Anne T. Coughlan

Executive compensation, management turnover, and firm performance : An empirical investigation

Abstract This paper investigates the internal managerial control mechanisms at the disposal of a corporations compensation-setting board or committee. The hypotheses tested are that both compensation changes and management changes are methods used to control top management, and that the use of these control methods is motivated by changes in the firms stock price performance. Public data from the period 1977–1980 support our hypotheses. We conclude that the firms board creates managerial incentives consistent with those of the firms owners, both by setting compensation and following management change policies which benefit shareholders.

An Empirical Analysis of Sales-Force Compensation Plans

Among the array of direct and indirect methods of motivation and control available to the sales manager is sales-force compensation. In this article, the authors summarize theoretical predictions from the economics, marketing, finance, and accounting literatures on the structure of optimal sales-force compensation plans. Guided by these insights, they then construct empirical models to quantify the effect of various sales-force factors, firm and product factors, and market factors on compensation. Using data from 286 firms in 39 industries, the authors examine determinants of incentive components and total pay and the optimal horizon for incentive pay. Copyright 1992 by University of Chicago Press.

Optimal Reverse Channel Structure for Consumer Product Returns

Consumers often return a product to a retailer because they learn after purchase that the product does not match as well with preferences as had been expected. This is a costly issue for retailers and manufacturers---in fact, it is estimated that the U.S. electronics industry alone spent

Network marketing organizations: Compensation plans, retail network growth, and profitability

13.8 billion dollars in 2007 to restock returned products [Lawton, C. 2008. The war on returns. Wall Street Journal (May 8) D1]. The bulk of these returns were nondefective items that simply were not what the consumer wanted. To eliminate returns and to recoup the cost of handling returns, many retailers are adopting the practice of charging restocking fees to consumers as a penalty for making returns. This paper employs an analytical model of a bilateral monopoly to examine the impact of reverse channel structure on the equilibrium return policy and profit. More specifically, we examine how the return penalty is affected by whether returns are salvaged by the manufacturer or by the retailer. Interestingly, we find that the return penalty may be more severe when returns are salvaged by a channel member who derives greater value from a returned unit. Also, the manufacturer may earn greater profit by accepting returns even if the retailer has a more efficient outlet for salvaging units.

Chapter 13 Salesforce compensation: A review of MS/OR advances

Abstract Network marketing organizations, or NMOs, are retail selling channels that use independent distributors not only to buy and resell product at retail, but also to recruit new distributors into a growing network over time. Commissions and markups on personal sales volumes, and net commissions on the personal sales volumes of downlines, are the methods of compensation commonly used to motivate NMO distributors. In this paper, we develop, analyze, and calibrate a dynamic decision model of the growth of a retail NMO. Descriptive and prescriptive insights show how compensation and other model parameters affect distributor motivation, sales, and network growth and profitability.

New technology adoption in an innovative marketplace: Micro- and macro-level decision making models

Publisher Summary The extensive MS/OR literature on sales force compensation in marketing has attacked a great variety of problems facing sales managers, including how to set commission rates, whether to delegate pricing authority to a sales force, what mix of salary and incentive compensation to provide to the sales force, whether or not to offer a menu of compensation plans, and how to elicit valuable information from salespeople about their utility functions and sales response functions. In the case of theoretical models, some predictions have been tested statistically, but these tests have been incomplete and, in some cases, inconclusive. Based on available empirical results, one cannot reject agency theory as a useful paradigm for compensation-setting, but further research is necessary to increase the level of confidence in the theory and its predictions. On the decision support system (DSS) front, few diagnostics have been presented for the models described in the literature, although those presented suggest the usefulness of the approach as well.

Determinants of Pay Levels and Structures in Sales Organizations

Abstract Innovative markets are those which are undergoing rapid development due to changing customer needs or improving technological capability. Because these markets are so dynamic, new products are introduced frequently, and there is a high degree of uncertainty regarding their potential for success. We review literature relevant to firm decision-making, including such topics as timing the adoption of a technological innovation, determining optimal spending on an innovative technology, and predicting the success of a class of products which are based on a particular innovative technology. We consider these problems both at the micro (individual firm) and macro (aggregate) levels.

A Cointegration Analysis of the Correlates of Performance in Franchised Channels

Two key issues in business-to-business (B2B) sales force management are (1) how much a given sales job should be compensated (pay level) and (2) how much of the compensation should be fixed versus variable (pay structure). The authors examine the paychecks drawn by people in more than 14,000 selling jobs and more than 4000 sales management jobs in five B2B industry sectors in five European countries. They show that pay levels and structures reflect an apparent balancing of two conflicting pressures: the economic imperative (to reward better performers by heightening pay dispersion) and the compensation differential compression resulting from high tax regimes. In particular, B2B firms appear to use variable pay as a way to lessen the salary differential compression impact of high tax regimes on salesperson motivation. Furthermore, similar to chief executive officers, sales managers can have an important multiplier effect that justifies paying them at increasing rates as job challenge rises.

How Firm Strategies Impact Size of Partner-Based Retail Networks: Evidence from Franchising

Not much is known about the primary drivers of performance in franchising systems. With some notable exceptions, much of the franchising literature on performance related issues has focused on either contrasting failure rates of independent small businesses and entrepreneurs with those of franchises and/or system survival issues. The existing literature on franchising performance displays at least three other characteristic patterns. First, most studies have restricted themselves to a single sector, usually, the fast food restaurant industry, since it is often perceived and portrayed as the archetypical franchise sector. Second, existing investigations have tended to focus on a single measure of performance. Finally, with the exception of survival articles, empirical studies have typically confined themselves to cross-sectional examination of the evidence. In other words, we know very little about what fosters long term performance.

Dynamic competitive pricing strategies

How do firms’ partnering strategies impact the size of their partner-based retail networks? We draw on agency theory to address this question in the context of franchising. Our econometric analyses (based on 9 years of longitudinal balanced panel data) include assessment of data nonstationarity and estimation of a dynamic panel data model that accounts for unobserved heterogeneity and endogeneity. Our findings indicate that franchisee network size is driven more by franchisor strategies that mitigate agency costs than by strategies that simply lower entry and ongoing costs and barriers for franchisees.