How does a standards-based reporting system motivate my child to excel?

Research has shown that letter grades do not motivate students to learn.  On the contrary, research has found three consistent effects of using - and especially, emphasizing the importance of - letter or number grades:

1. Grades tend to reduce students' interest in the learning itself.  One of the most well-researched findings in the field of motivational psychology is that the more people are rewarded for doing something, the more they tend to lose interest in whatever they had to do to get the reward (Kohn, 1993).  Thus, it shouldn't be surprising that when students are told they'll need to know something for a test - or, more generally, that something they're about to do will count for a grade - they are likely to come to view that task (or book or idea) as a chore.
2. Grades tend to reduce students' preference for challenging tasks.  Students of all ages who have been led to concentrate on getting a good grade are likely to pick the easiest possible assignment if given a choice (Harter, 1978; Harter and Guzman, 1986; Kage, 1991; Milton et al., 1986).  The more pressure to get an A, the less inclination to truly challenge oneself.  Thus, students who cut corners may not be lazy as much as rational; they are adapting to an environment where good grades, not intellectual exploration, are what count.
3. Grades tend to reduce the quality of students' thinking.  Given that students may lose interest in what they're learning as a result of grades, it makes sense that they're also apt to think less deeply.  One series of studies, for example, found that students given numerical grades were significantly less creative than those who received qualitative feedback but no grades.  The more the task required creative thinking, in fact, the worse the performance of students who knew they were going to be graded.  Providing students with comments in addition to a grade didn't help: the highest achievement occurred only when comments were given instead of numerical scores (Butler, 1987; Butler, 1988; Butler and Nisan, 1986).

Intrinsic motivation is the most powerful kind of motivation - when a student is involved in the learning process by knowing their strengths and where they need to improve, the student can work with teachers and parents to set meaningful goals of excellence, strive to achieve the goals, and experience success.