Pay-for-performance: Helping those that help themselves?

Topic: Compensation, Motivation, Rewards
Publication: The Wall Street Journal
Article: When schools offer money as a motivator.
Blogger: James Grand

Long gone are the days when Mom and Dad would offer a few bucks for an “A” on your report card to buy some candy from the grocery store.  Now, the schools are starting to provide the incentives—and they aren’t just offering up bubble gum and lollipops.

A recent article from The Wall Street Journal (August 21, 2008) reported that a number of schools around the country are implementing new pay-for-performance (PFP) systems as means of encouraging high school students to enroll and pass Advanced Placement (AP) courses. The performance rewards (in some cases, upwards of$1000) are given to the top performing students on the various AP exams. With a great sigh of relief from its investors, longitudinal analyses of the PFP systems have shown mostly positive results—higher enrollment in AP classes, higher test scores and more graduating seniors moving on to college (whew).

But should schools (and other organizations, for that matter) be wary of the PFP reform?  Research from organizational psychology, management and education indicates that although PFP is generally linked to higher overall performance and satisfaction across a variety of domains, there are a number of consequences that should be carefully considered before they are used (Rynes, Gerhart, & Parks, 2005, provide an excellent review of the issues associated with PFP systems).

For example, there is evidence to suggest that PFP is more attractive to individuals’ with greater need for achievement and self-efficacy, which are often related to characteristics such as education level and even gender or race in many work domains. Thus PFP systems have the potential to create discriminative compensation practices or entirely homogenous workforces if not carefully monitored.  Furthermore, in jobs/tasks where units of performance are not clearly established (i.e., subjective supervisor ratings, etc.), the benefits of PFP are often difficult to determine and may actually be detrimental.

Time will tell if PFP catches on in our nation’s schools—in the meantime, I suppose a bag of M&M’s never hurt anybody.

Singer-Vine, J. (2008, August 21). When schools offer money as a motivator. The Wall Street Journal. pp. D1.