Considering Merit Pay: Motivation, Fairness, and Retention

Vol. 11 No. 7


There has been considerable discussion and debate in private school board rooms, administrative offices, and faculty lounges in recent years regarding “merit pay” (also known as “pay for performance”). While this type of pay arrangement is common in virtually every environment outside of schools, it is still a relatively novel concept in the private-independent school world. Today, we’d like to take a look at issues of motivation, fairness, and retention with respect to merit pay systems.


It is often said that merit pay will motivate teachers to maintain high performance levels. We don’t believe that this is the case. As management theorist Frederick Herzberg noted more than 60 years ago, money is a “dis-satisfier,” not a satisfier. This means that while insufficient pay will decrease morale and performance, the converse isn’t true—i.e., high-performing teachers won't perform any better if they are on a pay-for-performance compensation plan`. Therefore, paying teachers for performance in hopes of motivating higher performance is, we believe, a misguided effort.


“If pay-for-performance isn’t going to be a motivator, then why do it?” you may ask. One answer, we believe, has to do with the question of fairness. On the one hand, paying all teachers the same (or at least, giving them the same annual increase), intuitively appeals to schools’ collegial cultures. At the same time, though, it raises questions of fairness within the culture. That is, is it fair (as judged from the standpoint of the school’s mission, culture, and values) to give a mediocre teacher the same increase as one who is knocking herself out day and night to meet the needs of her students and colleagues to the fullest? This is a question that each school needs to grapple with.


We believe that retention is a primary issue in pay-for-performance discussions—i.e., will having a merit-pay program make it easier for your school to attract and retain high-performing talent? As Gen-Y and the Millenials are increasingly interested in pursuing greater immediate influence over their salary path, we find merit pay increasingly becoming a retention issue. All else being equal, if the school across town provides an opportunity for an up-and-coming talent to grow his/her salary aggressively in the coming years—whereas your school only provides “salary ladder” increases to everyone on an equal basis—are you at risk for losing your burgeoning talent pool?


Merit pay isn’t right for all schools and all cultures. We believe, though, that it is a question that all schools must consider. We hope that the above provides a prism or framework for having such a candid discussion in your school.

Additional ISM resources of interest
ISM's Monthly Update for School Heads Vol. 9 No. 3 Make a Merit-Based Pay System Work for Your School
ISM's Monthly Update for Business Managers Vol. 9 No. 2 Merit-Based Pay Is More Than A Trend

Additional ISM resources of interest for Gold Consortium members
I&P Vol. 38 No. 4 A Simple Merit-Pay Approach for Private-Independent Schools
I&P Vol. 30 No. 5 Pizza, Compensation, and Faculty Culture: Is it Time for Merit Pay?
I&P Vol. 36 No. 15 Merit Pay and Bonuses for Private-Independent School Teachers: Boon or Bust?

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