Composition and Compensation

Harikesh Nair, Oystein Daljord (both at Stanford GSB) and I have a new paper titled “Homogenous Contracts for Heterogeneous Agents: Aligning Salesforce Composition and Compensation” that I have posted on my website. The paper examines the complementarities and distortions that arise on account of firms using uniform (across salespeople) features in their sales compensation contracts. What we find is that the presence of such uniform features creates a link across salespeople even in the absence of of explicit complementarities such as team selling or territory overlaps. Further, we find that by carefully pruning the salesforce a firm might be able to reap contractual efficiencies and get close to profit levels that accrue when contracts are completely tailored to individual salespeople. This is a follow up to our earlier paper and comments are most welcome.