An Empirical Analysis of Continuing Improvements Following the Implementation of a Performance-Based Compensation Plan

Performance improvements subsequent to the implementation of a pay-for-performance plan can result because more productive employees self-select into the firm (selection effect) and/or because employees allocate effort to become more effective (effort effect). We analyze individual performance data for 3,776 sales employees of a retail firm to evaluate these alternative sources of continuing performance improvement. The incentive plan helps the firm attract and retain more productive sales employees, and motivates these employees to further improve their productivity. In contrast, the less productive sales employees’ performance declines before they leave the firm.

An Empirical Analysis of Performance Impacts Resulting From Conversion to Franchise Operations

Franchising is an important form of organizational control. Possible benefits of franchising include its ability to reduce agency costs that increase with costly monitoring, and provide incentives for the use of local information by onsite managers. However, these benefits may come at a cost, as franchisees may reduce quality by choosing to free ride. While many studies have investigated the reasons for franchising, few studies have documented the impacts of franchising on unit level operating performance. Using time-series data from a number of lodging properties that were converted to franchisee control from company control, this study documents the performance impacts of franchising. The analysis reveals that conversion results in a modest decline in financial performance and an immediate sharp decline in quality.

An Empirical Analysis of Manufacturing Overhead Cost Drivers

Empirical validity of the claim that overhead costs are driven not by production volume but by transactions resulting from production complexity is examined using data from 32 manufacturing plants from the electronics, machinery, and automobile components industries. Transactions are measured using number of engineering change orders, number of purchasing and production planning personnel, shop- floor area per part, and number of quality control and improvement personnel. Results indicate a strong positive relation between manufacturing overhead costs and both manufacturing transactions and production volume. Most of the variation in overhead costs, however, is explained by measures of manufacturing transactions, not volume.