The article is focused on implementation of effective contract – a tool for assessing teaching personnel performance in higher education institutions. On the basis of a number of Russian cases related process is analayzed in regard to its effect on motivation and strategies of employees, its role in solving tasks universities face. Results reveal a distorted rendering and a limited understanding of such notions as ‘performance-related pay’ and ‘effective contract’. Both tools are resorted to in rare particular situations in order to solve formal and tactical problems. Effective contract for academic workers is regarded as a way for conforming to the requirements of external authority bodies. It was revealed that the effective contract is currently represented as a fragmented system for managing teaching personnel performance and its elements are at different stages of development, implementation and application in higher education institutions. Existing managing traditions rely largely on indicators borrowed from higher authorities’ systems for monitoring and control. It is noteworthy that indicators for assessing effectiveness and quality of teaching are almost not present. Higher education institutions tend to employ equalizing strategies that are common to them for payment schemes and incentive payments allocation thus leaving the motivational potential of the effective contract unrealized.