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We thank Emily Beam, Jasmijn Bol, Zoe Cullen, Guido Friebel, Robert Garlick, Jessica Hoel, Mitch Hoffman, Lisa LaViers, John List, Robert Metcalfe, Harish Sujan, Jason Snyder, and seminar participants at Harvard Business School for helpful comments. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
Overview — This study reports the effects of compensation cuts in a large sales organization. Results help to clarify managers’ implicit constraints, and provide a unique lens for analyzing the link between compensation schemes, worker performance, and turnover. Wage rigidity creates real and financial frictions, though the real-world drivers of rigidities remain largely unstudied. We use staggered commission reductions at a sales firm to estimate effects on worker turnover and effort.
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