Performance Management through Compensation and Motivation: An Intervention Study Beyond Pay for Performance in the Sales Force

Using compensation as part of an organizations performance management is a central lever for steering employees and achieving performance goals. Growing acceptance of self-determination theory (SDT) is spurring debate over the motivational impact of compensation. Field-based evidence that compares different compensation approaches regarding their impact on behavior and performance can have a meaningful impact on this debate. Hence, a longitudinal field-based intervention study is at the heart of this cumulative dissertation. I made 851 observations of sales representatives and conducted 42 interviews with employees across the three organizations involved in the study. I combined this data with company records over 17 months and present the analyses in three articles. Article 1 sheds light on team learning behavior (TLB). Learning in teams continues to gain momentum in companies that heavily rely on knowledge work and compete in a volatile business environment. Based on longitudinal growth modeling, this article concludes how and why the design of compensation systems can influence the level of TLB. Article 2 provides a holistic description of the intervention. It offers insights to practitioners who are either not aware of the need to align compensation systems with current performance management or make inconclusive findings about how best to implement the change in compensation. The intervention studys qualitative insights are described in this article and offer implications for leadership and strategic management. By utilizing regression models and difference-in-differences estimators, Article 3 tests the different effects of the two interventions and confirms previous findings on the crowding-out effect. Most notably, removing rather than reducing the share of variable compensation seems more likely to steer the work effort and motivation. Overall, this dissertation contributes to our understanding of SDT and compensation as part of contemporary performance management. Scholars and practitioners are urged to attach greater value to intrinsic motivation.

Using compensation as part of an organizations performance management is a central lever for steering employees and achieving performance goals. Growing acceptance of self-determination theory (SDT) is spurring debate over the motivational impact of compensation. Field-based evidence that compares different compensation approaches regarding their impact on behavior and performance can have a meaningful impact on this debate. Hence, a longitudinal field-based intervention study is at the heart of this cumulative dissertation. I made 851 observations of sales representatives and conducted 42 interviews with employees across the three organizations involved in the study. I combined this data with company records over 17 months and present the analyses in three articles. Article 1 sheds light on team learning behavior (TLB). Learning in teams continues to gain momentum in companies that heavily rely on knowledge work and compete in a volatile business environment. Based on longitudinal growth modeling, this article concludes how and why the design of compensation systems can influence the level of TLB. Article 2 provides a holistic description of the intervention. It offers insights to practitioners who are either not aware of the need to align compensation systems with current performance management or make inconclusive findings about how best to implement the change in compensation. The intervention studys qualitative insights are described in this article and offer implications for leadership and strategic management. By utilizing regression models and difference-in-differences estimators, Article 3 tests the different effects of the two interventions and confirms previous findings on the crowding-out effect. Most notably, removing rather than reducing the share of variable compensation seems more likely to steer the work effort and motivation. Overall, this dissertation contributes to our understanding of SDT and compensation as part of contemporary performance management. Scholars and practitioners are urged to attach greater value to intrinsic motivation.