Doug J. Chung is the MBA Class of 1962 Associate Professor of Business Administration in the Marketing unit at Harvard Business School. He teaches Sales & Sales Force Management and Business-to-Business Marketing in the second year MBA Elective Curriculum. He also chairs the executive education program, Managing Sales Teams and Distribution Channels. He has previously taught the core Marketing course in the first year MBA Required Curriculum, Marketing Models in the DBA Curriculum, and in various Executive Education programs at the Harvard Business School and Harvard Law School.
Professor Chung focuses his research primarily on sales force management and incentive compensation. He has worked with firms worldwide to develop effective employee incentive compensation systems and his work has been published in Marketing Science, Management Science, Journal of Marketing Research, Harvard Business Review, and the European Financial Review. His current work examines how different elements of an incentive compensation plan affect the performance and selection of varying types of sales agents.
Professor Chung earned his Ph.D. in management at Yale University, where he also earned an M.A. and M.Phil. in management. He is the recipient of the ISMS Doctoral Dissertation Award, ISBM Doctoral Support Award, and the Mary Kay Doctoral Dissertation Award, and he was the finalist for the 2014 John D. C. Little Award and the 2015 Frank M. Bass Award. He is also a member of the Edward A. Bouchet Graduate Honor Society. He was selected as a 2017 MSI Young Scholar by the Marketing Science Institute. Professor Chung serves on the editorial board at major academic journals, including Marketing Science, Journal of Marketing Research, and the International Journal of Research in Marketing. He completed his undergraduate studies at Korea University. Prior to pursuing a career in academics, Professor Chung served as an officer and platoon commander in the South Korean Special Warfare Command. He also held a variety of industry positions with several multinational companies.
We conduct a field experiment in which we vary the sales force compensation scheme at an Asian enterprise that sells consumer durable goods. With variation generated by the experimental treatments, we model sales force performance to identify the effectiveness of various forms of conditional and unconditional compensation. We account for salesperson heterogeneity by using a hierarchical Bayesian framework to estimate our model. We find conditional compensation in the form of quota-bonus incentives to improve performance; however, it may lead to lower future performance. We find little evidence that effectiveness differs between a quota-bonus plan and a punitive-bonus plan framed as a penalty for not achieving quota. We find unconditional compensation in the form of reciprocity to be effective at improving sales force performance only when given as a delayed reward of which the effectiveness decreases with repeated exposure. We also find heterogeneity in the impact of compensation on performance across salespeople; unconditional compensation is more effective for salespeople with high base performance, whereas conditional compensation is equally effective across all types of salespeople.
Intercollegiate athletics in the United States have become a multibillion-dollar industry over the past several decades. In this study, we investigate the short- and long-term direct monetary effects of operating a winning athletics program for an academic institution of higher education. We construct a unique panel dataset from multiple sources and utilize the latest dynamic panel data estimation methods to account for heterogeneity while also addressing endogeneity concerns. We find that success in men’s football and basketball has a significant impact on a school’s respective football and basketball revenues; however, the effect is different based on the type of school. We find that regular season wins in football account for most of the increase in revenue for established schools whereas invitations to prestigious postseason bowl games play a big part for less-established schools. Furthermore, we find that student population and education quality dissipate the effect of athletic success on monetary payoffs. We find that success in basketball carries over more from the past than in football with additional contemporaneous marginal effects for established schools. We do find, however, that past athletic success carries over significantly to the present in both football and basketball, suggesting the significance of the long-term monetary effect of athletic success to many academic institutions in the United States.
Much of what we believe about the best ways to compensate and motivate the sales force is based on theory and lab experiments. But in the past decade, researchers have been moving out of the lab and into the field, analyzing companies' sales and pay data, and conducting experiments involving actual salespeople. The findings from this new wave of research support some current compensation practices but call others into question. For example, studies clearly show that caps on commissions hurt sales. If managers must retain a cap, they should set it as high as possible to avoid reducing reps' incentives. Although overly complicated compensation systems have their downsides, research has found that a system needs to include enough elements (such as quarterly performance and overachievement bonuses) to keep high performers, low performers, and average performers engaged throughout the year. Managers should be careful in setting and adjusting quotas. For instance, studies show that ratcheting (raising a salesperson's annual quota if he or she exceeded it the previous year) dampens motivation. The research also suggests that it's important to pay attention to the timing of bonuses: a reward given at the end of a period is more motivating than one given at the beginning.
For practical reasons, many companies offer a common incentive plan to an entire sales force rather than offering customised plans for each individual. Doug J. Chung, Thomas Steenburgh, and K. Sudhir address how companies can design a single plan that motivates everyone to work to the best of their abilities.
I measure the spillover effect of intercollegiate athletics on the quantity and quality of applicants to institutions of higher education in the United States, popularly known as the "Flutie Effect." I treat athletic success as a stock of goodwill that decays over time, similar to that of advertising. Overall, athletic success has a significant long-term goodwill effect on future applications and quality. However, students with lower than average SAT scores tend to have a stronger preference for athletic success, while students with higher SAT scores have a greater preference for academic quality.
We estimate a dynamic structural model of sales force response to a bonus based compensation plan. Substantively, the paper sheds insights on how different elements of the compensation plan enhance productivity. We find evidence that: (1) bonuses enhance productivity across all segments; (2) overachievement commissions help sustain the high productivity of the best performers even after attaining quotas; and (3) quarterly bonuses help improve performance of the weak performers by serving as pacers to keep the sales force on track to achieve their annual sales quotas. The paper also introduces two main methodological innovations to the marketing literature: First, we implement empirically the method proposed by Arcidiacono and Miller (2011) to accommodate unobserved latent class heterogeneity using a computationally light two-step estimator. Second, we illustrate how discount factors can be estimated in a dynamic structural model using field data through a combination of (1) an exclusion restriction separating current and future payoff and (2) a finite horizon model in which there is no forward looking behavior in the last period.
