Examining Salesperson Effort Allocation in Teams : A Randomized Field Experiment

When salespeople who are heterogeneous in abilities are assigned into teams, how do they adjust effort as the abilities of their coworkers change? Economic theory predicts that when salespeople compete with each other, the lower-ability salesperson strategically decreases effort as the ability of the coworker rises; correspondingly, the higher-ability salesperson reduces effort as the coworker’s ability decreases. When salespeople are compensated based on group revenues however, no strategic adjustment of effort should occur when the coworker’s ability changes. We test these predictions using a field experiment that spans 29 retail booths and 116 salespeople at a major retailer. Each booth compensates salespeople using either a contest-based or a revenue-sharing incentive and employs four salespeople, with two salespeople per shift. We randomly assign salespeople to work shifts, thus exogenously varying the ability of the salesperson’s coworker. The results show that under the contest-based incentive, the pattern of sales is consistent with theory predictions. However, under the revenue-sharing incentive, the sales pattern suggests that the lower-ability (higher-ability) salesperson increases effort when the coworker’s ability increases (decreases). We develop a social preference model to explain this result and also examine the revenue implications of team composition under different sales incentives