Incentives in U.S. Charter Schools: For-Profit and Nonprofit Choices

Abstract

ABSTRACT This paper examines the relationship between policy, organizational type, and the utilization of extrinsic incentives. Charter school reform spread throughout the country in the 1990s, providing the unique opportunity to study over a thousand new public organizations and the innovative operational decisions they made. Traditional public schools typically use standard salary-based reward systems and are bound by collective bargaining agreements that limit the opportunity to innovate in the area of personnel practices. Many charter school advocates shared a belief that new ways of operating public schools could benefit students. Consistent with expectations, the paper finds that for-profit charter schools compared to non-profit charter schools utilize personnel practices with more extrinsic incentives such as merit pay, pay-for-performance, and rewards for professional development. Charter schools located in states with permissive state laws in regard to collective bargaining also use more teacher incentives. These findings can inform scholarship in organizational behavior, personnel theory, and public administration. They can also be used to inform practice and educational policies to improve public schooling. Finally, in other service areas outside of education, public administrators, and managers can gain a better understanding of the distinctions between for- and nonprofit organizations.