ISSN 1347-5495

経営研究Business Research

No. 51
Katsuyoshi Takashima
Professor, Graduate School of Business Administration,
Kobe University“Behavior-Based Salesforce Control Systems andInterdepartmental Communication”
November 10, 2004
Graduate School of Business Administration,
Kobe UniversityBehavior-Based

Salesforce

Control

Systems

andInterdepartmental Communication
Katsuyoshi Takashima

Abstract
Salesforce control systems can be classified into outcome-based control systems andbehavior-based control systems. Recent organizational change has brought a growinginterest towards behavior-based control systems. Through behavior-based control
systems one can decrease the ambiguity of sales activities and increase information
sharing between the sales department and other departments. The results from a study of
about 300 sales organizations suggest that companies introducing behavior-based
control systems expect the effect of interdepartmental communication. The results ofthis study provide guidelines for managers to aid their selection of a behavior-based
control system and to promote cross-functional communication for information sharing.

Introduction
The choice of salesforce control systems within sales management has been paid
increased attention and has also become a focal point in marketing literature. That is,much theoretical and empirical research has already been accumulated concerning the
choice of control systems, and it has been pointed out that the characteristics of sales
activities differ between control systems used in salesforce management (Anderson andOliver, 1987; Cravens et al., 1993; Oliver and Anderson, 1994; Krafft, 1999). Thesestudies described major salesforce control systems and discussed the effects of thesesystems on the salesperson’s behavior. For example, Anderson and Oliver (1987)
suggested that salesforce control systems could be classified into an outcome-based
control system and a behavior-based control system.
1

This paper focuses on the relationship between the choice of salesforce control
systems and interdepartmental communication, which extends previous studies in thisarea. Although a large number of studies have assessed the positive aspects of abehavior-based control system, little attention has been given to the effect ofcross-functional information sharing according to a behavior-based control system. A
behavior-based control contributes to decreasing ambiguity of sales activities and makes
information of customer needs and sales activities understandable for other departments.
In this article, we present evidence on the relationship between the choice of
behavior-based control systems and the expectation of the cross-functional
communication drawn from an empirical study of sales organizations. The results of thisstudy provide guidelines for managers to aid their selection of a behavior-based control
system and to promote cross-functional communication for information sharing.

Outcome-based and Behavior-based Control Systems
The basic characteristic of outcome-based control systems is that the activities ofsalespeople are not strictly monitored by management, and the evaluation andrewarding are done by direct use of objective measures, such as sales and profits that anindividual has achieved (Anderson and Oliver, 1987; Cravens et al., 1993; Oliver andAnderson, 1994). Therefore, by looking at outcomes such as sales and profits, managers
judge whether or not salespeople are performing to their expectations.
Furthermore, as the compensation system is reflective of sales results, each sales
person is motivated to achieve higher results (Anderson and Oliver, 1987; Chowdhury,1993). Additionally, due to sales activities being diverse and liable to change, it isrecommended that individual sales people, through their own experience, useappropriate selling skills in line with the different transaction conditions, customers andindividual personalities (Dubinsky et al., 1986). Thus, in outcome-based control systems,
analyzing information regarding the actual activities for improvement of their behavior
becomes the individual role of the sales person in charge. As management does not havesufficient data about their sales activities, even if salespeople fill out call reports, themanager can only give some advice, which is mental rather than concrete.
Therefore, the merit of outcome-based control is that the management costs of2

salesforce are minimized. Normally, sales activities are mainly conducted out of theircompanies and the situations of the actual sales activities are very complicated.
Accordingly, if a manager tried to identify an efficient sales method by detailed
observation of individual circumstances, then the management costs would increase. In
outcome-based control systems, as management is mainly based on the results of sales
and profits, such time-consuming communication would be omitted and the expected
management costs would be low.
In addition to this, it is easy to form a consensus with sales people and managers,
because the rule is simple and clear−those with larger sales and profits contribute moreto the firm, and those who contribute more to the firm will be compensated.
On the other hand, it can be pointed out that a demerit of outcome-based control
systems is that because the performance is appraised based on short-term sales andprofits sales people overemphasize the pursuit of short-term results (Adkins, 1979). In
other words, it can be said that sales people are inclined to disregard customer
relationships and be negative towards future market developments under outcome-based
control systems.
In contrast to outcome-based control, behavior-based control is the style in which
management gathers detailed information concerning sales people’s activities, and thensets a number of goals and gives instructions to sales persons regarding their sales
activities. Also, personal evaluation and compensation are not only based on the figuresof sales and profits, but also based on sales people’s overall input towards sales
activities, which includes selling ability (e.g., aptitude, product knowledge) and theirindividual activities (e.g., number of calls) (Anderson and Oliver, 1987; Oliver andAnderson, 1994).
Thus, in behavior-based management a number of measuring scales are establishedregarding the sales processes that sales people carry out, and sales activities aremonitored in detail. For example, detailed contents−how much contact was made withwhich customer, how and what was proposed to the customer, how much time was spent,and what was learnt in training−are collected, and these data are accumulated.
Furthermore, in order to control sales activities it is necessary to observe data collected
about these sales processes and also to consider problems related to sales activities andcustomer relationships (Weitz, 1978).
In such a behavior-based control system, the principal advantage emphasized is that a3

sales manager can avoid the pursuit of sales people’s short-term results because
short-term results are not directly related to evaluation and compensation (Anderson andOliver, 1987).
On the other hand, the demerit of behavior-based control systems is thatadministration may become complicated (Marshall and Ferre, 1998). In other words,
gathering data, analysis and direction are conducted thoroughly and frequently, thus theadministration costs can become higher than outcome-based control systems.

Choice of a Salesforce Control System
Outcome-based and behavior-based control systems are very different types of sales
control systems. In previous research, consideration has been given as to how selecting
control systems can be affected by the condition of sales.
Anderson and Oliver (1987) show the selection pattern of sales control systems, as
shown in Figure 1, based on organization theory (e.g., Ouchi, 1979; Eisenhardt, 1985).
The first factor affecting the selection is whether there is enough process knowledge tobe able to plan beforehand what sort of sales activities need to be developed.
In behavior-based control systems, it is better to possess more process knowledge inconsidering what type of sales activity will be viable. In other words, when customer
demands are varied and the situation is uncertain, and when various types of sales
activities are developed in order to match different customers and different situations,the relationship between actions and results will become more difficult to recognize. As
a result, it will be more difficult to identify a suitable sales process. In this case, thecomplexity of behavior-based control systems will be emphasized.
The second factor in the selection of control systems is the ability to measureoutcomes accurately and completely. If a company mainly wants to pursue short-termsales and profits, it is easy to measure the outcomes specified (John and Weitz, 1989).
On the other hand, if it wants to pursue, not short-term factors such as sales and profits,
but rather long-term goals such as customer satisfaction and market development for
new products or areas, it is difficult to measure such outcomes through overall sales
activities.
In a situation where a company gives priority to short-term sales and profits due to4strategy and competition, outcome-based control can be considered to be more valid.
That is to say, when the harmful effects from having short-term goals such as sales andprofits are small, the demerits of outcome-based control are kept to a minimum(Anderson and Oliver, 1987; Oliver and Anderson, 1994).
However, in a situation where companies want to emphasize long-term goals, such asenhancing customer goodwill and reputation or the future sales of a pioneering productline, it is difficult to judge performance through sales and profits. In this situation, if an
outcome-based control system is used, sales people will pursue short-term goals andthere will be harmful effects. Behavior-based control will therefore become necessary.
These two conditions can be represented in Figure 1. When there is perfect process
knowledge, and when managers cannot measure outcomes accurately and completely[Ⅲ] , then behavior-based control should be chosen. When there is imperfect process
knowledge, and output measures are accurate and complete [Ⅱ], then outcome-based
control is appropriate. Furthermore, when there is sufficient process knowledge andoutcomes are measurable [ Ⅰ ], it is possible to use either outcome-based or
behavior-based control systems.
Figure 1.
Choice of sales control systems
Process Knowledge

High
Ability to
MeasureOutcomes
Accurately
andCompletely

Low

Perfect

Imperfect

behavior-based or
outcome-based control[Ι]outcome-based control

behavior-based control“clan” control

[Ⅲ]

[Ⅳ]

[Ⅱ]

Adapted from Anderson and Oliver (1987)

From this figure, we can see there is a case where either outcome-based or
behavior-based control would be unsuitable. That is when there is imperfect process5knowledge and it is difficult to measure sales outcomes [ Ⅳ ]. This is because
behavior-based control is not valid due to lack of understanding of sales process, andoutcome-based control is unsuitable as sales outcomes cannot be measured properly.
In such a situation, organization theory proposes a third type of control system, the“clan” (Ouchi, 1979; Eisenhardt, 1985). A clan means a group made up of members
who have the same values, and where the organization has a strong commitment(Deshpande et al. 1999). When a clan is formed in salesforces, sales people’s actions are
consistent with the company’s goals and customer relationships, and sales people avoid
pursuing short-term goals since they value the company’s goals and customer
relationships as important as their own goals (Anderson and Oliver, 1987).

Behavior-based Control Systems and Interdepartmental Information Sharing
According to Anderson and Oliver (1987), when there is sufficient process knowledge
and the possibility of measuring outcomes is low, behavior-based control is suitable.
However, considering recent shift toward behavior-based control systems (Marshall andFerre 1998), this selection of control systems based on process knowledge and theability to measure outcomes is not always justified.
At least, even though there is a shift to behavior-based control, it is difficult to findany change in sales activities which have been more oriented towards short-term
outcomes than before or where the sufficient process knowledge of sales people andmanagers has made the prior planning of sales activities more efficient.
According to Anderson and Oliver model, unless the level of their process knowledge
has increased recently, companies without sufficient process knowledge would selectoutcome-based control or clan-type control in salesforce management. Nevertheless,many companies tend to introduce a behavior-based control system in their salesforce
according to relationship-based sales strategies (Cravens et al., 1993). In such an
instance, what other contributing factors are involved in the application of
behavior-based control?
Then, we present one further factor that is important in selecting behavior-based
control systems, which is the effect of interdepartmental communication.
Behavior-based control systems can reduce ambiguity of information regarding sales
6activities and customer relationships. The reduction of ambiguity brings about thepositive promotion of interdepartmental information sharing.
As sales activities are carried out outside of the company, those who are not directly
involved in sales activities cannot get an accurate awareness of the situation. Since thecustomers give nonverbal responses in the course of negotiation, it is not possible to getan accurate understanding of all of the communication and reactions of the customers
during the selling process (Dubinsky et al., 1986). Even if an accurate recording could
be made, such data would be too redundant to be used in database systems. In any case,specifying the factors that bring about outcomes in daily sales activities is a difficult
task. It is also especially difficult to ascertain which actions had an effect on the successof breeding customer relationships. These kinds of ambiguities in sales activities bringabout a situation where other departments cannot accurately understand the sales
activities (Hedda 1997).
Furthermore, due to the various interests held by the sales people, information
regarding sales activities is often distorted. For example, the sales people tend to claim
to the managers that stagnation in sales performance is not due to mediocre sales
activities, but due to a temporary environment that they cannot control.
In addition to this, sales departments often tend to demand excessive service of otherdepartments in order to adapt to the specific customer’s needs, such as customization,
fast delivery and special technical assistance. Sales people and sales managers perceive
these actions as vital in customer relationship management (Siguan et al., 1994), but on
the other hand, other departments regard this extra service to the customers as overkill,and become concerned if this extra cost does not bring the appropriate extras results.
Therefore, if the ambiguity in sales activities could be reduced, it would be possible
for other departments to share information regarding sales activities (Gupta andWilemon, 1986; Gupta and Wilemon, 1988). Under behavior-based control systems,
sales behavior wouldn’t be grasped by infrequent and comprehensive information of
profit or sales, but process data from sales activities and indicators at intermediatestages,

which

would

becomeclearer

for

other

departments

andpromoteinterdepartmental cooperation.
These kinds of change in interdepartmental communication through behavior-based
control systems can be understood as the formalization of interdepartmental
communication (John and Martin, 1984; Gupta and Wilemon, 1986; Ruekert and Walker,
7

1987). Regarding this issue, formalization has also been explained in terms ofcontributing to interdepartmental coordination through decreasing interdepartmental
conflict. In other words, formalized rules and procedures in interdepartmental
communication clarify the roles of each department and its managers, and much conflict
can then be resolved through restricting dysfunctional activity. According to Moenaert
et al. (1994), the formality in these rules and procedures promotes active
communication between the marketing department and the R&D department. Therefore,
formal communication does not eliminate informal communication, but as it becomes aplatform for informal contact within the organization, informal communication also
becomes more active, which rather promotes innovation (Moenaert and Souder, 1990;
Moenart et al., 1994).
From these viewpoints, in behavior-based control systems, standardizing andformalizing

proceduresofcommunication

in

sales

activities

canreduceinterdepartmental conflict, and a higher level of interdepartmental cooperation can be
expected.
Specifically, through communicating the situation of sales activities in detail, thefollowing various interdepartmental effects can be expected. Firstly, throughinformation sharing regarding the situation of sales activities with the R&D department,
cross-functional cooperation in sales activities such as investigating customer needs andtechnological problem solving can be carried out in a swift and planned fashion (Boles
et al. 1996). In a situation where effective information sharing is carried out, productdevelopment will be efficient (Gupta and Wilemon, 1988).
Secondly, in the case of customized production, it is important to have an accurate
understanding of the progress in negotiations with the customer, and to share thisinformation with the production department and the service department. If thesedepartments have early and symptomatic information on expected orders, which allows
enough lead time before the time of delivery, it will be easy to cut costs by applying
more planned and efficient methods for production and customer service.
The emphasis placed on the interdepartmental information sharing based on
behavior-based control systems is consistent with the emphasis being placed onrelationships in marketing activities. Basically, the idea of shifting to a salesforce
control system aiming to solve customer’s problems through the establishment ofcustomer relationships is widely accepted (Evans et al., 1998; Bauer et al., 1998). The
8

shift to relationship marketing will bring an interest in a behavior-based control system.
There are two reasons for the demand of an interdepartmental cooperation system
based on behavior-based control for customer relationships.
The first reason is that in the last few decades, as product technology has become
increasingly specialized and complicated, it has become more difficult for sales people
with their limited knowledge to propose solutions to the customers. Therefore, in orderto understand and solve the customer’s problem, it now requires the cooperation of theother departments such as the R&D departments (Dunn et al. 1981; Moon andArmstrong, 1994; Boles et al., 1996; Moon and Gupta, 1997). However, the functional
differences in the organization will prove to be an impediment to cross-functional
communication for swift and flexible adaptation to the customer’s needs and effective
problem-solving (Moon and Armstrong, 1994; Lambe and Spekman, 1997).
For other departments such as R&D departments, it is desirable to have
behavior-based control systems employed in order to form a cooperation system withthe sales department. By employing behavior-based control systems in the sales
department, the ambiguity in sales activities can be decreased, and sales activities canbe better coordinated with product development activities. Hence, the following
hypothesis is suggested.
H1: The more important information exchange with the customer regarding
product development becomes, the more a behavior-based control system
will be employed.
The second reason for the demand of behavior-based control systems regarding
customer relationships is that in the case of transactions between a number of sales
offices and a number of establishments of a client company, it is necessary to coordinate
and control the sales activities and customer service activities among various sales
offices and various departments within a selling company (Cespedes et al., 1989;
Millman, 1996; Boles et al., 1999; Montgomery and Yip, 2000). For example, even if
centralized purchasing decisions are being made at customer’s head office, it is still vitalto gather information from each of the customer’s departments through sales offices andto carry out cohesive sales and service activities. Then, if activities of sales and service
offices in each region can be coordinated, the level of effectiveness and efficiency in9solving the customer’s problems can be expected to rise.
In the case of contact with a customer’s various departments and multiple
management levels, it is important to be able to share information interdepartmentallyand between sales offices regarding the current status of the relationship with thecustomer and sales activities. Since behavior-based control systems can decrease theambiguity in sales activities, behavior-based control systems can be expected topromote interdepartmental information sharing regarding customer relationships andsales activities within a selling company. Therefore, the following hypothesis issuggested.
H2: The more important contact with the various departments and managementlevels of a customer becomes, the more a behavior-based control system
will be employed.
It is anticipated that when attempting to develop a marketing strategy whichemphasizes long-term relationship and cross-functional contact with the customer,
interdepartmental information sharing based on behavior-based control systems isorientated. This is thought to have had an influence on the shift to behavior-based
control in the last few decades.

Methods
Behavior-based control systems can be expected to promote interdepartmental
information sharing regarding sales activities. We will now attempt to confirm whether
Japanese companies looking forward to these kinds of effects have actually employed
behavior-based control systems using the data from a mail questionnaire.
The

SampleThe data we will use here is a survey conducted in June 1999. A mailing−including acover letter, a stamped return envelope, and questionnaires−was sent to chief sales
executives of the top 1000 companies according to sales from three prefectures (Aichi,
Gifu, Mie) in Central Japan. Although 412 replies were received, considering thedifferences between manufacturing and service industries, 303 replies from sales
10executives in the manufacturing industry were used for analysis. The industry of the
responding firms are machinery 25.4%, construction 14.9%, primary metals 8.9%, food
8.3%, electronics 7.6%, nonmetallic mineral product 5.6%, textile 5.3%, chemicals
4.0%, paper 2.3%, agriculture and mining 0.7%, other manufactures 17.2%.
Measures
Control system classification criteria
Sales control systems were measured using a 3-point scale concerning the extent ofmonitoring and direction by sales managers. If the sales people were “left to conduct
sales activities on their own,” this was thought of as an outcome-based control system,
and if the manager gave them detailed instructions, that was taken as a behavior-based
control system.
Importance of information exchange with the customer regarding productdevelopment
We asked the following question “Comparing to the average level in the industry, insales activities, to what extent do you place emphasis on information exchange with thecustomer regarding product development?” We then split the results into two groups,
those who responded that they put much emphasis on it, and those that did not.
Although this was measured using a 3-point ordinal scale (much emphasis, medium,
little emphasis), the answers of ‘little emphasis’ were so few that we integrated the last
two answers.
Importance of contact with the various departments and management levels of acustomer
Regarding the importance of the relationship with the customer’s various departments
and management levels, we collected replies from the question “Comparing to theaverage level in the industry, in sales activities, to what extent do you place emphasis on
your relationship with the various departments and the upper management levels ofcustomer companies?” We then again broke these into those who placed much emphasis
on it and those who did not. Although this was measured using a 3-point ordinal scale(much emphasis, medium, little emphasis), the answers of ‘little emphasis’ were so few
that we integrated the last two answers.

11

Results
In order to test the hypotheses (H1 and H2), we examined the distributions of the sales
control systems between two groups. The results were presented in Table 2 and Table 3.
The Mann-Whitney U-test was used to compare the percentage of sales control systems
between two groups as to the information exchange with the customer regarding
product development and the contact with the various departments and the upper levelsof management of the customer companies. Both p values of less than 0.05 wereconsidered to indicate statistically significant differences.
Table Ⅰ.
Information sharing regarding product development and sales control systems
To what extent do you placeemphasis on informationexchange with the customer
regarding productdevelopment?
Much Emphasis
Less Emphasis

Sales Control Systems
Outcome-based

MediumBehavior-based

Total

29.6%
(61)
42.4%
(39)

48.1%
(99)
43.5%
(40)

22.3%
(46)
14.1%
(13)

100.0%(206)
100.0%(92)

Notes: Figures in parentheses represent the numbers of respondents. N=298.

Table Ⅱ.
Contact with the various departments/levels and sales control systems
To what extent do you placeemphasis on yourrelationship with the various
departments and the upper
management levels ofcustomer companies?
Much Emphasis
Less Emphasis

Sales Control Systems
Outcome-based

MediumBehavior-based

Total

29.1%
(58)
42.6%
(43)

49.2%
(98)
41.6%
(42)

21.6%
(43)
15.8%
(16)

100.0%(199)
100.0%(101)

Notes: Figures in parentheses represent the numbers of respondents. N=300.

12

Therefore, H1 and H2 are supported. In other words, there is a tendency that the more
important the information exchange with the customer for product development and therelationship with the various departments and management levels of the customer
companies become, the less outcome-based control systems will be used and the more
behavior-based control systems will be employed.
We can suggest the following. Firstly, in a situation where gathering information on
the customer needs or providing technology information to the customer is regarded asimportant for product development, it becomes vital that the R&D department has an
accurate and swift grasp on the information being communicated through the sales
people regarding the product development. It is also important that they cooperate insales activities by providing the salesforces with information regarding technology andproducts, or even participate in sales activities themselves. Secondly, when the sellingcompany has contact with the various departments and management levels of thecustomer company, it often becomes important to share information on sales activities
to the various departments and levels within the customer company among sales andservice offices, factories and distribution centers of the selling company.
Through using a behavior-based control system in such cases to clarify the situationof sales activities, the cross-functional communication between the sales people and thevarious departments and levels can be smoothed out and create more effective
interdepartmental coordination for the customer relationships.

Conclusion
Over the past few decades, several articles have emphasized that throughbehavior-based control systems sales managers can regulate the pursuit of short-termsales outcomes, which is the main advantage of behavior-based control systems. In
other words, through behavior-based control systems, the pursuit of long-term
relationships with customers can be secured, and future market development can be
expected.
However, we presented another advantage of behavior-based control systems.
Behavior-based systems can reduce the ambiguity of sales activities and make for easeof cross-functional information sharing and interdepartmental cooperation which need13

information of sales process verified in detail.
The discovery we made was that regarding this advantage of behavior-based control
systems Japanese companies at least tended to select behavior-based control systems
based on the expectation of interdepartmental information sharing and cooperation.
Since the expectation of interdepartmental information sharing and cooperation has
increased in recent years with the changing competitive environment, the transfer tobehavior-based control systems based on this expectation has become an objective inmany companies’ organizational changes. In other words, the more prominent thedifferentiation through customer relationships or customer service and emphasis on
information technology are becoming, the more necessary strengthening customer
adaptation strategy with coordination and cooperation between sales departments andR&D, production, and service departments is becoming. This has bred much interest in
the effectiveness and efficiency of interdepartmental coordination achieved through thechange to behavior-based control systems.

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