This study reviews the theories of action that advocates of performance funding have espoused for higher education in three states that are leaders in performance funding: Indiana, Ohio, and Tennessee. The authors found that espoused theories of action are incompletely articulated, with significant gaps in the specification of policy instruments, desired institutional changes, and possible obstacles and unintended impacts.
Performance funding is conceived largely as stimulating changes in institutional behavior and student outcomes by providing financial inducements and securing institutional buy-in. Less attention is paid to other policy instruments, such as providing information on institutional performance to the colleges and building up the capacity of institutions to engage in organizational learning and change. The authors of this paper argue that insufficiently articulating the theories of action for performance funding makes it less likely that it will be successful and avoid undue harm.
This working paper was originally released in July 2013. A revised version was released in February 2014.