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What About "Merit" Pay?

Many boards today are asking their heads and directors to explore the challenging concept of merit pay. In the corporate and business context merit pay seems “natural” in that pay often is tied to some measurable outcomes or sales targets. School leaders and teachers frequently use, as “push back” against this concept, the argument that tangible results are much more difficult to measure in the school world.

There are a myriad of approaches to “merit” pay, if by that word we mean “flexible” pay that helps to meet a school’s mission. It IS possible to create more flexible salary systems that may provide more mission appropriate alternatives to the longevity based salary scales used in so many of our schools. The problem is that no two schools are alike and no two faculty cultures are exactly alike either.

Salary systems in schools, in this Consultant’s opinion, must be designed for a particular school’s mission and culture. There is no boilerplate formula that can be transferred easily and appropriately from one school to another with the expectation that it will work as effectively as it might have elsewhere. Boards and heads need to start with a clearly focused definition of the school’s mission and from there, develop a philosophy of compensation that sends clear signals to prospective and current teachers about what the school values the most (and the least) in their behavior, training and outcomes.

I. When Change is Needed

A recent boarding school client, without a stated philosophy of compensation and with limited resources, was trying to stretch its compensation budget by paying teachers to take on additional class assignments rather than increasing their base salaries. Almost everyone took on a fifth class in order to earn more money.

This School also has tutors who provide important one-on-one learning. Their pay was comparable to teachers with a full class load and they had no extra duties. While this tutoring system provides unique educational opportunities for students with special needs and for some international boarders who need to become more proficient using English, it was also a burden on the compensation budget as well as on the other teachers who took on a heavy load outside of the classroom. Needing to attract more students, the School also did not pass on enough of the cost in the form of fees.

While this School was meeting students’ need in a unique, mission-based manner, there was a basic inequity in this unpublished system. The younger, newer teachers carried the bulk of the daily teaching, coaching and residential workload and thus, they were the group with the highest turnover. On the other hand, the tutors were local, stayed long term, provided stability, were intensely loyal to the mission and were often the ones who bonded most closely with the students and their families. Overall School climate was actually very healthy.

So while this “system” seems inherently unfair and perhaps not an entirely wise way to allocate money, it was working on several levels, and it was mission centered. However, overall pay for the young teachers was too low and the School needed to boost their earning power significantly to lengthen their average stay to more than three years.

At another client School with a lock step longevity based scale, salaries are competitive, and the benefit package is generous including a defined benefit retirement plan as well as a defined contribution plan. The School also knows that the defined benefit plan is becoming too costly.

In addition, the School pays almost $1.0 million a year in the form of extra pay and stipends. Many of the assignments and titles are unusual, and they represent ways to pay teachers more dollars outside of the lock step salary scale. While there was no “published” philosophy of compensation and no official “merit” or “flexible” pay at this School, it was delivering more money to teachers by providing summer grants and summer school teaching opportunities as well as by giving stipends and titles. A very successful annual fund helps to subsidize this expensive system.

However, many of the teachers do not seem to comprehend or appreciate fully this relatively “rich” compensation package, perhaps because they have become accustomed to it after many years of service at this one School and because class sizes are large. Since keeping tuition low is an integral part of this School’s mission, and salaries are fairly high, this School cannot afford to reduce the teachers’ work load AND pay stipends. Thus, most teachers feel legitimately stretched given that they teach over 100 to 110 students and take on additional assignments.

At a third international school, the Board and the Head became increasingly concerned that the School’s salary scale of 20 steps was constantly going up and thereby driving up tuition. Other than paying teachers to take on positions of responsibility and to earn advanced degrees, there was no way to differentiate among them and reward performance. This School’s challenge was to create a credible evaluation process that was based on a focused peer and administrative team approach to helping teachers grow professionally. After establishing meaningful evaluation criteria and training every teacher and administrator to serve as members of evaluation teams, the School earned the trust of the faculty to the point where it could redesign its salary system. The School had already devised an alternative, more flexible band and range salary model, but it was waiting for faculty acceptance of the evaluation process in order to use it, not only as a tool for professional growth, but as a way to differentiate performance and justify pay increases over time. The key elements of the model were the following:

  1. All new hires would be on the new system.
  2. All current teachers could choose the new system or be grandfathered into the old current system, for a finite period of time.
  3. The salary career ladder would be superimposed over the old scale so that no one lost ground; everyone could see the advantages and direction that the career ladder pattern offered; and everyone understood the criteria for making these periodic shifts.
  4. The salary differentials between one ladder and another were substantial.
  5. The salary levels overlapped somewhat from one ladder to another.
  6. The highest most highly paid ladder was left empty until it was clear that the rigorous criteria for entry were achieved.
  7. No individuals currently holding administrative posts or head of department roles could move into the highest ladder. That was reserved for full time teachers only.
  8. There was a redefinition of a full time job to ensure both equity and fairness across grade levels and to avoid drifting further down the path of paying extra for simple duties historically considered part of a full load.

The School is only in its third year of this new system, so it is too early to know how well the new approach will fare in the long run, BUT the School entered into the entire exercise of moving away from a lock step salary system and a elaborate extra pay scheme thoughtfully, with professional assistance and with faculty buy-in.

What do all of these Schools have in common? All wanted to study how they were spending their faculty compensation money (85% of the total budget in most schools worldwide); all had adopted some stipend or extra pay schedule and wanted to reward performance in the classroom instead of prompting teachers to leave it in order to earn more money; and all understood that they did NOT know exactly how to accomplish these goals. While they asked for this Consultant’s professional help, they designed new salary systems unique to their Schools.

II. How to Implement Change and How Quickly?

To work effectively, any flexible salary system (“flexible” means one that rewards aspects of performance other than just longevity, graduate credits, administrative titles and/or extra curricular pay) needs to have buy in by administration, board and the vast majority of the teaching staff. Getting to that point is possible through a carefully designed process of exploration of salary system designs, structured dialogue, study, and collaboration over a period of six months to a year. Pushing the acceptance or development of a merit or performance based salary system more quickly than that is moving into dangerous territory in terms of faculty resistance and resentment.

In this Consultant’s opinion, it takes two years to change a salary system significantly or to alter the design of a current one in ways that reflect a real change in philosophy. The first step is to understand the current culture and the existing salary structure and to recognize how and whether it matches the school’s mission. No change should be undertaken until these cultural, political, and historical factors are understood well. In the cases mentioned above, no one really acknowledged or knew intrinsically the rationale behind the compensation and benefits tradeoffs that had evolved. They had simply occurred over time.

Schools need to examine a possible change in salary structure and philosophy, not with the overt goal of paying more money to teachers (though we certainly know that the majority are under paid now), but rather to examine HOW money is paid out, i.e. how does the current salary structure, benefit package, work load and evaluation process affect how money is delivered to those in the teaching ranks?

In fact, if schools enter into this dialogue with the expectation that the end result will be to pay more money across the board, boards will never agree to undertake the review. However, behind the scenes board members will continue to question and challenge the validity of the current “scale.” In fact, the majority of board members worldwide has not asked about a school’s salary system or scale, and usually cannot explain how it works. These board members may not have been around when it was first designed or adopted, often with little relevance to mission, or may never have been informed about its development in the first place. While the word “merit” is politically charged in many school contexts, the idea of exploring options to current inflexible (and often unfair) systems should not be avoided simply because of faculty politics, administrative reluctance or board members’ lack of knowledge.

In reviewing and discussing the concept of a more flexible salary system, boards must always keep these points in mind:

  1. The faculty needs to buy into the concepts decided upon.
  2. The head must believe that the system is workable and not overly bureaucratic.
  3. There must be a reasonable degree of stability in the top leadership charged with carrying out effective evaluation
  4. Such changes cannot be used as a tool to reduce compensation as that will undercut the core dialogue from the outset.
  5. There needs to be a process and sufficient time for a subset of faculty, board and administration to engage in a reasoned dialogue about why current salary systems may not be effective in the long run.
  6. There needs to be an openness to explore innovative, more flexible options that ultimately may benefit teachers more while being more mission focused.
  7. ALWAYS begin with a thorough understanding of how the CURRENT salary system functions and WHY and HOW it became what it is.

John Littleford
Senior Partner