Imagine pondering what your district operations would look like under a set of worsening scenarios: What would happen if the budget were to decrease next year by 2%? What if it were to decrease by more than 5%? Even worse, what if there were a decline of 10% or more? What would we do differently and how would we make those tough choices? How would the community react? How about our staff? Would our Board hold together through the difficult decisions? Would chaos ensue?
n the Fairfax County (Virginia) Public Schools (FCPS), we faced a high degree of uncertainty about what would happen to our 2010 budget. This article describes a significantly redesigned process through which our district planned for a range of budget cuts from roughly 2% to 10%, which translated to reductions ranging from $40 million to well over $200 million.
Managing through this uncertainty and preparing realistic options under different scenarios took our planning efforts to a new level of managerial effectiveness. It was an intensive process that included a variety of stakeholders in unprecedented ways. It built alignment externally with our various stakeholders. Internally, it led to the formation of meaningful bonds between people on the leadership team from different departments. As we worked together, people really started to look at how departments could help one another.
Getting Started
First, we were guided by clear priorities defined at the Board level by our Strategic Governance Initiative, which articulates our beliefs, vision, mission, and student achievement goals (Figure 1). Second, we relied on an unprecedented level of community input and collaboration to help inform and test our priorities. Third, we used an innovative structure at the central office to evaluate and make decisions about the over 175 programs offered at the Fairfax County Public Schools. For each, we decided as a team whether to keep, reduce, redesign or eliminate the program.
Budget Background & Scenario Approach
As a fiscally dependent school district, over 75% of our budget is funded by Fairfax County. This differs from the average Virginia school division which receives approximately half of its financial support from its local government. Fairfax’s next largest funding source, the State of Virginia, adopted its FY2010 budget with an approximately 7 percent reduction to K-12 education.
It was important during this part of our planning to recognize and respect that the school budget comprises a major portion of state and local government budgets, and therefore competes with other services provided by the local and state governments. When revenue drops are so severe, how do we have the “prioritization” discussion to make tradeoffs between state and local services vs. school district services? Are we getting the ‘short end’ because we are such a large portion of the state/local budget? Are they? In this particular case, County and school officials collaborated with an unprecedented degree of coordination and transparency over the financial structure of the total budget. It may have been the first time that the County officials and school officials shared a stage for such a purpose. Again, in the end, the inclusion of all the relevant stakeholders made the outcome of the process that much more successful.
To oversee the review of over 175 FCPS programs and services, the FCPS School Board established a Program Review Committee. A series of work sessions with the full School Board on the FY2010 budget were facilitated by me, and innovative use of scenario planning resulted in a “tiered” approach to reductions for the FY2010 budget. Gap-closure scenarios were created for three tiers of potential total budget cuts, ranging from the more moderate needs-based scenario that most closely aligned with Board strategy, to an extreme scenario of dramatic cuts forced by level-funding from the County. Figure 2 shows the sources of our funding deficit, as well as a summary of the scenarios or “tiers” of budget cuts anticipated.
The Strategic Governance Initiative
At the center of all FCPS’ planning activities is the School Board’s Strategic Governance Initiative (SGI), which includes beliefs, vision, mission statements, and student achievement goals to provide a more concentrated focus on student achievement and to establish clearer accountability. The SGI provides a framework for the school system’s operation and for the School Board’s future work. The Fairfax County School Board recognizes that it has a unique and important role to play in assuring that the school system achieves the results expected by the community and deserved by the students. The Board also recognizes that as an elected Board, it must assure that the staff, under the authority of the Superintendent, has the freedom and authority to do its work without interference, but also has full accountability for the results of its decisions.
The Board accepts the challenge to perform its own duties with the same degree of excellence expected of the Superintendent and staff members.
The FCPS School Board formed base prioritization guidelines for budget rationalization (Figure 3). Priority order and importance needed to be established at the outset in order to create appropriate responses to various budget cut scenarios.
It occurred to me at this time that by strategically managing peoples’ expectations, do we actually lower the demand/expectation to change the revenue side of the equation? Do we so focus on where to cut that we forget to ask the most critical question: Should we cut this program at all? In the focus on cuts, we never really force the funding agency to re-visit revenue. An important question to ponder at this time is “What business are we in?” At some point, as cuts get deeper in consecutive budget cycles, it is important to step back and ask “Are we about to make our excellent school system into a good school system or our good school system into a mediocre school system?” And, “Is this okay with us?” Because if it is not, it is worth taking the public temperature about revenue increases and asking whether an increase in revenue is either feasible or necessary.
Community Input and Collaboration
Led by Chief Communications Officer Barbara Hunter, a comprehensive framework was put in place to obtain community input to achieve the following objectives: 1) Provide clarity and inform the public about budget information and the budget process, 2) Provide opportunity for the public and employees to make suggestions and share concerns about services and proposed areas for reduction, 3) Achieve community-wide input by soliciting comments.
As Figure 4 shows, the process began with a series of joint sessions with representatives from the County government, so that a mutual and shared understanding could be developed with the community about current fiscal challenges. Through community dialogue meetings, employee brown bags and surveys, online and telephone forums for public questions, suggestions and comments, the County and school district engaged in a more robust public input process at an earlier juncture than in any budget cycle in recent memory.
Additionally, a parallel and highly visible process called Lines of Business (LOB), with all associated agency presentations and documents available online, brought an even greater amount of transparency than was already provided through the publication of all budget documents on the County website.
The second phase focused more specifically on FCPS budget issues, and tested priorities with the community. As part of the community dialogues, 72 facilitated small groups containing 718 total members of the public were asked three questions in their facilitated small group discussions.
We asked questions such as:
The discussion that resulted from these dialogues was measured in several ways. One departure from the past included the use of an outside firm to analyze word count rather than use traditional quantitative surveys that ask people to rank things and force answers into categories. We were able to discover the issues that really invoked passion, whether negative or positive. This method of measurement helped us to understand with greater meaning the top subjects for our constituency. It seemed to capture the community input and validate it in a more meaningful way.
This data was used to confirm hypotheses and inform senior executive input into the budget discussions. Detailed summaries have been provided on the County and district websites. Benefits from these communications vehicles are twofold: 1) Rich information is calculated and disseminated in a structured manner and 2) Public concerns and questions are responded to, creating a high “customer service” touch point for the district. In addition, extensive employee outreach was conducted, including: discussions with employee associations, e-mail communication and open meetings, employee brown bags (19 facilitated small groups with 197 participants), an employee survey, and use of regular district feedback mechanisms like TIPS (To Improve Programs and Services) e-mail and phone submission. Complementing these efforts were meetings with the Superintendent’s advisory councils and community groups and the oversight of the School Board Program Review Committee.
Data and insights gathered through these various processes were numerous, and were collected and disseminated from the Office of Public Affairs in a variety of ways, including news releases, newspaper ads, flyers, posters, local cable, and extensive use of the district and county websites.
Central Office Budget Rationalization Process
Fairfax County Public Schools is by all accounts a large district, and reviewing 175 programs for potential reduction or elimination called for a new process and structure. Each of the programs was to be judged by the core budget team for categorization into four buckets: 1) Keeping as is; 2) Reduction; 3) Restructuring; and 4) Elimination. The Core Budget Team consisted of the Superintendent, the Superintendent’s leadership team, the Budget Director, select Principal representatives, and the School Board Clerk.
The Role of the Program Budget
Since FY2003, Fairfax County Public Schools (FCPS) has released a program budget document, presenting the total resources allocated to each educational program. The FY2009 Program Budget details expenditures, positions, offsetting revenue, and net cost by program. It also includes the student achievement goal and sub-goal that each program supports, a program description, the method of service provision, an explanation of cost, list of mandates, and outcomes. With this detailed information, the program budget serves as a valuable tool for FCPS and the School Board to use when making programmatic and budgetary decisions.
The program budget narratives are designed to provide program information and costs in a clear and consistent manner. Program narratives provide detailed information including a program description, method of service provision, and an explanation of costs. Program charts provide two years of financial data (detailed by full-time salaries, parttime salaries and overtime, employee benefits, operating expenses, positions, total program costs, offsetting revenue, and net cost of the program), supporting department, program contact, phone number, web site, list of mandates, and outcomes. As our team embarked on the difficult work of reviewing each program, these budget documents were invaluable in creating a fact-based conversation that allowed budget issues to be considered with respect to the overarching strategic priorities.
As shown in Figure 5, the team was charged with completing a single comprehensive spreadsheet that tracked the gap closure as programs were reviewed. Further, cuts were considered against the three tiers of revenue: how would the program structure look for each scenario?
The team met weekly, and discussed budget reduction on a program-by-program, line-by-line basis for all district programs and operations. Each meeting was limited to a few hours, as the team realized that productive working time had a limit due to the intensity of the discussion. Another interesting innovation of the process was our use of electronic voting technology (TurningPoint) to take real-time “votes” of program direction during the team meetings. The TurningPoint system was borrowed from a classroom each time the team met. This allowed the team to establish clear consensus or immediately identify problem areas in a quasi-confidential manner.
These were difficult conversations, and the team relied heavily on a variety of inputs to arrive at the consensus recommendations. First, the School Board’s priorities were the guiding mantra by which all cuts were judged. Second, the community and employee priorities were acknowledged. Third, but perhaps most important of all, were the program budget documents that allowed the team to debate each program on a factual basis that considered total program cost, reach, and performance.
Addressing Constituent Issues
Ultimately, the role of a school superintendent is also political and superintendents rely on political capital for many situations. With a multitude of programs “on the chopping block,” a superintendent must ask, “How do I maintain my political capital with the members of stakeholder groups each seeking to maintain their favorite program?”
In Fairfax, we had five programs dealing with preparing under-represented students for college. These were minority students and students eligible for free or reduced price meals. Each of these programs had their own staff and their own set of constituents in the community. Unfortunately, our own staff in these five programs had never tried to work synergistically, nor had any ‘supervisors’ asked or expected them to. Consequently, each of the five was a separate “silo” program. We, the leadership team, believed the programs (or silos) were inefficient, duplicative and “ego centric” in operations. When we moved to put all under one umbrella of operation, the separate staff and constituents all pointed fingers elsewhere and, in some cases, made claims of racism, and lack of support for under-represented groups of students. As we proceeded through the budget reductions and program meshing, we had staff who continued to feed the fire of discontent. We continued to deliver the message of no negative impact on student services, and the need for reduction in overhead costs. Public testimony added more discontent during the final budget deliberations, but our message ultimately prevailed with the School Board and broader community. But, at what long term cost?
In Fairfax, we tried to use the current economic crisis as an opportunity to restructure our organization along a set of core values and goals adopted by the leadership. Ultimately, this is harder work than implementing an ‘across the board’ reduction. Restructuring or cutting some programs altogether while leaving others alone entails a great deal more risk than an across the board cut that may feel “fair” but will not serve the district as well.
One example of this issue was our centrally managed summer school program where no school felt responsible for their students’ summer success. As part of the need to find reductions, we decided to change the whole approach to providing summer school. For years, there had been repeated, in fact annual, recommendations to revise the summer school program so deciding to do so was not an issue. All principals and program staff agreed it needed to be completely redesigned. When we decided to redesign the summer school program, it was December 2007. Immediately, staff recommended a good six to nine month redesign process such that the new program would be ready for implementation the following summer. I wrestled with the amount of work necessary to redesign the delivery of summer school and the shift of responsibility for students from a “central staff” to school-based staff. I wasn’t sure if it would be feasible for staff to produce changes and gain approval from the Board on the rapid timetable that I was dictating—especially if we completed re-design after final budget approval. I chose to give the direction, “Redesign summer school for the next summer, or don’t offer it at all.” We made it, but not without a lot of angst. It was a clear case where a simple reduction in the old way of delivering service was not going to work in the new budgetary climate.
Final Outcome
On May 21, 2009, the School Board adopted the FY2010 budget of $2.2 billion, a decrease of $10.3 million or 0.5% from the prior year. Factoring in the increase in enrollment in the district, this actually represented a 4% decrease on a per student basis. This compares with a $35.8 million increase in FY2009 budget over FY2008, and increases of 3.3% to 7% in years prior.
With relatively minor final adjustments, the budget passed unanimously. The level of support demonstrated the success of the hard work our team put into this effort. Moreover, we now have a framework in place that can be used and refined to meet the challenges ahead.
This brief builds on Motivation Tactics Within The DMC Human Capital Framework by discussing compensation-based mechanisms for enhancing teacher motivation. It provides an overview of the history and current state of variable teacher compensation plans, which have been shown to have a significant positive impact on student learning. Though public school districts have historically employed a single salary schedule, the drive for increased school accountability will likely shift more districts toward the incentive pay structures already popular in the private sector. This brief describes structural and organizational steps to design and implement a variable pay plan, and offers examples of successful programs.
K e y C o m p o n e n t s :
More in-depth analysis, implementation information, and tools for Motivation Through Incentive Compensation are available through the The District Management Council (DMC). Please call toll-free 877-DMC-3500 .
The Evolution of Teacher Compensation American public education has followed a varied path of compensating teachers. The prevailing practice of the 1800s was to have local communities pay teachers primarily through room and board. As the American economy became more complex and industrialized in the late 1800s, the demand for more specialized education led to a position-based salary system, which distinguished teacher pay by grade and assignment. The differentiation, however, eventually produced charges of bias detrimental to women and minorities. By the mid-1900s, a single salary schedule, with predictable and objective increments regardless of grade, race, or gender, had gained dominance. This monolithic system of set steps and levels has remained the norm for school districts across the country.i
Starting in the 1980s, various efforts moved to break free of the single salary schedule and replace it with variable, performance-based systems. Usually referred to as “merit pay,” these pioneering systems sought to improve teacher quality and enhance the allure of the teaching profession. Yet change proved difficult and highly limited. Inadequate funding, the emergence of divisive and competitive teacher work environments, and overly subjective assessments of merit conspired against an overhaul of the compensation system.ii
As of 2004, according to the U.S. Department of Education, 93% of all public school districts continued to employ the single salary schedule. By contrast, a study by Hewitt Associates found that 80% of U.S. businesses have adopted at least one variable pay plan. Private and charter schools are also far less tied to a conventional salary schedule than are public schools.iii It is logical to conclude that the popularity of variable systems will penetrate public schools more and more. Increased parental choice and subsequently greater competition from private and charter schools, as well as the drive toward more accountability and regular assessment, should encourage the adoption of variable pay models.
Variable Compensation Plans Can Drive Student Performance
To promote the quality teaching that leads to enhanced student achievement, variable compensation can be a more effective approach than the conventional schedule. Replacing a system with little connection between teacher compensation and teacher quality and few rewards for teacher excellence, variable pay can increase the flexibility to recruit talent, drive out underperforming teachers, and incentivize standards-based reform.iv
Some research has suggested that linking teacher pay to individual and school metrics can have a positive impact on student learning. As a management tool that has taken root in public schools only in the past few years, variable pay has not yet been the subject of extensive empirical research. Nonetheless, a number of highly regarded academic studies have already documented a direct relationship with student performance. For example, a study of a performance-based pay program in Tennessee during the 1980s and 1990s found that K-3 students with incentivized teachers scored nearly three points higher in math and two points higher in reading than did the control group. The improved outcomes held for students with both beginner and veteran incentivized teachers.v
Promoting Teacher Quality Via Variable Pay
The last few years have witnessed a resurgence of interest in incentive pay programs. 11 states have launched initiatives to explore variable compensation schemes. Education Week estimates that as many as one-third of the nation’s public school districts are “poised to participate” in performance pay programs.vii
The big federal initiatives in education have explicitly encouraged variable pay. The No Child Left Behind Act’s “highly qualified teacher” provisions authorized the use of federal funds to help districts develop “merit-based performance systems” and “differential and bonus pay” for teachers in “highneed academic subjects” and “high-poverty schools. viii
Another impetus for variable compensation came in the form of the American Recovery and Reinvestment Act (ARRA), the federal stimulus. One of the key areas of reform that states must agree to advance in exchange for accepting stimulus dollars is “teacher effectiveness and equitable distribution of effective teachers.” To make progress in this area, the ARRA allotted $200 million for the Teacher Incentive Fund, which “encourages school districts and States to develop and implement innovative performance-based compensation systems” that reward teachers and principals for gains in student performance and the fulfillment of high-need areas. The Department of Education’s 2010 Budget Request seeks another $517 million, an increase of $420 million over the regular 2009 level, for the Teacher Incentive Fund.x
It is clear that promoting incentive compensation for teachers will be a priority of the Obama administration. In June 2009, U.S. Secretary of Education Arne Duncan challenged members of the National Education Association to overcome their resistance to performance pay. Describing his own work initiating a performance pay plan as Superintendent in Chicago, Duncan stated, “To remove student achievement entirely from evaluation is illogical and indefensible.” xi
New Compensation Strategies for American Public Schools
Previous attempts at performance pay plans failed in part because stakeholders did not start with a common base of definitions and expectations. To design and sustain a successful variable compensation scheme, it is necessary first to clarify the range of options.
As variable compensation plans have gained popularity in public schools in the past decade, they generally have fallen into one of three broad forms:
Performance-based plans provide awards, either salary increases or annual bonuses, to individual teachers or to school-wide faculty for improved student achievement or other valued outcomes. Teachers can be evaluated on their value-added contribution, their performance in the classroom, or the absolute performance of students. Schools as a whole can be assessed by absolute academic performance, value-added gains, or some other measure, such as attendance or graduation rates.xii
Knowledge and skill-based plans compensate individual teachers, through salary increases, bonuses, or progressions on the salary schedule, for acquiring a range of skills and qualifications deemed important by the district.xiii Needs-based plans supplement standard pay for those individual teachers who work in underperforming schools or specialize in hard-to-fill areas. The teacher’s school assignment and area of expertise become the basis for salary increases, bonuses, or higher movements on the salary scale.xiv
Each style has merits and drawbacks. Performance-based plans formally link compensation and student performance. But performance evaluated on an individual basis may reduce cooperation among teachers, while school-based awards risk a “free-rider” problem. Knowledge and skill-based programs improve the efficiency of the teacher force. They are, however, expensive and time consuming, especially given their indirect link to student achievement. Needs-based compensation increases school and district efficiency, but lacks a connection to teaching quality or student achievement.xv
Program Design and Implementation
Regardless of the mechanisms they employ for differentiating pay, successful incentive compensation plans share a set of guiding principles.
First, to serve its overarching purpose, the incentive program must be linked to the district’s strategic objectives. To motivate employees to contribute to the organizational strategy, the incentives must be both large enough to have an impact and simple enough to be easily understood. Objective performance measures should help to guarantee an equitable treatment of all participants. The program must have firm and consistent support for sustainability, yet maintain flexibility to respond to new challenges that arise. Finally, regular communication with employees should shore up the other principles. xvi
Translating these principles into practice involves several structural and procedural elements:
A structurally and procedurally coherent incentive compensation plan also requires strong organizational support from the outset of the undertaking. To marshal stakeholders in support of variable pay, districts should:
Though working with all stakeholders is important, actively involving teachers in the plan development is especially vital. Teachers’ buy-in is critical to the overall success of the endeavor, as teachers must value the structure, goals, and rewards of the program.xviii
Admittedly, resistance among teachers to some forms of incentive compensation remains strong. Both national teacher unions, for example, opposed a reauthorization of the No Child Left Behind Act that would have factored student test scores into the granting of incentive pay.xix
Nonetheless, districts that include teachers in the design process and address their concerns have a good chance of receiving their backing for many types of variable compensation programs. According to a 2003 Public Agenda survey, a significant majority of teachers support, in descending order, giving financial incentives to teachers who “work in tough neighborhoods with low performing schools,” “consistently work harder, putting in more effort than their peers,” “teach difficult classes with hardto- reach students,” “consistently receive outstanding evaluations from their principals,” and “receive accreditation from NBPTS [National Board for Professional Teaching Standards].”xx In setting up variable pay plans, districts can tap into this sizable support. American Federation of Teachers President Randi Weingarten, for example, has indicated support for differentiated pay plans that result from local collaboration and collective bargaining and that include a strong professional development element.xxi
Incentive Compensation Going Forward
The renewed interest in performance pay raises many exciting opportunities. First, the plans that have been put into practice so far have generally not included growth modeling to ascertain the value-added impact on a group of students over time. Such data will be a priority in coming years. Indeed, the Department of Education’s vastly expanded Teacher Incentive Fund hopes to “use data from emerging State and local longitudinal data systems to track outcomes and associate those outcomes with educator performance.”xxii More broadly, a move toward differentiated pay holds promise to correct the current mismatch between monetary and non-monetary incentives for teachers. As districts increasingly prioritize and reward effective teaching, the financial incentive of compensation should also reflect this trend.
Planning for leadership succession can provide increased continuity of strategic focus and enable your organization to avoid unnecessary turbulence during times of leadership transition. In these fiscally uncertain times, loss of district productivity due to problems in leadership turnover can be especially problematic. Districts need planning tools and development processes to maximize existing talent and cultivate the necessary leadership skills to grow student achievement and build the overall performance capacity of the organization.
Culture transformation. Leadership development. Innovative partnerships. These themes and more are tackled in the Spring 2010 edition of the District Management Journal. Through case studies, feature articles, interviews, DMC focuses on examples of district leaders, foundation, and business partners who are engaging in bold initiatives to align strategy, strengthen management capacity, and foster collaboration to achieve tremendous results. The issue includes an extensive set of work on the topic of Pay-for-Performance -strategies, structures, and funding options for school districts considering the design and implementation of a program.
Download the full issue for more ideas on the power of leadership and management.
During a regular breakfast meeting with industry leaders, Dr. Joe Hairston, Superintendent of the 104,000-student Baltimore County Public Schools (BCPS), had a “light bulb” moment. With leaders from Northrop Grumman, Lockheed Martin, Johns Hopkins University, University of Baltimore, Breakaway Games, and TrainingPort Strategies at the table, Hairston brainstormed about forming an innovative partnership to align the goals of industry with the goals of the district to boost STEM – science, technology, engineering and math education – in the Baltimore County Public Schools.
Failure is not an option and hope is not a strategy. When discussing our work in Aurora Public Schools (CO) I often use these words first coined by Gene Krantz, the NASA Apollo 13 Mission Director. Every day parents not only entrust us with their children, they assume that we are doing everything possible to ensure their children’s success. It is our duty to meet these expectations. To do this in Aurora Public Schools (APS), we had to transform our school district.
Read more: Aurora Public Schools: Building a Culture of Trust
In 2005, GE Foundation, the philanthropic organization of the General Electric Company, launched the Developing Futures in Education program, to which it has committed more than $150 million to drive reform at six U.S. school districts. While the objective is to prepare students for college and for careers in math and science, this program is unique in its approach. The program focuses on growing school district management capacity through a vibrant partnership between the districts and GE’s corporate and divisional managers. GE managers bring to bear their expertise in core areas such as personnel management, resource allocation, collaboration, and technology to accelerate change and scale up innovations. Districts have experienced impressive successes, from implementing new math and science curricula to enhancing professional development programs. In this edited interview with Bob Corcoran, President and Chairman of GE Foundation, and Kelli Wells, Director of U.S. Education Programs of GE Foundation, DMC's John J-H Kim discusses Developing Futures, and GE's innovative approach to working with these districts.
Written by John Kim
Read more: Innovating Education: An Interview with James H. Shelton III
Written by District Management Council The
Read more: Cultivating Leadership: An Interview with Ray Cortines
Written by Joseph Scherer
Read more: Managing in Times of Fiscal Uncertainty: An Interview with Tom Payzant
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