Examining Salesperson Effort Allocation in Teams: A Randomized Field Experiment

When salespeople with heterogeneous sales abilities are assigned into teams, how do they adjust effort as the abilities of their coworkers change? We investigate this question using a field experiment that spans 29 retail booths and 116 salespeople at a major department store in China. Each booth compensates salespeople using either an individual-based commission (IB) or a revenue-sharing (RS) incentive and employs four salespeople, with two salespeople per shift. Our field experiment randomly assigns salespeople to work shifts, thus exogenously varying the ability of a salesperson’s coworker. The results show that under the IB incentive, the lower-ability salesperson will strategically decrease effort as the ability of the coworker rises; correspondingly, the higher-ability salesperson reduces effort as the coworker’s ability decreases. In contrast, under the RS incentive, the sales pattern suggests that the lower-ability (higher-ability) salesperson increases effort when the coworker’s ability increases (decreases). These empirical results provide broad support to our theory that accounts for the effect of social preferences on salespeople’s effort decisions. We also examine the revenue implications of team composition on firm performance under different sales incentives.