The Comprehensive Effects of Sales Force Management: A Dynamic Structural Analysis of Selection, Compensation, and Training

This study provides a comprehensive model of an agent’s behavior in response to multiple sales management instruments, including compensation, recruiting/termination, and training. The model takes into account many of the key elements that constitute a realistic sales force setting: allocation of ef...

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Bibliographic Details
Published in:Management science 2021-11, Vol.67 (11), p.7046-7074
Main Authors: Chung, Doug J., Kim, Byungyeon, Park, Byoung G.
Format: Article
Language:English
Subjects:
Attrition
Compensation
dynamic structural models
exclusion restriction
Hiring
hyperbolic discounting
identification
Personnel selection
present bias
Proximity
recruiting
Recruitment
Sales
sales force compensation
Sales management
selection
Structural analysis
Termination
Training
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Summary:This study provides a comprehensive model of an agent’s behavior in response to multiple sales management instruments, including compensation, recruiting/termination, and training. The model takes into account many of the key elements that constitute a realistic sales force setting: allocation of effort, forward-looking behavior, present bias, training effectiveness, and employee selection and attrition. By understanding how these elements jointly affect agents’ behavior, the study provides guidance on the optimal design of sales management policies. A field validation, by comparing counterfactual and actual outcomes under a new policy, attests to the accuracy of the model. The results demonstrate a tradeoff between adjusting fixed and variable pay; how sales training serves as an alternative to compensation; a potential drawback of hiring high-performing, experienced salespeople; and how utilizing a leave package leads to sales force restructuring. In addition, the study offers a key methodological contribution by providing formal identification conditions for hyperbolic time preference. The key to identification is that under a multiperiod nonlinear incentive system, an agent’s proximity to a goal affects only future payoffs in nonpecuniary benefit periods, providing exclusion restrictions on the current payoff. This paper was accepted by Matthew Shum, marketing.
ISSN:0025-1909
1526-5501
DOI:10.1287/mnsc.2020.3853