Opening the Black Box: Behavioral Responses of Teachers and Principals to Pay-for-Performance Incentive Programs

Educator incentive programs offer the promise of better aligning teacher compensation with effort, but potentially at the cost of introducing conflict or stress. Using North Carolina data, we examine how teachers’ receiving a performance bonus influences perceptions of the efficacy of school leadership and work environment. Surprisingly, results show perceived improved workplace quality in schools that barely missed the bonus, suggesting that the failure prompts positive change in the organization. Further, favorable survey responses and test score improvements are isolated to schools with some history of failures, suggesting a role for experimentation by school leadership to find reforms that work.