Personnel policy in public sector organizations: evidence from England's academy schools

Many governments are increasingly decentralizing the governance of public sector organizations, by granting more autonomy to their managers. At the same time, public sector managers often cannot use key personnel practices, such as pay-for-performance or firing. In this context, it becomes especially important to study the personnel policy of effective public sector organizations. This paper contributes to this goal by leveraging a large-scale successful educational reform that has turned around low-performing schools through the outsourcing of their management to a range of independent organizations. Taking advantage of the staggered introduction of English sponsored academies from the early 2000s onwards, we show that the new school managers systematically make three personnel-related decisions. First, the probability that they appoint a new headteacher doubles upon the takeover. New headteachers are, on average, less experienced, but more likely to come from outstanding schools and better paid. Second, sponsors choose to invest in younger and less experienced teachers, who have either previously served in outstanding schools or who are high-performing fresh university graduates willing to start their career in disadvantaged schools. At the same time, the management takeover increases the likelihood that more experienced and lower-achieving teachers leave. Third, and likely contributing to explain these sorting dynamics, sponsors substantially redesign teachers' pay structure and abandon a seniority-based pay scale, leading to an increase in pay dispersion across equally experienced teachers. These results suggest that injecting a culture of high-performance is an effective way to induce less motivated employees to leave and high-achieving ones to join in settings where firing is not an option.