Contextual Analysis of Performance Impacts of Outcome-Based Incentive Compensation

Abstract

This study investigated how contingency factors such as competitive intensity, customer profile, and behavior-based control influenced the effectiveness of an outcome-based incentive plan supporting a customer-focused service strategy. Empirical analyses were based on data for 77 months from 34 outlets of a major retailer, 15 of which implemented the incentive plan. Results support theoretical predictions: the positive impact of outcome-based incentives on sales, customer satisfaction, and profit increased with intensity of competition and proportion of upscale customers and decreased with level of supervisory monitoring.