We examine the relationship between competition and reward practices in the public education sector. We hypothesize and find that school principals who face more intense competition make greater use of performance-based financial rewards and apply greater differentiation in its distribution between higher versus lower performing teachers. However, we do not find similar evidence for nonfinancial rewards. Further analyses suggest that financial rewards help attract and retain teachers in the face of competition. We also hypothesize and find that, as competition intensifies, principals direct incentives toward student outcomes that are easier to measure and communicate (student achievement) as well as their key determinant (teacher competence), relative to outcomes that are harder to measure and communicate (student well-being and engagement). Our findings suggest that school principals view financial incentives as effective for gaining a competitive edge and that competition can influence the relative importance they place on different student outcomes.

Many organizations have professional employees on fixed-term and ongoing employment contracts. While hiring employees on fixed-term contracts offers organizations operational flexibility and other benefits, it also brings about challenges in the form of relatively lower goal alignment and ability of these employees, thus creating the need for management controls. At the same time, given the costs and constraints of designing and implementing a control system, we expect that the planned use of fixed-term workers would be affected by the type of control environment that organizations are willing or able to create. Hence, this study investigates whether an organization's choice of its control environment and its use of fixed-term professional employees are interdependent (i.e., made jointly). Using surveys from different sources and archival data from the education sector, we find that some types of controls (i.e., action controls and organizational culture) and the organization's choice of using fixed-term employees are interdependent, while other controls (i.e., employee selection practices and results control) are independent of this choice. We also find that the interdependence between the choice of using fixed-term employees and the control environment is generally weaker when organizations use fixed-term contracts as an implicit screening mechanism for ongoing employment. Finally, in additional analysis, we find evidence that the interdependence between controls and the use of fixed-term employees is primarily due to concerns related to goal alignment rather than ability.