PUNCHBACK: ANSWERING CRITICS
Is the Private Sector a Model for Merit Pay?
BY RICHARD ROTHSTEIN
t has become commonplace for education policymakers to argue that the way
to improve teacher quality is to pay teachers more if they are more effective.
This, the policymakers say, is how the private sector works.
But it is hard to find private-sector examples for such merit pay proposals.
True, an exception is stockbrokers and sales clerks who are paid on commission. But we all know this system can engender high-pressure tactics that benefit the
commission-paid workers at the expense of their customers. Used-car salesmen may
be an extreme case, but recent prosecutions of Wall Street brokers show that conflicts between the interests of incentive workers and their clients are always potentially present and must be carefully monitored.
I
Similar problems would arise in
schools, where merit pay systems, when
based heavily on test scores, give teachers improper incentives to emphasize
tested over equally important untested
aspects of the curriculum. And do we
want school children to be pressured in
ways that might be effective in getting
adults to buy a used car?
Tying Outcomes
When quality of work is important, corporations do not generally evaluate college-educated employees by numerical
goals. For most professional jobs, it is
hard to isolate the contribution of a single employee. Quantitative criteria are
rare, even for group goals.
Consider management consulting.
The pay of consultants cannot reasonably be tied to numerical outcome goals,
such as gains in a client firm’s stock price
relative to overall market indices. It
would be impossible to determine what
role consultants’ advice played in a company’s success or failure. Also, stock
prices can rise and fall. A collapse this
year might result from bad advice given
five years ago when the price was rising.
Should the compensation of consultants
who gave advice to Silicon Valley
dot.com start-ups be based on skyrocketing stock prices in 1999 or on worthless
equities in 2002?
Should a 4th-grade teacher be rewarded for better scores of her students
this year, rather than basing her pay on
whether 8th-grade scores of her students
collapse, four years later, because a solid
foundation for future success was sacrificed for short-term compensable gains?
Such difficulties in tying professional
work to short-term measurable outcomes mean that for professionals in the
private sector, decisions on merit pay are
mostly subjective. Firms typically base
6 The School Administrator December 2005
merit pay on qualitative, not quantitative evaluations, relying upon input
from supervisors, co-workers and even
subordinates.
When it comes to merit pay, the
practices of many retail firms toward
their professional employees also do not
fit the stereotype of pay-for-quantity alleged by those who want schools to
adopt performance-based measures.
Wal-Mart, for example, asks every managerial and administrative employee to
negotiate annual goals with a supervisor.
For individual raises, Edison principals recommend small merit raises based
on classroom observations, judgments
about how well teachers work in teams,
how they involve parents and the quality of student work portfolios, including
test scores for reading and math, where
appropriate. Such increases average only
about 3 percent of pay.
Costly Oversight
An ironic aspect of the demand for
teacher merit pay is that those who advocate it often also claim schools have
too much bureaucracy, with too much
money being spent outside the classroom. Yet a workable merit pay system
requires much more administration than
schools now can afford.
In the private sector, when pay is
based on merit, managers devote many
hours, sometimes as much as a week, to
each employee’s evaluation. Young law
firm associates have senior partners for
“The Edison Schools, for example, does not
tie individual pay directly to test scores.”
Raises are then based on management’s
judgment of how the employee related
to customers and to co-workers and on
management’s subjective evaluation of
work quality, recognizing that even good
work can have poor results because of
factors beyond an employee’s individual
control.
Pay for performance in private
schools also does not resemble ideas being floated for public education. Certainly, elite academies do not use test
data to calculate teacher pay. Nor, typically, do private schools for the less privileged.
Even for-profit education firms don’t
use merit pay in a way that many education policymakers imply. The Edison
Schools, for example, does not tie individual pay directly to test scores. Edison,
however, does give schoolwide bonuses,
based not only on test scores but also on
measures of parent satisfaction and supervisory evaluations of programs in music,
art and other difficult-to-test outcomes.
mentoring, supervision and modeling,
where the partner-to-associate ratio is
typically one to one. Business executives
rarely have more than five subordinates
reporting to them. At newspapers, editors often supervise no more than 10 reporters. But in public schools, it is common for one principal to oversee 25
teachers, often with little or no administrative assistance. No merit system that
is based on careful supervisory evaluation, relying heavily on qualitative performance measures, can succeed with a
1:25 supervisory ratio.
Perhaps pay for performance could
help improve public schools. But if the
private sector is the model, designing
merit pay requires more care than yet
seems evident.
Richard Rothstein is a research associate of the
Economic Policy Institute and a visiting professor
at Teachers College, Columbia University. He is
the author of Class and Schools (Teachers College
Press). E-mail: rr2159@columbia.edu