In praise of performance pay—for online-learning companies

Whether
you consider this week’s New York Times article on K12.com a “hit
piece
” (Tom Vander Ark) or a “blockbuster
(Dana Goldstein), there’s little doubt that it (and the recent
crop of other pieces like it
) will have a long-term impact on the debate
around digital learning. Polls show
that the public in general and parents in particular are leery of cyber
schools, and this kind of media attention (sure to be mimicked in local papers)
will only make them more so.

But
just as these criticisms aren’t going away, neither is online learning. That
genie is out of the bottle. So how can we go about drafting policies that will
push digital learning in the direction of quality?

Creating Sound Policy for Digital Learning coverThis is
something we at Fordham are busy pondering. To that end, we’ve published
three papers (so far) in our series Creating Sound Policy for Digital Learning: Rick Hess on quality
control
; Paul Hill on funding;
and Bryan and Emily Hassel on teachers.
And in January, we’ll publish an analysis by the Parthenon Group of what
high-quality fulltime online learning really costs.

Set
aside for a moment the Times’s extremely selective use of data, expert
opinion, and evidence. Where the article landed a punch, in my view, was around
the perverse incentives at play today. Clearly K12, and its well-paid CEO, Ron
Packard, face strong incentives to boost enrollment at their schools.
Unfortunately, states haven’t figured out a way to create similar incentives
around quality. And that needs to change.

First,
a short digression. I worked at K12 many moons ago, just after its creation. (I
believe I was employee number ten.) I needed a job, and I convinced Bill
Bennett to create a role for me in which I would figure out how to take K12’s
rich resources and make them available for poor kids. (After-school tutoring
programs seemed to be particularly promising venues.) Our basic assumption was
that K12’s model—which relied on parents or other caretakers doing most of the
instruction—wouldn’t be feasible for kids living in poverty, most of whom would
need the custodial care offered by traditional public schools.

To be
honest, I didn’t make much progress. The learning materials weren’t even
created yet, and so I had few “partnerships” to offer to communities; I left
after nine months.

But
what a difference a decade makes. One of the real surprises of the online-learning
movement is that lots of poor families are choosing to give it a try, and that
explains (to a large degree) why K12’s test scores are lagging. (Yes, poverty
and achievement are linked
, at least for now.)

Schools of all kinds should only get paid for the days of instruction that kids actually show up (or log in) for.

 
   
 

And the
impression painted by the Times article is that online education
companies like K12 have every reason to sign up as many parents as
possible—poor, rich, whatever—regardless of how prepared they are to tackle the
challenge of home-based instruction. Because of some states’ sloppy finance
systems, the schools can keep the money if the families change their minds and
head back to traditional schools. And, as has been true for all public schools
since the beginning of time, the online schools get paid whether their students
are learning or not.

Solving
the payment problem is the easier challenge. Schools of all kinds should only
get paid for the days of instruction that kids actually show up (or log in) for.
But is it time to consider performance-based funding, too? To pay companies
like K12 more or less depending on how their students perform on state tests or
depending on their graduation rates?

In his paper
for Fordham
, Paul Hill dismisses the idea, arguing that:

Pay
for performance would create a harsh environment for all education providers.
Conventional, virtual, and hybrid schools might spend money on a student’s
instruction for a whole course or semester yet receive nothing in return.
Online vendors of all kinds, who have little control over their students’
effort or persistence, could be even more at risk. In general, this approach
would limit the unproductive use of public funds and quickly destroy any vendor
that could not demonstrate good results. It would favor providers with deep
pockets, e.g., district-run schools and online vendors supported by large
foundations. Performance-based payment as defined here could create a lethal
environment for smaller-scale innovators.

He’s
probably right about smaller-scale innovators, but I still think it’s worth a
try, at least for full-time online schools. (It might be harder in the “blended
learning” setting, where a child might be taking just one or two subjects
online.)

What if
K12 only got paid for every student that made at least a year’s worth of
progress on the state test? Some argue that this would create its own perverse
incentives, encouraging the company to cherry pick students who are most likely
to succeed. But if the measure is student growth, and if the test being used is
a good one (the latter being a big if, admittedly), then all kids but those
with severe cognitive disabilities should be seen as contenders.

Instead
of signing up students willy-nilly, K12 would then have a reason to vet each
family’s situation to make sure they are ready
for the rigors of online learning
. They would invest, up-front, in
assessing whether the child’s parents or other caretakers are up to the task of
instructing the student, and whether they have a home situation conducive to
success. And then K12 would work like the dickens to make sure every student makes
strong progress over the course of the year.

Personally,
I’d like to see performance-based pay for all schools. That may not fly anytime
soon, but performance pay for online learning (at the least the full-time,
virtual-charter-school version) could. Which state is ready to give it a try?

This piece originally
appeared
(in a slightly different form) on Fordham’s
Flypaper blog. To subscribe to Flypaper, click here.

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