Essays on Promoting Agent Productivity in Marketing Channels

Abstract

My dissertation studies the instruments available for business organizations to promote the productivity of their employees working in various marketing channels. Essay 1 focuses on the B2B sales context in which information about environments and customers is often localized. Therefore, salespeople are likely to be more informed and knowledgeable about the environments than their supervisors. Under such information asymmetry between the firm and the salesperson, theory suggests that, optimally, the firm should leverage the information and secure value from it by delegating decision-making authority to the salesperson. I use insights from the sales management literature and practice to suggest that firms could choose to delegate (or not) decision authority to salespeople along two broad sets of activities– those that prospect, target, and cultivate customers and those that negotiate price and close sales. I term the delegation decision on the first set of activities as task delegation and for the second set of activities as price delegation, and then, I explore the complementarity between these two types of delegation and its impact on salesperson’s productivity. Using proprietary data on salespeople selling industrial equipment, I find that firms delegate both pricing and task-related activities when the salesperson has significant information advantage over the firm. I also find complementarity between these two decisions with the salesperson achieving higher level of productivity only when the task and price decisions are both either delegated to him or decided upon by the firm but not when one decision is delegated and the other is centralized. Finally, I find that a salesperson’s experience enhances this complementary effect. My results provide theoretical insights and managerial guidance on when, how, and to whom should firms allocate sales-related decision rights. In Essay 2, I focus on the channel settings in which employees need to work on multiple tasks. While the performance of some tasks is easily verifiable to the employers, the performance of others is not; I refer to the two types of performance as quantity performance and quality performance, respectively. Due to the difference in measurability, motivating the employees to balance their effort allocation between the two essential performance types is a challenge for the employers. In this research, I show that the employers could overcome this challenge by making relational investment – non-monetary and voluntary investment that focuses on improving the employees’ welfare. I contend that such relational investment could improve the employees’ performance through two mechanisms. The first mechanism is the calculative mechanism through which the employees view their employers’ relational investment as an exchange for their productivity and thus expend more effort; however, due to the calculative mindset, they will only allocate the effort to performance outcomes that are observable to the employers, i.e., quantity performance. The second mechanism is the reciprocal mechanism with which employees feel obligated to the employers’ investment, and thus the resultant moral imperative to repay drives the employees to work harder on all performance outcomes that are desired by the employers, including quality performance. I further propose that the employers’ monitoring of quantity performance would strengthen the effect of the calculative mechanism but weaken the effect of the reciprocal norm mechanism. I test the prosed effects using proprietary data obtained from a barbershop chain. The research illustrates the value of relational investment in motivating employees, especially when some performance outcomes of the employees are not readily observable to the employers. Furthermore, the research also highlights that the interaction between formal control mechanisms (e.g., monitoring) and informal ones (e.g., relational investment) are dynamic. Rather than arguing these mechanisms as absolutely complementary or substituting, I show that monitoring and relational investments could either complement or substitute each other depending on the nature of the performance and relationship under study. In sum, my dissertation attempts to improve our understanding of employees’ productivity in marketing channels and provide suggestions for business organizations to overcome the issues, i.e., information asymmetry and multi-tasking, that inhibit the productivity increase in marketing channels.