In the early phase of this country's reform movement, merit pay plans were gaining in popularity throughout the country. The central question was, how do we improve our compensation and performance appraisal systems to motivate teachers in the classroom? With the failure of many of these plans came the recognition that in concentrating on the question of teacher motivation, we had ignored other important educational issues. We had given insufficient attention specifically to questions of the work of teaching, school culture, and administrative leadership. A renewed interest emerged in how to design the compensation and performance appraisal system to capitalize on teachers' intrinsic motivations to teach. The challenge became to provide rewards that recognized the genuine development of teachers' professional skills. In this article, we try to explicate a series of strategic questions that must be considered before implementing a performance appraisal system for teachers: (1) What should be evaluated in teaching? (2) How should performance appraisal be linked to organizational rewards? and (3) How can performance appraisal reflect the work of teaching? v