Teachers’ pay is being used both to motivate and discipline teachers - and it’s not working. In any job there is a necessary link between pay and the two ways to manage performance: performance reviews and capability procedures. When these work effectively and in harmony, they are perceived to be fair and improve the work done But this is clearly not the case in schools. Here, the operation of these processes has become so skewed that none of them is doing what it should.

In fact pay is trying to do a job properly done by the other two.

Look at the introduction in 2000 of pound;2,000 threshold payments and a new upper pay spine. The intention was to reward and motivate the “best” teachers. But this attempt to introduce merit-related pay into teaching caused nothing but trouble.

The unions, employers, and Department for Education and Skills have been turning cartwheels to come up with this week’s compromise on the upper pay scale (which will allow most teachers to progress to UPS level 3 but only a minority of “excellent teachers’ to get further rises). It remains to be seen how long this sticking plaster will last.

The fact is that there is no single reason or scapegoat for the muddle over pay, and performance: interference by politicians; poor implementation of ill-thought-out initiatives by civil servants; the School Teachers’ Review Body’s practice of making pay recommendations with scant regard for performance management processes; and education authorities’ and schools’

inability to manage pay and performance processes effectively have all contributed to the mess.

What teachers need is systems that they can trust, which are fair and which are seen to be fair. The knock-on effect would be that the recurring problems we have with pay, recruitment and retention, motivation and widespread pessimism that just won’t go away, would all be alleviated.

Expert advice, together with the inclusion and co-operation of all stakeholders, could lead to creative problem-solving - and make it so much better than it is now.

So how do we do it? Let’s start with some “givens”. In any job anywhere:

* the employer has responsibilities to look after employees and to enhance the bottom line (in schools this translates as “pupil outcomes”);

* the employee also has a duty to give value for money;

* the purpose of an organisation’s processes and systems is to facilitate delivery of the above. But that is not enough. We want a structure that helps teachers to excel.

To do this, we have to understand what makes teachers tick - and it certainly isn’t money.

Some people are money-hungry or motivated by the trappings of status - the big car, large expense account and huge desk. But even when these more materialistic people climb the corporate ladder, they realise that wealth is not enough: they need something else to motivate them.

The three main “intrinsic motivators”, according to experts in this area, are achievement, autonomy and excitement. These can be had in spades in teaching - and not one relates to money!

Of course, teachers need money. But experts say that extrinsic motivators such as pay are less important than the intrinsic ones, such as the joy of working with children.

Pay - even bucket loads of it - is not the answer.

Salary alone does not encourage excellence. In fact if some business pundits are to be believed, it sometimes militates against it!

A Harvard Business Review polemic by academic Alfie Cohn, suggests that performance-related pay schemes (Cohn calls them “eat what you kill” schemes), reduce both motivation and performance. He observes that:

* money is not the overriding concern of most people;

* performance-related pay is manipulative and heightens the perception of being controlled;

* competitive reward schemes disrupt relationships between staff and reduce co-operation;

* dependence on financial incentives to solve problems diverts attention from the real issues and problems;

* incentive schemes discourage risk-taking, experimentation and creative exploration;

* rewards that are contingent on performance undermine interest in the job itself.

He concludes that PRP schemes buy compliance but do not encourage excellence. The question is, will we settle for compliant teachers or are we aiming for excellence?

I think we need to go back to first principles and decide on the purpose of each of the three processes.

Performance reviews should be used to enhance performance to the level of excellence. A good performance review will include the following:

* no explicit link between performance and pay;

* training for appraisers and appraisees;

* ownership by the appraisee - that is let the teacher take responsibility for their own peformance;

* development of the individual;

* development of the organisation;

* accountability;

* implementation with fully informed agreement.

Capability procedures should be used to bring unacceptable performance to acceptable levels.

However, in schools, capability procedures carry a stigma which discourages their use, except in extreme cases.

In a world where we have removed the stigma of special needs for children, why should we treat adults differently? Adults should also be able to move in and out of a “special needs” category. Struggling teachers need early support. To provide it, capability procedures need to be reinvented, and rehabilitated.

In healthy organisations, pay increases are underpinned by three criteria; to reward past performance, to motivate for future improvement and to recruit and retain good workers. And when a fair pay system is used in conjunction with effective performance reviews and capability processes, pay can help encourage excellence.

But there is a darker side to linking pay and performance. As Cohn states, pay systems are often used to control workers - through withholding pay as “punishment” for underperformance.

But underperformance is properly the territory of capability procedures.

Pay is also used inappropriately as a motivator. This is properly the territory of the performance review system. Although he was not exactly an exemplar in personnel matters, it seems that Charles Dickens’ Fagin - who paid the same to his young pickpockets whatever they stole - had a point; we must think again!

Jane Phillips is an occupational psychologist, a governor of a primary school and chair of the National Association of Governors and Managers. She writes here in a personal capacity