Game and Punishment Criminal Justice Lens on Commission Structure Ethics: An Abstract

Abstract

Gaming behaviors may cause salespeople to bend or break agreements with customers, reducing customer trust (Román and Ruiz 2005) and increasing supply chain costs to business customers. The salesperson’s firm is also directly harmed by gaming behaviors. The opportunity to engage in gaming behaviors increases as the complexity of the commission structures increases (Larkin 2014; Owan, Tsuru, and Uehara 2015; Oyer 1998, Tzioumis and Gee 2013). Tiered commission structures, also known as nonlinear compensation plans, may be particularly prone to gaming behaviors because salespeople can earn greater commission rates as they reach certain levels of sales performance during a commission period (Freeman et al. 2019; Larkin 2014; Owan et al. 2015).

Commission structures are often complex. In tiered commission structures, the percentage of variable pay changes at different levels of sales performance. Salesperson behaviors may change just prior to commission deadlines, depending on goal achievement. According to the deterrence doctrine, people weight temptation versus consequences before engaging in unethical behaviors. When the difference between tiers is large, it creates a larger temptation. Furthermore, salespeople should frame sales revenue differently depending on whether it leads to a new commission tier. Salespeople are likely to justify and downplay the consequences of gaming behavior that avoids rewards framed as a “loss” compared to gaming behavior intended to achieve a “gain.” Using a sample of professional salespeople participating in an experiment, this research shows that salespeople are more likely to engage in gaming behavior to avoid a loss, particularly when rewards stakes are high and their visibility within the organization is low. These findings demonstrate that commission plan structure has an impact on salesperson behaviors above and beyond the extant paradigm of variable versus fixed compensation.

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