Can You Apply 'Pay for Performance' To Higher Education?

"The Obama administration's efforts to implement policies to address access and cost issues in higher education are well-intended. Yet in truth, they put the cart before the horse. Many of these ideas are drawn from the health policy world, and a significant amount of work must be done first to understand the impact of these proposals. Otherwise, they have the potential to do serious harm if put into place prematurely," Raynard Kington, president of Grinnell College, writes in The Huffington Post's The Blog.

"Let's start with the idea that federal dollars should be tied to educational outcomes. This is the administration's most ambitious proposal, though how it would work remains unspecified. In explaining its plans, the administration has borrowed terminology such as 'Pay for Performance' from the health policy sector, an area in which I worked before moving to higher education. The higher education community could learn a lot from health care's efforts to control costs and increase quality. But the administration must err on the side of caution before proposing crude policies without knowing more about how they would work and whether they would achieve intended goals.

Tying 'pay' to 'performance' sounds good, but how would it work in practice? What outcomes would be used as proxies for college? The Obama administration has proposed three: completion rates, graduate earnings and advanced degrees of graduates. For the sake of argument, let's ignore the conceptual drawbacks of taking any of these as a valid measure of whether a college is doing a good job. An incentive system only works if the outcome is truly a measure of quality -- of how well the college performs for its students.


We are far from a consensus about tools to help adjust outcomes for variations in input risk. And we lack the evidence base needed to reasonably deploy the type of 'Pay for Performance' system the administration has proposed -- a fact that should be obvious in Washington.

Instead of criticizing colleges with neat sound bites, the administration should be working with educators to build the evidence base that our education system needs. This is the only way that institutions can tackle the hard task of ensuring that every dollar is used in the most effective, efficient way for future generations."

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