feelings of

resentment between colleagues. Those making more money take on increased

responsibilities and colleagues perceive them as “earning” the additional compensation

through increased efforts (Ellis, 1984). The knowledge and skills based approach to

merit pay enhances the professional expertise of teachers by rewarding them for meeting

certain professional standards thought to boost student achievement (Odden, 2001).

Supporters of this method taut the similarities between it and the single salary schedule

claiming that teachers with equivalent credentials receive the same compensation. Some

teachers earn more than others as evident on the single salary schedule yet no teaching

jobs pay more than others. The plan developed for use in Cincinnati incorporates

different ways to earn increased pay with an emphasis on knowledge and skills.

Cincinnati’s Plan

       In Cincinnati, the school district’s administration, devoted to improving the

quality of its’ workforce while raising student achievement levels, worked in conjunction

with the union to develop a new salary schedule that included a bonus linked to school

performance and a knowledge and skills based component (Odden, 2001). Teachers are

placed in one of five performance categories: apprentice, novice, career, advanced,

accomplished. To move up teachers must know the content to be taught, understand how

students learn, and develope effective instructional and classroom management strategies.

They must ensure that every student learns. Explicit standards in these areas guide the

process so expectations as to how to move up on the scale remain clear After a fixed

number of years in the first two categories, teachers who fail to advance lose their jobs.

Principals as well as peers evaluate the teachers on the standards to determine whether or

not the teacher advances. Because principals varied in their implementation of the

performance-based evaluation system, the district chose to provide principals and peer

assessors with intensive training to perfect the evaluation system. Teachers also earn

supplements for acquiring National Board Certification, earning a masters degree in the

area in which they teach, working in an area suffering from a teacher’s shortage, and

taking on a leadership role. The school performance portion of the plan uses Ohio’s

proficiency tests as a measure with improvement benchmarks linked to the performance

goals of the district’s strategic plan. The plan went into effect for the 2002/03 school

year. Although it sounds impressive, the odds stand against a program such as this one.

Arguments against a merit pay system

       Although merit pay systems exist in some form or fashion in a few school districts

across the country, numerous reasons exist to argue against such compensation systems.

Performance related pay schemes such as merit pay systems work best with the

establishment of clearly measurable outcomes. Teaching fails to lend itself to such

clearly measurable outcomes unless student test results serve as the sole criterion of

success (Chamberlin,, 2002). When test results serve as the sole criterion of

success, employees neglect other important elements of the job like teaching students the

importance of responsibility or the dangers of drugs. When we compare education to

procedural tasks like assembling furniture, we neglect the crucial role of teachers in

helping students become productive citizens (Holt, 2001). Teachers may possibly

concentrate attention on students most likely to improve their test scores while ignoring

others. With a major emphasis on standardized tests, the long-term overall goal of

improving student learning tends to fall to the wayside. Student performance on a

standardized test measures more than just the responses of an isolated individual but of

the entire school system at that moment as it impinges on the student (Holt, 2001).

       Merit pay systems lean toward the subjective side making them unreliable. The

performance of the student depends on factors outside of a teacher’s control like whether

or not the students eat breakfast, whether or not they participate in extra-curricular

activities, and whether or not they relate well with other students. Teacher performance

depends on extraneous factors that include the amount of time devoted to preparation, a

sense of ownership of the subject matter, the tone of the class and school, and their

understanding of the curriculum (Holt, 2001).

       Herzberg’s study of employee motivation explains that factors such as good

working conditions and salary fail to promote psychological growth. Based on this

information, Jacobson concluded it more productive to improve intrinsic rewards of

teaching like recognition of the value of teachers’ work and the amount of class time

devoted to students rather than provide extrinsic rewards such as increased pay

(Chamberlin, et al., 2002). Vroom’s expectancy theory states that prospective rewards

motivate employees only if they believe that working harder leads to improved

performance and greater rewards and they are attracted by the idea of more money.

Because of the multifaceted relationship between teachers’ efforts and results, factors that

include overcrowded classes and poor resources may demoralize teachers and prevent

them from gaining anticipated performance-related rewards (Chamberlin, et al., 2002).

       No conclusive findings exist to prove that performance-related pay leads to

improved motivation, or retention and recruitment of high quality staff. Salary affects

recruitment but not the choice of teaching as a career (Chamberlin, et al., 2002). The

merit pay plan rewards certain goals over others. A problem arises when individual

teacher goals fail to match the goals of the school. Teachers also experience difficulty

meeting expectations for teacher performance when those expectations are numerous,

vague, or conflicting (Chamberlin, et al., 2002). When evaluations serve as the

determinant for merit raises, teachers may find it difficult to discuss problems with

supervisors who conduct the evaluations. They may even play up to the evaluation in

order to receive the reward making it difficult for supervisors to obtain a true picture of

the teacher’s capabilities (Chamberlin, et al., 2002).

       Cost functions as a deterrent to the implementation of merit pay systems.

Evaluations work to determine whether or not individuals deserve a raise. The expense

lies in the money distributed to teachers as well as in the cost of administering the

evaluation process used to determine who receives pay increases. Evaluating

performance requires meetings, lesson observations, and other administrative costs. The

costs will be realized either in the salaries of additional staff hired to complete the

evaluations or in the cost of other worthwhile activities left undone (Chamberlin, et al.,

2002). The constant shortage of funds in the public K-12 schools differs from the private

sector where customers bare the costs of raises provided to those employees (Chamberlin,

et al., 2002). The imposition of quotas that limit the number of teachers eligible for the

raises in order to cut costs hurts teacher morale. The use of a merit pay system as a

reform measure to improve student achievement contains many pitfalls as evident by the

number of concerns addressed above.


       In today’s environment of educational reform, merit pay functions as another

avenue of reform aimed at pushing teachers to increase student achievement to levels of

near perfection. Although merit pay at first glance appears as a quick fix to assist school

districts in meeting the daunting goals of No Child Left Behind, its past failures serve as

testimony to its ineffectiveness. Most districts discontinue using the merit system within

six years (Chamberlin, et al., 2002). The information presented by Newmann (1996) and

Berends (2002) in their respective books on education reform prove that factors such as

school culture, leadership, communication, participatory decision making, and a

commitment to intellectual quality determine whether or not reform measures chosen to

improve student achievement actually work.


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                Complexities                           student test
                 of Teaching                              results
                and Learning

            Merit                                                         Increased
            Pay                                                            student


                         Subjective                              Employee
                         Evaluations                             Motivation

Merit pay fails to lead to increased student achievement due to the many variables that

affect the outcome of a merit pay system.

Merit Pay

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