Conflict between Supervisory Monitoring and Monetary Incentives

52 Pages Posted: 15 Aug 2018 Last revised: 21 Nov 2018

See all articles by Rajiv D. Banker

Rajiv D. Banker

Temple University - Department of Accounting

Shunlan Fang

Kent State University

Seok-Young Lee

Sungshin Women's University

Date Written: November 8, 2018

Abstract

Supervisory monitoring and monetary incentives are often used concurrently to mitigate agency conflicts. When an agent has to exert different types of effort for multi-dimensional tasks, little evidence exists on the interaction effect on an agent’s performance when both control mechanisms are present. We explore this question by utilizing the data from a field experiment by a high-end retailer, who introduced a monetary incentive scheme for the sales staff in randomly selected stores. Our results reveal that there is an inverted U-shaped relation between monitoring and performance. The introduction of the incentive plan motivates salespersons and significantly reduces the optimal level of monitoring. However, a conflicting interaction arises as the marginal impact of monitoring diminishes when monetary incentives are provided, and the marginal impact of monetary incentives decreases as the monitoring level increases and becomes negative when the monitoring level is high.

Keywords: Incentive plans; Monitoring; Interaction between control mechanisms; Salesforce performance; Field experiment

JEL Classification: D23; D83; J33; M30; M52

Suggested Citation

Banker, Rajiv D. and Fang, Shunlan and Lee, Seok-Young, Conflict between Supervisory Monitoring and Monetary Incentives (November 8, 2018). AAA 2019 Management Accounting Section (MAS) Meeting. Available at SSRN: https://ssrn.com/abstract=3232151

Rajiv D. Banker

Temple University - Department of Accounting ( email )

Philadelphia, PA 19122
United States

Shunlan Fang (Contact Author)

Kent State University ( email )

Kent, OH 44242
United States

Seok-Young Lee

Sungshin Women's University ( email )

249-1 Dong-Dong 3-Ka Sungbuk-Ku
Department of Business Administration
Seoul 136-742
KOREA
+82 2 920-7464 (Phone)
+82 2 920-7363 (Fax)

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