Archived Information

CPRE Financial Briefs: Reinventing Teacher Compensation Systems - September 1995

Linking Compensation to Organizational Needs

The history of successful change in teacher compensation can serve as a guide for thinking through teacher compensation change today. If pay practices that endure are those that are well-aligned with broader changes in the economic and social climate, as well as the strategic needs of the school system, the obvious first step in designing a new teacher compensation structure is to identify the broader changes in the society, and parallel changes in the education system (Kelley 1995).

Economic Context

Today the broader economy is undergoing a dramatic change in the organization of the workplace and the manner in which employees are paid. The globalization of the economy is pressuring companies to drastically improve product and service quality, in a short time frame and often with limited resources. These same pressures are pressing upon governments and public agencies, including schools.

To produce these large-scale improvements, many companies are restructuring, often decentralizing their management systems and flattening their organizational structures. They are creating multi-functional work teams, giving them power and authority to accomplish organizational and team goals, while holding the teams accountable for results.

This new strategy for organizing work requires considerable ongoing investment in training. Team members are trained in technical areas, in new functional areas for which teams are responsible, and in the business skills needed to engage in self-management. Galbraith, Lawler and colleagues (1993) have termed these changes the "new logic" of organization.

Many companies following this new logic also have designed new forms of employee compensation to encourage and reward the skills needed in their new organizations-team-based leadership and management skills, technical and analytical skills to support continuous improvement, and skills needed to work across traditional functional lines.

As a result, concepts such as skills-based pay, competency-based pay, pay for knowledge, pay for professional expertise, collective rewards for adding value to performance, and gainsharing characterize new compensation strategies that have been developed and used successfully in private sector organizations (Firestone 1994; Odden and Conley 1992).

Under these strategies, individuals are not paid on the basis of seniority or for doing a particular job. They are paid based on the skills and competencies they develop to do the many job tasks they perform as work-team members. Further, a portion of each team member's pay can depend on the results of the team's effort. In short, compensation has been changed to align organizational incentives and rewards with the strategic needs of the workplace.


South Carolina's Performance Pay Plan

Established in 1984, The South Carolina School Incentive Reward Program (SIRP) is the longest running state-sponsored, group-based performance plan in the nation.

It gives performance bonuses to approximately 25 percent of schools. Schools must meet student achievement criteria to receive 80 percent of the full award for that year; an additional 10 percent is awarded to each winning school that maintains teacher and student attendance at or above 96 percent (Richards and Sheu 1992).

Schools are placed in one of five comparison bands based on percentage of students receiving free lunches; percentage receiving reduced-priced lunches; average teachers' years of education beyond the bachelor's degree; and percentage of students meeting or exceeding the readiness standard on a cognitive skills test given in all elementary schools.

Schools compete with other schools in the same band for awards, and the SIRP rewards improvement in student test scores. Awards of about $25-$40 per pupil have been distributed annually to winning schools, with the typical school receiving $15,000-$20,000. Award monies are used for instructional purposes by the winning schools.

South Carolina's banding system has been found to more equitably distribute funds across schools with different student SES levels. However, the banding system is also vulnerable to challenges of possible racial bias, since it sets lower expectations for schools serving lower SES students.

Education Changes

Current education reform trends reflect changes in the organization of work described above, thus suggesting a need to realign teacher compensation to these new ways of organizing schools.

Starting with the Effective Schools movement of the 1970s, recent reforms began requiring teachers to develop new skills and competencies and take on new roles. The Effective Schools movement required teachers to develop a set of "effective teaching" practices and to become involved with the principal in school improvement efforts. Today's education reforms expect teachers to acquire the professional expertise sufficient to teach a world-class" curriculum well to the diverse students in schools. Today's teachers also are being asked to take broader leadership roles in school management, organization and instruction. And in the past few years, teachers also have been asked to focus on results-student achievement-rather than just education processes.

In other words, major changes in the organizational needs of schools, generally similar to those in non-school contexts, have emerged over the past 30 years (Kelley) 1995). Just as in other organizations, these changes have produced significant gaps between the needs of schools as organizations and the current teacher salary structure.

Shifting pay increments from years of experience and loosely related education units to more direct measures of professional skills and competencies, adding a mechanism that encourages on-going training and assessment of instructional strategies, and perhaps adding group-based performance bonuses, are compensation changes that could link how teachers are paid with the evolving strategic needs of new school organizations (Conley and Odden 1995; Darling-Hammond 1996; Odden and Odden 1995; Odden 1996; Mohrman, Mohrman and Odden 1995).


Douglas County, Colorado's New Pay Plan

In 1993-94, Douglas County teachers, administrators, and community members developed a new pay plan. Implemented in 1994-95, the plan retains base pay and pay for additional coursework from the single-salary schedule. But it revises the years of experience component to provide annual increments only for years in which teachers' performance is judged "proficient" on established criteria as judged by their principals. In addition, the new plan adds four bonuses:

  1. A $1000 bonus for outstanding teachers selected by principals who evaluate teaching practice portfolios based on specific written criteria. The number of bonuses that may be awarded in any one year, and the number of awards any one teacher may receive over time is unlimited.

  2. A $250-500 bonus for learning one or more specific skill blocks which the district identifies and provides training for. Over a three-year period, teachers may participate voluntarily. After the three years, the skill blocks will be incorporated into the annual evaluation as skills required for all "proficient" teachers. In the first year, the district offered training for only one skill block, computer skills. The; number of blocks is expected to increase over time to about seven, with the next one focused on student assessment.

  3. A bonus for responsibility pay, which for most teachers is nominal ($35-$200 per year). Each school receives $4.50 per student for responsibility pay. A teacher committee is established at the school site to determine how the money will be distributed. In the first year, it compensated teachers for school committee leadership, coaching, curriculum development, and for advising student activities.

  4. A school-performance award bonus. Each school can voluntarily propose a school-wide project for improving student performance. Submitted at the beginning of the year to a committee of teachers and administrators, the proposal must identify planned activities and evaluation mechanisms. Bonuses are awarded to schools that successfully complete the activities, whether or not student achievement improved. This stipulation is intended to award creativity, innovation, and risk-taking. In the first year, every school participated (although a few individual teachers within the schools did not). The award per teacher depends on the number of schools and teachers that successfully complete the process.


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