Wage Transparency and Social Comparison in Sales Force Compensation

Long, Xiaoyang; Nasiry, Javad

doi:10.1287/mnsc.2019.3461

Cited by 28 publications

(8 citation statements)

References 42 publications

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“…Li et al (2020) constructed a behavioral model, including "byexpectation fairness" and "by-state fairness," and motivated their experimental observations to explain managers' effort and order decisions under different compensation contracts. Long and Nasiry (2020) investigated the implications of social comparison on agents' effort decisions as well as the firm's optimal compensation scheme. However, our work is Production and Operations Management different from theirs in the following manner.…”

Section: Literature Reviewmentioning

confidence: 99%

The implications of pay transparency in the presence of over‐ and underconfident agents

Fan

Chen

et al. 2023

Production and Operations Management

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Many companies are under pressure to improve pay transparency; however, its impact on their agents and principals remains unclear. As a way to investigate the upside and downside of pay transparency, we conduct our study based on a scenario in which agents have "cognitive bias" (namely, over-or underconfident). We also capture the notion of "social comparisons" behavior (namely, behind-averse and ahead-seeking) that occurs under pay transparency. By exploring a one-principal-two-agent model, we find that agents' optimal effort decisions are affected by the "intersection" between agents' social comparison behavior and cognitive bias. Specifically, relative to the opaque policy, we find that pay transparency can entice agents to improve their job performance (in general). Our analysis also provides a guideline for principals to implement transparent payment policies properly (including the optimal payment scheme and the recruitment strategy). Specifically, pay transparency could enable the principal to offer a lower merit-based factor level but a higher base salary level than opaque policy to motivate agents. To obtain high retained earnings, it is profitable for the principal to hire an overconfident agent if the principal chooses to adopt the opaque policy, but hire a mildly underconfident agent if pay transparency is selected. Moreover, we extend the base model to incorporate working capability heterogeneity across agents. We find that the agent's effort incentive and his opponent's working capability move in the same direction when the two agents' working capabilities are comparable under the transparent policy. Finally, by incorporating the environment's relative favoritism into the base model, we observe that when the environment is highly uncertain, the underconfident agent is willing to leverage environment uncertainty but the overconfident agent is willing to exert more effort.

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Section: Literature Reviewmentioning

confidence: 99%

The implications of pay transparency in the presence of over‐ and underconfident agents

Fan

Chen

et al. 2023

Production and Operations Management

View full text Add to dashboard Cite

show abstract

“…Li et al (2020) compared linear and non-linear contracts and showed that the feature of fairness plays a role in the realized outcomes, leading to a reduction in the benefits of non-linear contracts. Additionally, Long and Nasiry (2020) discussed the advisability of making wages transparent to employees. The incentive-design issue becomes more complicated with multitasking agents.…”

Section: Literature Reviewmentioning

confidence: 99%

Agents’ Self‐Routing for Blended Operations to Balance Inbound and Outbound Services

Legros¹

2021

Production and Operations Management

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T his study aims to evaluate the cost of agents' self-routing in a service system with inbound and outbound customers.We assume that inbound customers arrive over time depending on the waiting time offered, while outbound customers can be contacted at all times. Furthermore, agents are in control of routing decisions and are aware of the state of the system. Accordingly, they decide whether to serve an inbound or outbound customer, or to idle. The system manager seeks to provide a suitable trade-off between agents' choice of serving inbound and outbound customers by incentivizing their actions through linear payouts. Hence, there arises a problem of determining the cost of agents' self-routing, which can be interpreted as a variant of the principal-agent problem where the agents' efforts are directed toward selecting their routing policy. Through a Markov decision process, we show that the agents' optimal policy is a reservation threshold policy for inbound customers, and express the compensation parameters that minimize staffing cost. We conclude that motivating idling decisions through linear payouts incurs high costs. This justifies the current practice of using automated routing in call centers. Moreover, paying for idling cannot reduce staffing cost. However, discriminating between delayed and non-delayed customers in the reward structure presents a high potential of reducing agents' pay. Finally, in situations where agents do not know the status of their colleagues, our analysis argues in favor of not revealing the state of the system to them through delay announcements when the objective waiting time is low.

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“…We do not care how people obtain the peers’ information for comparisons interpersonally. Recently, [ 37 ] identified the conditions; thereby a company should reveal wage information to its employees, resulting in social comparisons. They found that social comparisons reduce collaborations interpersonally but could increase their willingness to ally for lowering the cost of effort.…”

Section: Happiness For Willingness-to-workmentioning

confidence: 99%

Measuring happiness under interpersonal comparison: An advanced theoretical framework and implications

Chai

2021

PLoS ONE

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The origin of happiness arouses people’s curiosity for a long time. Recent research introduces a utility theory for measuring subjective happiness in a social context. The past recent monetary conditions influence the present subjective happiness through two distinct channels: interpersonal comparison and self-adaptation. In this paper, we develop this theory to analyze behavioral patterns. Together with prospect theory’s gain-loss utility function, we exploit the theory in predicting psychological phenomena of craving. We explore the relationships between happiness and earnings. Under certain conditions, a high payoff disappoints you immediately and even leads to continuous disappointment across periods. We extend the explanations of the scenarios of New York cabdrivers’ labor-supply decisions. The effect of social comparisons may trigger workers’ behaviors of quit-working, which deepen related understandings of the literature.

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Wage Transparency and Social Comparison in Sales Force Compensation

Cited by 28 publications

References 42 publications

The implications of pay transparency in the presence of over‐ and underconfident agents

The implications of pay transparency in the presence of over‐ and underconfident agents

Agents’ Self‐Routing for Blended Operations to Balance Inbound and Outbound Services

Measuring happiness under interpersonal comparison: An advanced theoretical framework and implications

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