Control mechanisms, idea transfer, and performance in sales organizations

Industrial Marketing Management 41 (2012) 841–848

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Industrial Marketing Management

Control mechanisms, idea transfer, and performance in sales organizations Karen E. Flaherty ⁎, James M. Pappas 1 Department of Management, Spears School of Business, Oklahoma State University, Stillwater, OK 74078, United States

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Article history: Received 1 October 2010 Received in revised form 1 September 2011 Accepted 30 September 2011 Available online 28 October 2011 Keywords: Sales management Idea transfer Control systems Knowledge-based theory

a b s t r a c t Drawing on the knowledge-based theory of the firm, the authors examine the differential effects of an individual orientation and a group orientation on idea transfer from the salesperson to the sales manager. The authors also consider the moderating effect of output and process control on the relationship between group and individual orientation and idea transfer. The results suggest that individual and group orientations have different effects on idea transfer, and these effects are moderated by output control. Salespeople who share ideas with the sales manager are rated as higher performers by the manager. At the group level, a climate of idea sharing among salespeople results in improved unit performance. © 2011 Elsevier Inc. All rights reserved.

1. Introduction According to the knowledge-based theory of the firm, original ideas develop from autonomous individuals, diffuse within the team, and then become organizational standards (Nonaka & Takeuchi, 1995). Once ideas and thoughts develop in the minds of individuals, they must be transferred to others, assimilated among a group to create group knowledge, and then transferred and integrated across groups to create organizational knowledge (Grant, 1996a, 1996b; Nonaka & Takeuchi, 1995). By successfully transferring and integrating individual knowledge, firms achieve a position of competitive advantage (Nonaka & Konno, 1998). Over the past decade, academics have acknowledged the importance of knowledge management and have begun to study these processes in more depth. Existing literature clearly suggests that complex skills and knowledge are embedded in the minds of individual organization members. The firm's ability to leverage this embedded knowledge, however, is not automatic (Badaracco, 1991). It depends greatly on organization's routines and practices, which influence how organization members offer knowledge to others and how they take this knowledge into consideration (Conner & Prahalad, 1996). Organizational routines and practices vary in the extent to which they promote effective information flows, reduce information overload, and facilitate information sharing. Several conceptual studies explore this line of reasoning. For instance, Tushman and Nadler (1978) suggest that mechanistic organizational forms decrease information processing capabilities, while organic forms increase information processing capabilities. ⁎ Corresponding author. Tel.: + 1 405 744 8653. E-mail addresses: karen.fl[email protected] (K.E. Flaherty), [email protected] (J.M. Pappas). 1 Tel.: + 1 405 744 7729. 0019-8501/$ – see front matter © 2011 Elsevier Inc. All rights reserved. doi:10.1016/j.indmarman.2011.10.008

Similarly, Simons (1991) argues that various organizational mechanisms influence information search and use, and Makhija and Ganesh (1997) propose that the type of coordination mechanism employed by the firm will influence the type of information transferred. While this research is useful in demonstrating the relevance of various organizational practices (e.g., control and coordination mechanisms) to the firm's knowledge management processes, it does not yet provide a complete understanding of how these organizational practices affect specific phases of the knowledge management process or performance. To the best of our knowledge, no prior study has empirically examined the potential influence of management coordination mechanisms on the transfer of new ideas. As a result, organizations remain largely in the dark about how to stimulate idea transfer (Davenport & Prusak, 1998). Our main research objective here is to provide a more complete explanation of how managers can influence one step of the knowledge transfer cycle—the transfer of information or ideas from the employee to management. We know that managers typically use coordination mechanisms to help achieve their organizations' goals (Gupta & Govindarajan, 1991; Ouchi, 1979). Control systems and various other coordination mechanisms are often employed to help motivate organization members to perform certain tasks and to make decisions that are consistent with organization objectives. In many respects, “a control system performs its function by controlling the flow of information” (Brinberg & Snodgrass, 1988, p. 447). We consider the impact of informal coordination mechanisms on the transfer of ideas from individual organization members to group managers. Specifically, we evaluate the extent to which an individual-oriented coordination mechanism (the extent to which employees take pride in their work and responsibility for their own job activities) and a group-oriented coordination mechanism (the extent to which employees interacts with and receive feedback and evaluation from

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peers) influence idea transfer. We also consider how formal output coordination mechanisms might moderate the relationship between informal organizational coordination and the transfer of ideas from individuals to their managers. Finally, we establish a link between idea transfer and selling performance at the individual level as well as idea transfer and unit performance at the group level (refer to Fig. 1). The remainder of this article is organized in three sections. First, we consider the various perspectives of knowledge management processes from the existing management and marketing literature. Second, we develop our model, which identifies factors under an organization's control that may influence the occurrence of the transfer of ideas from the individual to the manager. Third, we provide an empirical test of our model and discuss the results. 2. Knowledge management perspectives The term “knowledge management” is generally used to describe the effective use of knowledge resources—including organizing and making available all pertinent explicit and tacit knowledge (Sabherwal & Becerra-Fernandez, 2003). A firm's explicit knowledge is information that is already recognized and articulated in some form, while tacit knowledge includes insights, intuitions, and hunches that may be more difficult to express (Nonaka, 1994; Polanyi, 1996). These insights, intuitions, and hunches are also often referred to as “data,” connoting potentially important information that has not yet become knowledge. The accumulation of “data” is obviously critical to the knowledge management process. Without this initial piece of information, new knowledge will never develop. Knowledge and knowledge management are at the core of several related theoretical perspectives. These include the knowledge-based theory of the firm, organizational learning theory, and Nonaka's theory of knowledge creation. The fundamental position of the knowledge-based theory of the firm is that the firm's unique knowledge is its most valued resource. As mentioned previously, the knowledge-based theory of the firm suggests that knowledge starts with the individual and, to the extent that the firm can access and integrate this knowledge using various mechanisms and technology, the firm will achieve a competitive advantage (e.g., Conner & Prahalad, 1996; Grant, 1996a, 1996b). Firms exist primarily to provide the knowledge integration function (Kogut & Zander, 1992). Likewise, organizational learning theory argues that organizational learning takes place through individuals (Simons, 1991), but ultimately comes together to impact the organization (Slater & Narver, 1995).

IdeaTransfer (Aggregate)

Business-Unit Performance

Idea Transfer

Selling Performance

Business-Unit Level Individual Level

Self Control

Professional Control

Output Control

Fig. 1. Conceptual model.

Organizational learning is something more than just the cumulative learning of each individual (Fiol & Lyles, 1985). Nonaka's theory of knowledge creation (Nonaka, 1994; Nonaka & Konno, 1998; Nonaka & Takeuchi, 1995) also argues that individual knowledge is the foundation for organizational knowledge. An organization cannot create knowledge devoid of individuals (Conner & Prahalad, 1996; Kogut & Zander, 1992). In the current study, we consider how salespeople contribute new knowledge in the form of ideas for new programs, initiatives, etc., within the organization. We acknowledge that individual knowledge often comes from the formal leaders. However, we suggest that offering ideas is not solely reserved for those who occupy a formal leadership position within the organizational hierarchy. As a result, it is essential that firms understand how managers can facilitate and encourage these functions among all employees. We build on these basic principles to derive our hypotheses. 3. Conceptual development and study hypotheses The present study was motivated by several organizational developments. An increasing pace of competition coupled with increasing resource constraints as well as shortened product life cycles heightens the pressure to “internalize new information” within the firm in an effort to engage in successful strategic renewal (Floyd & Lane, 2000). To accomplish this task, top management must have access to new information and be able to internalize it in order to shape new competencies (Burgelman, 1991, 1994; Floyd & Lane, 2000). Perhaps one of the most important functions of management control is to facilitate information transfer within the organization (Ouchi, 1979; Tushman & Nadler, 1978). Controls affect the flow of knowledge throughout the organization. They act as signals to individuals regarding what activities ought to be executed. Yet researchers have largely ignored the effects of management control systems on idea transfer. In an effort to address this gap, we consider the interplay between two types of informal control (self and professional), output control, idea transfer from the salesperson to the sales manager, and its resulting impact on selling performance as well as its aggregated effect on unit performance. In the following sections, we review the management control literature and develop hypotheses regarding the effects of control on idea transfer and performance. 3.1. Management control systems Management control systems (MCS) are often defined as systems for influencing and coordinating human endeavors within the firm (Flamholtz, Das, & Tsui, 1985; Langfield-Smith, 1997). Examples include planning systems, budgeting systems, career planning systems, and project monitoring systems (Marginson, 2002). Past research in MCS focused on formal control systems, including both process (activity or behavior-based) and output (direct or volume-based) control (Anderson & Oliver, 1987; Cravens, Ingram, LaForge, & Young, 1993; Jaworski, 1988) as well as informal control mechanisms (Jaworski, Stathakopoulos, & Krishnan, 1993; Mintzberg & Waters, 1982; Ramaswami, 1996). Informal controls do not impose strict procedures and rules to be followed. Instead, the control evolves from a clan culture supported by management and the firm (Ouchi, 1980). Several distinct types of informal controls are noted in the literature (e.g., Jaworski et al., 1993; Ramaswami, 1996; Robertson & Swan, 2004; Sharma, 1997). In this paper, we focus on an individually oriented mechanism, “self-control” (i.e., taking responsibility for one's jobs, etc.), and a group-oriented mechanism, “professional control” (i.e., control via professional norms). 3.1.1. Self control While transaction cost economics suggest that individuals will exhibit self-interest and bounded rationality (Williamson, 1985),

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other research indicates that some agents behave altruistically and will exhibit self control (e.g., Ramaswami, 1996; Sharma, 1997). Self control is defined as the degree to which employees take pride in their work and responsibility for their job activities. The self control literature suggests that while control systems implemented by organizations provide performance standards, evaluation mechanisms, and systems of reward and punishment (Lawler, 1976), individuals also possess self-generated personal standards by which they engage in self-evaluation and self-administration of rewards and punishments (Manz, 1986). Based on Carver and Sheier (1981) negative feedback loop, we contend that individuals who engage in selfcontrol processes first evaluate existing “conditions,” then compare the current “conditions” to the desired standard, and finally engage in behaviors to reduce the discrepancies from the standard (Manz, 1986). In short, given self control, employees focus on minimizing deviations from standards in their performance. Thus, to the extent that self control is present, opportunistic behavior is likely to be reduced because the agent's norms and goals (ultimately to perform at a high level) are consistent with those of the organization. The self-control system relies on, or trusts, the individual to act in a manner that is beneficial for the organization, which is possible because the organization members share these norms and priorities. Thus, we argue that the sales professional will respond with positively directed behaviors toward the organization. In an effort to increase individual performance, we suggest that sales professionals who are driven by self control will be likely to offer ideas and suggestions to the manager that they perceive will enhance the organization and their individual performances. H1. The presence of self control is positively related to idea transfer. 3.1.2. Professional control Professional control represents the degree of interaction, feedback, and evaluation among peers. It stresses group discussion and cooperation. Hackman (1987) suggests that while group interaction is generally assumed to be positive, it can have negative consequences on group performance (referred to as process loss). Two possible causes for process loss are suggested in the social psychology literature (Steiner, 1972)—coordination loss and motivation loss. Coordination loss results when group members do not optimally combine their individual responses—for example, when a team of individuals engaged in a tug-of-war pull on the rope at different times (Levine & Moreland, 1994). Motivation loss results when group members do not exert the maximum amount of effort on a task. A common example of motivation loss is social loafing. This occurs when individual responses are combined in a way that masks an individual's contributions to the group effort; as a result the individual does not demonstrate maximum effort (Harkins & Szymanski, 1987). We argue that professional controls embracing group cooperation and interaction may mask the perceived benefits of engaging in an exchange of ideas directly with management. In a professional control situation, individual efforts may not be as easily noticed or acknowledged (process loss); therefore, the benefits of offering ideas may not be perceived as outweighing the potential costs of offering ideas (e.g., risking being viewed negatively by managers or peers). Consistent with a coordination loss argument, individuals may have an idea or a hunch; but instead of passing it directly along to a manager, they feel compelled to discuss it among their peer groups. By doing so, the idea may be shot down and never passed along to the manager, the efficiency with which the idea is eventually passed along may decrease, or an individual's novel idea may morph into the group's preconceived ideas (i.e., group think will occur). Group collaboration often prompts routine behavior that has been described as mindless (Langer, 1997) and habitual (Gersick & Hackman, 1990). Under such conditions, the acquisition of a new routine (or the

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adoption of a new idea) will require a definitive switch from a “mindless” routine to a “mindful” change (Zellmer-Bruhn, 2003). Due to these challenges, we argue that sales professionals operating within a professional control atmosphere will be less likely to offer new ideas to the manager. H2. The presence of professional control is negatively related to idea transfer. 3.1.3. Output control as moderator Some control researchers question the plausibility of a single type of control exerting a direct effect on performance, suggesting instead that various types of control may operate simultaneously in a single work group. For instance, Ouchi and Maguire (1975) and Jaworski (1988), among others, suggest that process and outcome control mechanisms may be most effective when used in combination. Thus, understanding the joint effects of various control mechanisms is important. Anderson and Oliver (1987) empirically examine various control combinations (pure behavior, pure outcome, and a hybrid or mix of both behavior and outcome) and find that the hybrid system offers benefits for performance. Cravens, Lassk, Low, Marshall, and Moncrief (2004) consistently find that “high control” consisting of a combination of high behavior and high outcome control outperforms bureaucratic, clan, or low-control combinations. This research provides a foundation for examining the interactions between various types of control. We argue that the direct effect of one type of control on performance is likely to change depending on whether another form of control is used simultaneously. We propose that output control will interact with self control to influence performance. Likewise, output control will interact with professional control to influence performance. Output-based control is defined as the extent to which sales managers set, monitor, and evaluate performance standards or sales outcomes (Jaworski et al., 1993). When following an outcome system, salespeople are controlled mostly by incentive compensation; focus is placed on the outcome achieved rather than the activities or processes carried out in an effort to achieve the outcome (Cravens et al., 1993). Output control sends a clear message that the sales professional's focus is to be output performance and less latitude is provided for behaviors outside of this role (Cravens et al., 1993). We argue that if the sales professional takes pride in his/her work and feels a sense of accountability to perform at a high level (self control) and if he/she perceives that the manager is most interested in the achievement of set performance standards or sales goals, then the sales professional will accordingly direct his/her efforts toward the attainment of the set goal and will be less likely to engage in activities outside of this parameter. H3. When a high degree of output control is implemented, the positive effect of self control on idea transfer will diminish. We argue that the use of output control will also moderate the expected relationship between professional control and performance, but in a different way. Research indicates that the occurrence of process loss is not a guarantee. It can be reduced or even eliminated if any of the following occur: the identifiability of the individual's contributions is increased, it is easy to evaluate the individual's contributions, or the individual's task involvement or accountability is increased (e.g., Levine & Moreland, 1994). Output control serves to directly enhance the accountability of the sales professional in this case. To the extent that sales output standards are set, measured, and rewarded, the individual's motivation is likely to increase. In many respects, output control increases the importance of a positive performance outcome to the individual sales representative. While we previously suggested that social loafing (a form of motivation loss), inefficient group coordination, or potentially group think— which are experienced in the presence of a group or professional

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atmosphere—would interrupt the likelihood that an individual offers a new idea to managers, we now suggest that if combined with output control, the likelihood of these forms of process loss decrease because output control increases the importance of enhanced performance in the eyes of the individual. H4. When a high degree of output control is implemented, the negative effect of professional control on idea transfer will diminish. 3.1.4. The relationship between idea transfer and performance 3.1.4.1. Selling performance. The strategy process literature explores the conditions that are likely to lead to organization members' participation in idea exchange (e.g., Floyd & Lane, 2000; Floyd & Wooldridge, 1992), one consequence of which may be less work. We evaluate the association between the degree to which the sales professional offers ideas and individual-level sales performance. Consistent with past research, we define sales performance as the salesperson's achievement of both quantity and quality sales objectives (e.g., Sujan, Weitz, & Kumar, 1994). Floyd and Wooldridge (1992) propose that any involvement in strategy (such as offering new ideas to managers) leads to enhanced individual decision making. Improved decision making on the part of the individual is expected to result in superior organizational strategies as well as superior “individual strategies.” For instance, enhanced salesperson decision making should result in better decisions regarding customer interactions, ultimately facilitating relationship development, enhanced customer service, etc. Furthermore, a general shift toward innovation and customer responsiveness among firms has led to a substantial change in the relevance of formal planning. The need for innovation must be balanced with planning and direction in order to prevent confusion and inconsistency. A salesperson who shares and participates in the strategic understanding of the firm will better understand strategic priorities and, as a result, communicate this information to customers in a coherent and consistent manner. Thus, to the extent that salespeople offer ideas and engage in conversations with management, we expect that they will have a better understanding of their jobs and customers and perform at a higher level. H5. Idea transfer is positively related to individual selling performance. 3.1.4.2. Unit performance. Menon, Bharadwaj, Adidam, and Edison (1999) find that comprehensiveness (the systematic identification and evaluation of alternatives to strategy) leads to improved creativity and learning throughout the firm. Further, McKee, Varadarajan, and Vassar (1990) find support for a positive relationship between comprehensiveness and unit performance. This stands to reason as the more members of the organization participate in idea generation, the more effective the firm's strategy is likely to be based on the rationale that this activity will allow managers to fully evaluate all strategic options and increase the probability that the best option is chosen (Schweiger, Sandberg, & Ragan, 1986). The very process of discussing and comparing ideas can facilitate creativity and organizational learning, both of which are shown to be positively related to unit performance. An organizational culture that fosters this type of strategic activity among its sales professionals can create an advantage that is difficult for rivals to interpret and imitate.

obtained from a national (U.S.) list. A random sample of the firms was contacted via initial telephone calls during which we introduced the study to sales managers; determined whether participation was feasible; and if so, generated support from the sales managers. Sales managers of interested firms (one per firm) were mailed an instruction packet including a cover letter, a manager questionnaire, and three sales professional questionnaires. Managers were asked to complete the manager questionnaire and distribute the questionnaires to three selected sales professionals, one above-average performer, one average, and one below-average. All questionnaires were to be returned separately. The manager questionnaire included measures of background variables regarding the firm as well as a measure of each sales professional's performance rankings and the extent to which each sales professional offered ideas (engaged in idea transfer). These rankings were matched with the responses from the corresponding sales professional. The sales professional questionnaire included measures of control as well as a host of demographic and background information, including prior industry experience, level of education, etc. Business reply envelopes were attached to each questionnaire. Questionnaires were coded to allow the matching of sales professionals to managers as well as to the master list of companies. Follow-up packets were sent to nonrespondents two months after the initial mailing. Of 450 managers who initially expressed interest and prequalified for participation, 65 returned questionnaires, a 14.4% response rate. Of the total 195 sales representatives who were given questionnaires by the managers, 147 returned them, a 75.4% response rate. The data collection effort led to a total of 147 matched dyads (132 dyads received from the first wave of data collection and 15 received from the second wave); managers from 57 different firms returned questionnaires. In many instances, two or three “salesperson” questionnaires were returned per each “manager” questionnaire. Of the 147 dyads, 94 were obtained from pharmaceutical sales companies, while the remaining 53 were from firms selling proprietaries/sundries within the healthcare industry. A test of differences between the groups across study variables exhibited no significant differences, thus warranting the pooling of these responses. Given the possibility of a total of 1350 possible dyads that we might have received, we calculate an overall response rate of approximately 11%. To test for nonresponse bias, we compared responses from the first wave against those from the second wave (Armstrong & Overton, 1977). No significant differences were determined for the variables in the study. Additionally, comparisons of firm size across respondents and nonrespondents indicated no significant differences. 4.2. Measures reported by sales professionals

H6. A group-level climate of idea transfer is positively related to unit performance.

Preexisting measures that have been found to be valid and reliable in past research were used for all constructs. Where necessary, the measures were adapted slightly in wording to fit the context of the current study. Of the measures completed by the salespeople, most were seven-point, Likert-type, multi-item scales. These included Ramaswami's (1996) five-item measure of output control, four-item measure of process control, four-item measure of self control, and five-item measure of professional control. Level of education was measured via responses to the following: some high school, high school grad, some college, college graduate, some graduate work, and graduate degree. Industry experience was measured via responses to the following ranges in years of service: 0–5, 6–10, 11–15, 16–20, over 20.

4. Methods

4.3. Measures reported by managers

4.1. Sample and data collection

Managers reported on each sales professional's selling performance using the Sujan et al. (1994) six-item measure (alpha = .90). To measure salesperson idea transfer, we adapted those items from Floyd and Wooldridge's (1992) measure of strategic activity

Data were obtained from sales organizations operating in the healthcare sector. Contact information for the organizations was

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concerning the transfer of ideas from the employee to upper management. These included three items measuring the extent to which the sales professional proposes new programs to managers, brings new opportunities to the attention of managers, and justifies the role of new programs to managers. Market turbulence was measured using Slater and Olson (2000) five-item scale (alpha = .73). Unit performance was measured using the managers' reports of performance perceptions, including their units' sales growth, market share, and profitability rated in comparison to their major competitors and their sales units' objectives. This formative measure was labeled “unit performance” (alpha = .91). 4.4. Control variables Previous research suggests that firm size, level of experience, or education of the employee may influence key dependent variables (e.g., Keats & Hitt, 1988). As a result, we controlled for the potential effects of these factors by entering in the regression equation the log of the number of employees as well as the level of experience reported by the individual sales professionals. However, our analysis showed that these variables did not have a significant effect on our results. Therefore, we do not present these in reports of our analysis. To verify the psychometric properties of the study measures, we used confirmatory factor analyses (CFAs). We estimated several submodels due to the large number of items. This approach is consistent with past research (Doney & Cannon, 1997). The first two models included measures obtained from the salesperson (self, professional, and output controls). The remaining two models included individual selling performance, unit performance, and the idea transfer measure. Fit indices indicate adequate fit for both models (controls: χ 2 = 170.1, GFI = .90, CFI = .92, RMSEA = .05; and performance: χ 2 = 171.1, GFI = .89, CFI = .90, RMSEA = .06). Standardized item loadings for all items were significant at the p b 0.01 level, indicating support for the convergent validity of each construct (e.g., Montoya-Weiss, Massey, & Song, 2001). Further, none of the confidence intervals of the phi values were equivalent to 1, indicating support for the discriminant validity of the constructs (Bagozzi & Phillips, 1982). Again, Cronbach's alpha met or exceeded minimally acceptable standards for all constructs. Scale items are presented in Appendix A. 5. Results Correlations, means, and standard deviations of all variables are provided in Table 1. To test the main effects of self and professional control on idea transfer (H1 and H2), we used ordinary least squares regression analysis. Given that individual performance data were nested (salespeople were nested within sales managers), we violate the assumption of independence. In order to correct this problem, we must account for the variance associated with sales manager response (Hollenbeck, Ilgen, & Sego, 1993). To do so, we conducted a basic transformation of the idea transfer construct, such that idea transfer′ = idea transfer − μ (idea transfer) across all sales managers.

This allows us to control for the sales manager variance in response to the idea transfer measure. We can then test the effect of the individual's reports of control on individual's idea transfer (H1 − H4) reported by the sales manager as well as the effect of idea transfer on individual selling performance (H5) (but controlled for sales manager variance). Thus, idea transfer′ was used to test H1 through H5. 5.1. Informal control and idea transfer To test H1 and H2, we regressed self control and professional control on idea transfer′. H1 suggested a positive relationship between self control and idea transfer. Our results confirm this expectation (β = .58, p b .01). This finding supports our argument that a selfcontrol system creates an atmosphere wherein the sales professional is likely to offer ideas to managers. Sales professionals who take pride in their work are willing to engage in an exchange with managers, possibly in an effort to enhance the overall performance of the organization or at least individual performance. H2 suggested a negative relationship between professional control and idea transfer. Our results support this expectation (β = −.31, p b .01). This indicates that in a group-oriented system, organization members will be less likely to offer ideas to managers. While in the past, a group or team atmosphere has been generally assumed to promote information sharing, our results suggest that a professionalcontrol environment may actually interfere with the exchange of ideas from the individual sales professional to the manager. 5.2. The moderating effect of output control To test our hypotheses regarding the interactions between self and professional control and output control (H3 and H4), we used a moderated hierarchical regression analysis (Aiken & West, 1991). We estimated an initial regression equation including self control and professional control. In the second model, the hypothesized interactions were added. Prior to doing so, the constituent variables were mean-centered in order to eliminate multicollinearity (Aiken & West, 1991). Variance inflation factors were below the cutoff of 10, ranging from 1.0 to 2.2 and suggesting that multicollinearity was not a problem. The results are presented in Table 2. These results indicate some support for the hypothesized interaction effects. The addition of the interaction terms to the main effects model increased R 2 significantly (see Table 2). The self control × output control interaction term is significant and negative (β = −.24, p b .01). Also, the professional control × output control interaction term is positive, as expected (β = .15, p = .07). However, the relationship is only marginally significant at the p b .1 level. These findings indicate that the influence of self control and potentially professional control on idea transfer from the sales professional to the sales manager varies across levels of output control. We conducted simple slope tests to Table 2 Results of regression analysis: the effects of control on idea transfer.

Table 1 Variable means, standard deviations, and intercorrelations. OC Output control (OC) Self control (SC) Professional control (PC) Idea transfer′ (IT′) Selling performance (SP) Business-unit performance (SBUP) Mean Standard deviation

1.00 .20⁎ .14 .07 −.01 −.11 4.91 1.62

SC 1.00 .24⁎⁎ .34⁎⁎ .36⁎⁎ .10 4.94 1.24

⁎ Correlation is significant at the 0.05 level (2-tailed). ⁎⁎ Correlation is significant at the 0.01 level (2-tailed).

PC

IT′

SP

SBUP

1.00 .03 .11 .08 4.91 1.61

1.00 .54⁎⁎ .08 0.04 1.14

1.00 .03 3.53 .717

1.00 5.04 1.03

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Independent variables Output control Self control Professional control Interactions Output control × Self × Professional Model fit ⁎⁎ p b .01 (two-tailed). ⁎ p b .10 (two-tailed).

Main effects model

Interaction effects model

β

t-value

β

t-value

.057 .528 −.311

.648 5.180⁎⁎ − 2.909⁎⁎

.060 .479 −.257

.690 4.766⁎⁎ − 2.353⁎⁎

Adjusted R2 = .20 F(3,147) = 11.75⁎⁎

−.242 − 3.057⁎⁎ .150 1.824⁎ Adjusted R2 = .27 F(5,145) = 13.81⁎⁎

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explore the form of this effect. To do so, we followed the procedure recommended by Cohen, Cohen, West, and Aiken (2003). We estimated the slope of the relationship between self control/professional control on idea transfer at high and low levels of output control (at one standard deviation above for high and one standard deviation below for low). Refer to Figs. 2 and 3 for plots of the results using the unstandardized estimates and intercepts (Cohen et al., 2003). When output control is high, the presence of self control does not meaningfully change the extent to which the professional will offer the manager ideas. However, when output control is low, self control substantially increases the extent to which the professional will offer the manager ideas. Further, when output control is high, the presence of professional control decreases idea transfer from the sales representative to the manager. When output control is low, professional control does not appear to meaningfully change the extent to which the representative offers ideas. H5 and H6 consider the influence of idea transfer on individual selling performance and unit performance, respectively. In order to test H5, we regressed idea transfer′ on individual selling performance. The results indicate support for our prediction (β = .55, p b .01). In order to test H6 (the effect of idea transfer on overall unit performance), we cast idea transfer as a group-level variable. This required the computation of the within-group agreement coefficient, as indicated by the rwg (James, Demaree, & Wolf, 1984). Somech (2003) notes that if group members (e.g., salespeople) show agreement relative to the attitude or behavior described, the variable can be considered an aggregate, unit-level variable and used in aggregate form in subsequent analysis. The value of .70 is generally regarded as the cutoff signifying the demarcation of high versus low interrater agreement indexed via rwg (LeBreton, Burgess, Kaiser, Atchley, & James, 2003). The origin of this value can be traced to George (1990); the appropriate interpretation of rwg is the proportional reduction in error variance (LeBreton et al., 2003). Therefore, a value of .70 indicates that only 30% of the observed variance may be attributed to random measurement error variance. With values higher than .70 determined as the criterion for meaningful interpretation among organization members, the rwg estimates of within-group inter-rater reliability for strategic activity indicated a high level of agreement. The median value of the rwg coefficients for strategic activity was .75, with 48 groups meeting the .70 agreement criterion. The rwg results suggest that this variable did show an appropriate level of agreement to justify aggregation for data analysis. Based on the recommendation of Bliese (2000), the groups that did not show a sufficient level of within-group inter-rater reliability were removed. To examine the aggregate relationship between strategic activity and unit performance, a regression analysis was conducted using the 48 groups that met the agreement criterion. The aggregate strategic activity score was used as the independent variable and unit

Idea Transfer

1 Low Output Control

High Output Control

0

-1 High

Low

Self Control Fig. 2. Self control × output control on idea transfer.

1

Idea Transfer

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High Output Control Low Output Control

0

-1 High

Low

Professional Control Fig. 3. Professional control × output control on idea transfer.

performance as the dependent variable. As hypothesized, the analysis revealed a significant and positive relationship between sales professionals' idea transfer and unit performance (β = .17, p b .05).

6. Discussion and conclusions Research on knowledge management processes (Badaracco, 1991; Conner & Prahalad, 1996) suggests that the complex skills and knowledge embedded in the minds of individual employees are not always leveraged appropriately by organizations. Unless organizations implement mechanisms that enable effective information flow between organization members, the delivery of new knowledge may stall (Conner & Prahalad, 1996). Creating a work environment with few constraints can improve knowledge fertilization and problem solving (Sarin & McDermott, 2003). Our study extends current literature by offering an empirical test of the potential influence of management control systems on the transfer of information from salespeople to sales managers. We find that both individual-oriented and grouporiented coordination mechanisms influence knowledge transfer. Noting that scant attention has been paid to the knowledge transfer process within firms (Zellmer-Bruhn, 2003), we also examined group-level dynamics using hierarchical linear modeling. By doing so, we find that business units can create a climate that encourages idea transfer and improves performance at the work-unit level. More specifically, our results indicate that when salespeople perceive a self-control management system, they are more likely to share ideas with managers. Conversely, when salespeople perceive a professional-/team-control management system, they are less likely to share ideas with managers. We also identify a key boundary condition of these effects. The presence of output control in combination with self control greatly reduces the positive effect of self control on idea transfer, while the presence of output control in combination with professional control reduces the negative effect on idea transfer. The results provide conceptual insights into knowledge management research (Nonaka & Takeuchi, 1995), in particular with respect to the determinants and consequences of organization members' idea sharing. Consistent with prior conceptual research, we find support for the notion that organizationally controlled management systems can influence the prevalence of idea transfer between organization members (in our case, sales professionals and managers). On the consequence side, we provide evidence that idea transfer exerts a strong effect on selling performance at the individual level. Furthermore, at the group level, a climate of idea transfer has an effect on unit performance. Our research also contributes to the sales management literature. We are the first to examine how idea transfer from salesperson to manager influences selling performance.

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Our empirical results provide a managerially relevant guide to influencing effective idea transfer within the sales force. First, organizations desiring enhanced exchange of ideas need to consider the appropriate balance of controls (control combinations). The implementation of an output control system, for instance, may be strategically utilized to quell negative effects of professional control. Meanwhile, eradicating output control may be beneficial to idea transfer if a self-control system is in place. In brief, management must critically examine and question the control systems at work within their organizations. To effectively do so will require an assessment of the controls currently at work as perceived by organization members, as well as consideration of the combined effects of the various control mechanisms. However, output control has differential effects on the prevalence of idea transfer in the presence of self versus professional control, which presents an interesting question. How can managers effectively use control to promote idea transfer within the sales force? Furthermore, it is likely that, at least to some degree, salesperson perceptions of informal controls (self and professional) are intrinsically derived. Assuming that reports of self and professional control by salespeople are not entirely under the control of the firm, managing the effects of control combinations becomes challenging. The idea of offering compensation options to employees whereby not every salesperson in the company receives the exact same compensation plan is gaining traction in practice and could provide a viable response to the question presented here. Based on our results, we argue that sales managers first and foremost ought to assess salesperson's perceptions of self and professional controls. Second, if a particular salesperson perceives a high degree of self control, then decreasing output control should enhance idea sharing. 6.1. Study limitations and directions for future research While this study suggests some meaningful new results surrounding the sales professional's exchange of ideas with the sales manager, several limitations must be noted. First, our study is limited in its cross-sectional approach, thus the possibility for the reversal of hypothesized relationships cannot be ruled out. Second, the study's focus is limited to one group of organization members, the sales professional—in particular sales professionals operating within the healthcare sector. While considerable variance exists within this group, we cannot completely rule out the possibility that results may differ across other sales groups. Third, the focus of our study is limited to the transfer of ideas from the sales professional to the sales manager; we do not, however, consider the quality of the new ideas that are shared. Future research should focus on determining when good ideas versus bad ideas are shared. Also, we do not study the entire knowledge process. It is important to clarify that we capture one initial step in the process. In fact, often the new ideas or hunches offered by organization members may never become explicit knowledge. In order for bottom–up learning to occur effectively, managers need to be aware of new ideas coming from subordinates as well as accepting of these ideas. Future research examining the influence of control on later stages of knowledge processes is needed. Appendix A. Scale items of select constructs (item loadings provided in parentheses) Ouput control, 5 items, α = .90, AVE = .57 (Ramaswami, 1996) Specific performance goals are established for my job. (.90) My supervisor monitors the extent to which I attain my performance goals. (.91) If my performance goals are not met, I would be required to say why. (.85) I receive feedback from my immediate supervisor concerning the extent to which I achieve my goals. (.76)

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My pay increases are based upon how my performance compares with my goals. (.58) Process control, 4 items, α = .85, AVE = .63 (Ramaswami, 1996) My immediate boss monitors the extent to which I follow established procedures. (.68) My immediate boss evaluates the procedures I use to accomplish a given task. (.89) My immediate boss modifies my procedures when desired results aren't met. (.84) I receive feedback on how I accomplish my performance goals. (.60) Self control, 4 items, α = .80, AVE = .62 (Ramaswami, 1996) The major satisfaction in my life comes from my job. (.68) The work I do on this job is very meaningful to me. (.61) I feel that I should take credit or blame for the results of my work. (.74) I like to do more than my share of the work at my job. (.79) Professional control, 5 items, α = .94, AVE = .59 (Ramaswami, 1996) The department encourages cooperation between its members. (.80) Most of the members in my department are familiar with each other's work. (.79) The department fosters an environment where we respect each other's work. (.90) The department encourages job-related discussions between members. (.88) Most members in my department are able to provide accurate appraisals of each other's work. (.78) Individual performance, 6 items, α = .90, AVE = .69 (Sujan et al., 1994) Contributing to your company's acquiring a good market share. (.77) Selling high profit-margin products. (.65) Generating a high level of dollar sales. (.78) Quickly generating a high level of dollar sales. (.81) Identifying major accounts in your territory and selling to them. (.75) Exceeding sales targets. (.79) Idea transfer, 3 items, α = .88, AVE = .65 (Floyd & Wooldridge, 1992) Brings new opportunities to the attention of managers (.63) Justifies the role of new programs or processes to managers (.74) Proposes new programs and projects to managers (.84) References Aiken, L. S., & West, S. G. (1991). Multiple regression: Testing and interpreting interactions. Newbury Park CA: Sage Publications. Anderson, E., & Oliver, R. L. (1987). Perspectives on behavior-based versus outcomebased salesforce control systems. Journal of Marketing, 51(4), 76–88. Armstrong, J. S., & Overton, T. S. (1977). Estimating nonresponse bias in mail surveys. Journal of Marketing Research, 14(3), 396. Badaracco, J. L. (1991). Alliances speed knowledge transfer. Planning Review, 19(2), 10–15. Bagozzi, R. P., & Phillips, L. W. (1982). Representing and testing organizational theories: A holistic construal. Administrative Science Quarterly, 27(3), 459–490. Bliese, P. D. (2000). Within-group agreement, non-independence, and reliability: Implications for data aggregation and analysis. In K. J. Klein, & S. W. Kozlowski (Eds.), Multilevel theory, research, and methods in organizations (pp. 349–381). San Francisco, CA: Jossey-Bass. Brinberg, J. G., & Snodgrass, C. (1988). Culture and control: A field study. Accounting, Organizations and Society, 13(5), 447–464. Burgelman, R. A. (1991). Intraorganizational ecology of strategy making and organizational adaption: Theory and field research. Organizational Science, 2(3), 239–262. Burgelman, R. A. (1994). Fading memories: A process theory of strategic business exit in dynamic environments. Administrative Science Quarterly, 39(1), 24–56. Carver, C. S., & Sheier, M. F. (1981). Attention and self-regulation: A control-theory approach to human behavior. New York: Springer-Verlag. Cohen, J., Cohen, P., West, S. G., & Aiken, L. S. (2003). Applied multiple regression/correlation analysis for the behavioral sciences (3rd ed). Hillsdale NJ: Erlbaum. Conner, K. R., & Prahalad, C. K. (1996). A resource-based theory of the firm: Knowledge versus opportunism. Organization Science, 7(5), 477–501. Cravens, D. W., Lassk, F. G., Low, G. S., Marshall, G. W., & Moncrief, W. C. (2004). Formal and informal management control combinations in sales organizations—The impact on salesperson consequences. Journal of Business Research, 57, 241–248. Cravens, D. W., Ingram, T. N., LaForge, R. W., & Young, C. E. (1993). Behavior-based and outcome-based salesforce control systems. Journal of Marketing, 57, 47–59.

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Karen E. Flaherty (Ph.D., University of Massachusetts at Amherst) is Associate Professor of Marketing in the Spears School of Business at Oklahoma State University. Her research interests include the study of sales force leadership, control systems, motivation, and performance. Her work has been published in journals such as the Journal of the Academy of Marketing Science, Journal of Retailing, Journal of Business Research, the Journal of Personal Selling & Sales Management, and Industrial Marketing Management, among others. James M. Pappas (Ph.D., University of Massachusetts at Amherst) is Associate Professor of Management in the Spears School of Business at Oklahoma State University. His research interests include the study of strategic management in mid-level professionals, health care management and corporate sustainability. His work has been published in journals such as the Journal of Management Studies, Journal of Business Research, Health Care Management Review and Industrial Marketing Management.