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Pay and performance in a customer service centre - principal and agents or principally angels?




We have followed a pay for performance reform in the phone based customer service centre of an insurance company, from its introduction in 2001 until the end of 2004. We use hard and soft data from the design and impact of the reform to contrast two theories of work motivation; the traditional self interest hypothesis that the principal-agent model builds on, with the hypothesis that fairness and reciprocity are significant motivational forces at workplaces. The reform was initiated to increase sales of insurance in the customer service centre and it gave the operators both economic incentives and fairness- and reciprocity incentives to increase their sales effort. The reform had a positive effect on sales; the operators answered more calls and sold insurance to a higher fraction of customers after the reform. This observation alone does not help us identify the importance of the motivational hypothesis we compare. However, when we look closer at the evolution of the design and impact of the payment plan, we conclude that our data correspond best with the standard principal-agent model.

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  • Aarbu, Karl Ove & Torsvik, Gaute, 2006. "Pay and performance in a customer service centre - principal and agents or principally angels?," Working Papers in Economics 12/06, University of Bergen, Department of Economics.
  • Handle: RePEc:hhs:bergec:2006_012

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    Team incentives; multitask; fairness; reciprocity.;

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects


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