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Improving the Effectiveness of Field Sales Organizations
Improving the Effectiveness of Field Sales Organizations A European Perspective
Artur Baldauf David W. Cravens For companies competing in rapidly changing business environments, the sales force can be an important source for improving organizational effectiveness. The results of a study of 159 field sales managers in 79 Austrian companies point to higher effectiveness in organizations utilizing sales management directing and evaluating activities to a greater sales extent than managers in less effective organizations. Moreover, the effective sales organizations place more emphasis on their sales territory design, and, additionally, their sales forces show significant differences in both personal characteristics
Address correspondence to David W. Cravens, Professor of Marketing, Texas Christian University, Box 298530, Fort Worth, TX 76129. The authors acknowledge Katja Krampera (University of Vienna) for the valuable assistance in collecting the data.
Industrial Marketing Management 28, 63–72 (1999) © 1998 Elsevier Science Inc. All rights reserved. 655 Avenue of the Americas, New York, NY 10010
and performance dimensions. Salespeople in the more effective sales units display higher levels of intrinsic and extrinsic motivation, sales support orientation, and customer orientation. Both salesperson behavior and outcome performance were rated higher by managers in the organizations with more effective sales units. © 1998 Elsevier Science Inc.
INTRODUCTION Responding to the challenges of the rapidly changing global business environment, sales executives need to take actions which improve sales organizational effectiveness [1, 2]. Evidence of companies’ reactions to these environmental dynamics is shown in a study of European and U.S. companies which highlights extensive changes
0019-8501/99/$–see front matter PII S0019-8501(98)00023-6
Key drivers of sales unit results are sales managers and salespeople working together. being implemented in sales strategies and organizational structures [3]. These studies point to the need for improving effectiveness but offer limited insights as to the factors that are related to effectiveness. Selling costs account for a major portion of sales and marketing expenditures in business-to-business sales organizations. Moreover, sales and marketing activities offer substantial opportunities for improving the effectiveness of the business, since general and administrative, engineering, and operations areas in many companies have already experienced major productivity gains during the last decade [4]. Consequently, improving the effectiveness of sales organizations is a high priority on the action agenda of many companies today [5, 6]. Sales organization effectiveness is a summary measure (index) of organizational outcomes (e.g., sales, volume, market share, profit contribution, or customer satisfaction) to which the salesperson is a partial contributor [7]. Several studies point to the contribution of environmental, organizational, and salesperson variables to sales response [8–10]. Importantly, effectiveness is partly (but not entirely) attributable to the salespeople assigned to the sales organization and effectiveness includes more than assessing the responsiveness of sales and selling efforts. Considering effectiveness at the field sales unit level where the sales manager has direct management responsibility for a group of salespeople, our objective is to examine how more and less effective sales organizations
ARTHUR BALDAUF is Assistant Professor at the University of Vienna and was the Earl D. Dyess International Visiting Scholar at Texas Christian University in Forth Worth, Texas. DAVID W. CRAVENS is Professor of Marketing at Texas Christian University in Forth Worth, Texas.
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differ with respect to specific organizational and salesperson variables. This study, conducted in Austria, is, to our knowledge, the only known research which examines sales organization effectiveness in continental Europe. It contributes to a small but growing base of international research that examines effectiveness and related sales management issues [11, 12]. The research methodology for the present study employs a research instrument adopted for use in the Austrian selling environment where a sample of 159 Austrian field sales managers participated. BACKGROUND We define and examine the dimensions of sales organization effectiveness, followed by the development of several hypothesized relationships between constructs that are potentially useful in explaining differences in effectiveness. The conceptual framework guiding the study is shown in Figure 1. We include both salesperson and sales organization constructs. As discussed in the Methods section, the measures used for sales organization effectiveness take into account environmental differences across the sample so environmental factors were not included in this framework. Environmental influences include the intensity of competition and market potential applicable to the organizational unit of interest, whereas organizational factors consist of managers’ skills, activities, and efforts, organizational competencies, and resources. The qualifications and efforts of the salespeople comprise the remaining influences on effectiveness. Sales Organization Effectiveness We know that sales organization effectiveness is the summary evaluation of the outcomes (results) achieved by a sales unit during some specified time period [7]. Al-
FIGURE 1.
Salesperson, sales organization and effectiveness relationships.
though effectiveness may be assessed for the entire sales organization or for disaggregate units such as regions, districts, territories, or customer groups, in our study field sales unit effectiveness is the organizational level of interest. The most widely used measure of sales organization effectiveness is total sales volume. Nonetheless, other measures have been used (or proposed) including market position, costs, profit contribution, return on assets managed, and residual income analysis [7, 13–17]. More recently, customer satisfaction measures have also been applied to gauge sales organization effectiveness, particularly by those firms employing Total Quality Management concepts and methods. Sales Management Control Strategy Strategies for managing salespeople range from emphasis on influencing the behavior to affecting the outcomes produced by salespeople [18–20]. Anderson and Oliver [18] describe sales management control systems in terms of the extent of salesperson monitoring, directing, evaluating, and rewarding activities carried out by sales managers. They propose that these activities are
performed to a greater extent when an organization is pursuing a behavior-based control strategy, compared to an outcome-based strategy. A company’s sales management strategy may be positioned anywhere across the behavior–outcome continuum. However, there is empirical evidence indicating that sales organizations pursuing behavior-based control strategies display higher levels of effectiveness [12, 19]. Anderson and Oliver [18] state that behavior-based control systems will achieve higher sales organization objectives compared to outcome-based control systems. Some empirical support for this proposition was found by Cravens et al. [19] examining 144 U.S.-based companies where the unit of analysis was the entire sales organization instead of field units. Another study conducted in Australia, using a sample of 146 field managers which were attributable to organizations employing behaviorbased management strategies found significant (0.05 or better) two-way correlations between sales management monitoring and sales and market share effectiveness, sales management directing and profitability effectiveness, sales management evaluating and sales and market share effectiveness and profitability effectiveness, and 65
Greater monitoring, directing, evaluating, and rewarding salespeople helps them to perform better. sales management rewarding and profitability effectiveness [11]. Significant correlations were not found for any of the four sales management activities and customer satisfaction effectiveness. A study of 144 sales managers in the United Kingdom reported significant differences for the extent of sales management directing, evaluating, and rewarding activities and a composite effectiveness measure comprised of sales volume, market share, profitability, and customer satisfaction [12]. The respondents were sales managers in organizations employing behavior-based sales management strategies. The various studies provide empirical support for the following hypothesis: H1: The greater the extent of monitoring, directing, evaluating, and rewarding activities by field sales managers, the higher the level of sales unit effectiveness.
Sales Territory Design Sales territory design consists of decisions about assigning customers/prospects to specific salespeople, determining geographical configuration of the salesperson’s work unit, deciding call frequency, and setting other necessary parameters to provide each salesperson with an opportunity to perform well. The importance of properly designed sales territories is recognized by both managers and sales management researchers [2, 7, 21]. Poor designs negatively impact salesperson performance and sales organization effectiveness by limiting the salesperson’s opportunity to perform and suboptimizing the deployment of expensive selling resources. Surprisingly, other than general discussions in sales management texts, sales territory design has received limited attention by sales management scholars and managers. Sales territory design is of primary concern in organizations employing strategies that are more behaviorbased than outcome-based. In contrast, outcome-based 66
strategies have limited advantages to be gained by improving territory design, since selling costs are primarily payment of sales commission. The main objective of outcome-based strategy is maximizing sales [11, 18], and this can be accomplished by expanding the size of the sales force rather than optimizing the outcomes of individual salespeople. Competing in a selling environment appropriate for behavior-based sales management strategy, both salesperson performance and sales organization effectiveness can benefit from improved organizational structure, optimal size of the sales force, effective territory configuration, and optimal allocations of selling effort within each territory. Empirical support for a significant relationship between design and effectiveness is provided by a sample of 144 United Kingdom field sales managers employing behavior-based sales management strategies [12]. Another study applying a LISREL analysis of 146 Australian sales units detected a significant (t 5 2.17) path between design and effectiveness [11] and therefore the following hypothesis is offered: H2: Field sales managers that are more satisfied with their unit’s sales territory designs will display relatively high sales unit effectiveness compared to managers who are less satisfied with their designs.
Salesperson Characteristics The salesperson characteristics that appear to be relevant in examining differences in sales unit effectiveness include intrinsic motivation, recognition motivation, sales support orientation, and customer orientation. The supporting logic for these salesperson characteristics is provided by the Anderson and Oliver [18] propositions and subsequent empirical studies [19, 20]. Sales organizations pursuing behavior-based sales management control strategies will staff their organizations with salespeople who display these characteristics to a greater extent com-
Better salesperson performance of selling activities increases sales unit effectiveness. pared to organizations utilizing outcome-based management control strategies. Moreover, these characteristics have been found significant in a path analysis model comprised of sales force characteristics, sales force control system, salesperson performance, and sales organization effectiveness [19]. The salesperson characteristics were not directly linked to sales organization effectiveness in the conceptual model; instead the characteristics displayed significant paths to the sales force control system. The before mentioned United Kingdom study discovered significant differences between more and less effective sales units for sales force motivation, customer orientation, and sales support orientation. Based on these findings and the above conceptual and empirical results, the following hypotheses are stated: H3: The greater the extent that a sales organization’s salespeople have the following characteristics, the higher will be the effectiveness of the sales units. H3a: Intrinsic motivation H3b: Recognition motivation H3c: Sales support orientation H3d: Customer orientation
behavioral performance components. Therefore, we propose the following hypotheses: H4: Higher levels of sales unit effectiveness will be found in organizations whose salespeople display relatively high performance for the following aspects of behavior performance: H4a: Technical knowledge H4b: Adaptive selling H4c: Teamwork H4d: Sales presentation H4e: Sales planning H4f: Sales support H5: Higher levels of sales unit effectiveness will be found in organizations whose salespeople display relatively high outcome performance.
METHODS The hypotheses are examined using a sample of sales organizations located in Austria. It is, to our knowledge, the first known study examining salesperson, sales organization, and effectiveness relationships in a non-English speaking country.
Sales Force Performance
Sample and Data Collection
Salesperson performance is defined as the assessment of the salesperson’s behavior (e.g., activities) based on the contribution of the behavior to the effectiveness of the sales organization [22]. It is conceptually useful to consider performance as being comprised of behavior (the activities salespeople perform), and outcomes resulting from behavior [23, 24]. The previously discussed Australian research detected empirical support for a positive relationship between behavior and outcome performance and between outcome performance and sales organization effectiveness [11]. Piercy et al. [12] also report significant differences between more and less effective sales units and outcome performance. Differences were identified for most of the
Sales managers from 203 Austrian companies were asked to participate in this study. The respondents were field sales managers responsible for direct supervision of assigned salespeople. As we wanted to cover a wide range of selling environments these companies were selected on a judgmental basis. Additionally, applying the snowball method we relied on personal contacts and references. Finally, responses were obtained from 159 field sales managers in 79 companies leading to a response rate of 39%. Compared to other studies [25], and taking into account the eight-page questionnaire that each respondent completed, this response rate can be considered to be acceptable. Austrian sales organizations are relatively small compared to U.S. companies. In our sample the median 67
The activities of salespeople are important indicators of sales results. sales force size was 20 and field sales managers supervise 8 to 10 people. The types of sales forces included were generalists (34%), product specialists (33%), service specialists (15%), and product/service specialists (18%). The largest portion of sales was consumer products (46%), followed by industrial goods (34%) and services (15%). Another objective of the sampling design was to include sales organizations covering the continuum from behavior-based to outcome-based sales management strategies. An indicator of which strategy is used by an organization is the mix of salary and incentive compensation in total compensation [18]. The sample contained sales organizations with compensation plans ranging from primarily salary to primarily incentive pay. Behavior-based, combination-based, and outcome-based organizations appear to be represented in the sample. Construct Measurement A summary of information on the multiple-item scales used to measure the study constructs is shown in Table 1. Included are the number of scale items, alpha values, and sources of the scales. SALES ORGANIZATION EFFECTIVENESS. Four measures of effectiveness were obtained for each sales unit supervised by the field sales manager respondents. Effectiveness 1, 2, and 3 (EFF 1, 2, 3) were measured compared to the major competitor and the sales unit objectives for sales and market share (four items), profitability (two items), and customer satisfaction (two items) using fivepoint scales anchored by “much worse” (1) and “much better” (5). The use of the relative measures for EFF 1, 2, and 3 enabled comparisons across different selling environments, competitive situations, and market potentials. Since these measures take into account differences in external factors, environmental measures were not included in the study. The relative measures also avoided asking the sales managers for confidential effectiveness information. Review of the distribution of responses indicate that the 68
managers in the sample provided low, medium, and high effectiveness scores, though, not surprisingly, the distribution is skewed toward high effectiveness (Table 2). The fourth effectiveness measure consisted of a sixitem scale indicating the sales manager’s evaluation of average sales per salesperson, selling expenses, obtaining new customers, salesperson turnover, use of computer technology, and retaining existing customers. The scale ranged from “needs improvement” (1) to “outstanding” (7). Responses were placed into high, medium, and low effectiveness groups for each effectiveness measure. The TABLE 1 Construct Scale Items, Reliabilities, and Scale Sources
Construct
Number of Scale Items
Alpha Value*
Source of Scale
4 2 2 6
0.84 0.49* 0.73* 0.72
Cravens et al. [19] Cravens et al. [19] Cravens et al. [19] New Scale
8 5 5 7 10
0.69 0.75 0.54 0.78 0.89
Anderson and Oliver [18]
3 2 2 2
0.81 0.48* 0.55* 0.46*
3 4 5 5 4 6 7
0.85 0.90 0.83 0.87 0.87 0.84 0.72
Sales organization effectiveness Effectiveness 1 Effectiveness 2 Effectiveness 3 Effectiveness 4 Sales management control strategy Monitoring Directing Evaluating Rewarding Sales territory design Salesperson characteristics Intrinsic motivation Recognition motivation Sales support orientation Customer orientation Sales force performance Behavior performance Technical knowledge Adaptive selling Teamwork Sales presentations Sales planning Sales support Outcome performance *Correlation for two-item sale.
Babakus et al. [11]
Behman and Perreault [23]
Behman and Perreault [23]
Managers who work to improve sales territory designs have more effective sales units. top and bottom one-third of the sample were used in the analysis of differences for the construct measures (Figure 1). SALES MANAGEMENT CONTROL STRATEGY. This construct was measured by four dimensions: monitoring, directing, evaluating, and rewarding [18]. Sales managers indicated the extent to which they performed each activity. Multiple-item scales were used for each component. The scale ranged from “to a great extent” (10) to “not at all” (1). SALES TERRITORY DESIGN. The design construct was measured using a 10-item scale based on the sales force deployment and territory design literature [11]. The sales manager indicated the level of satisfaction for the sales territories in the sales unit, using a seven-point scale ranging from “very satisfied” (7) to “not at all satisfied” (1). SALESPERSON CHARACTERISTICS. The salesperson characteristics were measured using multiple-item scales ranging from “to a great extent” (10) to “not at all” (1). The number of items were: intrinsic motivation (three items), recognition motivation (two items), sales support (two items), and customer orientation (two items ). SALES FORCE PERFORMANCE. Sales force performance was measured suing a seven-point scale anchored by 1 for “needs improvement” and 7 for “outstanding.” The
TABLE 2 Sales Managers’ Ratings of Sales Unit Effectiveness Effectiveness*
Effectiveness Component EFF 1 EFF 2 EFF 3 EFF 4*
sales manager provided a summary assessment for the salespeople in his or her unit. The behavioral performance measures include technical knowledge (three items), adaptive selling (four items), teamwork (five items), sales presentation (five items,), sales planning (four items), and sales support (six items). Sales force outcome performance was measured by a seven-item scale. The seven items include producing high market share, selling highprofit margin products, generating high dollar sales, selling new products/services, identifying and selling to major accounts, developing sales with long-term profitability, and exceeding all sales targets and objects. RESULTS AND DISCUSSION An important research issue is the extent to which sales managers provided objective assessments of the sales unit effectiveness measures. While there is an upward bias in the responses, the distribution shown in Table 2 indicates a range of ratings from high to low. Since the frame of reference for each respondent was the same (e.g., relative to major competitor and sales unit objectives), comparisons across different managers’ sales units should be meaningful. To examine our hypotheses we used difference tests for the high and low effectiveness groups. These tests, of course, do not indicate cause and effect relationships, only that significant differences are present. Organizational Factors and Sales Unit Effectiveness
Low (1 and 2 ratings) (%)
Neither High nor Low (3 rating) (%)
High (4 and 5 ratings) (%)
3.8 4.5 2.5 14.5
30.2 36.5 17.8 31.4
66.0 59.0 79.7 54.1
*Low ratings were 1, 2, and 3; high ratings were 5, 6, and 7 for EFF 4.
SALES MANAGEMENT CONTROL STRATEGY. The supporting logic for H1 is that organizations whose field sales managers perform the activities of monitoring, directing, evaluating, and rewarding to a greater extent than managers in other organizations, will experience higher levels of sales unit effectiveness. The results of difference tests for the four management activities are shown 69
Similar drivers of effectiveness are found in Austrian, Australian, and United Kingdom sales organizations. in Table 3. There is mixed support for H1 across the four measures of effectiveness. The stronger support centers on sales managers’ directing activities. The remaining activities display fewer differences across more and less effective sales units. Using a composite measure of effectiveness, Piercy et al. [12] in their United Kingdom study found directing, evaluating, and rewarding activities significantly different at 0.05 or better. Our results using four different effectiveness measures show significant differences for evaluating activities on profitability (EFF 2) and customer satisfaction (EFF 3). Neither the Austrian nor the United Kingdom study provides much support for monitoring activity differences. SALES TERRITORY DESIGN. There is strong support for H2. Mangers who are more satisfied with their unit’s sales territory design tend to have more effective sales units. The differences between more and less effective units were significant at better than 0.05 for each of the four effectiveness measures. Piercy et al. [12] also detected a significant difference for design. In summary, the organizational factors of sales management control strategy and sales territory design appear to impact sales unit effectiveness. While the sales management control strategy is not a dominant factor in
impacting effectiveness, it is important, particularly in the case of directing activities. Moreover, the sales management control strategy may play a more indirect role in effectiveness through sales territory designs, salesperson characteristics, and salesperson performance.
TABLE 3 Difference Tests for Sales Management Control Strategy and Sales Unit Effectiveness
TABLE 4 Difference Tests for Salesperson Characteristics and Sales Unit Effectiveness
Salesperson Factors and Sales Unit Effectiveness SALESPERSON CHARACTERISTICS. Significant differences exist for the four effectiveness measures for both salesperson motivation characteristics as shown in Table 4. Sales support orientation shows significant differences for EFF 1, EFF 2, and EFF 4, whereas customer orientation has significant differences on EFF 2 and EFF 4. Thus, there is substantial support for H3. Note, however, that effectiveness differences were only found for the intrinsic motivation and recognition motivation characteristics using the customer satisfaction (EFF 3) effectiveness measure. SALESPERSON PERFORMANCE. Strong support is provided for H4 (behavior performance and effectiveness) and H5 (outcome performance and effectiveness) as shown in Table 5. All dimensions of behavior performance display differences for the four components of effectiveness, except technical knowledge and sales support
Level of Significance for High Minus Low Differences
Level of Significance for High Minus Low Difference Sales Management Activity
EFF 1
EFF 2
EFF 3
EFF 4
Salesperson Characterisitcs
EFF 1
EFF 2
EFF 3
EFF 4
Monitoring Directing Evaluating Rewarding
* 0.028 * *
* 0.038 0.014 *
* 0.001 0.042 0.010
0.003 0.022 * *
Intrinsic motivation Recognition motivation Sales support orientation Customer orientation
0.035 0.018 0.019 *
0.003 0.007 0.019 0.041
0.017 0.030 * *
0.003 0.006 0.000 0.000
*Not significant at 0.05 or better.
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*Not significant at 0.05 or better.
Motivation is a vital characteristic of high performance salespeople. where two effectiveness components were significant. The composite behavior performance construct measure is significant across the high and low effectiveness groups, as is outcome performance. MANAGERIAL IMPLICATIONS The study results point to several possible avenues for improving the effectiveness of field sales organizations. Role of Organizational Factors The study findings offer some support that behaviorbased sales management control strategies are associated with higher levels of sales unit effectiveness. Sales management directing activities have the strongest link to effectiveness. The specific activities included in sales management directing construct measure are: (1) encourage salespeople to increase their sales results by rewarding them for their achievements; (2) actively participate in training salespeople on the job; (3) regularly spend time coaching salespeople; (4) discuss performance evaluations with salespeople; and (5) help salespeople develop their potential. These directing activities involve coaching and relationship building between managers and salespeople. TABLE 5 Difference Tests for Salesperson Performance and Sales Unit Effectiveness Level of Significance for High Minus Low Differences Performance Dimension
EFF 1
EFF 2
EFF 3
EFF 4
Behavior performance Adaptive selling Technical knowledge Teamwork Sales presentations Sales planning Sales support Outcome performance
0.000 0.000 0.024 0.022 0.003 0.000 * 0.000
0.007 0.024 * 0.005 0.012 0.037 * 0.000
0.002 0.005 * 0.015 0.013 0.003 0.015 0.003
0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000
*Not significant at 0.05 or better.
The importance of the directing activities adds to other research findings as well as opinions expressed by executives that the role of sales managers in many organizations is shifting away from command and control management toward coaching styles of management [1, 2]. Coaching and relationship-building activities are associated with high sales unit effectiveness. Mangers who perform directing activities to a greater extent compared to other managers should achieve better results. It is apparent that sales managers’ coaching and relationshipbuilding activities are emphasized in Europe as well as in Australia and the United States. The strong link we found between sales territory design and unit effectiveness highlights the importance of management’s role in providing salespeople the opportunity for high performance. Poorly designed territories are hurdles that even highly competent salespeople cannot overcome. Role of Salesperson Factors Sales managers know that the salesperson is an important contributor to sales unit effectiveness. Identifying the salesperson characteristics that are most closely linked to sales unit effectiveness is of potential value in selecting and managing salespeople. It is apparent from the study results that both intrinsic motivation and recognition motivation are important characteristics of high performance salespeople. These forms of motivation are displayed by the salespeople that are assigned to the more effective sales units, and thus motivation should receive the attention of field sales managers in both recruiting and on-the-job relationship building. Sales support orientation and customer orientation characteristics are not as strong as the motivation but are also relevant. Behavior performance and outcome performance are higher in the more effective sales units. This points to the important relationship between what salespeople do (behavior) and the outcomes they accomplish. Both behavior and outcomes appear to be important areas of perfor71
mance evaluation of salespeople, particularly in companies using behavior-based control strategies. Finally, several components of salesperson behavior performance are linked with differences in sales unit effectiveness. Adaptive selling, teamwork, sales presentations, and sales planning performance differ significantly between more and less effective sales units for all four effectiveness measures. Technical knowledge and sales support performance appear to play a less important role in sales unit effectiveness. Because the firms in our study were Austrian, the results cannot be directly related to firms in other countries, particularly those outside Europe or even in other regions of Europe. Nonetheless, it is important to note that the findings are generally consistent with other studies in Australia [11], United Kingdom [12], and the United States [19], recognizing the fact that similar cultural backgrounds due mainly to immigration and increasing assimilations of environmental factors (e.g., economic variables) between countries could also provide some explanations. In sum, there is a growing base of global evidence that behavior-based sales management control strategies are being adopted by many companies and, when properly applied, these strategies result in higher levels of sales unit effectiveness.
REFERENCES 1. Corcoran, Kevin J., Peterson, Laura K., Baitch, Daniel B., and Barrett, Mark F.: High Performance Sales Organizations: Creating Competitive Advantage in the Global Marketplace. Irwin, Chicago, IL, 1995.
for Salesforce Management. Journal of Marketing Research May, 134– 144 (1972). 9. LaForge, Raymond W., and Cravens, David W.: Empirical and Judgmentbased Sales Force Decision Models: A Comparative Analysis. Decision Sciences 16, 177–195 (1985). 10. Ryans, Adrian B., and Weinberg, Charles B.: Territory Sales Response Models: Stability Over Time. Journal of Marketing Research (May), 229– 233 (1987). 11. Babakus, Emin, Cravens, David W., Grant, Ken, Ingram, Thomas N., and LaForge, Raymond: Investigating the Relationships Between Sales Management Control, Sales Territory Design, Salesperson Performance, and Sales Organization Effectiveness. International Journal of Research in Marketing 13, 345–363 ( 1996). 12. Piercy, Nigel F., Cravens, David W., and Morgan, Neil A.: Sources of Effectiveness in the Business-to-Business Sales Organization. Journal of Marketing Practice: Applied Marketing Science 3, 43–69 (1997). 13. Cron, William L., and Levy, Michael: Sales Management Performance Evaluations: A Residual Income Perspective. Journal of Personal Selling and Sales Management (August), 57–66 (1987). 14. Dubinsky, Alan J., and Barry, Thomas E.: A Survey of Sales Management Practices. Industrial Marketing Management 11, 133–141 (1982). 15. Jackson, Donald W., Jr., Keith, Janet E., and Schlacter, John L.: Evaluation of Selling Performance: A Study of Current Practices. Journal of Personal Selling and Sales Management (November), 42–51 (1983). 16. Morris, Michael H., Davis, Duane L., Allen, Jeffrey W., Avila, Ramon A., and Chapman, Joseph: Assessing the Relationships between Performance Measures, Managerial Practices, and Satisfaction when Evaluating the Salesforce. Journal of Personal Selling and Sales Management (Summer), 25–35 (1991). 17. Schiff, Jack S.: Evaluate the Sales Force as a Business. Industrial Marketing Management 12, 131–137 (1983). 18. Anderson, Erin, and Oliver, Richard L.: Perspectives on Behavior-based Versus Outcome-based Salesforce Control Systems. Journal of Marketing (October), 76–88 (1987). 19. Cravens, David W., Ingram, Thomas N., LaForge, Raymond W., and Young, Clifford E.: Behavior- Based and Outcome-based Salesforce Control Systems. Journal of Marketing (October), 47–59 (1993).
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Artur Baldauf David W. Cravens For companies competing in rapidly changing business environments, the sales force can be an important source for improving organizational effectiveness. The results of a study of 159 field sales managers in 79 Austrian companies point to higher effectiveness in organizations utilizing sales management directing and evaluating activities to a greater sales extent than managers in less effective organizations. Moreover, the effective sales organizations place more emphasis on their sales territory design, and, additionally, their sales forces show significant differences in both personal characteristics
Address correspondence to David W. Cravens, Professor of Marketing, Texas Christian University, Box 298530, Fort Worth, TX 76129. The authors acknowledge Katja Krampera (University of Vienna) for the valuable assistance in collecting the data.
Industrial Marketing Management 28, 63–72 (1999) © 1998 Elsevier Science Inc. All rights reserved. 655 Avenue of the Americas, New York, NY 10010
and performance dimensions. Salespeople in the more effective sales units display higher levels of intrinsic and extrinsic motivation, sales support orientation, and customer orientation. Both salesperson behavior and outcome performance were rated higher by managers in the organizations with more effective sales units. © 1998 Elsevier Science Inc.
INTRODUCTION Responding to the challenges of the rapidly changing global business environment, sales executives need to take actions which improve sales organizational effectiveness [1, 2]. Evidence of companies’ reactions to these environmental dynamics is shown in a study of European and U.S. companies which highlights extensive changes
0019-8501/99/$–see front matter PII S0019-8501(98)00023-6
Key drivers of sales unit results are sales managers and salespeople working together. being implemented in sales strategies and organizational structures [3]. These studies point to the need for improving effectiveness but offer limited insights as to the factors that are related to effectiveness. Selling costs account for a major portion of sales and marketing expenditures in business-to-business sales organizations. Moreover, sales and marketing activities offer substantial opportunities for improving the effectiveness of the business, since general and administrative, engineering, and operations areas in many companies have already experienced major productivity gains during the last decade [4]. Consequently, improving the effectiveness of sales organizations is a high priority on the action agenda of many companies today [5, 6]. Sales organization effectiveness is a summary measure (index) of organizational outcomes (e.g., sales, volume, market share, profit contribution, or customer satisfaction) to which the salesperson is a partial contributor [7]. Several studies point to the contribution of environmental, organizational, and salesperson variables to sales response [8–10]. Importantly, effectiveness is partly (but not entirely) attributable to the salespeople assigned to the sales organization and effectiveness includes more than assessing the responsiveness of sales and selling efforts. Considering effectiveness at the field sales unit level where the sales manager has direct management responsibility for a group of salespeople, our objective is to examine how more and less effective sales organizations
ARTHUR BALDAUF is Assistant Professor at the University of Vienna and was the Earl D. Dyess International Visiting Scholar at Texas Christian University in Forth Worth, Texas. DAVID W. CRAVENS is Professor of Marketing at Texas Christian University in Forth Worth, Texas.
64
differ with respect to specific organizational and salesperson variables. This study, conducted in Austria, is, to our knowledge, the only known research which examines sales organization effectiveness in continental Europe. It contributes to a small but growing base of international research that examines effectiveness and related sales management issues [11, 12]. The research methodology for the present study employs a research instrument adopted for use in the Austrian selling environment where a sample of 159 Austrian field sales managers participated. BACKGROUND We define and examine the dimensions of sales organization effectiveness, followed by the development of several hypothesized relationships between constructs that are potentially useful in explaining differences in effectiveness. The conceptual framework guiding the study is shown in Figure 1. We include both salesperson and sales organization constructs. As discussed in the Methods section, the measures used for sales organization effectiveness take into account environmental differences across the sample so environmental factors were not included in this framework. Environmental influences include the intensity of competition and market potential applicable to the organizational unit of interest, whereas organizational factors consist of managers’ skills, activities, and efforts, organizational competencies, and resources. The qualifications and efforts of the salespeople comprise the remaining influences on effectiveness. Sales Organization Effectiveness We know that sales organization effectiveness is the summary evaluation of the outcomes (results) achieved by a sales unit during some specified time period [7]. Al-
FIGURE 1.
Salesperson, sales organization and effectiveness relationships.
though effectiveness may be assessed for the entire sales organization or for disaggregate units such as regions, districts, territories, or customer groups, in our study field sales unit effectiveness is the organizational level of interest. The most widely used measure of sales organization effectiveness is total sales volume. Nonetheless, other measures have been used (or proposed) including market position, costs, profit contribution, return on assets managed, and residual income analysis [7, 13–17]. More recently, customer satisfaction measures have also been applied to gauge sales organization effectiveness, particularly by those firms employing Total Quality Management concepts and methods. Sales Management Control Strategy Strategies for managing salespeople range from emphasis on influencing the behavior to affecting the outcomes produced by salespeople [18–20]. Anderson and Oliver [18] describe sales management control systems in terms of the extent of salesperson monitoring, directing, evaluating, and rewarding activities carried out by sales managers. They propose that these activities are
performed to a greater extent when an organization is pursuing a behavior-based control strategy, compared to an outcome-based strategy. A company’s sales management strategy may be positioned anywhere across the behavior–outcome continuum. However, there is empirical evidence indicating that sales organizations pursuing behavior-based control strategies display higher levels of effectiveness [12, 19]. Anderson and Oliver [18] state that behavior-based control systems will achieve higher sales organization objectives compared to outcome-based control systems. Some empirical support for this proposition was found by Cravens et al. [19] examining 144 U.S.-based companies where the unit of analysis was the entire sales organization instead of field units. Another study conducted in Australia, using a sample of 146 field managers which were attributable to organizations employing behaviorbased management strategies found significant (0.05 or better) two-way correlations between sales management monitoring and sales and market share effectiveness, sales management directing and profitability effectiveness, sales management evaluating and sales and market share effectiveness and profitability effectiveness, and 65
Greater monitoring, directing, evaluating, and rewarding salespeople helps them to perform better. sales management rewarding and profitability effectiveness [11]. Significant correlations were not found for any of the four sales management activities and customer satisfaction effectiveness. A study of 144 sales managers in the United Kingdom reported significant differences for the extent of sales management directing, evaluating, and rewarding activities and a composite effectiveness measure comprised of sales volume, market share, profitability, and customer satisfaction [12]. The respondents were sales managers in organizations employing behavior-based sales management strategies. The various studies provide empirical support for the following hypothesis: H1: The greater the extent of monitoring, directing, evaluating, and rewarding activities by field sales managers, the higher the level of sales unit effectiveness.
Sales Territory Design Sales territory design consists of decisions about assigning customers/prospects to specific salespeople, determining geographical configuration of the salesperson’s work unit, deciding call frequency, and setting other necessary parameters to provide each salesperson with an opportunity to perform well. The importance of properly designed sales territories is recognized by both managers and sales management researchers [2, 7, 21]. Poor designs negatively impact salesperson performance and sales organization effectiveness by limiting the salesperson’s opportunity to perform and suboptimizing the deployment of expensive selling resources. Surprisingly, other than general discussions in sales management texts, sales territory design has received limited attention by sales management scholars and managers. Sales territory design is of primary concern in organizations employing strategies that are more behaviorbased than outcome-based. In contrast, outcome-based 66
strategies have limited advantages to be gained by improving territory design, since selling costs are primarily payment of sales commission. The main objective of outcome-based strategy is maximizing sales [11, 18], and this can be accomplished by expanding the size of the sales force rather than optimizing the outcomes of individual salespeople. Competing in a selling environment appropriate for behavior-based sales management strategy, both salesperson performance and sales organization effectiveness can benefit from improved organizational structure, optimal size of the sales force, effective territory configuration, and optimal allocations of selling effort within each territory. Empirical support for a significant relationship between design and effectiveness is provided by a sample of 144 United Kingdom field sales managers employing behavior-based sales management strategies [12]. Another study applying a LISREL analysis of 146 Australian sales units detected a significant (t 5 2.17) path between design and effectiveness [11] and therefore the following hypothesis is offered: H2: Field sales managers that are more satisfied with their unit’s sales territory designs will display relatively high sales unit effectiveness compared to managers who are less satisfied with their designs.
Salesperson Characteristics The salesperson characteristics that appear to be relevant in examining differences in sales unit effectiveness include intrinsic motivation, recognition motivation, sales support orientation, and customer orientation. The supporting logic for these salesperson characteristics is provided by the Anderson and Oliver [18] propositions and subsequent empirical studies [19, 20]. Sales organizations pursuing behavior-based sales management control strategies will staff their organizations with salespeople who display these characteristics to a greater extent com-
Better salesperson performance of selling activities increases sales unit effectiveness. pared to organizations utilizing outcome-based management control strategies. Moreover, these characteristics have been found significant in a path analysis model comprised of sales force characteristics, sales force control system, salesperson performance, and sales organization effectiveness [19]. The salesperson characteristics were not directly linked to sales organization effectiveness in the conceptual model; instead the characteristics displayed significant paths to the sales force control system. The before mentioned United Kingdom study discovered significant differences between more and less effective sales units for sales force motivation, customer orientation, and sales support orientation. Based on these findings and the above conceptual and empirical results, the following hypotheses are stated: H3: The greater the extent that a sales organization’s salespeople have the following characteristics, the higher will be the effectiveness of the sales units. H3a: Intrinsic motivation H3b: Recognition motivation H3c: Sales support orientation H3d: Customer orientation
behavioral performance components. Therefore, we propose the following hypotheses: H4: Higher levels of sales unit effectiveness will be found in organizations whose salespeople display relatively high performance for the following aspects of behavior performance: H4a: Technical knowledge H4b: Adaptive selling H4c: Teamwork H4d: Sales presentation H4e: Sales planning H4f: Sales support H5: Higher levels of sales unit effectiveness will be found in organizations whose salespeople display relatively high outcome performance.
METHODS The hypotheses are examined using a sample of sales organizations located in Austria. It is, to our knowledge, the first known study examining salesperson, sales organization, and effectiveness relationships in a non-English speaking country.
Sales Force Performance
Sample and Data Collection
Salesperson performance is defined as the assessment of the salesperson’s behavior (e.g., activities) based on the contribution of the behavior to the effectiveness of the sales organization [22]. It is conceptually useful to consider performance as being comprised of behavior (the activities salespeople perform), and outcomes resulting from behavior [23, 24]. The previously discussed Australian research detected empirical support for a positive relationship between behavior and outcome performance and between outcome performance and sales organization effectiveness [11]. Piercy et al. [12] also report significant differences between more and less effective sales units and outcome performance. Differences were identified for most of the
Sales managers from 203 Austrian companies were asked to participate in this study. The respondents were field sales managers responsible for direct supervision of assigned salespeople. As we wanted to cover a wide range of selling environments these companies were selected on a judgmental basis. Additionally, applying the snowball method we relied on personal contacts and references. Finally, responses were obtained from 159 field sales managers in 79 companies leading to a response rate of 39%. Compared to other studies [25], and taking into account the eight-page questionnaire that each respondent completed, this response rate can be considered to be acceptable. Austrian sales organizations are relatively small compared to U.S. companies. In our sample the median 67
The activities of salespeople are important indicators of sales results. sales force size was 20 and field sales managers supervise 8 to 10 people. The types of sales forces included were generalists (34%), product specialists (33%), service specialists (15%), and product/service specialists (18%). The largest portion of sales was consumer products (46%), followed by industrial goods (34%) and services (15%). Another objective of the sampling design was to include sales organizations covering the continuum from behavior-based to outcome-based sales management strategies. An indicator of which strategy is used by an organization is the mix of salary and incentive compensation in total compensation [18]. The sample contained sales organizations with compensation plans ranging from primarily salary to primarily incentive pay. Behavior-based, combination-based, and outcome-based organizations appear to be represented in the sample. Construct Measurement A summary of information on the multiple-item scales used to measure the study constructs is shown in Table 1. Included are the number of scale items, alpha values, and sources of the scales. SALES ORGANIZATION EFFECTIVENESS. Four measures of effectiveness were obtained for each sales unit supervised by the field sales manager respondents. Effectiveness 1, 2, and 3 (EFF 1, 2, 3) were measured compared to the major competitor and the sales unit objectives for sales and market share (four items), profitability (two items), and customer satisfaction (two items) using fivepoint scales anchored by “much worse” (1) and “much better” (5). The use of the relative measures for EFF 1, 2, and 3 enabled comparisons across different selling environments, competitive situations, and market potentials. Since these measures take into account differences in external factors, environmental measures were not included in the study. The relative measures also avoided asking the sales managers for confidential effectiveness information. Review of the distribution of responses indicate that the 68
managers in the sample provided low, medium, and high effectiveness scores, though, not surprisingly, the distribution is skewed toward high effectiveness (Table 2). The fourth effectiveness measure consisted of a sixitem scale indicating the sales manager’s evaluation of average sales per salesperson, selling expenses, obtaining new customers, salesperson turnover, use of computer technology, and retaining existing customers. The scale ranged from “needs improvement” (1) to “outstanding” (7). Responses were placed into high, medium, and low effectiveness groups for each effectiveness measure. The TABLE 1 Construct Scale Items, Reliabilities, and Scale Sources
Construct
Number of Scale Items
Alpha Value*
Source of Scale
4 2 2 6
0.84 0.49* 0.73* 0.72
Cravens et al. [19] Cravens et al. [19] Cravens et al. [19] New Scale
8 5 5 7 10
0.69 0.75 0.54 0.78 0.89
Anderson and Oliver [18]
3 2 2 2
0.81 0.48* 0.55* 0.46*
3 4 5 5 4 6 7
0.85 0.90 0.83 0.87 0.87 0.84 0.72
Sales organization effectiveness Effectiveness 1 Effectiveness 2 Effectiveness 3 Effectiveness 4 Sales management control strategy Monitoring Directing Evaluating Rewarding Sales territory design Salesperson characteristics Intrinsic motivation Recognition motivation Sales support orientation Customer orientation Sales force performance Behavior performance Technical knowledge Adaptive selling Teamwork Sales presentations Sales planning Sales support Outcome performance *Correlation for two-item sale.
Babakus et al. [11]
Behman and Perreault [23]
Behman and Perreault [23]
Managers who work to improve sales territory designs have more effective sales units. top and bottom one-third of the sample were used in the analysis of differences for the construct measures (Figure 1). SALES MANAGEMENT CONTROL STRATEGY. This construct was measured by four dimensions: monitoring, directing, evaluating, and rewarding [18]. Sales managers indicated the extent to which they performed each activity. Multiple-item scales were used for each component. The scale ranged from “to a great extent” (10) to “not at all” (1). SALES TERRITORY DESIGN. The design construct was measured using a 10-item scale based on the sales force deployment and territory design literature [11]. The sales manager indicated the level of satisfaction for the sales territories in the sales unit, using a seven-point scale ranging from “very satisfied” (7) to “not at all satisfied” (1). SALESPERSON CHARACTERISTICS. The salesperson characteristics were measured using multiple-item scales ranging from “to a great extent” (10) to “not at all” (1). The number of items were: intrinsic motivation (three items), recognition motivation (two items), sales support (two items), and customer orientation (two items ). SALES FORCE PERFORMANCE. Sales force performance was measured suing a seven-point scale anchored by 1 for “needs improvement” and 7 for “outstanding.” The
TABLE 2 Sales Managers’ Ratings of Sales Unit Effectiveness Effectiveness*
Effectiveness Component EFF 1 EFF 2 EFF 3 EFF 4*
sales manager provided a summary assessment for the salespeople in his or her unit. The behavioral performance measures include technical knowledge (three items), adaptive selling (four items), teamwork (five items), sales presentation (five items,), sales planning (four items), and sales support (six items). Sales force outcome performance was measured by a seven-item scale. The seven items include producing high market share, selling highprofit margin products, generating high dollar sales, selling new products/services, identifying and selling to major accounts, developing sales with long-term profitability, and exceeding all sales targets and objects. RESULTS AND DISCUSSION An important research issue is the extent to which sales managers provided objective assessments of the sales unit effectiveness measures. While there is an upward bias in the responses, the distribution shown in Table 2 indicates a range of ratings from high to low. Since the frame of reference for each respondent was the same (e.g., relative to major competitor and sales unit objectives), comparisons across different managers’ sales units should be meaningful. To examine our hypotheses we used difference tests for the high and low effectiveness groups. These tests, of course, do not indicate cause and effect relationships, only that significant differences are present. Organizational Factors and Sales Unit Effectiveness
Low (1 and 2 ratings) (%)
Neither High nor Low (3 rating) (%)
High (4 and 5 ratings) (%)
3.8 4.5 2.5 14.5
30.2 36.5 17.8 31.4
66.0 59.0 79.7 54.1
*Low ratings were 1, 2, and 3; high ratings were 5, 6, and 7 for EFF 4.
SALES MANAGEMENT CONTROL STRATEGY. The supporting logic for H1 is that organizations whose field sales managers perform the activities of monitoring, directing, evaluating, and rewarding to a greater extent than managers in other organizations, will experience higher levels of sales unit effectiveness. The results of difference tests for the four management activities are shown 69
Similar drivers of effectiveness are found in Austrian, Australian, and United Kingdom sales organizations. in Table 3. There is mixed support for H1 across the four measures of effectiveness. The stronger support centers on sales managers’ directing activities. The remaining activities display fewer differences across more and less effective sales units. Using a composite measure of effectiveness, Piercy et al. [12] in their United Kingdom study found directing, evaluating, and rewarding activities significantly different at 0.05 or better. Our results using four different effectiveness measures show significant differences for evaluating activities on profitability (EFF 2) and customer satisfaction (EFF 3). Neither the Austrian nor the United Kingdom study provides much support for monitoring activity differences. SALES TERRITORY DESIGN. There is strong support for H2. Mangers who are more satisfied with their unit’s sales territory design tend to have more effective sales units. The differences between more and less effective units were significant at better than 0.05 for each of the four effectiveness measures. Piercy et al. [12] also detected a significant difference for design. In summary, the organizational factors of sales management control strategy and sales territory design appear to impact sales unit effectiveness. While the sales management control strategy is not a dominant factor in
impacting effectiveness, it is important, particularly in the case of directing activities. Moreover, the sales management control strategy may play a more indirect role in effectiveness through sales territory designs, salesperson characteristics, and salesperson performance.
TABLE 3 Difference Tests for Sales Management Control Strategy and Sales Unit Effectiveness
TABLE 4 Difference Tests for Salesperson Characteristics and Sales Unit Effectiveness
Salesperson Factors and Sales Unit Effectiveness SALESPERSON CHARACTERISTICS. Significant differences exist for the four effectiveness measures for both salesperson motivation characteristics as shown in Table 4. Sales support orientation shows significant differences for EFF 1, EFF 2, and EFF 4, whereas customer orientation has significant differences on EFF 2 and EFF 4. Thus, there is substantial support for H3. Note, however, that effectiveness differences were only found for the intrinsic motivation and recognition motivation characteristics using the customer satisfaction (EFF 3) effectiveness measure. SALESPERSON PERFORMANCE. Strong support is provided for H4 (behavior performance and effectiveness) and H5 (outcome performance and effectiveness) as shown in Table 5. All dimensions of behavior performance display differences for the four components of effectiveness, except technical knowledge and sales support
Level of Significance for High Minus Low Differences
Level of Significance for High Minus Low Difference Sales Management Activity
EFF 1
EFF 2
EFF 3
EFF 4
Salesperson Characterisitcs
EFF 1
EFF 2
EFF 3
EFF 4
Monitoring Directing Evaluating Rewarding
* 0.028 * *
* 0.038 0.014 *
* 0.001 0.042 0.010
0.003 0.022 * *
Intrinsic motivation Recognition motivation Sales support orientation Customer orientation
0.035 0.018 0.019 *
0.003 0.007 0.019 0.041
0.017 0.030 * *
0.003 0.006 0.000 0.000
*Not significant at 0.05 or better.
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*Not significant at 0.05 or better.
Motivation is a vital characteristic of high performance salespeople. where two effectiveness components were significant. The composite behavior performance construct measure is significant across the high and low effectiveness groups, as is outcome performance. MANAGERIAL IMPLICATIONS The study results point to several possible avenues for improving the effectiveness of field sales organizations. Role of Organizational Factors The study findings offer some support that behaviorbased sales management control strategies are associated with higher levels of sales unit effectiveness. Sales management directing activities have the strongest link to effectiveness. The specific activities included in sales management directing construct measure are: (1) encourage salespeople to increase their sales results by rewarding them for their achievements; (2) actively participate in training salespeople on the job; (3) regularly spend time coaching salespeople; (4) discuss performance evaluations with salespeople; and (5) help salespeople develop their potential. These directing activities involve coaching and relationship building between managers and salespeople. TABLE 5 Difference Tests for Salesperson Performance and Sales Unit Effectiveness Level of Significance for High Minus Low Differences Performance Dimension
EFF 1
EFF 2
EFF 3
EFF 4
Behavior performance Adaptive selling Technical knowledge Teamwork Sales presentations Sales planning Sales support Outcome performance
0.000 0.000 0.024 0.022 0.003 0.000 * 0.000
0.007 0.024 * 0.005 0.012 0.037 * 0.000
0.002 0.005 * 0.015 0.013 0.003 0.015 0.003
0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000
*Not significant at 0.05 or better.
The importance of the directing activities adds to other research findings as well as opinions expressed by executives that the role of sales managers in many organizations is shifting away from command and control management toward coaching styles of management [1, 2]. Coaching and relationship-building activities are associated with high sales unit effectiveness. Mangers who perform directing activities to a greater extent compared to other managers should achieve better results. It is apparent that sales managers’ coaching and relationshipbuilding activities are emphasized in Europe as well as in Australia and the United States. The strong link we found between sales territory design and unit effectiveness highlights the importance of management’s role in providing salespeople the opportunity for high performance. Poorly designed territories are hurdles that even highly competent salespeople cannot overcome. Role of Salesperson Factors Sales managers know that the salesperson is an important contributor to sales unit effectiveness. Identifying the salesperson characteristics that are most closely linked to sales unit effectiveness is of potential value in selecting and managing salespeople. It is apparent from the study results that both intrinsic motivation and recognition motivation are important characteristics of high performance salespeople. These forms of motivation are displayed by the salespeople that are assigned to the more effective sales units, and thus motivation should receive the attention of field sales managers in both recruiting and on-the-job relationship building. Sales support orientation and customer orientation characteristics are not as strong as the motivation but are also relevant. Behavior performance and outcome performance are higher in the more effective sales units. This points to the important relationship between what salespeople do (behavior) and the outcomes they accomplish. Both behavior and outcomes appear to be important areas of perfor71
mance evaluation of salespeople, particularly in companies using behavior-based control strategies. Finally, several components of salesperson behavior performance are linked with differences in sales unit effectiveness. Adaptive selling, teamwork, sales presentations, and sales planning performance differ significantly between more and less effective sales units for all four effectiveness measures. Technical knowledge and sales support performance appear to play a less important role in sales unit effectiveness. Because the firms in our study were Austrian, the results cannot be directly related to firms in other countries, particularly those outside Europe or even in other regions of Europe. Nonetheless, it is important to note that the findings are generally consistent with other studies in Australia [11], United Kingdom [12], and the United States [19], recognizing the fact that similar cultural backgrounds due mainly to immigration and increasing assimilations of environmental factors (e.g., economic variables) between countries could also provide some explanations. In sum, there is a growing base of global evidence that behavior-based sales management control strategies are being adopted by many companies and, when properly applied, these strategies result in higher levels of sales unit effectiveness.
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