Team Incentives and Performance: Evidence from a Retail Chain

54 Pages Posted: 4 Sep 2015

See all articles by Guido Friebel

Guido Friebel

Goethe University Frankfurt; Centre for Economic Policy Research (CEPR); IZA Institute of Labor Economics

Matthias Heinz

University of Cologne; Centre for Economic Policy Research (CEPR)

Miriam Krüger

Goethe University Frankfurt

Nick Zubanov

Goethe University Frankfurt

Multiple version iconThere are 3 versions of this paper

Date Written: August 2015

Abstract

We test the effectiveness of team incentives by running a natural field experiment in a retail chain of 193 shops and 1,300 employees. As a response to intensified product market competition, the firm offered a bonus to shop teams for surpassing sales targets. A bonus to teams rather than individuals was a natural choice because the firm does not measure individual performance and relies on flexible task allocation among employees. On average, the team bonus increases sales and customer visits in the treated shops by around 3%, and wages by 2.3%. The bonus is highly profitable for the firm, generating for each bonus dollar an extra $3.80 of sales, and $2.10 of operational profit. The results show the importance of complementarities within teams and suggest that improved operational efficiency is the main mechanism behind the treatment effect. Our analysis of heterogeneous treatment effects offers a number of insights about the anatomy of teamwork. The firm decided to roll out the bonus to all of its shops, and the performance of treatment and control shops converged after the roll-out.

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

JEL Classification: J3, L2, M5

Suggested Citation

Friebel, Guido and Heinz, Matthias and Krüger, Miriam and Zubanov, Nick, Team Incentives and Performance: Evidence from a Retail Chain (August 2015). CEPR Discussion Paper No. DP10796, Available at SSRN: https://ssrn.com/abstract=2655482

Guido Friebel (Contact Author)

Goethe University Frankfurt ( email )

Grüneburgplatz 1
Frankfurt am Main, 60323
Germany

Centre for Economic Policy Research (CEPR)

London
United Kingdom

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Matthias Heinz

University of Cologne ( email )

Albertus-Magnus-Platz
Cologne, 50923
Germany

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Miriam Krüger

Goethe University Frankfurt ( email )

Grüneburgplatz 1
Frankfurt am Main, 60323
Germany

Nick Zubanov

Goethe University Frankfurt ( email )

Grüneburgplatz 1
Frankfurt am Main, 60323
Germany

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