Center for American Progress

Principal Compensation: More Research Needed on a Promising Reform

Principal Compensation: More Research Needed on a Promising Reform

This report examines research on principal compensation and suggests a strategy for compensation reform.

Read the full report  (pdf)

School reforms and improvements depend crucially on the implementation of strategies at the school level—from human resources to curriculum to parent involvement. And the successful implementation of these strategies in turn depends largely on principal leadership.

 Few studies link principal attributes directly to student achievement, and of those that do, some are methodologically limited by data constraints. Tracing the impacts of principals on student achievement is also difficult because their actions may affect students through both direct and indirect avenues. For example, principals may directly affect students through curricular choices and indirectly affect them through hiring decisions that determine the quality of teachers in their schools. Despite these constraints, it is clear that principals have a profound influence: They play a crucial role in shaping their schools’ environments, which in turn influences the quality of teachers in them.

Given the importance of principals, and the role of compensation in determining the quality of people who opt to pursue this career path, it is striking how little is known about the structure of principal compensation. We know how much principals are paid nationally on average and relative to teacher salaries, and how this has changed over time. Yet we have only a scattershot picture of issues such as the extent to which principal compensation is linked to specific principal credentials or characteristics, or covered by collective bargaining agreements; whether principals are financially rewarded for taking tough leadership assignments; and whether there is a link between their compensation and measures of their performance.

This report includes new empirical research using national data on principals and their salaries to determine whether there appear to be significant shifts in the way principals are paid over a 10-year period from the 1993–94 school year to the 2003–04 school year. The findings from this work show that principals are rewarded for: having more experience, leading a secondary school, leading an urban or suburban school, leading a larger school, and being in a larger school district. Interestingly, there is relatively little change over time in the factors that explain principal salaries, which provides suggestive evidence that there haven’t been major shifts over time in the structure of principal compensation. This is interesting since there is a great deal of discussion of pay for performance for principals so one might assume that there would have been a notable shift toward that pay structure during the 10-year period.

Not surprisingly, numerous difficulties arise when it comes to linking principals’ pay to their performance. For example, principals’ jobs are multi-dimensional and the linkage of pay to specific performance objectives may cause them to overly focus their time and energy on achieving those objectives. But it is possible to mitigate these and other concerns, and in general there appear to be fewer obstacles to overcome in comparison with those encountered when implementing pay for performance for teachers.

Linking principal pay to performance may even be an almost necessary precursor to implementing performance pay for teachers. It is not a great leap to suggest that principals can make a better case for performance pay for teachers when they themselves are being judged based on performance, and that teachers are more likely to accept this type of pay reform when they see themselves as being part of a broader system that has these incentive  built into it from top to bottom. In other words, teachers may view it as a matter of basic fairness that principals be subject to a pay-for-performance system before they subject themselves to such a system. For these reasons, advocates of teacher pay reforms may wish to also focus on principal compensation reform.

Before principal pay for performance can move forward, we need to better understand how principal compensation affects the quality and performance of the nation’s principals. This report recommends four key steps to further our understanding of principal compensation and how it should be reformed:

Collection of more detailed data on principal compensation. The primary explanation for the lack of research linking principal compensation to any measure of principal quality is that national and state-level data covering these areas is unavailable. There is currently no principal equivalent to the information that can be garnered from the U.S. Department of Education’s Schools and Staffing Survey, which asks detailed questions of school districts about their teacher pay policies. Collecting additional data on principals would undoubtedly spur new research.

Greater experimentation with principal compensation structures. The only way to learn directly about the best compensation practices for getting talented principals into
schools is to study the consequences of variation in the way that principals are paid. We need principal pay experiments in order to figure out what works.

Development of detailed and sensible principal pay reform designs. It is both financially and politically costly for individual school districts to develop their own initiatives from scratch. Model programs should therefore be developed to make reform more accessible to districts.

An influx of new money for principal pay initiatives. School districts need funding for new programs from outside the school district. New funding could be provided by states,
the federal government, and private foundations. This would enable districts and principals opting to try a reform to see an immediate tangible benefit from trying something new.

We have good reasons to be concerned about the quality of the nation’s principals and the influence of compensation in determining it. We also have reason to believe that compensation reform is a promising strategy for improving principal and subsequently school quality. Yet the near total lack of evidence on the efficacy of reforms, such as pay for performance, points to data and research deficiencies that must be addressed in order for us to learn more about their effects and make sound public policies.

Read the full report:


The positions of American Progress, and our policy experts, are independent, and the findings and conclusions presented are those of American Progress alone. A full list of supporters is available here. American Progress would like to acknowledge the many generous supporters who make our work possible.