research review points to five key choices that should be considered in designing incentive systems:
1. Who is targeted by the incentives: In complex organizations, incentives can be designed for people in different positions who can affect outcomes in different ways.
2. What performance measures are used: The performance measures to which incentives are attached must be aligned with the desired outcomes for the incentives to have their desired effect.
3. What consequences are used: The size and structure of the consequences provided by the incentives will affect how the incentives operate and should be designed to be appropriate to the situation.
4. What support is provided: Without resources in support of organizational objectives, incentives can be discouraging to the very people they are intended to help, particularly if those people lack the capacity to reach the target that provides a reward or avoids a sanction.
5. How incentives are framed and communicated: To be effective incentives need to be framed and communicated in ways that reinforce people’s commitment to the goal that incentives have been put in place to achieve, rather than in ways that erode that commitment.
The committee’s research review also identified three issues related to evaluating the success of incentive systems:
1. Nonincentivized performance measures for evaluation: Incentives will often lead people to find ways to increase measured performance that do not also improve the desired outcomes. As a result, different performance measures—that are not being used in the incentives system—should be used when evaluating how the incentives are working.
2. Changes in dispositions: In addition to evaluating the changes in a set of defined objective outcomes, it is important to consider the way incentive systems affect people’s dispositions to act when they are not being directly affected by the incentives.
3. Weighing costs and benefits: Incentive systems will typically generate a mix of costs and benefits that have to be weighed against each other to determine the net value of the system.
The tests that are typically used to measure performance in education fall short of providing a complete measure of desired educational