x

Please fill out this short user survey of only 3 questions in order to help us improve the site. We appreciate your feedback!
Pay for Performance – Evidence from a large discount retailer v2
Last registered on November 02, 2016

Pre-Trial

Trial Information
General Information
Title
Pay for Performance – Evidence from a large discount retailer v2
RCT ID
AEARCTR-0001758
Initial registration date
November 02, 2016
Last updated
November 02, 2016 12:15 PM EDT
Location(s)
Region
Primary Investigator
Affiliation
University of Cologne
Other Primary Investigator(s)
PI Affiliation
University of Applied Science Neuss
PI Affiliation
University of Cologne
Additional Trial Information
Status
On going
Start date
2016-01-01
End date
2017-12-31
Secondary IDs
Abstract
This field experiment consists of two projects.

Project 1: The first project is a follow up on the field experiment registered under the ID AEARCTR-0000961. We hold the circumstances constant and incentivize the same normalized key performance variable (average receipt) for a group of randomly assigned employees of the lower (shop) management instead of the middle (district) management in the previous experiment. In the previous experiment we found that on average the bonus payment did not affect the average receipt. We hypothesize that lower level store managers have a more direct operational control to influence the average receipt and therefore we investigate the hypothesis that the bonus has a positive impact on the average receipt when paid to the store managers.

Project 2: In project 2 we investigate the role of relative performance information and complexity in incentive design by adding one additional treatment to project 1. We randomly assign the store managers to either being paid based on a normalized key performance variable as in project 1 (change of the average receipt to the same month in the previous year relative to the change of the average receipt of all stores in Germany normalized to the change relative to the months before the experiment) or to a substantially simpler key performance variable (average receipt compared to the average receipt in the same month of the previous year). In both cases, the bonus is paid out only when the performance measure exceeds a threshold value.

We hypothesize that the change in the normalization can affect the store manager’s performance in different ways. First, the normalization shifts the threshold value after which a bonus is paid out. While in treatment 1 this threshold varies with the nationwide performance of the firm, this is not the case in treatment 2. This will allow us to study whether and to what extent store managers strategically adapt their effort reaction based on the distance to the threshold.

But we also hypothesize that there can be at least two countervailing behavioral effects: on the one hand, using the development of the nation-wide average receipt as a normalization provides a better insurance to employees (Holmström (1979)’s informativeness principle) and this, in turn, could behaviorally trigger a more positively reciprocal reaction of the store managers. On the other hand, the normalization increases the complexity of the incentive scheme which may decrease the perceived influence store managers have on the key performance variable.
External Link(s)
Registration Citation
Citation
Manthei, Kathrin, Dirk Sliwka and Timo Vogelsang. 2016. "Pay for Performance – Evidence from a large discount retailer v2." AEA RCT Registry. November 02. https://doi.org/10.1257/rct.1758-1.0.
Former Citation
Manthei, Kathrin et al. 2016. "Pay for Performance – Evidence from a large discount retailer v2." AEA RCT Registry. November 02. http://www.socialscienceregistry.org/trials/1758/history/11606.
Experimental Details
Interventions
Intervention(s)
Intervention Start Date
2016-11-02
Intervention End Date
2017-01-31
Primary Outcomes
Primary Outcomes (end points)
Among many: the change of the key performance indicator (avg. receipt), order behavior of managers, food expiration, FTEs, mystery shopping results, questionnaire
Primary Outcomes (explanation)
Secondary Outcomes
Secondary Outcomes (end points)
Secondary Outcomes (explanation)
Experimental Design
Experimental Design
The intervention takes place in one region of Germany for three months. We randomly assign managers within the region to either the treatment group “normalized” (1), the treatment group “simple” (2) or control group (3) using the stratification method by Thomas Barrios (2013).

T1: Lower (shop) management receive mail that they will receive €125 per percentage point increase of the normalized (change of the average receipt to the same month in the previous year relative to the change of the average receipt of all stores in Germany normalized to the change relative to the months before the experiment) performance variable. Bonus payments are resticted to maximum €375.

T2: Lower (shop) management receive mail that they will receive €125 per percentage point increase of the performance variable above the value of the previous year. Bonus payments are resticted to maximum €375.

T3: Lower (shop) management receives nothing except a notification that they will get a bonus for the increase of some other (at this point unknown) variable at a later stage (after this intervention).
Experimental Design Details
Randomization Method
Stratification method by Thomas Barrios (2013)
Randomization Unit
Shop managers
Was the treatment clustered?
No
Experiment Characteristics
Sample size: planned number of clusters
No clusters
Sample size: planned number of observations
334 Shop managers
Sample size (or number of clusters) by treatment arms
T1 – 112
T2 – 110
T3 – 112
Minimum detectable effect size for main outcomes (accounting for sample design and clustering)
IRB
INSTITUTIONAL REVIEW BOARDS (IRBs)
IRB Name
IRB Approval Date
IRB Approval Number
Post-Trial
Post Trial Information
Study Withdrawal
Intervention
Is the intervention completed?
No
Is data collection complete?
Data Publication
Data Publication
Is public data available?
No
Program Files
Program Files
Reports, Papers & Other Materials
Relevant Paper(s)
REPORTS & OTHER MATERIALS