I’ve never been to attracted to teacher performance bonus schemes.

See below for why, as well as what type of bonuses I think would be much more effective.

When Performance Bonuses Work

Generally speaking, I think performance bonuses work best in two cases:

(1) Rewarding employees for executing redundant, low complexity tasks; or

(2) Providing significantly large bonuses (20%+ of salary) to provide major incentives for high-level employees in companies or divisions where enterprise performance is really just the aggregate of a lot of individual performance (sales, trading, etc.).

The above is based on a mix of research (books like Drive) and personal observation. Of the two, I’m more confident in using performance bonuses in the first situation (low complexity tasks) than I am in the second (large bonuses to star individual performers).

When Retention Bonuses Work

Retention bonuses reward both longevity (you usually have to stay with the org for 3+ years) as well as basic levels of performance (you only get the reward if you perform well enough to still be employed).

Retention bonuses are best used when you’re more focused on retainining high-perfomers than  trying to increase their performance through financial incentives.

What Kind of Bonuses Should We Give Teachers? 

Most teacher bonus programs are designed to give relatively small bonuses (below 10% of salary) for excellent performance on very complicated tasks.

This is the worst of both worlds.

If we are going to give teachers performance bonuses, they should be of a significant size so as to at least really tap into individuals wells of achievement, financial, and status seeking.

That being said, I’m skeptical this is the right way to approach bonuses, especially in the high-performing charter sector, where teacher retention is a much bigger issue than teacher performance.

There are probably more gains to be had in keeping people longer than attempting to inducing them to perform at even higher levels.

How Might You Structure Retention Bonuses? 

This blog is probably not the best place to develop sophisticated financial models, but the following should give you the gist of how a very simple model might work:

1. Let’s assume a beginning teacher makes 45K.

2. I’d cut this to 40K and then try to attract people based on a (presumably) strong culture + deferred compensation down the road.

3. I’d say: We’ll give you a 30K bonus if you stay with us for four years and in the last two years of your teaching your are in the top 50% of teachers in our evaluation system. If you’re below, that we’ll still give you a 15K.

4. Financially, this will likely be pretty close to a break even. For the teachers who get the full bonus, you’ve lost 10K (20K saved in compensation, 30K spent on retention bonus). For teachers who get the lesser bonus, you’ve gained 5K (20K saved in compensation, 15K spent on bonus). For teachers who leave after two years or so, you’ve saved 10K.

Why I Think This is a Good Idea

1. It solves the right problem: retention rather than performance. If high-performing charters got four years out of their best teachers the performance of the sector would likely increase.

2. 30K is a lot of money! That’s a good portion of a down payment for a house. I think that much money at the end of the tunnel would affect behavior, especially when a second year teacher is thinking: that’s just two more years, and then I get 30K.

3. The performance component will likely not people off (few people predict that they will be in the bottom 50%). It also both acts as insurance (paying low performers less) and cost saver (makes them model work much better).

4. You could also iterate on it in a bunch of ways: (1) only offer it to teachers after X years of performance (2) shorten or lengthen the investment period (3) increase or decrease the amount of the bonus. Different combinations might work in different markets / different organizational cultures.

All told, I think this would be a much better way to increase performance of teachers and schools.

But Maybe I’m Wrong

Let me know why in the comments. Or publicly lambast me on or Facebook, if you’d like.