Experimental Design Details
In our partner organization, about 2700 loan officers work in 425 different branches. Loan officers face various tasks such as recruiting new clients, managing and helping existing clients, disbursing new loans, collecting regular instalments, and cross-selling utility products.
The wage consists of a monthly base salary and monthly high-powered bonus payments subject to performance on various dimensions. First of all, the bonus structure depends on branch characteristics (which types of loans are issued, how many clients the branch is handling) as well as loan officers’ caseload (in terms of the number of clients). The total bonus payment consists of the sum of five different dimensions that are measured and incentivized independently of each other: Bonus on net client increase, Bonus on collection rate, Bonus on utility products (phone, TV, etc.), Bonus on home improvement loan, and Bonus on sanitation loan.
To attain the first two bonus payments, a specific threshold must be met. The remaining bonus payments are piece rates. Currently, a large fraction of loan officer (approx. 70%) does not achieve any bonus payments. Most frequently, loan officers attain the bonus on net client increase, collection rate and utility products.
We have three treatment groups, 1) control, 2) breakdown and 3) target, that receive different information on their bonus calculations in the HR management app that our partner organization is using. In control, loan officers receive the same information as they did before. Their total bonus amount is communicated to them by the end of the month in the payment slip which they can access via the HR app. Different from our treatment, this total bonus is only a lump-sum number. Therefore, loan officers in Control do not get information on i) the different categories of the bonus and ii) the composition of their bonus payment. However, they can access information regarding their current performance in the HR app independently. More specifically, this performance information contains the total number of clients, total outstanding, collection rate and the number of utility product sold. For this, they need to be able to calculate their bonus payments on their own which implies knowing all information that feeds into the bonus calculation, the different bonus thresholds and where to access information on their performance in the app. To capture any effects from administering surveys on bonus payments and incentives, we will have a "pure control" group that receives the same information as the control group, but for which we will not collect any survey data. In our second treatment group, the breakdown treatment, we provide loan officers the breakdown of their total bonus in the five above-mentioned categories in the internal HR app that is already in use. The information displays both the loan officers’ last month’s performance and how much bonus they received in each category in the last month. In our third treatment group, the target treatment, we provide loan officers with the exact bonus threshold for each category in addition to the breakdown information. More specifically, loan officers receive information that highlights the gap/excess between their performance and the required threshold for each bonus category for the last month. It also gives the information on how to precisely calculate bonus payments in all dimenstions. Similar to the breakdown treatment, all information will be communicated to loan officers via the internal HR app. We will assess the effects of our communication intervention based on survey data and administrative data. Survey data: First, a baseline survey will be administered before the start of the intervention. Second, a knowledge test of the current incentive scheme and general questions regarding financial literacy and cognitive capacity will be implemented. To assess potential learning from this test, we randomize individuals in a detailed and a less detailed version that arguably limits the scope for learning. Third, high-frequency work-stress questions will be administered on a weekly basis via the HR app during the intervention. Lastly, endline data will be collected after six months. Administrative data records on performance will complemented the survey data.