Dhinu Srinivasan

CONTEXTUAL ANALYSIS OF PERFORMANCE IMPACTS OF OUTCOME-BASED INCENTIVE COMPENSATION

This study investigated how contingency factors such as competitive intensity, customer profile, and behavior-based control influenced the effectiveness of an outcome-based incentive plan supportin...

Association of Nonfinancial Performance Measures with the Financial Performance of a Lodging Chain

A test of nonfinancial measures used as part of a management-incentive program by a U.S.-based, full-service hotel chain found that improvements in the nonfinancial measures were followed shortly by increases in revenue and profit. The two nonfinancial measures are customer satisfaction as measured by guests’ comment card indications of likelihood to return and level of complaints. The lag between the nonfinancial measures and changes in revenue and operating profit was six months in this case. While the test applies directly to that one chain, the lesson is important to the rest of the hotel industry.

The impact of supervisory monitoring on high-end retail sales productivity

Based on a two-stage analysis of a panel of data on 12 outlets of a high-end retailer for 24 months, we investigate how the level of supervisory monitoring affects retail sales productivity. In the first stage, we use Data Envelopment Analysis (DEA) to compute the relative productivity of retail outlets in using their labor and capital resources to generate store sales. In the second stage, we regress the logarithm of DEA scores on contextual variables to obtain consistent estimators of the impact of contextual variables on productivity (Banker and Natarajan in Operation Research 56:48–58, 2008). Contrary to agency theoretic prediction that supervisory monitoring leads to an increase in retail sales productivity, our empirical results indicate that the higher the level of supervisory monitoring, the lower is the retail sales productivity for high-end retail outlets.

Pricing and capacity planning for product-line expansion and reduction

We investigate optimal pricing and capacity planning decisions for product-line settings such as introducing a new product or dropping an existing one. We consider a two-product, two-period model with stochastic demands, where price and capacity decisions are made at the outset. Investment in capacity must be traded-off against the possibility of buying at higher spot market prices due to shortage in capacity or charging a higher price to manage the demand. Prior studies argue that introducing an additional product to the product-line strains capacity, resulting in an increase in the price of an existing product. In contrast, we find that introducing a new product can also result in a drop in price of an existing product, enabling strategic pricing by firms. The necessary condition for this to occur is that the demand uncertainties for the products are of similar magnitude and negatively correlated. Similar insights are obtained for the setting where an existing product is dropped from the product-line. Hence, product-market decisions and contextual factors play a role in capacity planning, capacity cost allocation and pricing.

DOES CEO CHARISMA MATTER? AN EMPIRICAL ANALYSIS OF THE RELATIONSHIPS AMONG CEO CHARISMA, ORGANIZATIONAL PERFORMANCE, AND ENVIRONMENTAL UNCERTAINTY.

This paper reports the results of a study examining the relationships among strategic charismatic leadership, organizational performance, and environmental uncertainty with primary data from a samp...

The role of non-financial measures in controlling myopic activities: the case of hard selling

Using a principal-agent framework, many analytical studies have examined the role of non-financial or additional performance measures in enhancing long-run efforts such as customer service. However, myopic activities that enhance short-term firm performance at the expense of long-term profitability are prevalent across industries (and perhaps nations). Accordingly, the purpose of this paper is to investigate when and how non-financial measures may be used to control such myopic activities. Specifically, we investigate the interaction between a myopic behaviour known as hard selling and a specific non-financial measure (customer satisfaction), often used to measure the customer irritation that results from hard selling. Prior studies suggest that non-financial measures are always a valuable addition because they increase the level of long-run efforts and decrease the (over) reliance on financial incentives. In contrast, we find that non-financial measures may not always be valuable in controlling myopic activities, and when valuable, they may either increase or decrease the reliance on a financial measure such as accounting earnings. In addition, the impact of non-financial measures on myopic activities varies widely, ranging from no impact at all to complete elimination. Overall, these insights enhance our understanding of the role of non-financial measures in controlling myopic activities, in contrast to enhancing long-run efforts.