Pay-for-performance measures and reward systems for teachers fail to consider the role of performance appraisal and give too little attention to how changes in performance appraisal and reward systems affect organizational processes, such as interteacher cooperation and teacher-administrator relations. Presented are three strategic considerations that should be reviewed before implementing a performance appraisal system in school systems: the basis of performance appraisal (skills versus work outputs), the effects of linkages between performance appraisal and organizational rewards, and the nature of work interdependence. For each, implications for the structure of performance appraisal systems are examined. Performance appraisal is defined as a process occurring over time; a proposed structure calls for a focus on skill development during the pretenure period. Cooperation between school administrators and a team of teacher peers in the decision to grant tenure is emphasized. A diagram of the proposed structure of a teacher performance appraisal system and 20 references are included. (WTH)