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Published in Print: February 11, 2004, as Bidding for Talent

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Bidding for Talent

Targeting pay to the most productive workers or to those who fill the most difficult jobs is one way to increase the effectiveness of a personnel system without breaking the budget.

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Targeting pay to the most productive workers or to those who fill the most difficult jobs is one way to increase the effectiveness of a personnel system without breaking the budget.

One perplexing problem facing local school leaders is the poor allocation of talent within their districts. In many large urban districts, the least experienced and least effective teachers are disproportionately assigned to the poorest schools because transfer rights within the district allow experienced teachers to move to schools with better students and better working conditions. Likely results of the teacher-assignment system include a wider student-achievement gap between rich and poor and an exit from the profession by young teachers mired in dispiriting situations.

Attempts to address this problem by the payment of incentives to induce voluntary assignments have foundered on the cost of such programs and the charge that they subsidize mediocrity. Paying incentives to all teachers in poor schools may induce some teachers to shift into these schools, but it also results in paying incentives to all the existing staff members, including ineffective teachers. Facing a similar problem, the U.S. Navy has developed an innovative and cost-effective program to get qualified sailors to volunteer for difficult assignments. If local education leaders, perhaps with the encouragement of the federal or state governments, adapted this program, it could improve the allocation of teachers within districts.

Like urban school districts, the Navy has some unpopular locations, and therefore hard-to-fill jobs. The traditional approach to filling such jobs has been to order sailors into jobs— that is, to make assignments involuntarily. The problem with this approach is that sailors assigned to these jobs are more likely to leave the Navy. In order to make the system more voluntary, the Navy paid incentives to everyone in a location or in a particular type of job, but this solution is expensive. The Navy has also tried nonmonetary incentives, such as preference on the next assignment. A jury-rigged system of incentives proved costly in other ways and added to the overall inefficiency of the assignment system.

Developing rules for picking the winners is a crucial part of establishing the credibility of the program.

Now the Navy is experimenting with a new approach to the problem. It has created an eBay-like auction system that allows sailors to bid for assignments when vacancies arise in unpopular jobs. The bid in this system is a monthly stipend that the sailor would receive for taking the job. The auction relies on the simple observation that not all sailors have the same location and job preferences. Consequently, not all "bad" assignments are equally bad to all individuals. An auction is a relatively inexpensive way of allowing sailors to express their preferences. In the Navy's early experience with the program, some sailors bid $0, that is, they would take the assignment without any stipend, while others bid several hundred dollars per month for the same job.At the end of the bidding period, the assignment officer reviews all the bids and picks the winner. Unlike a simple auction, however, the assignment officer need not pick the lowest bid but can take into account other factors, such as past performance, professional development, and the priority of the job, in optimizing placement across all job assignments.

One likely objection to an auction system is that it seemingly violates the principle of equal pay for equal work. Under this program, sailors with the same job in the same location could receive different pay. One response to such an objection is that the system is voluntary and without purposeful or systematic discrimination. Furthermore, the Navy has a number of incentive payments that vary over time and may result in a situation similar to that produced by the auction. For example, pilots and navigators working in the same aircraft facing the same dangers and working conditions have received different pay.

Our society certainly has accepted the practice of price discrimination, of which this auction is a variation. Anyone who has ever asked fellow passengers on an airplane what fare they paid for the same flight is familiar with the concept. In implementing its auction program, the Navy has been able to overcome legal and regulatory barriers, as well as its own strong sense of tradition, because it has received enthusiastic support from the top leadership. Vigorous leadership within the education community would probably be required to implement such a program in local school districts.


How might such a system work within an urban school district? The district would start by establishing parameters for the program, including which schools and which teaching positions would be included, who could bid and how much, and what criteria would be used to determine the winner. Developing rules for picking the winners is a crucial part of establishing the credibility of the program. Districts with strong accountability systems and a decentralized personnel system might invest the principal with considerable latitude in selecting winners. If principals are held responsible for student outcomes, they have every incentive to find the best teachers possible and little incentive to use the auction to reward friends and punish enemies. With flexibility in picking winners, principals may prefer to retain experienced, effective teachers, rather than save a little stipend money.

Rules for dealing with incumbent teachers whose jobs are reopened for competition are likely to be particularly sensitive.

In districts with more centralized personnel systems, the administration might establish an objective set of criteria, taking into account experience, evaluations, special expertise, and other factors. Districts might also open up eligibility for bidding to qualified nonemployees and thereby use the program to attract experienced teachers into the district.

One difference between the Navy and the typical school district's personnel system is that the Navy rotates people through jobs. The duration in any one Navy job is generally known in advance. In the school context, assignment incentive pay might have a fixed duration of three or four years. At the end of that time, the job could be reopened for competition. Rules for dealing with incumbent teachers whose jobs are reopened for competition are likely to be particularly sensitive. The incumbent might choose to bid again or to move on to another position in another school in the district. If he or she chose to compete but was not selected to remain in the job, the district would offer an assignment in another school. The rules of the system must ensure that the auction is not used as an indirect method for firing teachers from the district.

Targeting pay to the most productive workers or to those who fill the most difficult jobs is one way to increase the effectiveness of a personnel system without breaking the budget. Adapting the experimental Navy system to help reallocate the experience mix and teacher talents to the poorest schools could help those students most likely to be left behind by the current system.

Donald J. Cymrot, an economist, directs the education research program of CNAC, a nonprofit research-and-analysis organization in Alexandria, Va., that includes the Center for Naval Analyses.

Vol. 23, Issue 22, Page 44

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