Financial Incentives for Hard-to-Staff Positions

Cross-Sector Lessons for Public Education

CAP presents a report from Public Impact about how to handle hard-to-staff positions in education based on research from other sectors.

Schools across the country struggle to attract and retain effective teachers. Research from other sectors, such as the military, suggests a range of options are available to help education leaders overcome this problem. (iStockphoto)
Schools across the country struggle to attract and retain effective teachers. Research from other sectors, such as the military, suggests a range of options are available to help education leaders overcome this problem. (iStockphoto)

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Executive summary

Schools across the country struggle to attract and retain effective teachers in “hard-to-staff” subject areas, such as math and science. They also struggle with retaining and attracting effective teachers in hard-to-staff schools—those that have a history of low performance, enroll high proportions of disadvantaged students, or are located in poor urban or isolated rural areas.

How can states and districts recruit and retain larger numbers of effective teachers in these schools and subject areas? One approach is to change compensation—to pay teachers more, through salary adjustments or incentives, for working in particular schools and subject areas. Unlike across-the-board pay raises, differentiated pay for these positions aims to make up for differences in the level of challenge teachers face in hard-to-staff schools or the higher pay available outside of education to people with certain expertise.

Though several districts and states are experimenting with hard-to-staff pay, education leaders have little research about the effectiveness of these programs or practical guidance on which to base the design of new ones.

Outside of education, however, in civil service, the military, the medical field, and private industry, paying more for hard-to-staff positions, or “market pay,” is common practice. Rural communities often struggle to recruit a sufficient number of high-quality nurses and physicians, the military has committed to filling even its most dangerous jobs with an all-volunteer force, and human resource directors in the private sector are familiar with the ebbs and flows of supply and demand in many positions. Across these sectors, bonuses and other incentives are used as a matter of course to attract a greater number of applicants, increase retention, and increase staff performance.

Each of these sectors offers significantly more research about the effectiveness of incentive programs than can be found in education. Due to the number of programs and depth of experience, they also offer practical lessons about their design and implementation. For this report, we collected research and experience from across sectors to help guide state and district leaders as they design and refine hard-to-staff programs in public education.

Many of the approaches we explore here, such as job auctions, are rarely if ever used in U.S. public education. Others are better known, though still infrequent in education, including
various forms of recruitment incentives and performance-contingent bonuses. The rarity of these solutions in public education highlights what is perhaps our most important finding from cross-sector experience: The education sector stands alone in its extreme reluctance to modify compensation in service of its ultimate mission. In the realm of compensation reform, the politics of parity have largely trumped the sector’s will to succeed. Nowhere is the terrible consequence of our misalignment of resources more evident than in the nation’s hardest-to-staff classrooms and most disadvantaged schools.

Based on our review of research on hard-to-staff pay programs in both the public and private sectors, as well as interviews with experts in fields with significant experience addressing hard-to-staff positions, we offer the following additional lessons for policymakers in education. These lessons are intended as a launch pad for the detailed compensation design required to implement hard-to-staff pay reforms effectively in education.

Compensation is powerful. In most other sectors, the question of whether to use pay to fill hard-to-staff positions is rarely even raised. Experts from across sectors agree that using compensation as a tool to address staffing challenges is a no-brainer, an integral part of business as usual that responds to the economic principle of “compensating differentials” and the realities of a changing labor market. With more expenditures tied up in personnel than almost any other aspect of an organization, compensation is one of managers’ and policymakers’ most powerful and manipulable tools to address staffing shortages. And there is compelling evidence that targeted incentives work—research and experience from each of the sectors we reviewed suggests that financial incentives can be highly effective for both recruitment and retention in hard-to-staff positions.

A “portfolio” of incentives may be most effective for a diverse candidate pool and workforce. The cross-sector evidence suggests that loan repayment programs, recruitment and retention bonuses, and salary supplements can all be highly effective in recruiting and retaining employees in hard-to-staff positions. Their success, however, depends largely upon the degree to which they are tailored to meet the specific needs of candidates and current employees. In education, a combination of loan repayment programs, recruitment bonuses, retention bonuses, performance bonuses, and other types of incentives may be the best approach to ensure that they are attractive to a variety of new candidates and current teachers.

Including a performance-based component boosts the recruitment and retention power of hard-to-staff pay. Compensation research from across sectors strongly suggests that adding a performance-based pay component to compensation consistently attracts and retains higher performers. In addition, the larger the performance-based pay opportunity available for a job, the higher its attraction for high performers. In education, policymakers’ ultimate goal must be not only to increase the number of teachers in hard-to-staff schools and subject areas, but also to increase the quality. Providing rewards for performance could serve as an incentive for candidates who believe that they will succeed in these venues, thereby increasing the quality of the candidate pool and potentially its size, as well.

Hard-to-staff incentives in other sectors typically make up a substantial portion of recipients’ total compensation. The cross-sector research does not offer a concrete formula for determining the most effective amount of hard-to-staff incentives. What is clear, however, is that employers across sectors are providing much larger incentives than the majority of hard-to-staff pay programs in education. Incentives between 10 percent and 30 percent of a teacher’s salary would be more in line with other sectors.

Decisions about which “units” are hard to staff are best made at the top, but on-the-ground managers should have discretion over distribution and amounts. Research from the public, defense, and private sectors makes clear that decisions about which particular jobs or units of an organization are hard to staff are best made at the top, to allow leaders with a broad view of the organization’s goals to prioritize staffing shortages across branches or divisions. But the evidence suggests it is the managers who work most closely with new candidates and staff who may be best suited to distribute the incentives and set individual incentive amounts. Translating this finding successfully to education will require education leaders to experiment with different levels of discretion, giving districts and school leaders varying levels of authority over incentive distribution and amounts, and monitoring the results.

Employers across sectors target a ready pool of candidates to help reduce the additional incentives required to get them into tough positions. Alongside financial incentives to address staffing shortages, successful organizations across sectors work to find candidates who already value certain aspects of the hard-to-fill job or who do not perceive the undesirable characteristics as drawbacks. Decades of economics research on “compensating differentials” have shown that most labor pools are heterogeneous when it comes to candidates’ values and preferences for particular aspects of a job. Education leaders can also capitalize on this heterogeneity through the use of auctions or by investing in targeted recruitment for candidates who are inherently attracted to the conditions that make some schools harder to staff—and so will require less differentiation in pay or none at all.

Organizations frequently solve staffing problems by reorganizing their operations to eliminate the disamenity or the need for the position. Employers in other sectors are also likely to rethink the nature of hard-to-staff positions entirely. If a particular position is chronically difficult to fill—especially due to disamenities, which are challenging or undesirable working conditions that come with the job—successful organizations in other sectors will reorganize operations, often using new technologies to eliminate the disamenity or the need for the position entirely. Education leaders also should consider using technology to alter the roles and location of teaching staff. In its basic form, this might include delivering programmed instruction in hard-to-staff subjects, such as math, online. It also might include bringing the job to the people rather than the people to the job in hard-to-staff locations: Excellent content instructors can be located anywhere if their interactions with students occur through a combination of video, audio, and online technologies. Such solutions would both allow and require significant changes in staff roles at the schoolhouse level and in compensation for all who contribute to the instructional process.

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