Managing Salesforce Performance: Behavior versus Outcome Measures

Abstract

Effective management and motivation of salesforce is crucial to the success of sales organization as it ensures proper salesforce focus on market needs and successful achievement of organization goals. Sales organizations have two main approaches for managing the behavior of their salesforce, namely, behavior-based (monitoring) and outcome based (incentives). A behavior system evaluates the salesforce in light of the selling process, while an outcome system evaluates the salesforce in light of results. This research identifies key characteristics of behavior- and outcome-based systems along with its benefits and drawbacks and suggests selection criteria for appropriate choice of behavior versus outcome measures. The study explains agency theory and highlights the underlying logic of short-term behavior of salespeople when compensated with incentives. Research also provides performance matrices for measurement and evaluation of financial impact of behavior and outcome control. The behavior-based and outcome-based control systems are at the extremes, and many sales organizations function in the middle, balancing the two. Finally, the study provides a numerical illustration to design an optimal performance measurement scenario based on behavior- and outcome-based measures.

Keywords: behavior control, outcome control, agency theory, fixed pay, variable pay