A Structural Model of a Multitasking Salesforce: Multidimensional Incentives and Plan Design

63 Pages Posted: 13 Sep 2019 Last revised: 14 May 2020

See all articles by Minkyung Kim

Minkyung Kim

UNC Chapel Hill Kenan-Flagler Business School

K. Sudhir

Yale School of Management; Yale University-Department of Economics; Yale University - Cowles Foundation

Kosuke Uetake

Yale School of Management

Date Written: September 13, 2019

Abstract

We develop the first structural model of a multitasking salesforce to address questions of job design and incentive compensation design. The model incorporates three novel features: (i) multitasking effort choice given a multidimensional incentive plan; (ii) salesperson’s private information about customers and (iii) dynamic intertemporal tradeoffs in effort choice across the tasks. The empirical application uses data from a micro nance bank where loan officers are jointly responsible and incentivized for both loan acquisition repayment but has broad relevance for salesforce management in CRM settings involving customer acquisition and retention. We extend two-step estimation methods used for unidimensional compensation plans for the multitasking model with private information and intertemporal incentives by combining flexible machine learning (random forest) for the inference of private information and the first-stage multitasking policy function estimation. Estimates reveal two latent segments of salespeople-a “hunter” segment that is more efficient in loan acquisition and a “farmer” segment that is more efficient in loan collection. We use counterfactuals to assess how (1) multi-tasking versus specialization in job design; (ii) performance combination across tasks (multiplicative versus additive); and (iii) job transfers that impact private information impact firm profits and specific segment behaviors.

Keywords: Salesforce compensation, Multitasking, Multi-dimensional incentives, Private information, Adverse selection, Moral hazard

JEL Classification: C61, J33, L11, L23, L14, M31, M52, M55

Suggested Citation

Kim, Minkyung and Sudhir, K. and Uetake, Kosuke, A Structural Model of a Multitasking Salesforce: Multidimensional Incentives and Plan Design (September 13, 2019). Cowles Foundation Discussion Paper No. 2199, September 2019, Available at SSRN: https://ssrn.com/abstract=3452977 or http://dx.doi.org/10.2139/ssrn.3452977

Minkyung Kim

UNC Chapel Hill Kenan-Flagler Business School ( email )

300 Kenan Drive
Chapel Hill, NC 27599
United States

K. Sudhir (Contact Author)

Yale School of Management ( email )

135 Prospect Street
P.O. Box 208200
New Haven, CT 06520-8200
United States
203-432-3289 (Phone)
203-432-3003 (Fax)

Yale University-Department of Economics ( email )

28 Hillhouse Ave
New Haven, CT 06520-8268
United States

Yale University - Cowles Foundation ( email )

Box 208281
New Haven, CT 06520-8281
United States

Kosuke Uetake

Yale School of Management ( email )

135 Prospect Street
P.O. Box 208200
New Haven, CT 06520-8200
United States

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