Providing information on the issue of merit pay for teachers, this booklet covers reasons for adopting merit-pay programs, examples of such programs now operating, definitions of types of programs, indications of why some programs have failed, and steps for developing a successful program. Noting the lagging pay of teachers and inadequacies of current promotion systems, the author describes the varieties of merit-pay plans. Examples of merit-pay programs show how teacher outputs are being used to determine awards, how merit-pay schedules have entirely replaced single-salary schedules in some districts, and how incentive pay can help districts meet special needs. Differential staffing and master-teacher plans are also explained and illustrated. Three major reasons are cited for most merit-pay failures--teacher opposition, inadequate financing, and administrative difficulties--and a variety of other reasons mentioned, as well. Finally, a seven-step approach is offered to implementing a program in any school district; the steps are chosen to avoid proven pitfalls, generate public support, and meet district needs. (JW)