interrelations between a gift exchange practice and the incentive system in a sales team

Question 1

What is the main finding of the Friis et al. case study on gift-giving in sales teams?

Answer 1

Salespeople continue selling beyond their bonus cap and transfer sales to colleagues due to norms of reciprocity, fairness, and self-interest.

Question 2

Why do salespeople “gift” their sales performance?

Answer 2

Collective benefits (team culture, goodwill, fairness)
Insurance (reciprocity ensures future support)
Self-interest (mitigates uncertainty, prevents free-riding)
Ratchet effect avoidance (prevents unrealistic target increases)

Question 3

How does gift-giving circumvent the ratchet effect?

Answer 3

When reps exceed their targets, management might raise future sales targets, making it harder to earn bonuses. Gift-giving helps control this risk by redistributing sales within the team

Question 3

How does gift-giving impact free-riding?

Answer 3

Salespeople avoid free-riding by ensuring mutual obligation and social control. Those who never reciprocate may face social disapproval and lose future support.

Question 4

How does gift-giving interact with formal control systems?

Answer 4

Complementarity: Encourages continued selling beyond caps

Substitution: Reduces need for strict performance monitoring

Crowding out: Can distort individual performance evaluation

Question 5

What are the risks of gift-giving in sales teams?

Answer 5

Distorted performance data (unclear who the real top performers are)

Reduced need for training (new hires may not learn as much)

Less accurate target-setting (managers may not see who is struggling)