Perspectives on Behavior-Based versus Outcome-Based Salesforce Control Systems

Author(s): Erin Anderson and Richard L. Oliver

Source: Journal of Marketing , Oct., 1987, Vol. 51, No. 4 (Oct., 1987), pp. 76-88
Published by: Sage Publications, Inc. on behalf of American Marketing Association

Stable URL: https://www.jstor.org/stable/1251249

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 Erin Anderson & Richard L. Oliver

Perspectives on Behavior-Based
Versus Outcome-Based Salesforce
Control Systems
Forms of control systems used in salesforce evaluation and based on the monitoring of outcomes or of
behaviors are described, contrasted, and evaluated in terms of emerging theories in economics, orga-
nization theory, and cognitive psychology. Generally, the principles of behavior control as opposed to
outcome control are found to be consistent with these theoretical perspectives with exceptions as noted,
though studies of descriptive trends suggest that outcome control remains useful as a sales management
philosophy. The authors conclude with a set of propositions intended to stimulate research on the man-
agerial and behavioral consequences of the two control philosophies.

Acontrol system is an organization's set of pro-
cedures for monitoring, directing, evaluating, and
compensating its employees. By accident or design, In
such a system influences employee behavior, ideally
in a way that enhances the welfare of both the firm
and the employee. One group of employees critical to
the organization's functioning is the salesforce. We
describe and discuss two major salesforce control sys-
tems and assess the effects of these systems on the
salesperson's cognitions, motivation, and behavior.
Like system frameworks generally (see Eisenhardt
1985), salesforce control systems can be classified into
those monitoring the final outcomes of a process and
those monitoring individual stages (e.g., behaviors) in
the process. In an outcome-based control system:
* relatively little monitoring of salespeople by
ods salespeople use to achieve results, are used
to evaluate and compensate the salesforce.
contrast, in behavior-based control systems:
* considerable monitoring of salespeople's activ-
ities and results is involved,
* high levels of management direction of and in-
tervention in the activities of salespeople are in-
volved, and
* subjective and more complex methods based
largely on (1) what salespeople bring to the sell-
ing task (e.g., aptitude, product knowledge), (2)
their activities (e.g., number of calls), and (3)
their sales strategies, rather than sales out-
comes, are used to evaluate and compensate the
salesforce.

management is involved, Outcome-based control approximates a market

* relatively little managerial direction or effort to contracting arrangement wherein salespeople are left
direct salespeople is involved, and alone to achieve results in their own way using their
* straightforward objective measures of results own strategies. Salespeople are held accountable for
(outcomes), rather than measures of the meth- their results (outcomes) but not for how they achieve
the results (inputs or behavior). Under such a system,
Erin Anderson is Assistant Professor and Richard L. Oliver is Associate the invisible hand of the marketplace pressures sales-
Professor, Department of Marketing, The Wharton School, University of people to perform and guides their actions. Firms us-
Pennsylvania. The authors thank Bob Trinkle of TSI for sharing his sug- ing outcome control systems reduce managerial over-
gestions and ideas.
head by capitalizing on the "direction" afforded by

Journal of Marketing
Vol. 51 (October 1987), 76-88.
76 / Journal of Marketing, October 1987

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market pressures, shifting risk to the salesperson (Basu in practice to determine how to compensate salespeo-
et al. 1985) and sharing rewards with the salesperson ple. Hence, firms follow industry norms, experiment,
in direct proportion to each individual's measurable and use ad hoc methods to cope with the compensa-
performance. Outcome-based control, then, is laissez tion puzzle (John and Weitz 1984; Smyth 1968).
faire management whereby the salesperson is made an
entrepreneur, responsible for his or her performance Outcome-Based Control
but free to select the methods of achievement.
Historically, salesforce managers and the performan
Behavior-based control systems represent an op- appraisal systems used by managers have tended
posing philosophy. Active managers, backed by a sig- emphasize outcomes rather than behaviors (Churchi
nificant management information-gathering staff, vig-
et al. 1985), particularly in determining compens
orously monitor and direct the operations of the tion. A major reason is the availability of simpl
salesforce. Managers typically have a well-defined idea seemingly equitable measures of sales volume or dol
of what they want salespeople to do and work to en- lars. Partly because of the ease with which orders us
sure the salesforce behaves accordingly. Sales results ally can be linked to the individual responsible for t
are presumed to follow, often in the long term. To sale, the dollar sales criterion is a popular and readi
ensure cooperation, the firm pays salespeople largely available measure; it is the single most commonly us
on a fixed basis (salary). Thus, the firm assumes risk performance index in published research reports (Wei
to gain control. Performance evaluation and increases 1981) and is very commonly used in practice (Pe
or decreases in salary (changes in reward) are based 1982). Sales unit volume is also a popular measur
on more complex, subjective assessments involving because of its intuitive appeal as an index of the breadth
what salespeople know and what they do (their inputs) and depth of sales. Other widely used indices are gro
rather than what they measurably achieve (their out- margin, net margin (sales minus the cost of the sale
comes). In behavior-based control systems, the visi- person), and the sales expense or cost/sales rati
ble hand of management is substituted for the invis- (Behrman and Perreault 1982). These last indices i
ible hand of the market's forces.
clude profitability, which can reduce the incentive
These extremes are stereotypes. Many salesforce maximize revenue (at the expense of margins) when
control systems are a mix of approaches, containing dollar sales is the criterion.
elements of both behavior- and outcome-based strat-
egies (see Churchill et al. 1985). Nonetheless, the Advantages of outcome-based control. By its na-
preceding discussion captures the major differences inture, selling is an independent occupation. The fact
the two separate philosophies. that salespeople spend considerable time on the road
makes supervision difficult. Further, selling is a de-
Overview manding occupation in which success is difficult to
predict. Contrary to popular belief, it is extremely dif-
The purpose of our article is to propose a framework ficult to profile the successful salesperson and to spec-
for selecting an appropriate salesforce control system
ify universal rules of thumb as to what makes one
as it affects the job-related knowledge, motivation,salesperson more effective than another (Weitz 1981).
behavior, and sales outcomes of the salesperson. TheBecause many types of individuals and many methods
analysis draws from economic theories of control of operation appear to succeed in one setting and fail
(transaction cost analysis and agency theory), orga-in another, developing situation-specific strategies is
nization theory, and cognitive psychology. We elab-difficult. In the terminology of Ouchi and McGuire
orate current viewpoints on salesforce control, present
(1975), it is impossible to specify a universal "trans-
and integrate four theoretical perspectives on this formation process" by which salespeople's inputs be-
problem, discuss the findings of studies, and describecome outputs (results). Knowing this, many managers
the incidence of practices used. We then present for prefer to let their salespeople use their own methods.
empirical testing a series of propositions about the im-
Instead of actively directing the salesforce, they give
pact of control systems on the salesperson. We con-a varied group of salespeople free rein and hold them
clude with implications for managerial strategy. accountable for the results.
Given the nature of the sales job and the hetero-
Review of the Sales Control geneity of the sales task, outcome-based control sys-
tems are the path of least resistance. These methods
Literature
also provide a compelling individual motivation in that
Despite their obvious managerial importance, com-nonproducers receive no compensation. Because of
pensation plans have received little empirical attentionthe often discouraging nature of selling (e.g., rejec-
in the salesforce management literature. Moreover, few tion by customers, incommensurate social status, task
if any comprehensive conceptual frameworks are usedambiguity due to little contact with supervisors), many

Salesforce Control Systems / 77

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managers believe outcome-based rewards are neces- and subjectivity of evaluation (Adkins 1979; Cocan
sary to maintain motivation. ougher and Ivancevich 1978). The subjectivity aspect
is of particular concern because subjective ratings of
Disadvantages of outcome-based control. Despite
salespeople by managers introduce bias, ignorance
their benefits, outcome-based systems have some well-
halo effects, and lack of credibility into the evaluation
known drawbacks. For example, the inherent lack of
system (Behrman and Perreault 1982; Jackson, Keith,
direction in such systems can permit sales behaviors
and Schlacter 1983). Further, the manager builds his
that harm the organization in the long run (e.g., lack
or her model of what is effective into the system and
of attention to customer satisfaction, primary empha-
salespeople may perceive it to be unfair. For example,
sis on the more profitable or, alternatively, easy-to-
a brash salesperson (at least in the manager's eyes
sell items in the product line). Further, outcome-based
may work a four-day week calling on selected ac-
systems tend to focus the salesperson on activities with
counts. If this salesperson outsells more personable,
immediate payoffs to the detriment of long-term re-
high effort compatriots who call on many accounts,
sults (John and Weitz 1984; Smyth 1968). For ex- he or she may feel underrated and underpaid in a be-
ample, salespeople may resist investing extra effort in
havior-based system. Such an individual would be tol-
selling new products, prospecting, penetrating large
erated and rewarded in an outcome-based system.
accounts (which are often more difficult to sell), and
Another problem with behavior-based systems is
providing service. Instead, they may be motivated to that the more comprehensive they become, the more
pursue immediate returns by minimizing service and they strain management's ability to collect, sift, and
by selling established products to smaller, regular ac- combine the information. This difficulty may explain
counts (Moynahan 1983). why sales managers commonly evaluate salespeopl
Managers can avoid these problems by using mul- by using only a few indicators (often heavily quali-
tiple indicators of outcomes (e.g., sales per product tative) on only a limited range of activities (Jackson,
or per account category) rather than one or two simple Keith, and Schlacter 1983).
indicators. However, the use of these indicators in-
creases the complexity of the system, necessitates more
Advantages of behavior-based control. The prin-
record keeping, and may involve subjective judg- cipal advantage of behavior-based control systems is
ments in combining separate indices into overall per- the control they afford the manager. In such systems,
formance assessments. Adding complexity to the con- the sales manager imposes his or her ideas of what
trol system necessitates a greater number of subjective
salespeople should be and do to achieve results, some
judgments and more information gathering, thereby
of which may be long term. Examples of such long-
shifting the system toward the behavior-based philos-
term payoffs include the future sales of a pioneering
ophy.
product line and new or repeat orders from enhanced
Behavior-Based Control customer goodwill and reputation. Further, in a be-
havior-based system, managers can direct salespeople
As noted, behavior-based control systems address the
to perform certain behaviors as part of company strat
process of selling rather than simply the outcome(s).
egy without the necessity of convincing each sales-
Salespeople in such systems may be evaluated and
person that the strategy is valid. One example is the
compensated on any number of factors that are not
strategy of low pressure expertise selling to create a
themselves measures of achievement but may result
particular image. Another example is the commitment
in sales performance. Personableness, product knowl-
of time to forecasting and planning instead of selling
edge, presentation quality, closing ability, services
In short, behavior-based systems enable companies to
performed, number of active accounts, calls made,
execute salesforce strategies that involve develop-
amount of correspondence, and days worked are com-
mental work and/or certain behaviors consistent with
mon examples (Jackson, Keith, and Schlacter 1983).
company strategy.
Typically, salespeople are rated by managers on these
Another advantage of a behavior-based philoso-
variables, which then are weighted and combined into
phy is that it enables the manager to eliminate ineq-
a composite evaluation upon which salary and pro-
uities that can arise in using simple output measures
motion decisions are based.1
For example, in some selling jobs, factors beyond the
salesperson's control have a major impact on results
Disadvantages of behavior-based control. Poten-
(Ryans and Weinberg 1979). Though it may create
tial drawbacks to such a system are the complexity
perceptions of inequity, subjectivity is necessary to
adjust performance evaluations for these uncontroll-
able factors. Otherwise, salespeople may be rewarded
'Patton and King (1985) find evidence that managers combine this
information in a linear compensatory way, which can become a or punished inequitably for events
fairly they do not influ-
complex process if more than a few variables are used. ence (Churchill et al. 1985).

78 / Journal of Marketing, October 1987

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 Theoretical Approaches to the the agent. The choice between outcome and behavior
Control Problem control depends on two factors, (1) the relative costs
of measuring behavior versus outcomes and (2) the
Several major theoretical approaches relevant to the
various forms of uncertainty that create risk in the sales
salesforce control problem are agency theory, orga-environment.
nization theory, transaction cost analysis, and cogni- Basu et al. (1985) applied agency theory to the
tive evaluation theory. The first three are pertinent to
compensation component of the control system. They
our discussion because they suggest behaviors modeled
en- the percentage of compensation that should
couraged or discouraged by systems that monitor be
be-fixed (behavior control) versus the percentage that
havioral processes versus those that measure out-
should be variable (outcome control) when uncer-
comes. Further, these approaches suggest the tainty takes the form of a weak link between effort
circumstances under which each system is appropri- and sales performance (cf. Vroom's 1964 "expec-
ate. Each addresses the problem with different as- tancy"). The analytical model they propose indicates
sumptions and identifies different sets of variables. that the weaker the link between salespeople's effort
Hence, it is useful to compare, contrast, and combine and sales results, the higher the proportion of com-
the three approaches. Alternatively, cognitive evalu- pensation that should be fixed. They argue that when
ation theory concerns how management philosophy efforts do not lead predictably to results (high uncer-
may affect the individual's cognition, (job) affect, and tainty), salespeople are at high risk in that they can
motivation. Thus, it adds a unique psychological per- be penalized for results largely beyond their control.
spective to our analysis. In the following section we It is less expensive for the risk neutral firm to assume
discuss these four approaches and their application to the risk (via salary) than to pay the very high com-
generate recommendations for an appropriate sales- mission rates risk averse individuals will demand to
force control system. compensate them for the risk assumed. This hypoth-
esis is consistent with Smyth's (1968) argument that
Agency Theory
when salespeople have a strong influence on whether
As described by Eisenhardt (1985), agency theory is a sale is made, they should be given incentives to ex-
an analytical, normative microeconomics/accounting ercise their influence; when salespeople have little in-
approach to the question of how principals can control fluence on the sale, they should not be penalized for
the activities of the agents to whom they delegate de- low sales (hence more salary).
cision-making authority. A central premise of this the- Coughlan and Sen (1986) review the propositions
ory is that principals and agents have divergent goals. generated by analytical agency theory models of
For example, the principal (in our case, the company) salesforce compensation, an important component of
desires increased profit whereas the agent (the sales- the control system, and underscore the importance of
person) desires increased personal income. Goal in- a model's assumption about the salesperson's risk
congruence places principals and agents in conflict. preference. If a salesperson is risk neutral (willing to
Agency theory is concerned with the design of control select the option with the highest expected value re-
systems that realign the incentives of both principal gardless of risk), an all-commission system is rec-
and agent so that both parties desire the same outcome ommended. However, if the salesperson is risk averse,
("incentive compatibility"). For example, profit shar- the Basu et al. (1985) position becomes more tenable.
ing is one element of the control system that focuses In their analysis, a salary component is recommended
both principal and agent on the profit motive. and that component rises as the link between effort
Agency models address the risk-bearing prefer- and results weakens. A second form of uncertainty is
ences of the firm and the agent (salesperson). A firm sales volatility, which puts the salesperson at risk and
has two choices about the allocation of risk in the sell- makes it less expensive for the firm to offer salary
ing environment. One is to purchase information about than to offer the level of incentive the risk averse
the agent's behavior, which it then rewards. This "be- salesperson demands.
havior control" system may be expensive because Coughlan and Sen (1986) point out that current
management overhead is involved. However, the versions of agency theory ignore several factors, in-
salesperson is freed of the risk that appropriate sales cluding the time lag from effort to outcome (sale),
behaviors may not generate results for reasons beyond factors other than effort that influence sales, interre-
his or her control. This system is appealing to the agent, lated demand for multiple products (i.e., synergy or
who usually is assumed to be risk averse whereas the competition within the product line), and the need to
firm is assumed to be risk neutral (Basu et al. 1985). perform nonselling functions. Nonetheless, agency
Alternatively, the firm can measure outcomes (which theory generates provocative propositions about a firm's
also may be costly) and hold the salesperson account- choice of a control system for the salesforce.
able. "Outcome control" shifts risk from the firm to In sum, agency theory predicts that behavior con-

Salesforce Control Systems / 79

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trol will be used when measuring inputs is less ex- mation system. However, in many instances, sales-
pensive than measuring outcomes and when uncer- forces do not have good output measures. A major
tainty puts the salesperson at risk. Outcome control factor leading to this problem is the considerable time
will be used when measuring outcomes is less expen- lag between effort and outcome in many types of in-
sive than measuring inputs and when environmental dustrial selling (Adkins 1979), a lag ignored by ana-
uncertainty is low. These and the following conclu- lytical agency theory models (Coughlan and Sen 1986).
sions are shown in Table 1. Further, data often are missing or inaccurate at the
salesperson level, particularly in the case of team sell-
Organization Theory ing, where individual impact is difficult to assess (An-
Organization theory (e.g., Ouchi 1979) addresses the derson 1985).
control issue from different premises. In contrast to Organization theory recognizes that, even if a firm
agency theory, organization theory explicitly recog-does have perfect information, it may not know how
nizes that (1) divergent goal preferences between to transform it into action strategy. For example, a
salesperson and firm need not be presumed in that sales manager may know a salesperson's call rate but
agents can be socialized to identify their goals with may not know whether the optimal strategy is to call
the organization's and (2) measuring either inputs, at the same rate, make more calls on more customers,
outputs, or both may be impossible (Eisenhardt 1985).make more calls on fewer customers, or even make
The second presumption-that good measures mayfewer calls. In short, a manager may not know what
behavior to exercise to achieve desired results. Eisen-
not exist-is in marked contrast to agency theory,
which assumes anything can be measured if the or- hardt (1985) calls this situation "low task programma-
bility" and Ouchi and McGuire (1975) refer to it as
ganization is willing to spend enough on its infor-

TABLE 1
Function
Recommended Control Strategies Based on Four Theoretical Perspectives as a of
Environment, Firm, and Individual Variables
Theory
Transaction Cognitive
Variable Agency Organization Cost Evaluation
Environmental Variables
High demand uncertainty Behavior
High sales volatility Behavior
High volatility, nonspecialized Outcome
reps
High volatility, specialized reps Behavior
Firm Variables
Willing to assume risk Behavior
Small salesforce size Outcome
Humanistic atmosphere Clan
Outcome measurement
Impossible Behavior
Inaccurate Behavior Behavior
Objective Outcome
High cost Outcome
Behavior measurement
Difficult/expensive Outcome
Transaction process Outcome or Outcome
unknown clan
Informational feedback Behavior
Controlling feedback Outcome
Salesperson Variables
Goal congruence Outcome
Risk aversion Behavior
High sales "expectancy" Outcome
Experience/specialization to Behavior
firm
Intrinsic motivation preference Behavior
Extrinsic motivation preference Outcome
All Other Circumstances Outcome

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ignorance of the "transformation process" (wherein
inputs become outcomes).
In such instances, organization theory recognizes
a third type of control system, the "clan" (Ouchi 1979).
Clans represent control by neither outcome nor be-
havior, but by socialization. The objective of a clan
is to inspire loyalty to the principal among agents, that
is, loyalty to the point of identification with the or-
ganization and its goals. Though how this objective
can be achieved is not entirely clear (Ouchi 1981), the
critical elements seem to be a warm, humanistic work
atmosphere, promotion from within, long-term em-
ployment, generous pay, and support and encourage-
ment of each individual. The personnel practices
of clans have been compared, albeit with consider-
able controversy, to Japanese management techniques
(Ouchi 1981). More recently, such personnel prac-
tices have been described by Peters and Waterman
(1982) as characteristic of a handful of "excellent"
American corporations. Despite these claims of su-
periority, clans are poorly understood and expensive
to maintain. Hence, Ouchi (1979) does not recom-
mend their use except under certain circumstances,
though Peters and Waterman (1982) disagree, arguing
that clans are always appropriate.
Figure 1 displays the organization theory hy-
potheses about control systems. As shown, clans are
reserved for situations in which little else seems fea-
sible (cell 4) in that the transformation process is un-
known (foreclosing behavior control) and adequate
measures of outcomes are unavailable (foreclosing
outcome control).2 If the transformation process is
known (cells 1 and 3), sales managers can prescribe
behavior, making behavior control feasible. If output
FIGURE 1
Knowledge of Process by Which Behavior
is Transformed into Outcomes8
Process Knowledge
Perfect Imperfect
High
Behavior or Outcome control
outcome control (2)
Ability to
Measure
(1)
Outcomes
Accurately
and
Behavior control Socialization "clan"
Completely (3) control
(4)
Low
aAdapted from Eisenhardt (1985) and Ouchi (1979).
2However, Williamson (1985) suggests that in highly problematic
circumstances, transactions may not even be arranged; hence sales-
forces may not be formed to operate in cell 4.
measures are poor, behavior control is the only fea-
sible choice, as in cell 3. Outcome control is appro-
priate if adequate output measures are available (cells
1 and 2) and is the only appropriate choice if the trans-
formation process is unknown (cell 2).
This framework has received partial empirical
support (Anderson 1985; Eisenhardt 1985; Ouchi and
McGuire 1975). In particular, the necessity of having
valid outcome measures in order to employ outcome
control has been supported. The clan system, how-
ever, has received little attention in the literature.
Literature suggests some managers prefer behav-
ior control ceteris paribus, employing it even when
good outcome measures are available. In particular,
managers are inclined to use more behavior control as
they gain experience, which gives them confidence
(perhaps falsely) that they know what behavior to pre-
scribe (Jackson, Keith, and Schlacter 1983; Ouchi and
McGuire 1975). Mowen et al. (1985) report evidence
that even experienced sales managers err in perfor-
mance evaluations by overvaluing sheer effort and
failing to account sufficiently for the impact of task
difficulty (e.g., variations in sales territories).
The organization theory approach is not without
shortcomings. It is silent on the issue of which method,
behavior or outcome, should be used if both are fea-
sible (cell 1). Further, it does not address the cost is-
sue explicitly. For example, it may be feasible to ac-
quire knowledge of the transformation process or to
develop outcome measures, but at such high cost that
ignorance and the expense of a clan are preferable.
Transaction Cost Analysis
In contrast to the prescriptions of organization theory,
transaction cost analysis represents the position that
outcome-based control systems are to be preferred un-
less certain circumstances prevail (Williamson 1985).
Generally it is argued that outcome control corre-
sponds to market contracting, wherein competitive
forces determine survival (see John and Weitz 1984).
Outcome control has the same benefit, namely that the
competitive mechanism is allowed to signal success-
ful strategies by eliminating practices that are ineffi-
cient or unattractive to customers. Thus, outcome
control is a marketing-oriented practice in that it al-
lows the customer to reward desired behavior and
punish undesired behavior. Transaction costs analysts
are suspicious of the firm's ability to improve on mar-
ket outcomes by substituting managerial direction for
the signals provided by outcomes, such as sales. Man-
agement's search for the ability to direct behavior (i.e.,
control) is viewed as being motivated in many cases
by ego considerations rather than by a genuine desire
to get better results by behavior control (Williamson
1981).
Nonetheless, transaction cost analysts do ac-

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knowledge circumstances in which behavior control is
appropriate. One such situation is when a salesper-
son's experience with the organization creates valu-
able specialized knowledge and working relationships
(i.e., "transaction-specific assets"). For example, the
salesperson may come to possess valuable knowledge
of the applications of the brand, working relationships
with accounting and shipping personnel, and close ties
to customers. Such "firm-specialized" (experienced)
individuals are thought to be too valuable to replace
(at least readily). To retain this firm-specialized sales-
person, while at the same time discouraging abuse of
privilege by the salesperson and preserving loyalty to
the organization, firms should shift toward behavior
control.
Anderson (1985) finds some support for this po-
sition whereas John and Weitz (1984) find stronger
support, including evidence of a clanlike system (e.g.,
promotion from within, long-term employment, warm
atmosphere) in which such salespeople predominate.
Though transaction cost analysis does not address the
clan mechanism in detail, it does acknowledge the value
of providing a "satisfying exchange relation," includ-
ing promotion from within and long-term employ-
ment, to individuals who have become valuable be-
cause of their transaction-specific assets (Williamson,
Wachter, and Harris 1975). Some empirical support
for this assertion is provided by Pfeffer and Cohen
(1984), who find promotion from within is most likely
to be practiced by firms in which employees tend to
accumulate firm-specific skills.
The role of uncertainty is less straightforward in
transaction cost analysis than in the agency theory and
organization theory approaches. When sales environ-
ments are highly volatile (uncertain) and salespeople
are readily replaceable, transaction cost analysis sug-
gests outcome control is the most appropriate choice,
albeit at high commission rates to compensate for in-
creased risk. Salespeople can be replaced if they fail
to find a way to cope with the uncertain environment.
Capable salespeople will be self-selected into such firms
because they know they can handle uncertainty and
will collect high compensation under an output con-
trol system. The firm reaps the advantages of high
performing salespeople, yet retains its flexibility, for
example, by minimizing overhead.
However, if salespeople are not readily replace-
able, perhaps because of experience benefits, flexi-
bility is sacrificed. The firm will be reluctant to ter-
minate nonperforming salespeople and cannot credibly
threaten to do so. Uncertainty aggravates the normal
problems of directing a salesforce and, with outcome
control and little credible threat of replacement, man-
agement may be faced with a lack of action alterna-
tives. Hence, substituting behavior control for out-
come control is a recommended solution in this
82 / Journal of Marketing, October 1987
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situation. Replaceability moderates the uncertainty/
control system relationship in that high uncertainty and
irreplaceable salespeople suggest behavior control;
otherwise, the recommended response to high uncer-
tainty is outcome control.
Transaction cost analysis acknowledges, as does
organization theory, the need to move toward behav-
ior control when output measures are inadequate. An-
derson (1985) and John and Weitz (1984) find strong
support for this position. The transaction cost ap-
proach also highlights a factor related to costs: when
little money is at stake, committing overhead to be-
havior control is pointless because overhead is likely
to outweigh any performance gains that can be
achieved. The implication is that behavior control is
undesirable and hence unlikely in very small sales-
forces.
Cognitive Evaluation Theory
On the basis of Deci's (1975) work in the area of in-
trinsic motivation, a more general theory of individual
perceptions of personal causality has been advanced
by Deci and Ryan (1985). Their "cognitive evaluation
theory" is relevant to our discussion because it ad-
dresses the motivational characteristics of outcome-
contingent and behavior-contingent reward structures
and offers behavioral guidelines for designing perfor-
mance feedback programs. Implicit in the Deci and
Ryan scheme is the belief that individuals prefer their
activities to be self-determined rather than other-de-
termined and therefore that they also prefer intrinsi-
cally motivated states to extrinsically motivated states.
In this context, it is argued that behavior control sys-
tems allow for a greater range of intrinsically moti-
vated attributions on the part of the salesperson.
The attributional basis (cf. Sujan 1986; Weiner
1980) for cognitive evaluation theory is a critical as-
pect in our application because the success of an out-
come- or behavior-based strategy for individual sales-
people hinges on the salesperson's perceptions about
his or her success or failure (i.e., to what he or she
attributes the outcome). Attributions are thought to
encompass three dimensions, internal/external locus
of causality (self- vs. other-determination), stability,
and controllability. Though the latter two dimensions
may be germane to sales activities, the first dimension
has the greatest role in cognitive evaluation theory,
primarily because of its effect on intrinsic motivation.
Essentially, individuals must feel they are responsible
for the results of their efforts if intrinsic motivation is
to be enhanced.
Thus, Deci and Ryan (1985) propose that external
events with behaviorally relevant implications (e.g.,
rewards) will affect motivation to the extent that they
influence attributions of locus of causality (self- vs.
other-determination), and to the extent that they in-
fluence secondary attributions of personal compe- person's efforts (cf. Churchill et al. 1985).
tence. Internal locus ascriptions and perceptions of The second issue raised by cognitive evaluation
competence (e.g., "I did it and I did it well") are theory is the degree to which feedback can be pre-
thought to increase intrinsic motivation. sented that is perceived by the salesforce as infor-
In cognitive evaluation theory, the mechanism by mational and noncontrolling. Because outcome con-
which a person makes intrinsic ascriptions is the re- trol systems link pay and other rewards to sales results,
ward structure. Rewards are thought to mediate judg- an outcome-based system may be perceived as con-
ments of self-determination and competence by virtue trolling by the salesforce. In effect, outcome-based
of the informational or controlling nature of the feed- systems entail "fate" control, as low producers face
back they provide. If feedback is interpreted as pro- potential termination. Though high sales levels can be
viding information relevant to improving one's per- seen, in some sense, as positively informative in out-
formance and competence, internal locus ascriptions come systems, inadequate performance can be seen
are enhanced and intrinsic motivation increases. Al- only in the context of negative feedback and personal
ternatively, if feedback is functionally similar to aincompetence. The inability to redefine low perfor-
control system, intrinsic motivation is decreased. Thus,mance into positive information is a major drawback
informational feedback results in perceptions of self- of outcome control.
determination and the ability to enhance one's com- In contrast, behavior control affords greater flex-
petence, thereby increasing intrinsic motivation, ibility to the manager because feedback is subjective,
whereas controlling behavior decreases levels of these involving criteria instrumental only to the eventual sales
variables. This scheme is shown in Figure 2. outcome. Thus, unfavorable evaluations on select cri-
These propositions are based on early work by Deci teria may be compensated by favorable evaluations on
(1971, 1972), who found that rewards contingent on others. Managerial judgments of on-the-job behaviors
task performance decreased intrinsic motivation. Latersuch as key account maintenance, prospecting, fore-
studies (e.g., Enzle and Ross 1978; Ryan, Mims, andcasting, and customer service can be made more in-
Koestner 1983) have shown that contingent rewards formative and oriented toward enhancing the esteem
generally decrease intrinsic motivation unless those and the competence of the salesperson and, thus, less
rewards are seen as informational and noncontrolling. intimidating and controlling. Of greater importance,
In relation to the salesforce control system, cog- however, is the indirect correspondence between
nitive evaluation theory raises consideration of two is- salesperson behaviors and sales outcomes; the sales-
sues. One is the degree to which the control system person is not held directly responsible for a lost sale.
used by management is inherently more conducive to
intrinsic than to extrinsic motivation. The content of Summary
the reward feedback should enable the salesperson to The conclusions drawn from the review of the four
rectify performance deficits. This requirement is not theoretical perspectives are summarized in Table 1.
easily met by outcome-based control systems. SalesThe variables identified as moderating a preference
outcomes, by their nature, are subject to numerous for outcome or behavior control are categorized as en-
forces not under the control of the salesperson. As a vironmental, firm, and individual influences. Gener-
result, the informational nature of sales results is com-ally, environmental uncertainty, difficulty in the
promised because only a small and perhaps unknown quantification or translation of sales outcomes, and risk
percentage of the variance in sales is due to the sales- averse, firm-specialized, or intrinsically motivated
salespeople argue for behavior control whereas small
firms with high relative measurement costs and direct
FIGURE 2
links between sales effort and performance argue for
Central Concepts of Cognitive Evaluation Theory
outcome control. Clans are a special case, reserved
Feedback Phase Rttribution Phase for corporate atmospheres of the humanistic variety.
I I II We now examine studies indicating the incidence of
Self-
Determi ned these practices among firms.
Performance Self- Internally
'Informative'--_ Eracement " Confidence- Motivated
/jyf~~~~~~ ~~~~State
No ,ture of Descriptive Studies of Salesforce
Rewards -
Fe ecback
Control Systems
Empirical research relating the theoretical perspec-
eacExternally Externally tives to salesforce control systems is generally lack-
'Controlling'-.-
IrndedExern Motivated
Performance
State
ing; one objective of our article is to stimulate such
Changes research. However, some literature describing the in-
cidence of types of control systems in salesforces is

Salesforce Control Systems / 83

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available. For the most part, the studies focus on one to-replace, experienced salespeople.
element, compensation. The elements of complete- Eisenhardt (1985) differs from other descriptive
ness of monitoring, amount of direction, complexity salesforce researchers in considering retail clerks in
of evaluation, and subjectivity of evaluation receive small specialty stores rather than industrial salespeo-
little attention. ple. This context introduces an important difference
As early as 1968, Smyth detected a shift toward for our analysis. In such a setting, the manager is al-
more behavior control in two forms: (1) greater com- ways in the store. Hence, the manager may find it
plexity, in particular making payment contingent on easier (less expensive in agency theory terms) to mon-
achieving multiple objectives, and (2) more use of sal- itor behavior than to monitor outcomes. Not surpris-
ary, even as a supplement to what are essentially in- ingly, Eisenhardt found a strong tendency to use be-
centive plans. Smyth's prediction is consistent with havior control, especially in smaller stores where the
the findings of Coughlan and Sen (1986), who tracked manager is always present and where the entrepreneur
the popularity of various kinds of compensation plans is unable to afford a powerful information system to
from 1972 to 1982. They show the overwhelming ma- track outcomes. Nonetheless, incidences of outcome
jority (70 to 75% in most years) are combination sal- control (incentive payment basis) were found, espe-
ary-plus-commission plans, with salary generally ac- cially when salespeople were more readily replaceable
counting for approximately 80% of total pay. Salary- and when outcomes were easier to evaluate. Further-
only plans are less common (15 to 25% of all plans) more, the author discovered that outcome control was
and commission-only plans are rare (generally less than used less rather than more often when sales environ-
10% of all plans). ments were volatile. This finding is in keeping with
These figures appear to support the popularity of agency theory, though it contrasts with the tenets of
behavior- over outcome-control philosophies in sales- transaction cost analysis.
forces, but whether the salary plan alone is indicative On the question of how managers evaluate their
of the control system used by management is not salespeople, Darden and French (1970) find there is
known. John and Weitz (1984), in a descriptive study no universal method; managers not only use different
of compensation practices, provide some insight on criteria but differ in how they weight and combine
this issue. They discovered that salesforces using a their information. However, survey results show one
high proportion of salary in their compensation pack- measure is overwhelmingly popular-the single, sim-
ages also used a low span of control, long-term em- ple output measure of sales volume (Dubinsky and
ployment, and promotion from within. This finding Barry 1982; Jackson, Keith, and Schlacter 1983;
suggests that managers actively directed their people Jackson, Ostrum, and Evans 1982; Jackson and
(facilitated by the low span of control), as would be Schlacter 1980; Patton and King 1985).
expected in behavior-based systems. Further, these At first this finding appears inconsistent with the
salesforces used elements of a clan system (secure greater salary component of compensation noted in the
employment, promotion from within) to control their John and Weitz data, which is conducive to behavior
salespeople. John and Weitz' finding is somewhat en- control. However, the use of volume as a performance
couraging because it suggests the behavior control criterion is often supplemented in a way that resem-
concept applies in the field as salary, monitoring, and bles behavior control. Jackson, Keith, and Schlacter
direction are correlated in their data. (1983) and Jackson and Schlacter (1980) find heavy
Thus, the Coughlan and Sen figures cited before reliance on subjectively assessed input measures such
may be suggestive of the degree to which firms use as attitude, aggressiveness, judgment/decision mak-
some amount of behavior control over their sales- ing ability, and planning.3 Further, Dubinsky and Barry
forces as judged by the high proportion of pay that is (1982) find evidence of extensive use of call reports
fixed (salary) in many salesforces. This finding is and expense reports to monitor activity and frequent
striking, given the independent nature of sales work coaching of salespeople by their managers. Such ac-
and the widespread belief that only incentive pay mo- tivities represent the active monitoring and direction
tivates a salesperson to make calls and face rejection. characteristic of behavior control. Similarly, Patton
Coughlan and Sen (1986) report additional data and King (1985) find considerable reliance on the in-
from John and Weitz (1984), who also found that the put factor "product knowledge" rather than on output
proportion of compensation that is fixed (salary) goes factors in promotion and transfer decisions.
up when outcomes are difficult to measure and also Thus, to some extent, the descriptive studies tend
goes up when inputs (behavior) are easy to measure.
This finding supports the emphasis of agency theory
3Jackson, Keith, and Schlacter (1983) find a strong preference for
on the cost of collecting information. As noted before, subjectively determined input measures. Objective measures such as
the John and Weitz data also support predictions that average cost per call are avoided, perhaps because of the record-keep-
salary would be used to a greater degree for difficult- ing burden such measures entail.

84 / Journal of Marketing, October 1987

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to support the theoretical perspectives we examine, portion of incentive (variable) compen-
though in many cases the data were not collected with sation.
the specific intent of identifying outcome and behav- Salesperson cognitions and capabilities. Given the
ior control philosophies. However, these studies il- differences in control systems resulting from these two
lustrate the complexity of the issues by showing the philosophies, we propose the following differences in
diversity of plans used by management. In the next salespersons' job-related cognitions and capabilities.
section we attempt to specify strategies for optimizing
the weighting of outcome versus behavior control. The
P2: The more a control system is behavior-
based rather than outcome-based, the more
setting used for discussion is the sales agency (man-
ufacturers' representative), an independent organi- product knowledge, company knowl-
zation that represents the product lines of multiple
edge, and integrated sales expertise the
manufacturers on a commission basis. We use the salesperson will have and the more
professionally competent the salesperson
manufacturers' representative setting because of the
will be.
latitude of management strategy it provides. In the sales
The reasoning behind this proposition is that behavior
agency, salespeople balance their personal needs with
the demands of customers, principals (i.e., the man-control removes the pressures and incentives to sac-
rifice long-term for immediate results. Salespeople are
ufacturers they represent), and the sales agency. Thus,
the agency, principals, and customers compete, tofreeda to develop their knowledge and professional
competence. Moreover, the possession of knowledge
large extent, for the salesperson's loyalty and effort.
and expertise is intrinsically rewarding and behavior-
Other sales organizations (e.g., corporate sales staffs)
are restricted cases of this environment in that only
based control systems are thought to enhance intrinsic
one principal controls management of the salesforce.motivation.

Salesperson affects and attitudes. Given our sug-

A Suggested Framework gested interpretation of salespeople's response to con-
trol systems, we propose that the type of control sys-
In the preceding discussion we compare four ap-
tem has the following effects on the salesperson's job-
proaches to the control problem. Implicit in these ap-
related affects and traditional measures of job atti-
proaches are arguments about the impact of a control
tudes.
system philosophy on salespeople. We develop these
ideas further by examining how two philosophies,P3: The more a control system is behavior-
outcome control and behavior control, may affect the based rather than outcome-based, the more
thoughts, feelings, and behaviors of salespersons. We a salesperson identifies with and feels
now frame suggestions as sets of propositions for the committed to the sales organization, is
purpose of stimulating research in the area of sales willing to accept direction and cooperate
control. Of necessity, some of the propositions are more as part of a sales team, accepts the au-
speculative (less firmly grounded in theory) than oth- thority of sales management, and wel-
ers. Propositions are not presented for the clan-ori- comes management performance re-
ented philosophy, as that notion has been defined as views. Further, behavior-based control
ill-developed and somewhat difficult to measure (Bar- systems are more likely than outcome-
ney 1986). based systems to attract, nurture, and re-
Control system strategies. Behavior-based mana- tain risk averse salespeople.
gerial philosophies, when properly implemented in sales Acceptance of authority and direction reflects the pur-
organizations, result in salesforce control systems that pose of behavior control-substituting managerial di-
differ on several dimensions from those resulting from rection for marketplace signals. Loyalty, commit-
outcome-based philosophies. ment, and cooperation spring from being freed from
P1: In behavior-based control systems, sales- short-term pressures and being rewarded for desired
people are monitored more closely, sub- behaviors. Further, by assuming risk, the firm is sig-
ject to considerable direction, evaluated naling commitment to its salespeople, which inspires
on an input basis by subjective and more commitment in return. Performance reviews are wel-
complex measures, and rewarded with a come, partly because the action suggestions are in-
higher proportion of fixed compensation. formative and partly because management can reduce
In outcome-based control systems, sales- performance ambiguity in the review process by clar-
people are monitored less frequently, of- ifying desired behaviors as defined by the firm. Fi-
fered little direction, evaluated on out- nally, behavior control attracts and nurtures the risk
come measures by objective and simple averse salesperson because this individual is required
methods, and rewarded with a higher pro- to assume little risk. In contrast, risk seekers chafe

Salesforce Control Systems / 85

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under salary ceilings and prefer rewards commensu-
rate with expected high levels of sales results.
Salesperson motivation. The control system should
affect both the salesperson's level of motivation and
its direction.
P4: The more a control system is behavior-
based rather than outcome-based, the more
the salesperson has higher levels of in-
trinsic motivation, is motivated by peer
recognition, and is motivated to serve the
sales agency.
By transferring all risk and reward to the individual,
outcome-based systems encourage "loner" attitudes
and a lack of loyalty to the agency. These effects are
thought to occur because the agency offers no protec-
tion against downside risk and may be perceived as
exploitive of the salesperson's results. In single-prin-
cipal (e.g., corporate) salesforces, the equivalent of a
"prima donna" attitude may arise whereby salespeo-
ple are unwilling to be influenced by management or
other salespeople and express a willingness to switch
employers readily.
P5: The salesperson's hierarchy of motivation
differs across outcome-based and behav-
ior-based systems.
Behavior-Based Outcome-Based
Systems Systems
Sales agency Self (personal
Customers and principals goals)
Self (personal goals) Customers
Principals
Sales agency
In behavior-based systems, the agency's interest comes
first because it is the agency that shelters the sales-
person from risk and, by active monitoring, forms a
strong communication bond with salespeople. Cus-
tomers and principals rank next in the hierarchy be-
cause, though neither offers the direction, authority,
and risk assumption of the agency, both are critical
to the agency's success. Personal needs are ranked last
because of the aforementioned loyalty that behavior
control engenders.
In contrast, outcome-based systems create an ego-
centric attitude because the salesperson is not shel-
tered from risk and because the agency has made no
commitment. Because the agency does not share the
salesperson's loss if "wrong" behavior is practiced,
salespeople may feel the agency has no "right" to di-
rect their behavior. The equivalent concept in single-
principal (corporate) sales staffs might be represented
by an independence of attitudes expressed in the all-
commission salesforce. Here, the self comes first and
the agency (or management) comes last. Customers
86 / Journal of Marketing, October 1987
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are ranked after personal needs because they offer di-
rect rewards (orders). Principals are ranked next be-
cause there would be little to sell without them. How-
ever, the attraction and retention of good principals is
viewed as the agency's problem. If the agency's port-
folio of principals declines, the salesperson can readily
switch agencies or, if the product line becomes less
competitive, the salesperson can just as easily switch
manufacturers.
Salesperson behavioral strategies. A salesper-
son's selling strategies also should be a function of
the type of control system.
P6: The more a control system is behavior-
based rather than outcome-based, the more
a salesperson can be expected to plan for
each call, make fewer calls, operate at a
lower ratio of selling to nonselling time,
and spend more time on sales support ac-
tivities. Further, salespeople are more
likely to use an "expertise sell" and "open"
rather than "closed" techniques in behav-
ior-based systems (Spiro and Perreault
1979) and to use "customer-oriented"
strategies (Saxe and Weitz 1982).
Behavior-based control systems remove immediate
pressure to sell, reward long-term outlooks, and
heighten intrinsic motivation. These factors encourage
more thoughtful ("working smarter"), planned, low
pressure selling styles that often are combined with
customer service to ensure repeat business and favor-
able word-of-mouth. "Open" sales techniques, whereby
the salesperson has no "hidden agenda" and no de-
ception is contemplated, are consonant with such a
long-term, service orientation.
Salesperson performance. Ultimately, the differ-
ences in attitudes, motivation, and behavioral strate-
gies should result in varying levels of performance
across control system philosophies.
P7: In control systems that are more behav-
ior-based than outcome-based, individual
salespeople will come closer to achieving
the sales agency's goals and to serving
customer needs, but will perform more
poorly on traditional output measures of
individual-level performance.
Serving customer needs (a long-term strategic consid-
eration) and meeting the agency's goals follow from
management's ability to direct salespeople to ignore
immediate market cues and follow management di-
rectives instead. This emphasis may hurt short-term
performance (e.g., current sales) and, in fact, is very
likely to do so as the purpose of behavior control is
to influence salespeople to sacrifice in the short term Finally, outcome control may be more feasible for small
to fill the firm's long-term strategic needs.4 salesforces and behavior control may be more feasible
for larger ones.
At the individual salesperson level, high sales "ex-
Conclusion
pectancy" (cf. Oliver 1974; Vroom 1964) and high
Four theories spanning diverse perspectives, including
goal congruence permit outcome control because the
macro and micro approaches, are reviewed as salesperson
they would perceive fewer obstacles to sales
pertain to the type of salesforce control systemsuccess.
rec- Under goal congruence, the firm would ben-
ommended for different environmental, firm, and efitin-
as well. Alternatively, a risk averse orientation
dividual variables. Generally, we find that little and
over-a preference for intrinsically motivated work en-
vironments favor behavior control. The latter prefer-
lap is evident in the identifying conditions specified
by each theory and that the various perspectivesence,leadin particular, requires the flexibility of infor-
mational feedback that is possible only in behavior
to complementary rather than conflicting predictions.
control systems. Finally, experienced, firm-special-
Most of the theories predict that environmental un-
certainty, be it a weak link between effort and izedsalessalespeople are retained best in behavior-based
(demand uncertainty) or "natural" volatility deriving
systems as explained by transaction cost analysis.
from the timing of need for the product (e.g., electric Embedded in these four theoretical rationales for
utility installations), argues for behavior controlthebe-appropriateness of behavior or outcome control are
cause outcome measures would be unstable andideas per- about how control systems influence salespeo-
ceived as inequitably distributed across salespeople.
ple. We extend these ideas to suggest a series of prop-
In this case, the firm is advised to absorb environ-
ositions about the impact of a control system on a
mental risk and monitor the behaviors of its salespeo-
salesperson's cognitions, attitudes, motivation, be-
ple. In so doing it can focus effort on the types of strategies, and, ultimately, performance. These
havioral
behaviors deemed most likely to generate sales in un-
propositions reflect the basic notion that behavior con-
certain environments and "smooth" the irregularities
trol and outcome control are very different philoso-
of incoming orders. phies that produce very different results. Hence, no
single control system is "the best" in all circum-
At the firm level, measurement and philosophical
stances. Rather than asking whether behavior or out-
issues appear to be key factors. Generally, the more
objective the measures and the more costly the come
be-control is preferable, we should ask under what
havior measurement process, the more outcome circumstances
con- each system functions well. The gen-
trol is recommended. Alternatively, inaccessible eralor
propositions are the ones available from the lit-
inaccurate output measures argue for behavioreraturecon- at the present time. We expect others to emerge
as for
trol. Philosophically, a willingness to assume risk future theoretical and empirical work is conducted
the salesperson and to provide informational,insup-
this area. Our review is hoped to stimulate such
portive feedback appears to coincide with a behavior work so that a more general theory of sales control
control perspective, whereas a humanistic philosophy strategies will be found.
seems to support (indeed require) a clanlike system. In summary, our review suggests that the type of
control system is instrumental for the proper func-
tioning of many phases of the sales management pro-
4A possible objection to P7 is posed by the findings of the Churchill
cess. In particular, it may have potential second-order
et al. (1985) meta-analysis of salesforce performance studies. Church-
ill and his colleagues found that, of six categories of variables influ-
effects on other performance determinants such as
encing performance, organizational/environmental factors (which may
include the salesforce control system) had the least impact on motivation
sales- and ones not considered here (e.g., role
person performance. However, they note that a possible explanationperformance, sales skills). Among the factors thought
is the general lack of variability and restriction of range in these fac-
to be related to performance, managerial strategy for
tors as only five studies were examined. They further note that other
factors such as aptitude also yielded low levels of predictabilitythe
whencontrol system is probably more important than
considered as sole determinants. Interestingly, the predictiveearly powerefforts in the recruitment and selection process
of organizational/environmental factors was highest for sellers of in-
(Churchill et al. 1985, p. 117), a consideration worthy
dustrial products to institutional clients, the sales context best repre-
sented here. of further study.

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