The Comprehensive Effects of Sales Force Management: A Dynamic Structural Analysis of Selection, Compensation, and Training

This study provides a comprehensive model of an agent’s behavior in response to multiple sales management instruments, including compensation, recruiting/termination, and training. The model on agents’ behavior takes into account many of the key elements that constitute a realistic sales force setting—allocation of effort, forward-looking behavior, present bias, effectiveness of training, and employee selection and attrition. By understanding how these elements jointly influence agents’ behavior, the study provides guidance on the optimal design of sales management policies. Counterfactual experiments show ways in which alternative compensation schemes, recruiting and termination policies, and sales training opportunities affect the selection and performance of the sales force. A field validation, by comparing counterfactual and actual outcomes under a new policy, attests the accuracy of the model. In addition, the study offers a key methodological contribution by providing formal identification conditions for hyperbolic time preferences. The key to identification is that, under a multi-period nonlinear incentive scheme, an agent’s proximity to a goal affects only future payoffs in non-pecuniary benefit periods, providing exclusion restrictions on the current payoff.