What Kind of Bonuses Should We Give Teachers?

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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 Twitter or Facebook, if you’d like.

5 thoughts on “What Kind of Bonuses Should We Give Teachers?

  1. Ryan Hill

    Great post, Neerav. Very similar to how we think of things. At rise a few years ago, the principal decided to use his sir plus to create a similar plan. Idea isn’t to incentivize better performance; that would be insulting. Idea is to make it so that great teachers can stay in the classroom and, as you say, still buy a house someday.

    Our system is based on a number of factors, including test scores where available, including observed performance in the classroom, and, importantly, including surveys of team members to see how they feel about the person. Can’t have this become a competitive endeavor.

    In the system, a $300,000 surplus with a staff of 30 teachers gets divided up in a way where the average teacher receives $10,000, but great teachers receive more-maybe as much as $15,000-and the lower performing teachers receive less.

    There are also bonuses available for other things that aren’t so performance related. Teachers who coach other teachers, or coach a basketball team, or any variety of other extra activities, can make something like $20,000 for the more time intensive things. And there are longevity bonuses up to $5000 per year, which escalates from $1500 in the first year.

    We have been studying this pilot system for a few years, and it seems to be working well to retain our best people. One challenge is that as you retain your best people, it gets harder and harder to afford the system. If for no other reason than that their scale based base salary goes up. Good problem to have, but ultimately the economics may force the school to have to go with the smaller staff. Our bet is that more great teachers with bigger classes is better than less
    proven teachers with somewhat smaller classes.

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  2. John Cozzi

    I think your observations are on the mark. A couple of observations from the corporate world: (1) you are right that direct incentives really only work in less complex, repetitive processes and where fairly unambiguous outcomes can be identified (ie, a lot of sales jobs fit this bill); (2) while people want to be highly rewarded, most employees want to work in an organization where their contributions are recognized and supported in non-financial ways such as positive feedback, appreciation, inclusion, opportunity to grow (so the financial incentive needs to be respectful but otherwise is not the driver); and (3) retention incentives only work where the culture works, otherwise the economics usually are irrelevant.

    In practice, it’s philosophically not much different in a well managed, growing company than in your model for schools. People react to incentives but in complex jobs financial incentives are just one part of the calculation and they follow, not drive, good cultures.

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  3. Wm. Murphy

    I agree that your observations are very much on the mark. I wonder how your views on this have changed or not changed based on your experience with the implementation of TIF?

    I was fairly surprised with the large support for TIF across the country and in particular the level of participation/pro-TIF orientation I saw in New Orleans. We had plenty of the evidence at least as early as 2005 (when I was first exposed to it) that supports the thinking you’re sharing in this post. However TIF was implemented by some responsible and respected folks across the education landscape.

    Is there perhaps a time when an organization or system rather than the individual is motivated by a bonus (ie. large influx of cash). Perhaps when an organization believes it is strapped for cash (living at a subsistence level) and lacks capacity for systems thinking it will actually work against its self-interest by taking the temporary solution (cash) nor realizing it will cause greater dysfunction later?

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    1. nkingsl Post author

      Yes, I think cash can be used to disguise dysfunctional cultures…

      Per TIF, my take was that the PD / coaching cycles were the most effective part of the program, and that bonuses were less important….

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