This paper focuses on the perceptions of all administrators (N=24) and teachers (N=165) in a school district regarding the success of a merit pay program in providing a motivational climate for teachers. In 1984 a school district in New Hampshire instituted a Performance Based Salary Program (PBSP). This paper addresses the following research question: What effect has the PBSP had upon the quality of the work environment for teachers? Survey results were focused on several areas: (1) background; (2) attitudes toward teaching; (3) attitudes toward PBSP; (4) impact of the PBSP; (5) teachers' self-reported performance ratings; (6) teacher evaluation; (7) job burnout; (8) teacher job satisfaction; and (9) recommendations. Followup interviews were conducted with randomly selected teachers (N=18), administrators (N=9) and board members (N=5). Success of PBSP has contributed to teachers' personal growth as well as improved student learning. Upon analysis of the study, it is clear that teachers believe that PBSP has led to improvement in the following areas: principal involvement, staff development, classroom instruction, education quality, financial support and community confidence. Teachers believe conditions have deteriorated as a result of PBSP in the following area: principal/teacher communications; cooperation among teachers; and teacher/administrator trust. Appended are 13 references. (SI)