Skip to content
ascd logo

Log in to Witsby: ASCD’s Next-Generation Professional Learning and Credentialing Platform
February 1, 2001
Vol. 58
No. 5

How Merit Pay Improves Education

Georgia's pay-for-performance school improvement program encourages school communities to design their goals and strategies for success.

In 1991, Georgia passed legislation to provide bonuses to schools that demonstrate exemplary performance and faculty collaboration. The program has grown in popularity, with more schools applying each year. To successfully complete the program, a school must show evidence of student achievement and a record of progress in attaining educational goals (Cornett & Gaines, 1994). The participating schools design their own objectives and must achieve at least 80 percent of their goals to receive the monetary award. The award goes to the school as a whole, and each school's faculty decides whether to allocate the funds for improvements within the school or for salary bonuses.
W. C. Abney Elementary School first applied and completed the selected objectives in 1996–1997 and continues to participate successfully in the award cycle. Many of Abney's teachers were assigned to the new C. A. Roberts Elementary School, which elected to participate in the program for the 2000–2001 school year.

The Story of Merit Pay

Interest in merit pay has been slow to develop in the United States. In the early 1800s, rural communities usually provided only room and board for teachers. Teachers had to meet very few educational requirements, and salary (or the lack of it) was not a real concern. Increasing urbanization and public interest in education resulted in the development of educational and certification requirements in the early 1900s. Merit pay was introduced after World War I, but most plans disappeared during the depression in the 1930s. In general, during the first half of the 20th century, a teacher's gender, race, and level of instruction were more likely to determine salary than equity or performance.
By 1950, however, approximately 97 percent of the school systems in the United States had adopted a single salary schedule (National Center for Education Statistics, 1995). School systems also developed pay scales that rewarded teachers according to their levels of education and years of experience. Most schools still use this traditional reward system.
Pay for exceptional performance surged in popularity following the 1957 Russian launch of Sputnik and a concern about science education in the United States. By the early 1960s, more than 10 percent of school systems were experimenting with some form of merit pay, but the lack of sustained interest and funding resulted in the loss of half of these plans by 1972. After the 1983 publication of A Nation at Risk, which recommended that teacher salaries be "professionally competitive, market-sensitive, and performance-based" (National Commission for Excellence in Education, p. 30), the idea of merit pay again resurfaced (Clardy, 1988). Almost all state educational systems now implement some form of merit pay, but most plans are appended to the traditional pay rewards for years of experience and educational levels.
Educators have tried many forms of merit pay, including career ladders, extended contracts, pay for extra duties, and pay for special knowledge or skills. The current trend is to reward teachers who meet measurable goals in student progress (Cornett, 1995). Industry's efforts at performance-based pay scales have proven most effective when an employee's performance or production is almost entirely a result of the employee's skill or application of labor. Merit pay scales are much less successful when the employee's performance is dependent on several factors out of the employee's control, and often an outside factor "may be more of a determinant than is the employee's ability" (Twomey, 1993, p. 2). Teachers may be autonomous within their classrooms, but their success is affected by the socioeconomic conditions in their communities and the administrative and other support structures within their schools, school systems, and states. In addition, many teachers are motivated by intrinsic factors rather than by extrinsic, or financial, rewards (Tharp, 1991).
Nevertheless, some forms of merit pay appear to improve the quality of students' educational experiences. Observations, anecdotes, and teacher perception surveys indicate that successful programs clearly identify the school's strategic goals, take working conditions into account, develop accurate measurements, and offer meaningful rewards (Clardy, 1988). In most such programs, participation is voluntary. Many observers conclude that participating teachers view the programs positively, while nonparticipants do not.
Researchers have conducted comprehensive evaluations of incentive programs in only a few states (Cornett & Gaines, 1994). Rigorously measuring the success of merit pay programs has been difficult because most of them do not last more than six years. Merit pay programs are discontinued for several reasons: supporting legislators may leave office, educators implement the programs unfairly, teachers' unions refuse to endorse them, competitive programs create poor teacher morale, or the programs are costly and difficult to administer (National Center for Education Statistics, 1995).
Schools usually find the traditional reward plan easier to administer because budgets can be set in advance and the plan creates little controversy. Research has shown, however, that increased educational attainment, a large factor in the traditional system, does not necessarily equal increased teacher efficacy and that the advantage of experience fades after the first four or five years of teaching (Farnsworth, Debenham, & Smith, 1991; Firestone, 1994; National Center for Education Statistics, 1995). Researchers have been trying to find ways to reform pay scales. The Consortium for Policy Research in Education sponsors the Teacher Compensation Project, which looks at various pay systems and encourages states and districts to try alternatives to traditional salary schedules (Bradley, 1998; Kelley & Odden, 1995).

Georgia's Plan

Because Georgia wanted to reward overall school improvement, the state education department designed a program to challenge schools to make improvements and maintain exemplary status. Georgia's program requires that the staff of the participating schools establish and demonstrate the attainment of four challenging goals.
Academic achievement goals must account for a minimum of 40 percent of the proposal. Student achievement is the sole criterion for success in this goal. Currently, schools design their own measures of student achievement, choosing from among various kinds of standardized tests and locally designed tests that provide baseline data for comparison.
The other goals are resource development—improving all available resources, including finances, volunteers, materials, and equipment; educational programming—instituting curricular improvements that support growth in the students' academic achievement and entire educational experience; and client involvement—increasing parental and community involvement with the school.
Schools provide in-depth, comprehensive assessments of their schools, staffs, student demographics, and the community context so that the state can evaluate each school according to its unique situation. Within the program's general guidelines, each school's faculty designs a school improvement plan. The amount of the reward is currently calculated at $2,000 for each certified staff member, but the school as a whole receives the financial reward, and the faculty and staff decide how the reward will be distributed.
The program avoids the pitfalls of many other merit pay programs. Combining criteria for developing both successful merit pay programs and successful school improvements, it emphasizes teacher accountability for student achievement and supports strategies that researchers have identified as positive predictors of student achievement: increased parental participation, successful utilization of community resources, and new program development.
By empowering teachers to propose how they will make the improvements, the plan engages teachers in state educational reform movements, a necessary step in implementing changes (Cornett, 1995). By allowing each school to design its own program, the plan shows an appreciation for diverse goals and situations that many have doubted possible in a merit pay system (Firestone, 1994). The program is noncompetitive; all schools may apply and receive monetary awards if they fulfill the requirements. There are no quotas. And if the school properly designs the distribution of the funding, all teachers (and other staff members, if chosen) equally participate in the benefits.
Georgia's program follows the trend of tying teacher and school incentive programs to comprehensive restructuring efforts (Cornett & Gaines, 1994). Utah's 21st Century program, like Georgia's, requires schools to design their own objectives (Walsh, 1998). School systems in Colorado, Illinois, Indiana, Nebraska, New York, Ohio, and Wisconsin are trying new forms of teacher compensation connected to accountability (Blair, 2000). In Minneapolis, Minnesota, teachers recently agreed to a contract linking pay to performance (Lonetree, 2000).
Georgia's program is different from most others because it is voluntary and involves add-on compensation, not total salary restructuring. Teams of educators throughout the state—teachers, administrators, and central office staff—evaluate the proposals. Two evaluators make suggestions for improving the proposals, returning them to the school for revisions. Three to five evaluators assess the revisions. Once accepted, these proposals are written contracts with the state.
Survey data from participating schools indicate positive results for long-term improvements in many areas, including faculty collaboration, parental involvement, and overall school climate. Also, levels of student achievement on the Iowa Test of Basic Skills, given statewide to students in grades 3, 5, and 8, were significantly higher over a three-year period for students in participating schools when compared with levels of achievement in nonparticipating schools that have the same demographic makeup. These survey and achievement data indicate that the pay-for-performance program provides an effective incentive for school improvement.

Why the Plan Worked for Us

Georgia's pay-for-performance program was a successful tool for improving W. C. Abney Elementary School. We were able to achieve 90 percent of our goals the first year, so our success was also a source of pride. Ninety-four percent of our staff voted to apply to participate the following year, and 100 percent voted to apply again for the third year. Most staff members are willing to commit the time and energy to developing goals and providing the extra documentation. Those less eager to do the extra work just for the money, or even for the accomplishment, do not want to let down their peers by failing to carry their part of the workload.
Our school reaped benefits beyond the financial rewards. First, the program helped us streamline our standard school improvement plan. By specifying fewer objectives, we focused more on the outlined improvements. Second, it obligated us to use more than casual observations to evaluate our results. It inspired us to delve more deeply into the implications of our standardized test results and to integrate preparations for standardized tests into our curriculum. In the past, we spent many hours working on strategies to improve students' test scores, but we always failed to connect our results to systematic methods that would hold each teacher accountable for using the strategic plan. The pay-for-performance program forced us to follow our plan. In short, our participation in this program enhanced our unity and focus.
We can attribute much of our success to the staff cohesiveness we had cultivated before attempting this project. Our previous experience with site-based decision making had helped us develop mutual support and confidence and a group philosophy about teaching and learning. Our staff had moved beyond a general congeniality to the professional collegiality necessary for working effectively toward common goals


Although teachers at both elementary schools plan to continue their participation in this program indefinitely, I can see possible reasons for deciding not to participate: designing new ways to accomplish goals may become increasingly difficult, the amount of time required for documenting each year's proposal may become prohibitive, and the program may change or be discontinued. I hope that the program will remain voluntary and continue to be a method for rewarding exemplary schools and not become a yardstick by which to evaluate every school.
Proposed changes to the structure of the program include limiting the evaluation of academic achievement goals to state-mandated tests. This effort to standardize the assessment of a school's success could damage one of the major merits of the program: requiring the school community to design its own criteria for success. If standardized tests are the only indicators of success, the tests and the limited criteria they measure will become the primary—and limited—focus of the school's efforts, a problem in all states that have adopted this notion of accountability.
Another proposed change is to shorten and simplify the application process, making it possible for schools to apply without seriously committing themselves to the process. So many schools may be able to participate that the limited pool of funds may become diluted, and the financial reward may become so minuscule that it will no longer be an incentive.
Those studying the issues of merit pay have concluded that programs that fundamentally alter pay structure on the basis of performance can produce fundamental changes (Cornett & Gaines, 1994). I hope that these fundamental changes will improve both schools and their students, but I fear that the proposed changes in Georgia's highly effective program will alter its basic tenets and jeopardize its future.

Blair, J. (2000, September 27). Cincinnati teachers to be paid on performance. Education Week, 20 (4), 1, 15.

Bradley, A. (1998, February 25). A better way to pay. Education Week, 17 (24), 29–31.

Clardy, A. (1988). Compensation systems and school effectiveness: Merit pay as an incentive for school improvement. (ERIC Document Reproduction Service No. ED 335 789)

Cornett, L. (1995). Lessons from ten years of teacher improvement reforms. Educational Leadership, 52 (5), 26–30.

Cornett, L., & Gaines, G. (1994). Reflecting on ten years of incentive programs: The 1993 SREB (Southern Regional Education Board) career ladder clearinghouse survey. Atlanta, GA: Southern Regional Education Board. (ERIC Document Reproduction Service No. ED 378 163)

Farnsworth, B., Debenham, J., & Smith, G. (1991). Designing and implementing a successful merit pay program for teachers. Phi Delta Kappan, 73 (4), 320–325.

Firestone, W. (1994). Redesigning teacher salary systems for educational reform. American Educational Research Journal, 31 (3), 549–574.

Kelley, C., & Odden, A. (1995, September). Reinventing teacher compensation systems. CPRE Finance Briefs, 6 [Online]. Available: www.ed.gov/pubs/CPRE/f6/index.html

Lonetree, A. (2000, November 17). Movement building to link teacher pay to performance. Minneapolis–St. Paul Star Tribune, pp. B1, B7.

National Center for Education Statistics. (1995). Salaries of teachers, indicator of the month. Washington, DC: U.S. Department of Education. (ERIC Document Reproduction Service No. ED 384 339)

National Commission on Excellence in Education. (1983). A nation at risk. Washington, DC: U.S. Department of Education.

Tharp, J. (1991). When merit pay fails: Searching for an alternative. NASPA Journal, 29 (1). 75–79.

Twomey, D. (1993). Value-added merit pay. (ERIC Document Reproduction Service No. ED 357 416)

Walsh, M. (1998, February 4). Governor seeks accountability, rewards. Education Week, 17 (21), 26.

End Notes

1 See www.doe.k12.ga.us/budget/pfp_evidence_00.pdf for the most recent evaluation of these data.

ASCD is a community dedicated to educators' professional growth and well-being.

Let us help you put your vision into action.
Discover ASCD's Professional Learning Services
From our issue
Product cover image 101034.jpg
Evaluating Educators
Go To Publication