Cai, Cexun(Jeff)

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  • Publication
    Silent or Salient? Perks and Perils of Performance Posting
    (2015-01-01) Cai, Cexun(Jeff)
    Many firms in the U.S. spend more on their sales force than they do on other marketing activities. Thus, improving sales force performance is of paramount importance. A controversial way is to post performance (i.e., display everyone's performance), now done with ease on social platforms due to advances in information technology. On one hand, posting performance encourages social comparison and competition. On the other hand, it may discourage low-end performers. Also, not posting performance may encourage greater effort from sales agents to push ahead or avoid falling behind, if they are unaware of how others are doing. The result of these opposing factors is, prima facie, unclear. I study the effectiveness of performance posting using theory and experiments. In a game-theoretic model of incomplete information about agents' abilities, I allow a firm to control the precision of social comparison by choosing whether to post performance. Firstly, I find that a firm should not post performance when agents' abilities are sufficiently homogenous, as this prevents a low-ability (high-ability) agent from being overly discouraged (overly complacent). In contrast, a firm should post performance when agents' abilities are sufficiently heterogeneous, as a low-ability agent puts in more effort to avoid lagging by too much. Secondly, some social comparison or competitiveness helps performance posting but too much hurts, i.e., there is a non-monotonic relationship in its effectiveness of performance posting, due to tradeoffs between how much a high-ability and low-ability agent changes effort. Thirdly, I find that the firm's profit from posting increases (decreases) when the financial compensation is unattractive (attractive). Said differently, firms that pay less are more likely to benefit from posting, and therefore, more likely to post. Next, I demonstrate the empirical validity of these propositions using a series of lab experiments and a field study. Together, my theoretical and empirical results provide guiding principles on when a firm can benefit from performance posting.