Consequences of marketing controls among sales and nonsales marketing personnel

NORTH- HOLLAND

Consequences of Marketing Controls Among Sales and Nonsales Marketing Personnel Sanjeev Agarwal Controls are an inevitable part of every organization. However, controls can produce undesirable work attitudes and behavioral outcomes among employees. This study examines the relationships between controls and these undesirable consequences for industrial sales personnel and contrasts it with that for nonsales marketing personnel. The study is based on a self-administered questionnaire filled by 150 sales personnel and 150 nonsales personnel drawn randomly from a recent listing of American Marketing Association members. The findings point to several important differences among sales and

Address correspondence to Dr. Sanjeev Agarwal, Associate Professor, Department of Marketing, College of Business, Iowa State University, Ames, IA 5001 1-2065. Telephone: (515) 294-9822; fax: (515) 294-6060.

nonsales personnel. Understanding these differences should enable managers to assess better marketing personnel and to design control systems that can better channel their efforts toward achieving marketing goals.

INTRODUCTION Companies successful in marketing are successful because they are good not only at making superior marketing plans, but also at effectively implementing the marketing plans [1] and controlling the marketing personnel [2-5]. To control marketing personnel effectively, companies must design control systems that enhance the probability of properly implementing specified plans and

Industrial MarketingManagement25, 411420

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Controls are employed to monitor, direct, evaluate, and reward employees. of achieving desired outcomes [5]. Traditionally, achieving desired outcomes has meant maximizing performance-based outcomes, such as sales volume, productivity, and profit margin. The contemporary view, however, is that companies must also strive to maximize positive work attitudes (e.g., satisfaction and commitment) and to minimize negative work attitudes (e.g., job tension and work alienation) and behavioral outcomes (e.g., dysfunctional behavior, information asymmetry, turnover, and absenteeism) among employees [3, 5, 6]. Despite extensive recognition that controls can produce undesirable behavioral consequences, this phenomenon has been studied only with senior marketing executives [7]. Empirical examination for sales personnel has been surprisingly limited. Sales personnel perform a unique boundary-spanning role, in which they work more independently than most nonsales marketing personnel and hence differ in the extent to which and the manner in which they interact with the immediate supervisors who control them. Because of the differences in their work roles and in their relationships with supervisors, they may respond differently from other marketing personnel to the various controls in use. The objective of this study is to examine the responses of sales personnel to control measures and contrast them with those of nonsales marketing personnel.

BACKGROUND AND RESEARCH DESIGN An organizational control system is comprised of a set of procedures for monitoring, directing, evaluating, and compensating the organization's employees. Organizations use a variety of control forms to ensure that employees' efforts are channeled toward activities that facilSANJEEV AGARWAL, Ph.D., is Associate Professor of Marketing at Iowa State University. His industrial experience includes manufacturing and sales of vegetable oil-processing plants and equipment. His research interests include the areas of international marketing and sales management.

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itate achieving of organizational objectives. Three questions that each organization asks in developing an appropriate control system are: 1. What types of marketing controls can be used? 2. What are the bases for selecting a particular control form? 3. What are the consequences of choosing an inappropriate control form?

Types of Marketing Controls Marketing controls can be divided into two broad categories, formal and informal. The difference between formal and informal controls is that the former are written and management-initiated mechanisms whereas the latter are unwritten and typically employee-initiated mechanisms [5]. Two types of formal controls most commonly employed are process and output. Process controls include stated rules that define how a given job is performed, whereas output controls include stated rules that define what level of performance an employee should achieve in a given job. Sales personnel, like other marketing personnel, are subject to a variety of formal controls [3, 4, 8]. Formally, their tasks are controlled by rules; these may be rules concerning processes to be completed (e.g., how to prospect and qualify customers, how to make a sales presentation, how to close a sale) or rules that specify standards of output or quality (e.g., sales targets, profit targets, service levels). The former set of rules falls in the category of process control, and the latter set of rules falls in the category of output control. Output-based controls imply that employees are given free rein on their activities, but they are held accountable for results. Given the nature of the sales job and heterogeneity of the sales task, outcome-based control systems are the path of least resistance [3]. Process-based control system addresses the process of selling rather than simply the outcomes. Salespersons are evaluated on a number of factors that are not themselves measurement of outcomes but may result in better sales performance [3]. These factors may include

The four types of controls a v a i l a b l e to marketers are output, process, professional, and self. personableness, product knowledge, presentation quality, closing ability, services performed, number of active accounts, calls made, amount of correspondence, and days worked. The two types of informal controls most commonly employed include professional and self-control. Professional controls refer to a system where peers engage in collegial interaction, discussion, and informal evaluation of employee performance. Professional control implies that work units establish certain norms, monitor conformity, and take action when its members deviate from the norms. Salespersons, for example, might establish norms for expenses, sales volume ceilings, or informal filing dates for paperwork. When a salesperson violates a norm, the group would exert covert or overt pressure on that individual [5]. Self-control refers to a system where an individual assumes responsibility for his or her job performance. Selfcontrol entails encouraging employees to set goals for themselves, self-monitor behaviors, self-evaluate performance, and self-administer rewards and punishments [8]. Given the complex nature of the selling task and the fact that salespersons have more detailed information about their customers than their supervisors do, it has been suggested that self-control is likely to be very effective. A salesperson, for example, could set a goal in terms of the number of prospective customers to call on each week. Having publicly committed to such a goal, the salesperson may direct attention and action toward developing a better prospecting strategy, such as increasing effort and persistence in making cold calls.

Bases for Selecting an Appropriate Control Form Not all types of controls can be used in every situation. The selection of a particular control form depends largely on the feasibility of the control form in a given task condition. The literature has identified two conditions that

determine whether or not a particular type of control is feasible or justifiable. One factor, called performance documentation, is the degree to which supervisors have documented appropriate measures to assess the achievements or performance outcomes of subordinates [5, 9]. Certain outcomes, such as sales and profits, are easy to measure and thus document. Others, such as customer service, are difficult. In such cases, reasonable surrogates may have to be developed and documented. For example, "complaints received" might be an acceptable measure of the performance of sales or service personnel along the customer service dimension. The second factor, called procedural knowledge, is the degree to which supervisors can specify clearly the activities a subordinate must perform to achieve a desired outcome [5, 9]. In other words, it refers to the knowledge of the transformation process that enables employees to transform actions (inputs) into performance (outputs). Specifically for a sales job, it refers to knowledge about how to prospect and qualify customers, how to make a sales presentation, how to close a sale, and so on. Because output control requires information about how to measure performance, its use is feasible or justifiable only when performance documentation is high. Likewise, process control, which requires knowledge of the process, can be used only when procedural knowledge is high. For example, using output control can be justified for salespersons only if it is possible to measure accurately sales targets, profit targets, service levels, and the like that can be directly attributable to each salesperson in order to evaluate his or her performance. Using process control is possible for salespersons only if they know how to prospect and qualify customers, how to make a sales presentation, how to close a sale, and so on. In situations where sales contracts materialize in large but infrequent chunks, it is difficult to develop measures of real progress or output achieved by each salesperson on a daily or even monthly basis. In such cases, a processbased control system might be more useful. In this sys-

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The type of task con di ti o n d i c t a t e s w h e t h e r or not a certain type of control is technically feasible. tern, organizations must identify activities that salespersons must perform to consummate sales successfully. Some activities are probably known to be desirable, such as the number of hours worked and the quantity of calls made. Other considerations may include customers' satisfaction with the salesperson or customers' familiarity with the company's products. In process-based control system, successful and satisfactory completion of such activities will constitute the basis for evaluating, monitoring, and rewarding salespersons. Informal controls are the most adaptable to a broad range of situations. Professional control and self-control are used primarily in situation where output and process controls are not an option. Basically, their use is inevitable when both performance documentation and procedural knowledge are low [9].

Consequences of Choosing an Inappropriate Control Form Controls are instituted to help sales managers to monitor, direct, evaluate, and reward sales personnel and to channel their efforts toward a common organizational goal. However, the bureaucratization resulting from implementing controls may induce sales personnel to develop undesirable work attitudes or engage in undesirable behaviors. Three consequences examined in this study include dysfunctional behavior, job tension, and information asymmetry. Dysfunctional behavior refers to a situation in which employees behave in ways that appear to be beneficial to the organization as assessed by the control system, but are dysfunctional for the organization in the long run. For example, a salesperson who focuses on maximizing sales volume at the expense of long-term customer relationship is acting dysfunctionally for the organization [10]. Lack of attention to customer satisfaction, primary emphasis on the more profitable or, alternatively, easy-to-

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sell items in the product line may result in immediate payoff for the salesperson at the expense of harm to organization in the long run. Employees may distort information before and after the conclusion of their work activities. For example, if organizations set sales targets, salespersons may underreport market potential to obtain lower, more easily achievable sales targets prior to starting their work activities [11]. After their work is done or at the time of their performance evaluation, employees tend to make performance reports more favorable than warranted, withhold information that reflects poorly on performance, or overstate competition faced by the product [12]. They may, for example, manipulate the product market boundaries to show static or increasing share [l 1]. Job tension reflects the individual-level stress caused by the job and performance evaluation. Information asymmetry refers to a situation wherein the employee possesses more information related to his or her work than that possessed by his or her supervisor. Such an asymmetry can be construed as a negative consequence because it opens up the possibility that the employee may use the information opportunistically.

The Contingency Model of ControlConsequence Relationship To assess when controls produce negative behavioral consequences, researchers have used contingency approach, which suggests that undesirable consequences may be minimized among employees by using controls that are congruent with the nature of the tasks that are being controlled [5]. Because use of output control is feasible and appropriate when there is information about how to measure performance, when high performance has been documented, its use should lead to fewer negative consequences. Similarly, the use of process controls should lead to fewer negative attitudes and o u t c o m e s when procedural knowledge is high than when proce-

A particular control type, even w h e n feasible, can induce e m p l o y e e s to develop undesirable c o n s e q u e n c e s . dural knowledge is low. Professional control and selfcontrol should, on the other hand, be effective in situations when both performance documentation and procedural knowledge are low. This study attempts to examine these hypotheses for two different types of samples, namely, sales and nonsales marketing personnel. The nature of the study is descriptive and its basic thrust is on identifying differences that might exist between both types of marketing personnel.

spondents that were under 25, 73.2% were between 25 and 39, 20.7% were between 40 and 55, and 3.0% were between 56 and 70 years of age. The nonsales sample consisted of 45.7% female and 54.3% male respondents. 42.7% of nonsales personnel had only graduated from high school, 48.2% had a bachelor's degree, 6.7% had a master's degree, and 1.8% held doctorate degrees. The nonsales personnel included product managers, marketing managers, general managers, marketing research analysts, marketing planning, and development personnel. There was no response bias between early and lat e respondents [ 13].

RESEARCH SETTING Measurement Scales The data for the present research were collected through the use of a self-administered mail questionnaire that was delivered to a national sample of 1250 marketing professionals drawn randomly from a recent membership roster of the American Marketing Association. The mailings yielded 335 responses, a response rate of 26.8%. After excluding 29 responses of high-level executives, such as marketing directors and presidents, out of 335 and excluding 91 such personnel from the total sampie of 1250, the effective response rate was 26.4% (306 out of 1159). Six observations had to be dropped because of extensive missing data. The resulting data set consisted of 300 observations. The total sample consisted of 150 sales personnel and 150 nonsales personnel. The sales sample consisted of 5.2% respondents that were under 25, 71.6% were between 25 and 39, 20.6% were between 40 and 55, and 2.6% were between 56 and 70 years of age. The sales sample consisted of 52.9% female and 47.1% male respondents. Twenty percent of the salespersons had only graduated from high school, 65.8% had a bachelor's degree, 11.6% had a master's degree and 2.6% held doctorate degrees. The nonsales sample consisted of 2.4% re-

The study included nine variables; (1) performance documentation, (2) procedural knowledge, (3) output control, (4) process control, (5) professional control, (6) self-control, (7) dysfunctional behavior, (8) job tension, and (9) information asymmetry. They were measured with the use of 4-, 4-, 5-, 4-, 5-, 5-, 5-, 6-, and 7-item scales, respectively, each one of which has its root in the literature [14]. With the exception of self-control, all constructs satisfied the reliability criterion of .70 [15].

Analyses The usable sample of 300 marketing personnel was separated into two groups, one comprising of 150 sales personnel and the other comprising of 150 nonsales marketing personnel. Each group was further split into two subgroups based on the mean values of performance documentation of the respective group. Each dependent variable (namely, dysfunctional behavior, job tension, and information asymmetry) was then separately regressed on the four types of control forms for each of the four subgroups. Similarly, to examine the effect of procedural knowledge, the sales and nonsales samples were each

415

Sales and nonsales personnel differ in the way they react to different types of controls.

split into two groups based on the mean values of procedural knowledge, and each dependent variable was regressed on the four control forms for each of the four subgroups.

RESULTS AND MANAGERIAL IMPLICATIONS Presented below are the results and associated discussion regarding managerial implications for each of the four control forms. In line with the contingency theory of control, we discuss the effectiveness of output controls when high performance is documented; process controls when procedural knowledge is high; and informal controls (professional and self-control) when both documented performance and procedural knowledge are low.

Consequences of Output Control The results for nonsales personnel when performance documentation is high (Table 1) indicate that output control has a nonsignificant relationship with either dysfunctional behavior or job tension, whereas it has a significant negative relationship with information asymmetry. Results for sales personnel when performance documentation is high indicate that output control has a significant positive relationship with both dysfunctional behavior and job tension and a nonsignificant relationship with information asymmetry. These results present a contrast. Using output control documentation is high when performance does not induce dysfunctional behavior or job tension among nonsales personnel, but it does induce both dysfunctional be-

TABLE 1 Standardized Regression Coefficients at Different Levels of Preformance Documentation Independent Variables

Dependent Variables Sales personnel Dysfunctional behavior Job tension Information asymmetry Nonsales personnel Dysfunctional behavior Job tension Information asymmetry * P D ; Performance documentation. t P < .01. * P < .05.

P < .001. tp<

416

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havior and job tension among sales personnel. Likewise, it reduces information asymmetry among nonsales personnel, but does not do so among sales personnel. These observations are noteworthy because they indicate that using output control, even when its use is justified on the premise that performance documentation is high, is detrimental with sales personnel. A possible explanation may be that it is a common practice to evaluate and compensate sales personnel primarily on the basis of the outputs they achieve rather than on the process they follow to achieve those outputs [3, 4, 9]. Many are free to use their own selling methods and are evaluated and compensated based solely on the results they achieve. Knowing that the reward structure is contingent on predetermined performance goals, sales personnel are likely to manipulate reporting of the outcomes in a manner that makes their performance look good on paper. The reason they are able to manipulate performance and get away with it most of the time is because they work independently and away from their supervisors most of the time. Supervisors cannot be expected to be completely familiar with the day-to-day operations of the sales personnel they supervise. Even though sales personnel cannot distort all kinds of outputs, especially the more aggregate ones such as sales, that will not stop them from distorting other, less visible, and less verifiable outputs, such as market shares. The fact that salesperson may distort information is well recognized by sales managers. Consequently, it is possible that the process of performance evaluation may involve some degree of conflict between the manager and the salesperson. Such conflicts between a supervisor and a salesperson, may, in fact, be responsible for higher job tension. The possibility of dysfunctional behavior is not confined only to reporting outputs. To the extent possible, sales personnel may even attempt to influence goal setting by presenting an inaccurate picture of the markets and customers. The tendency to report a smaller market potential to obtain smaller sales targets is a case in point. In addition, just because output measures are available does not mean that output goals are justified. Using output control can be justified only when, in addition to being able to measure discrepancy in outputs, it can also point out why the discrepancy happened and how it can be corrected [14, 16]. It is important that managers provide the latter kind of feedback to sales personnel in addition to telling them that they have not met the performance goals. Assume that a salesperson has been unable to achieve an assigned quarterly sales target. The super-

visor may compare actual performance to the target and inform the salesperson that he or she has to improve his or her performance. The means by which this may be carried out is usually left at the discretion of the salesperson. However, unless the salesperson has or is provided with information about the behavioral changes needed to overcome the performance deficiency, the salesperson may experience job tension and instead of complaining, simply manipulate reports to suit the requirements of the control system. It is important therefore that managers not rely exclusively on output controls. By providing some action guidelines as well, they can reduce the incidence of dysfunctional behaviors and job tension among salespersons.

Consequences of Process Control The results (see Table 2) indicate that at higher levels of procedural knowledge, process control is not related with dysfunctional behavior, job tension, or information asymmetry for nonsales marketing personnel. In the case of salespersons, likewise, the process control has a nonsignificant association with dysfunctional behavior and job tension. However, it has a significantly negative association with information asymmetry. For salespersons, the results indicate that using process control leads to high dysfunctional behavior when procedural knowledge is low but not when procedural knowledge is high. This implies that using process control when procedural knowledge is high may be beneficial in the case of salespersons because it eliminates dysfunctional behavior and helps to reduce information asymmetry. Among the nonsales marketing personnel, the results indicate that using process control is positively associated with dysfunctional behavior and with job tension when procedural knowledge is low but not when procedural knowledge is high. This implies that process control should be avoided when procedural knowledge is low for nonsales marketing personnel as well. These findings suggest that employees respond well to process control only when they perceive that procedural knowledge is high. Basically, it is important that employees perceive that process-related control measures have implications for their performance. To require salespersons, for example, to record the amount of time they spend traveling, making sales calls, and performing office work on, say, a daily basis, will not work unless they can see how such an activity may enhance their sales productivity. They may see it as an activity that takes time

417

Knowing what works and what d o e s not can help m a n a g e r s to d e v i s e better controls.

away from their main task, which is to make sales calls, and thus come to a conclusion that it is a waste of time. Having decided that, they may not maintain records on a daily basis. But just to fulfil the control requirement imposed on them by the organization, they may, at the end of the week or whenever the report is due, reconstruct daily reports. Although they meet the control requirement, they have engaged in a dysfunctional behavior. The burden of having to complete a useless task may result in experienced job tension as well. This response is dysfunctional for the organization because (i) reconstructed records are likely to be erroneous, and (2) recordkeeping of this kind for its own sake is in fact a waste of valuable sales time. If, however, there existed procedural knowledge about how to use the records, say, to

modify certain behaviors and increase productivity, salespersons may not act dysfunctionally. Maintenance of records, for example, may show that the time spent traveling is limiting their ability to spend more time with customers. This information may lead them to think about more efficient mapping of sales routes. Basically, the process of keeping records may allow the organization to control salespersons and to provide useful feedback for greater productivity, but such results can be obtained only when the salespersons know how maintaining records will lead them to improve their performance. Supervisors should reevaluate their process-related control measures to make sure that both salespersons and nonsales marketing personnel have the procedural knowledge needed to take advantage of the process-related control system.

TABLE 2 Standardized Regression Coefficients at Different Levels of Procedural Knowledge Independent Variables

Dependent Variables Sales personnel Dysfunctional behavior Job tension Information asymmetry Nonsales personnel Dysfunctional behavior Job tension Information asymmetry

* P K ; Procedural knowledge. P < .001. P < .01.

:i:p < .05. '~P<

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Moderating Variable Low P K * High P K Low P K High P K Low P K High P K Low P K High P K Low P K High P K Low P K High P K

Professional Control

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Consequences of Professional Control Professional control seems to be desirable for both sales personnel and nonsales marketing personnel in all situations, regardless of the level of performance documentation and procedural knowledge. These results imply using professional control is desirable for all kinds of employees and in all kinds of task conditions. It is important to point out that previous research based on contingency theory suggests that professional control is a useful control form when both performance documentation and procedural knowledge are low. However, this study points out that it is useful even when both performance documentation and procedural knowledge are high. The implication is that managers should foster interaction, cooperation, mutual respect, and job-related discussions among peers under all circumstances, even in conjunction with other controls.

Consequences of Self-Control Self-control has no effect on job tension and information asymmetry for both nonsales and sales personnel in all situations, regardless of the level of performance documentation or procedural knowledge. The only outcome influenced by self-control is dysfunctional behavior. Self-control reduces dysfunctional behavior among salespersons when performance documentation is low and among nonsales personnel when performance documentation is high. Self-control reduces dysfunctional behavior among salespersons when procedural knowledge is high, and among nonsales personnel at all levels of procedural knowledge. This suggests that self-control may be of limited use, although it plays an important part in reducing dysfunctional behavior among all types of marketing personnel.

CONCLUSIONS This study examined the work attitudes and behavioral outcomes of various marketing controls among sales and nonsales marketing personnel using the contingency theory of controls [5,9]. The data examined in this study suggest that the consequences of using controls differ among both sales personnel and nonsales personnel. The main findings are as follows: Among non-sales personnel:

1. Output controls do not lead to any negative behavior or consequence at any level of performance documentation. 2. Process controls lead to dysfunctional behavior and job tension when procedural knowledge is low but not when procedural knowledge is high. 3. Professional controls lead to lower dysfunctional behavior, job tension, and information asymmetry when performance documentation is low and leads to lower job tension and information asymmetry when procedural knowledge is low. 4. Self-control leads to lower dysfunctional behavior when performance documentation is high and at any level of procedural knowledge. Among sales personnel: 1. Output controls lead to dysfunctional behavior and job tension when performance documentation is high. 2. Process controls lead to dysfunctional behavior whenprocedural knowledge is low. 3. Professional controls lead to lower dysfunctional behavior, job tension, and information asymmetry at any level of procedural knowledge and performance documentation. 4. Self-control leads to lower dysfunctional behavior when performance documentation is low and when procedural knowledge is high. The inferences drawn from these results are, however, subject to several acknowledged limitations. First, caution must be exercised in drawing cause-and-effect inferences because of the cross-sectional research design employed. Second, like most studies dependent on selfreport data, the associations among constructs may be inflated as a result of common methods variance. Third, the measurement scales of some of the study constructs, especially self-control and professional control, need to further refined; the reliability score for self-control in particular was lower than what is traditionally considered appropriate. Fourth, the study did not examine the relationship between behavioral consequences and performance-based outcomes. As such, it is difficult to say that higher incidence of dysfunctional behavior, job tension, or information asymmetry is necessarily impeding the achievement of higher performance-based outcomes. Nevertheless, this research demonstrates that sales personnel respond differently from nonsales personnel to various controls in use.

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