More than a dozen years ago, one of the most important education and labor leaders of our time, Albert Shanker, posed a question that our nation has been grappling with ever since. "What would happen," he asked in a speech before the Pew Forum, "if we had a system where you had pay for performance in the sense of a series of graded sets of rewards, depending upon student outcome?"
Mr. Shanker envisioned a major restructuring of teacher compensation, one that would give teachers in the schools that made the most progress large bonuses, while teachers at schools that made little or no progress would receive no bonuses at all. Progress, he proposed, would be based on "gains in student outcomes, the value added [by the school]." What Mr. Shanker described was a model that rewarded success, a system that encouraged innovation and punished failure.
In business, these are everyday ideas: successful firms pay more for what's worth more: they create incentives that motivate employees to work harder and more effectively; when they're failing to produce results, they shut down. But these ideas are foreign to public education, which has long been characterized by life tenure, lock-step pay, and seniority, even though these values stifle motivation and provide no incentive for teachers to work harder and better. Over the years, many have argued that monetary incentives have no place in education systems. Mr. Shanker knew better. He pointed out that teachers were motivated by things besides money, but he concluded that it's very rare to find systems that work well without accountability and financial rewards.
Last week, we took a major step toward turning what Mr. Shanker and other dreamers have imagined into reality — at long last changing the incentive structure in our schools and starting to pay teachers more for demonstrating strong results. Mayor Bloomberg and I joined with the president of the United Federation of Teachers, Randi Weingarten, to announce a performance bonus plan for teachers.
Under our school-based bonus program, teachers at schools whose students achieve significant, measurable academic progress will receive cash bonuses. Teachers at schools that fail to help students learn and progress will not.
This program is a shift of dramatic and profound importance in that it ties a portion of teacher pay directly to improvements in student achievement, as measured by our sophisticated new accountability system.
It will make history in that it not only encourages individual performance but also motivates teachers to work together to make the entire school successful.
This school-based incentive structure, in effect, borrows an important concept from business — stock options. When companies give stock options to their employees, they attempt to align their employees' interests with those of the business' shareholders. If a company's stock rises, both the people who work at the company and the people who hold stock in the company experience a direct financial benefit. This gives employees an incentive to behave in ways that will enhance performance and thereby boost the company's stock price.
If only one employee is successful, the stock price is unlikely to rise significantly, just as in our plan, if only one teacher is successful, a school's students are unlikely to perform substantially better.
Only if many are successful and only if the best teachers help their colleagues identify challenges and improve will entire schools succeed and will teachers then become eligible for more pay. This will encourage individual teachers to do their personal best. It also will encourage collaboration and teamwork, as teachers share both responsibilities and rewards.
In his Pew speech, Mr. Shanker described what a faculty meeting would be like at school with this sort of incentive system: "It's very important to imagine what teachers would say to each other," he said. "What do you think they would do about colleagues who were likely to drag down the school? What would they say if they didn't have enough math teachers in the school? Do you see how things like protecting teachers who aren't performing and a single salary structure become less desirable?"
Our plan does not mean that differences in individual teacher's performances don't matter — schools are entirely free to differentiate, rewarding the most successful teachers with more pay. Schools could even use the lure of cash bonuses to attract great teachers to take jobs on their faculties.
Since schools are held accountable for student performance — with real monetary rewards — the individual school should decide how best to distribute the rewards. This approach is fully consistent with our overall goal of transforming the system to a much more dynamic model of school-based empowerment from a top-down, bureaucratic decision-making.
The incentive program goes into effect this school year. In its first year, 200 of our highest needs schools will be eligible to participate and the bonuses will be privately funded. This will help these schools — some of the toughest in our city — to attract and retain great teachers, who can then be rewarded as their schools improve outcomes for students. We plan to double the number of schools participating in year two and begin funding the program with public dollars.
Paying for performance has long been a dream. This administration, working with the UFT, is making it a reality. I am confident that rewarding excellence will make a difference for teachers, for schools, and, most importantly, for the people who matter the most in public education — our students.
Mr. Klein is the chancellor of New York City's Department of Education.