In response to education reform mandates, rewards and incentives such as career ladder and master teacher programs are being designed to break lock-step salary schedules and to retain competent teachers. While these "pay-for-performance" plans seem acceptable to taxpayers, few realize that such approaches have already been tried and proved unsuccessful due to funding limitations and the nature of teacher motivations. In fact, competitive reward systems may foster outcomes antithetical to the best interests of public education. The present study describes the efforts of one rural district in southeastern Texas to develop and implement a nonmonetary incentive program to foster cooperation and communication among teachers. The professional incentive plan evolving from teacher preferences offered grants for special projects, summer institutes, and conferences or workshops. In April 1985 and November 1986, 151 teachers were administered a questionnaire to obtain their perceptions of six school climate dimensions, as well as the recent career ladder and nonmonetary professional incentive plans. Teachers' perceptions of career ladders were extremely negative; career ladders were seen as unrelated to the six school climate indicators. Teachers' perceptions of the professional incentive plan were significantly related to their views of the principal as a leader and their instructional interactions with students. Included are 3 tables and 25 references. (MLH)