In the October 1987 Journal of Marketing an article appeared that has since come to inform, in very large degree, how modern organizations manage and motivate their sales forces. The article, written by Erin Anderson and Richard Oliver, introduced the world to the concept of “control systems.”

What they discovered should change the way you think about how you manage your sales team, and it should. They discovered two main approaches to organizing, motivating and compensating a sales force and, as usual, both systems are not created equal.

What is a control system?

According to Anderson and Oliver, control systems are “an organizations set of procedures for monitoring, directing, evaluating and compensating it’s employees.” In other words, control systems are the ways in which industries conduct their affairs through a series of checks and balances on their sales representatives. As such, the nature of these systems is incredibly important. Anderson and Oliver state that “by accident or design, such a system influences employee behavior, ideally in a way that enhances the welfare of both the firm and the employee.”

This basic description should be enough for any manager to sit up and take some notice. The way that you monitor, direct, evaluate and compensate your employees can shape your entire sales organization, “enhancing [0r hurting] the welfare of both the firm and the employee.”

However, this should also sound like common sense to most sales managers out there. Of course the way that you interact with your employees and your compensation structure matters, but what this research shows is just how much it matters and should prompt everyone to stop and think about which method you employ.

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Outcome-based

Oliver and Anderson break down sales control systems into two basic types. This is how they describe the first:

Historically, salesforce managers and the performance appraisal systems used by managers have tended to emphasize outcomes rather than behaviors, particularly in determining compensation. A major reason is the availability of simple, seemingly equitable measures of sales volume or dollars. Partly because of the ease with which orders usually can be linked to the individual responsible for the sale, the dollar sales criterion is a popular and readily available measure; it is the single most commonly used performance index in published research reports.

Reading this description we can see why the authors called this the path of least resistance. Odds are that even if your organization isn’t using an advanced CRM like Salesforce you at least know how many sales each of your representatives is getting.

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Behavior-based

The second model is called the behavior-based system, which “addresses the process of selling rather than simply the outcome. Salespeople in such systems may be evaluated and compensated on any number of factors that are not themselves measures of achievement but may result in sales performance… Typically, salespeople are evaluated by managers on these variables, which then are weighted and combined into a composite evaluation upon which salary and promotion decisions are based.”

On the surface, this method seems a little more difficult to track because it involves looking at more KPIs than just the dollar amount of sales. The behavior-based method also depends on weighting and combining the composite of multiple KPIs to determine an employee’s overall behavior and then determining salary and promotions based on that information.

It USED to be difficult…

According to Anderson and Oliver, the outcome-based method is old-fashioned and outdated. Just looking at one KPI, no matter how readily available or important it might be, doesn’t give you a complete view of the picture. And using an outcome-based control system has a bunch of other drawbacks. Shady selling practices, no focus on retention, egotistic and self-centered sales reps instead of team players who put the needs of the firm before their own are just a few.

Behavior-based systems, Anderson and Oliver discovered, lead to happier and more productive employees. They realize that if they have a bad month they aren’t going to be fired, and that helps them remain loyal to the company. They are better trained, think long-term and are more willing to adopt behaviors that align with corporate goals.

So why are companies still using outcome-based control systems? Simple- to judge someone on more than one KPI you NEED more than one KPI, and that you usually meant running tons of different reports and even then it would be impossible to spot patterns in a dozen different spreadsheets.

But that was before- this is the data age. With programs like Salesforce already generating all the data you would ever need you just need a way to see all of the KPIs at the same time. And it would be even better if you could not just see what a sales rep is doing in all of these different areas but have domain expertise built right in so you could see, in the blink of an eye, how a sales rep is performing against others in the industry or against corporate’s goals.

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That’s exactly what VisualCue for Salesforce does. It brings all of the KPIs into one place with expertise so you can create a  behavior-based environment in your sales team without sacrificing short-term gains.

Until next time,

The VisualCrew