Carolyn Deller is a Doctoral Candidate in the Accounting & Management unit at HBS. Carolyn's research interests are in management accounting, with a particular focus on the mechanisms (incentives, allocation of decision rights, feedback, etc.) used to enhance the motivation and ability of employees to reach their full potential.
Prior to beginning her studies at HBS, Carolyn worked at KPMG in Melbourne, Australia, where she completed her postgraduate studies in accounting, becoming a member of the Institute of Chartered Accountants in Australia. Carolyn graduated from the University of Melbourne with a Bachelor of Commerce (Degree with Honors) and worked at the University of Melbourne as a tutor, teaching in both the undergraduate and graduate accounting programs.
Who Should Select New Employees, the Head Office or the Unit Manager? Consequences of Centralizing Hiring at a Retail Chain
This paper contributes to an emerging literature in management control that studies employee selection as a mechanism to align employees with corporate goals and values. Specifically, we examine whether centralized hiring (in this study, by the head office of a U.S. retail chain) or decentralized hiring (in this study, by the store managers), leads to lower employee turnover. On one hand, a centralized model of hiring can allow a company to ensure enough resources and efforts are invested into consistently selecting job candidates fitting the company's values. On the other hand, centralization can neglect the potential informational advantage a unit manager may have to determine the candidates' fit with the unit team and local environment where s/he will work. We examine three major factors that may affect these tradeoffs: 1) the need to align new hires to company values; 2) the complexity of operations (which we claim reduces the time the unit manager has to select new employees); and 3) the informational advantage a unit manager has in selecting a candidate relative to the head office (based on the unit's location; the relevance of the unit managers' knowledge of local customers; and the unit manager's knowledge of his/her team). We conduct difference-in-differences analyses to examine the effects of centralized hiring on employee turnover. The overall effect of centralizing hiring on employee turnover is insignificant. However, consistent with the notion that centralized hiring would improve the alignment of employees with the company, we find that in more distant stores or stores operating in non-mainstream markets, centralized hiring is associated with greater retention of employees, especially employees highly aligned with the company's goals/values. On the other hand, we find that centralization is less beneficial for stores serving customers that are highly sensitive to service quality.
Keywords: Hiring of employees;
managers information advantage;
Situation or Environment;
Do Incentive Plans for Exemplary Employees Lead to Productive or Counterproductive Outcomes?
Using data from a retail chain, this paper studies the effects of a preferential plan providing incentives only to exemplary employees. Such plans incorporate elements of tournaments (through the selection of employees chosen largely on the basis of past performance but incorporating some managerial discretion) and linear incentives to align employees with company goals and values. We find that, on average, the implementation of the preferential incentive plan was associated with improvements in sales. Also, we find that this plan was associated with greater improvements in sales and gross profits, and reductions in the incidence of bad audits in stores where employees were initially less likely to be aligned with company goals. However, the plan was associated with lower sales and gross profits, and higher incidence of bad audits, absenteeism, and turnover in some situations where employees could have perceived the plan to be unattainable or unfair. Our study sheds light on the impact of preferential incentive plans, and the conditions under which these plans are more or less effective.
Keywords: Employee compensation;