Limits to Performance Pay

Time in between two OU modules, H800 and H807, leaves me some time to catch up on interesting articles, such as one in New Scientist (9 April 2011) on the alleged effects of performance-based payment schedules, commonly applied in the finance sector.

Making teachers’ pay dependent on reaching certain outcomes is frequently hailed as a way to increase the quality of teaching and education.  However, as New Scientist reported, the scientific evidence for the effectiveness of performance pay is surprisingly weak.  Even more, performance pay may prove counteractive and actually reduce teaching quality.



How does performance pay sound?

A central argument for the use of performance pay is that it increases external motivation, the motivation to do something because of the attached reward.  Conversely, intrinsic motivation refers to behaviour based on what we like or are interested in, without an obvious reward attached.  It appears however, that these two forms of motivation are not independent of each other, but inversely related.  This means that introducing external motivators such as performance pay actually reduces the internal motivation, a phenomenon known as the ‘overjustification effect’ (Deci, 1995).

There are several reasons why this overjustification effect may kick into place.  Performance is notoriously difficult to measure, and performance-related systems often end up measuring the wrong things, such as short-term results and outcomes instead of long-term vision and behaviour.  A teacher’s job is more than only achieving satisfactory test results.  Ignoring this multidimensional character of teaching may lead to  “teaching to the test”, a catchphrase used to describe narrowing of curriculum in an effort to elevate student test scores. Moreover, teachers work as members of a team. Introducing performance-related rewards at the individual teacher level might reduce incentives for teachers to cooperate.

Second, gaming behaviour is rife and there may be unintended consequences, like doctors becoming reluctant to accept the most serious cases (study in Annals of Internal Medicine, quoted by New Scientist).  Podgursky and Springer (2007) provide an overview of some documented ‘opportunistic’ strategies, like assisting students with test questions and ensuring that low-performing students are absent at tests.

A possible explanation for the overjustification effect is that performance-pay related systems come across as coercive and controlling (cognitive evaluation theory).  Teachers may encounter so many rules and administration that their motivation and creativity are being sapped.


Finally, performance pay does appears to be useful in some cases, like for repetitive tasks, but it’s unfit for improving learning in complex environments like schools and classrooms. Teachers should be attracted to and retained in the teaching profession with a decent and competitive salary, but maintaining and fuelling their intrinsic motivation seems the best way to optimize their performance.

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