Kinks as Goals: Accelerating Commissions and the Performance of Sales Teams / Peter J. Kuhn, Lizi Yu.

Format:

Book

Author/Creator:

Kuhn, Peter J.

Contributor:

National Bureau of Economic Research.

Yu, Lizi.

Series:

Working Paper Series (National Bureau of Economic Research) no. w28487.

NBER working paper series no. w28487

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2021.

Summary:

We study the performance of small retail sales teams facing an incentive scheme that includes both a lump sum bonus and multiple accelerators (kinks where the commission rate jumps upward). Consistent with standard labor supply models, we find that the presence of an attainable bonus or kink on a work-day raises mean sales, and that sales are highly bunched at the bonus; inconsistent with those models we find that teams bunch at the kinks instead of avoiding them. Combining simple theoretical models, institutional evidence, and heterogeneity analyses, we argue that that this unexpected bunching results from a previously unrecognized motivational benefit of piecewise linear reward schemes in team environments: Teams use the convenient, salient, kink-points as shared goals, which yield symbolic utility to their members when the points are attained.

Notes:

Print version record

February 2021.