Team Incentives and Performance: Evidence from a Retail Chain

Abstract

In a field experiment with a retail chain (1,300 employees, 193 shops), randomly selected sales teams received a bonus. The bonus increases both sales and number of customers dealt with by 3%. Each dollar spent on the bonus generates $3.80 in sales, and $2.10 in profit. Wages increase by 2.2% while inequality rises only moderately. The analysis suggests effort complementarities to be important, and the effectiveness of peer pressure in overcoming free-riding to be limited. After rolling out the bonus, treatment and control shops’ performance converge, suggesting long-term stability of the treatment effect.

Keywords: management practices, randomized controlled trial (RCT), natural field experiment, insider econometrics

JEL Classification: J3, L2, M5