Tag Archives: compensation

Who Are the Winners and Losers in Performance-Based Compensation?

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The other day I left a working session with a client where we were tackling the question of whether and how their team members should be compensated based on performance. Inevitably, it was a challenging and values-laden conversation. Performance-based compensation is an approach where some or all monetary compensation is related to how employee performance is assessed relative to stated criteria. This model is intriguing enough that it comes up in virtually every compensation or performance management project I’ve ever been involved in.

What does research tell us so far about compensation approaches? Most teacher compensation systems, in an attempt to be fair, base rewards off of years of experience and educational attainment using a “step and lanes” system. Yet, research shows that advanced degrees have little effect on student academic success except in the areas of math. And while teachers’ increasing experience in the early years leads to greater student achievement, there is limited evidence that teachers continue improving after five years on the job. With recent attempts at less-traditional approaches involving performance-based compensation, we have learned a great deal about how compensation can help retain our most effective teachers and therefore improve student achievement. Yet the “perfect” organizational compensation plan remains elusive.

Why is there still no playbook we can all follow around performance-based compensation? Because every compensation decision is about tradeoffs, which means there are winners and losers. I have yet to meet an administrator who wants to pay their educators less, yet there is a literal fixed pie that goes into school budgeting decisions, and educator compensation is by far the biggest piece of that limited pie. While we might want a world where we can keep everyone’s pay at least as good as it is now and provide incentives for our strongest teachers to stay in the classroom, that extra money has to come from somewhere (and hopefully a funding source that won’t be gone in a couple of years).

So let’s look deeper at some of the tradeoffs that apply to three different types of performance-based compensation:

1. Stick with a traditional “step and lanes” system, but teachers only move up a step if they meet a minimum specified level of performance

What is this? This is the simplest variation from the traditional experienced-based step schedule we often see in education, and therefore the one most likely implemented in larger districts or those just testing the waters. Truly low-performing teachers stop seeing automatic increases every year. In systems with early teacher tenure — where administrators may otherwise find themselves with low-performing, high-seniority teachers making far more than newer highly effective teachers — limiting increases to those meeting a specified performance level can mitigate limited resources going to low-performing teachers.

Who are the potential winners? The freed-up budget can then go to things that might benefit students, including classroom resources, aides, or other supports. If low-performers self-select out because of lower compensation, that frees up funds and teaching spots to bring in more effective teachers.

Who are the potential losers? This is a policy that sounds like a step in the right direction but might maintain the status quo (if all teachers are rated “effective” regardless of performance). High-performing teachers are potential losers as this policy does not incorporate higher pay for higher performance — it only helps to potentially weed out low performers. Continue reading →

Two Ways Compensation And Diversity Should Not Be At Odds

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At this time of year, schools are buzzing with the sounds of potential new teachers, school leaders, and other team members. Candidates are touring schools, presenting sample lessons, and interviewing, all with the end goal of an accepted offer. Given talent shortages in some areas of the country, Bellwether’s Talent Advising team has seen increased interest from both traditional and charter public school systems in redesigning their compensation approaches to best position them to attract top talent.

Despite rendollar-1924523_1920ewed energy in our sector to create diverse, equitable, and inclusive teams of adults that will then better create equitable and inclusive environments for students, existing diversity conversations don’t talk enough about compensation, and vice versa. Reasons for this may range from lack of awareness to conflicting priorities such as autonomy and flexibility. In well-intentioned efforts to woo particularly high-potential candidates, we often find leaders making isolated “little” decisions around compensation and rewards which can unintentionally create an inequitable set of practices and behaviors. In larger organizations where hiring authority is dispersed across a larger group of managers, these disparate choices can have even greater consequences.

For example, referral bonuses are all the rage, particularly in tight hiring markets for strong mission-oriented organizations where mission fit is critical for a successful hire. Referral bonuses are paid to existing staff members for referring successful candidates to their employer.  

Why might this create a diversity problem? This is a technique that does an excellent job of maintaining the status quo of your current team demographics. Your current team is going to know more people similar to themselves due to their natural networks. Now, if you already have a diverse set of staff, then maintaining the status quo through existing networks could be fine, but if you are trying to expand your pipeline to develop a more diverse pool, this practice could hurt more than help.

Instead, you can target your referral bonuses to those who find candidates for particularly high-need subject areas or schools, limiting them to where you truly need an extra tool in your toolbox. You could also offer bonuses to staff who actively support your efforts to expand your pipeline by attending career fairs at HBCUs or identity-based conferences or by reaching out to affinity groups at teachers colleges.

As another example, opportunities to negotiate are handled differently at different organizations, with some school systems tied to a strict salary and bonus schedule while others may offer a bonus or higher salary when a candidate negotiates.

Why might this create an equity or inclusiveness problem? It’s well-known that some identity groups are more actively, consistently socialized to negotiate. In our work with clients, we see lax negotiation approaches leading to greater perception of compensation inequity among staff members.  In addition, the more leeway a leader has in determining compensation, the more likely you are to see unintentional bias begin to show up in actual wage differentials. No matter how much anti-bias training we do, we need structures in place to mitigate this.

Leaders often say they need to have flexibility to negotiate, and while I might personally beg to differ after working at multiple organizations with strict policies, I understand the concern. To achieve your goals more equitably, we usually recommend getting really clear ahead of time on the factors that you might negotiate around, such as former salary, competitive offers, or years of relevant experience. You can then both identify a policy that can apply to anyone equitably, but also proactively communicate that policy so hiring managers and candidates less likely to negotiate otherwise now have a clear policy to work from. In addition, calibration meetings to align on decisions across managers or a compensation review step can enable some autonomy in hiring manager decision-making while providing some checks and balances in the system to intervene when unintentional bias shows up in outcomes.

If you incorporate a wide number of perspectives and zoom out on your compensation approach, you can preemptively adjust or identify when your well-intended initiatives have subtly morphed into an equity challenge. By proactively addressing these “little” structural decisions, you can improve retention; more easily meet your goals around diversity, equity, and inclusiveness; and reduce hiring pressure. Competitive compensation does not have to be at odds with building a diverse, equitable, and inclusive organization.