IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this article or follow this journal

Store Manager Incentive Design and Retail Performance: An Exploratory Investigation

  • Nicole DeHoratius

    ()

    (Graduate School of Business, University of Chicago, 5807 South Woodlawn Avenue, Chicago, Illinois 60637)

  • Ananth Raman

    ()

    (Harvard Business School, Morgan Hall, Soldiers Field, Boston, Massachusetts 02163)

Registered author(s):

    Store managers perform multiple tasks within a store, and the way in which they are evaluated and rewarded for these tasks affects their behavior. Using empirical data from multiple stores of a consumer electronics retailer, Tweeter Home Entertainment Group, we highlight the extent to which store manager incentive design impacts store manager behavior and, consequently, retail performance. More specifically, we describe the shift in store manager behavior resulting from a change in incentives, which, in part, altered the importance of sales relative to inventory shrinkage in the store manager compensation plan. Store managers, following this change, directed less attention to the prevention of inventory shrinkage and more toward sales-generating activities and made different process choices within the store. We observed increases in the level of inventory shrinkage and sales within these stores. Controlling for alternative drivers of sales and inventory shrinkage, we find this change in incentive design to be associated with a profit improvement of 4.2% of sales. This work indicates that altering how store managers are compensated impacts retail performance. Moreover, our findings underscore the importance of balancing the rewards given for different types of activities in contexts where agents face multiple competing tasks.

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL: http://dx.doi.org/10.1287/msom.1060.0150
    Download Restriction: no

    Article provided by INFORMS in its journal Manufacturing & Service Operations Management.

    Volume (Year): 9 (2007)
    Issue (Month): 4 (April)
    Pages: 518-534

    as
    in new window

    Handle: RePEc:inm:ormsom:v:9:y:2007:i:4:p:518-534
    Contact details of provider: Postal:
    7240 Parkway Drive, Suite 300, Hanover, MD 21076 USA

    Phone: +1-443-757-3500
    Fax: 443-757-3515
    Web page: http://www.informs.org/
    Email:


    More information through EDIRC

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

    as in new window
    1. Edward P. Lazear, 1996. "Performance Pay and Productivity," NBER Working Papers 5672, National Bureau of Economic Research, Inc.
    2. Canice Prendergast, 1999. "The Provision of Incentives in Firms," Journal of Economic Literature, American Economic Association, vol. 37(1), pages 7-63, March.
    3. Holmstrom, Bengt & Milgrom, Paul, 1991. "Multitask Principal-Agent Analyses: Incentive Contracts, Asset Ownership, and Job Design," Journal of Law, Economics and Organization, Oxford University Press, vol. 7(0), pages 24-52, Special I.
    4. Slade, Margaret E, 1996. "Multitask Agency and Contract Choice: An Empirical Exploration," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 37(2), pages 465-86, May.
    5. Alan L. Montgomery, 1997. "Creating Micro-Marketing Pricing Strategies Using Supermarket Scanner Data," Marketing Science, INFORMS, vol. 16(4), pages 315-337.
    6. Kathleen M. Eisenhardt, 1985. "Control: Organizational and Economic Approaches," Management Science, INFORMS, vol. 31(2), pages 134-149, February.
    7. Knez, Marc & Simester, Duncan, 2001. "Firm-Wide Incentives and Mutual Monitoring at Continental Airlines," Journal of Labor Economics, University of Chicago Press, vol. 19(4), pages 743-72, October.
    Full references (including those not matched with items on IDEAS)

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:inm:ormsom:v:9:y:2007:i:4:p:518-534. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mirko Janc)

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.