Merit pay in education at every level is much favored by administrators and politicians. My observations are that instituting merit pay for college faculty leads, first, to competition to be on the committees that design or administer the evaluation policy.

Second, it leads to attempts to pump up the scores that contribute the most points. Teaching tends to be measured by student evaluations, so improving these is aimed for. If this were attempted through increased helpfulness to students, it would be a good thing; but usually, it's done by handing out higher grades.

If improved research is given high priority, quality of research would be hard to measure, but quantity can be tallied. So abstracts, presentations, and short articles increase, but not monographs or books.

What is most striking is how strong an incentive even a small pool of money to be divided turns out to be.

I would say that merit pay tends not to improve instruction, research, or service by faculty. It is, however, divisive. It may be that this is a successful outcome for some administrators.