Discussion

The aggregate work productivity declined after the pay scheme change; thus there is evidence of both an effort effect and a sorting effect. I found that the change in incentive scheme from a piece-rate scheme to an hourly compensation scheme adversely affected pledge dollars received. For a majority of the lists, pledges per call attempt decreased after the pay scheme, as shown in Table 2. Table 1 shows that even though the amount of call attempts increased by nearly 10%, the amount of pledge dollars decreased by 17%. As expected, the amount of production, or pledge dollars per call attempt, decreased by about 25%. The decrease in production from switching to an hourly wage scheme is consistent with my hypothesis that the effort effect is linear.

Because an effort effect was found, and only six employees out of hundreds worked both springs, a sorting effect could be inferred. The high wage with low incentive to increase worker productivity attracted lower ability student callers to the Annual Fund. As shown in Table 3, Lazear (1996) found a 36% production increase for the autoglass industry, Shi (2010) found a 20-23% production increase in the tree-thinning industry, and Heywood, Wei, & Ye (2011) found a 50% increase in research publication for professors. According to my hypothesis, the Annual Fund should have had a decrease in production similar to the amount of increase in production for other industries. This hypothesis is supported as the Annual Fund saw a 25% decrease in production.

There is no clear tenure effect from the data, meaning workers did not become more productive after each successive month. The Spring 2011 production was not linear; however, the Spring 2012 data looks more promising. After the initial month in January Spring 2012, effort decreased by 22% and 26% in the next two months respectively. Production then shot up in April but decreased in May back down towards the level seen before April. Depending on what happened in April to make production rise for that month, the prevalence of a tenure effect is inconclusive.

The factors involved in making a successful cold call are both endogenous and exogenous. For example, the student caller could be more talkative or friendly, which may incline the potential donor to give a pledge. However, the potential donor could be irritated that he or she was called at an inconvenient time or not have the money to donate, and thus not donate regardless of the student worker’s effort. According to Clemens (2012), if the factors are more endogenous there should be a piece-rate, whereas if the factors are more exogenous they should use an hourly wage scheme. Because the student workers responded so strongly to the incentive, it can thus be inferred that the determinants of a successful call (one that ends in a pledge) are mainly endogenous. The implications of this are profound. Other donation calling centers which use an hourly pay scheme because of the perceived exogeneity of factors leading to success in a cold call could drastically increase their workers’ production by switching to a piece-rate scheme.