Noah Lim, John P. Morgridge Distinguished Chair in Business. PHOTO: CAMILLA KLYVE
“The whole is greater than the sum of its parts.”
Why are companies so fond of using team contests? For a high-stress industry like sales, the answer is pretty obvious: healthy competition helps motivate a sales force, shakes up the daily routine, and builds a sense of teamwork. Not surprisingly, greater effort expended on the part of employees can also translate into greater revenues for the company.
Although team contests are frequently used by sales managers, there are still some important questions on the design of team contests that have not been thoroughly studied. First, since salespeople on a team often have different abilities, experience, desire to succeed, or territorial endowments, how does team composition affect the effort put forth by individuals on the team? Second, knowing that managers usually rank teams based on the average (or total) team output regardless of the team composition, what other metrics could be adopted by managers?
With Hua Chen from the Terry College of Business at the University of Georgia, we looked at how team composition interacts with the metrics used to determine the contest winner on salespeople's effort. Our study examined effort across three types of contests where the contest winner may be the team with: 1) the higher average output, 2) the higher minimum output contribution within a team, and 3) the higher maximum output contribution within a team.
Using a game-theoretic model and lab experiment, we investigated the contests in which two identical teams, each with two team members who varied in ability, squared off against each other. The findings revealed that when team members have equal ability, all three metrics produced the same level of effectiveness within the team—that all team members exerted the same amount of effort regardless of the metric used to determine the winner. However, when team members are different in ability, the average metric yielded the best outcome.
We also noted that the minimum and maximum metrics can be considered optimal in different situations. The minimum metric, for example, can generate the highest level of effort if the teams competing are asymmetric, while the maximum metric can work optimally if team members have disparate costs related to their effort.
Moreover, we found that if the average metric was used, the difference in ability between team members was irrelevant; stronger and weaker team members exerted the same amount of effort as each other during the contest. However, when the maximum and minimum metrics were used to ascertain the winner, team members expended more or less effort relative to their status (stronger versus weaker). In other words, the difference in ability between team members became more obvious when using the other two metrics.
So, given these different metric scenarios, how would we synthesize this information and extrapolate it into something useful for sales management to put into practice when designing teams? We recommend the following:
- Managers should aim to understand what is behind the differences in sales employees, whether it be territorial endowments, ability, or some other factor.
- When team members have equal ability, managers can change the metric they use in contests throughout the year or sales period without a dip in results.
- When there is marked ability difference among team members, managers should watch how they are assigning staff to teams and which contest metric to employ.
- Finally, if the objective is to galvanize weaker team members, the minimum metric may be the one to employ.
Understanding when to use which metric gives sales managers more freedom in designing team contests, helping ensure that team composition and the resulting success it can yield have more to do with good planning than they do with random luck.
Read the paper “How Does Team Composition Affect Effort in Contests? A Theoretical and Experimental Analysis” published by Journal of Marketing Research.
Noah Lim is the John P. Morgridge Distinguished Chair in Business and a professor in the Department of Marketing at the Wisconsin School of Business.