Why Carrot-and-Stick Incentives Get An “F”, An Answer to The New York Times

Incentives for Panel Evals

The New York Times recently published an editorial calling for teachers to be punished or  rewarded based on the academic growth of their students, ignoring the fact that individualized incentives fail to increase overall performance or quality—either in education or in industry.

The science on this is clear: The most recent research includes a 2010 Vanderbilt study showing that the performance of teachers who were offered a bonus of up to $15,000 was no better than that of teachers who were offered no incentive. And a recent survey of 40,000 teachers funded by Scholastic and the Bill and Melinda Gates Foundation found that only one-quarter of teachers felt that performance pay was likely to have a strong impact on student achievement; instead, what the teachers valued the most, according to the study, was “supportive leadership, family involvement in education, access to high quality curriculum and student resources, and time for collaboration with colleagues.”

The teacher survey is particularly instructive because it underscores the disconnect between how merit-pay is supposed to work—as a carrot or stick to incentivize employees to improve their performance—and what employees say actually motivates them.

Merit-pay skeptics among senior managers note that merit pay appears to work during flush times when there is lots of money to go around, i.e. when just about everyone gets some merit pay. The big problem occurs during down times when there is less money to go around. Suddenly, instead of “incentivizing” the majority of employees, smaller bonus pools actually serve to demoralize the majority who do not benefit from merit pay.

Indeed, the bigger problem with merit pay was outlined by W. Edwards Deming, one of the

W. Edwards Deming in Tokyo

W. Edwards Deming in Tokyo (Photo credit: Wikipedia)

leading management thinkers of the 20th century who helped inspire the Toyota production system and who helped turn around the U.S. auto industry in the 1980s. Individualized merit pay, Deming argued, fosters short-term each-man-for-himself thinking over collaboration and organizational excellence—the incentive schemes behind many of the reckless gambles that led to the recent financial scandals, whether subprime mortgages, Libor rate-rigging or money laundering, are a case in point.

Of course, the real problem with merit pay is that it assumes that good organizations, including schools, are those that hire a lot of “star” performers, and that the biggest stars will work harder when chasing the carrot of merit pay. This view completely ignores the importance of the overall system in which individuals work—and which management controls–and the fact that all organizations, good ones and bad ones, have some stars and some laggards. Well-run organizations are likely to have more “stars” than laggards because the hiring and training is better. But the best organizations—check out Brockton High in Massachusetts, which achieved a turnaround with pretty much all the same teachers who worked there when it was a “failing” school—find ways to use training (i.e. professional development) and teamwork to improve everyone’s performance.

As Deming once said: The only reason an organization has dead wood is that management either hired dead wood or it hired live wood and killed it. Merit pay, by dividing and demoralizing employees, is a good way to erode initiative and overall quality.

In a rebuttal to The New York Times story, Sara Stevenson, a teacher in Austin, references Daniel H. Pink‘s Drive The Surprising Truth About What Motivates Us, which argues that 21st century workers are motivated by autonomy, mastery and purpose. She goes on to explain how motivation works at her school:

At my diverse urban public school, my principal rewards good teaching by praising and videotaping hte best teachers, setting them up as role models for the rest of the faculty. He chooses these master teachers as members of the leadership team, which advises the principal on both school policy and mission.

Teaching is a collaborative, communal effort. Teachers were file-sharing back when files were housed in metal cabinets.

Stevenson also notes that good principals know how to get rid of bad teachers.

Yep. Leadership, learning from best practices and collaboration. Those are the keys to improvement. Carrot-and-stick incentives can only undermine them.

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