The lesson of performance-based compensation is one of institutional change. Gaps between the goals of compensation policy and practice on the one hand, and organizational results on the other, have characteristically come from under-conceptualizing what is involved in performance-based compensation. The impact of performance-based compensation comes from anticipating the consequences of the reform for the entire district. As this CTAC report shows, performance-based compensation involves more than recognizing excellence in teaching; it should expand the system’s overall capacity to support classrooms and improve teaching quality. An effective and sustainable strategy for recruiting, retaining, and rewarding excellence in teaching will provide a fertile ground where teaching thrives as a profession and is nurtured at a greater level of excellence and scale. This report was commissioned by the Center for American Progress.