More from the Author

• Article | Journal of Labor Economics | Forthcoming

  The Cost of High-Powered Incentives: Employee Gaming in Enterprise Software Sales

  Ian Larkin

  This paper investigates the pricing distortions that arise from the use of a common non-linear incentive scheme at a leading enterprise software vendor. The empirical results demonstrate that salespeople are adept at gaming the timing of deal closure to take advantage of the vendor's accelerating commission scheme. Specifically, salespeople agree to significantly lower pricing in quarters where they have a financial incentive to close a deal, resulting in mispricing that costs the vendor 6-8% of revenue. Robustness checks demonstrate that price discrimination by the vendor does not explain the identified effects.

  Keywords: incentives; motivation; compensation; gaming; sales force management;

  Citation:

  Larkin, Ian. "The Cost of High-Powered Incentives: Employee Gaming in Enterprise Software Sales." Journal of Labor Economics (forthcoming).

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• Working Paper | HBS Working Paper Series | 2013

  The Cost of High-Powered Incentives: Employee Gaming in Enterprise Software Sales

  Ian I. Larkin

  This paper investigates the pricing distortions that arise from the use of a common non-linear incentive scheme at a leading enterprise software vendor. The empirical results demonstrate that salespeople are adept at gaming the timing of deal closure to take advantage of the vendor's accelerating commission scheme. Specifically, salespeople agree to significantly lower pricing in quarters where they have a financial incentive to close a deal, resulting in mispricing that costs the vendor 6-8% of revenue. Robustness checks demonstrate that price discrimination by the vendor does not explain the identified effects.

  Citation:

  Larkin, Ian I. "The Cost of High-Powered Incentives: Employee Gaming in Enterprise Software Sales." Harvard Business School Working Paper, No. 13–073, February 2013. (Journal of Labor Economics, Forthcoming.)

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• Working Paper | HBS Working Paper Series | 2013

  The Dirty Laundry of Employee Award Programs: Evidence from the Field

  Timothy Gubler, Ian I. Larkin and Lamar Pierce

  Many scholars and practitioners have recently argued that corporate awards are a "free" way to motivate employees. We use field data from an attendance award program implemented at one of five industrial laundry plants to show that awards can carry significant spillover costs and may be less effective at motivating employees than the literature suggests. Our quasi-experimental setting shows that two types of unintended consequences limit gains from the reward program. First, employees strategically game the program, improving timeliness only when eligible for the award, and call in sick to retain eligibility. Second, employees with perfect pre-program attendance or high productivity suffered a 6-8% productivity decrease after program introduction, suggesting they were demotivated by awards for good behavior they already exhibited. Overall, our results suggest the award program decreased plant productivity by 1.4%, and that positive effects from awards are accompanied by more complex employee responses that limit program effectiveness.

  Citation:

  Gubler, Timothy, Ian I. Larkin, and Lamar Pierce. "The Dirty Laundry of Employee Award Programs: Evidence from the Field." Harvard Business School Working Paper, No. 13–069, February 2013.

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