Sales Force Productivity
Introduction
Seventh Biennial Enhancing Sales Force Productivity Conference, University of Kansas, 21-23 Apr 2022
INTEREST CATEGORY: SELLING AND SALES MAN
POSTING TYPE: Revisits
Author: Kissan Joseph
UNIVERSITY OF KANSAS SCHOOL OF BUSINESS
Seventh Biennial Conference on
Enhancing Sales Force Productivity
The quality, quantity, deployment, and motivation of sales force efforts significantly impact both the top and bottom lines of companies in many industries where personal selling plays a critical role in the promotion of their offerings. In this context, the University of Kansas School of Business is pleased to host the Seventh Biennial Conference on Enhancing Sales Force Productivity.
Conference Co-Chairs:
Kissan Joseph, University of Kansas
Murali K. Mantrala, University of Kansas
Conference Advisory Committee:
Soenke Albers, KLU Hamburg
Srinath Gopalakrishna, University of Missouri
Manfred Krafft, University of Muenster
Nick Lee, University of Warwick
April 2123, 2022
Capitol Federal Hall
School of Business
University of Kansas
Lawrence, Kansas
business.ku.edu/ESFP
CONFERENCE AGENDA
THURSDAY, APRIL 21
46 p.m. Double Tree Hotel
Registration, Check-In, and Reception
67:30 p.m. Double Tree Hotel
Keynote 1
Prabha Sinha, ZS Associates and Northwestern University
810 p.m. Free State Brewery (via conference bus)
Dinner
FRIDAY, APRIL 22
67:30 a.m. Double Tree Hotel
Hot Breakfast
7:308:15 a.m. Shuttle buses
Travel from Hotel to Capitol Federal Hall
7:458:30 a.m. Capitol Federal Hall, Room 3015
Coffee and Refreshments
8:3010 a.m. Capitol Federal Hall, Room 3015
Research Session 1
1010:30 a.m. Capitol Federal Hall, Room 3015
Coffee and Refreshments
10:30 a.m.12 p.m. Capitol Federal Hall, Room 3015
Research Session 2
121:30 p.m. Walk to DeBruce Center
Lunch
1:303:30 p.m. Capitol Federal Hall, Room 3015
Research Session 3
3:304 p.m. Capitol Federal Hall, Room 3015
Coffee and Refreshments
45 p.m. Capitol Federal Hall, Room 3015
Keynote 2
Jason Belzer, Abbot Vascular
5:306:30 p.m. Lied Center Atrium (via conference bus)
Dinner
79 p.m. Lied Center
Popovich Comedy Pet Show
SATURDAY, APRIL 23
67:30 a.m. Double Tree Hotel
Hot Breakfast
7:308:15 a.m. Shuttle buses
Travel from Hotel to Capitol Federal Hall
7:458:30 a.m. Capitol Federal Hall Colloquium, Room 1010
Coffee and Refreshments
8:3010 a.m. Capitol Federal Hall, Room 1020
Research Session 4
1010:30 a.m. Capitol Federal Hall, Room 1020
Coffee and Refreshments
10:30 a.m.12 p.m. Capitol Federal Hall, Room 1020
Research Session 5
121:30 p.m. Capitol Federal Hall, Room 1020
Boxed Lunch and Industry Panel
1:303 p.m. Capitol Federal Hall, Room 1020
Research Session 6
3:304 p.m. Capitol Federal Hall Colloquium, Room 1010
Coffee and Refreshments
45 p.m. Capitol Federal Hall, Room 1020
Conference Wrap-Up and VIII ESFP Planning
510 p.m. Jack Stack BBQ (via conference bus)
Dinner Excursion to Kansas City
Research Session 1: Sales Analytics
Friday, April 22, 8:3010 a.m., CAPF 3015
When Does Reducing Sales Force Incentives Help or Harm? Understanding the Trade-Off between Performance Quantity and Quality
This article investigates how reducing the share of performance-based, monetary sales incentives affects salespeoples performance in terms of quantity and quality.
Martin Kr瓣mer, University of Bochum, Sascha Alavi, University of Bochum, Johannes Habel, University of Houston, and Michael Ahearne, University of Houston.
While prior research strongly suggests that performance-based, variable compensation improves sales performance, several companies have recently reduced the amount of variable compensation because they blame it for causing myopic selling behavior. However, the effects of such incentive reductions are not well understood. Therefore, we examine an industrial wholesaler that reduced the share of variable compensation for its sales force in one sales division (from 80% to 20%) while keeping it unchanged in another division. We differentiate between effects of the incentive reduction on salespeoples performance quantity and quality. While quantity reflects salespeoples effectiveness in terms of sales output, quality reflects how well salespeople advise their customers. Using difference-in-differences models, we show that salespeoples performance quantity declined after the incentive reduction while performance quality increased. The strength of these effects depends on the prior performance in the two performance facets: reducing incentives especially harms the performance quantity of salespeople with high prior performance quantity, while performance quality increases particularly for salespeople with low prior performance quality. Thus, managers contemplating the reduction of variable compensation need to carefully balance the trade-off between performance quantity and performance quality, given their sales forces current performance.
Letting Customers Win: Live-Chat Agent Effectiveness in B2C Sales Negotiations
How can you sell a $2000 refrigerator when you are faceless, voiceless, and touchless? Live-chat salespeople: Yes, we can!
Frank (Yufan) Lin, University of Missouri, Brady Hodges, University of Missouri, Detelina Marinova, University of Missouri, Jagdip Singh, Case Western Reserve University.
Sales negotiations over Internet-enabled live-chat portals are increasingly common in B2C durable product sales, but little is known about sales agent effectiveness in this context. Drawing from theories of scarcity and information processing, this study conceptualizes three sales agent tactics concession tactic, delay tactic, and value affirmation tacticthat interact to enhance the likelihood of closing sales. Unique live-chat data and archival performance data from a national home appliance retailer were employed to develop a validated corpus of textual cues to capture salesagent closing tactics and test the proposed hypotheses. The results show that the concession of an unadvertised discount is effective in increasing the likelihood of sales closing, and a delay in discount request response timing positively moderates this effect. By contrast, agents tactics to affirm product value have the opposite effect of reducing the effectiveness of the unadvertised discount. A live-chat lab experiment supports the mediating mechanism of perceived discount scarcity and extends the value affirmation tactics negative moderation effect when the delay tactic is high.
Salesperson Performance Benchmarking
Instead of using DEA or SFA for efficiency benchmarking salespersons, I suggest focusing on effectiveness by estimating individual sales response functions and using this information.
S繹nke Albers, K羹hne Logistics University.
Companies are always trying to make their salespeople working as efficient and effective as possible and therefore apply some kind of benchmarking by identifying which salespersons belong to the very successful salespeople and which ones can be improved by looking at best practices of other successful salespeople. The basis for this benchmarking is the sales response function expressing how sales effort translates into sales. As data envelopment analysis (DEA) or stochastic frontier analysis (SFA) have drawbacks I propose a new approach based on effectiveness comparisons.
I am demonstrating the approach with an example of a pharmaceutical salesforce that has data on sales for specific drugs in special geographical regions from a market research company and their own data on the number of visits or comparable activities by their salespeople directed to 3 segments of doctors. First, the coefficients of the individual response functions are transformed into elasticities as information on the effectiveness with which a salesperson is translating his or her effort into sales. Second, given the sales response function it can be checked whether a better allocation of effort across regions and/or segments can improve results. Third, for the chosen allocation it can be checked which salesperson would have achieved more sales according to the sales response function of a reference salesperson. The salesforce management of our company judged our results as very plausible and offering them high opportunities for improvements that they are currently using for training their salespersons.
Research Session 2: Performance Feedback and Dynamics
Friday, April 22, 10:30 a.m.12 p.m., CAPF 3015
Social Effects of Leaderboards in Sales Contests
Sales contests and leader boards have a substantial social motivation component. Salespersons are motivated to be among the leaders and avoid being laggards.
Yuanchen Su, University of Minnesota, George John, University of Minnesota, and Madhu Viswanathan, Indian School of Business.
Sales contests, which use relative performance to evaluate and reward employees, have long been considered a viable short-term tool for improving efforts. Often, these contests are multi-period with interim results available. One issue unsettled is whether interim results should be published as public leaderboards. Leaderboards influence monetary motivation interim standings allow contestants to better calibrate their effort given their distance from the prize(s). They also influence social motivation the first page of the leaderboard brings social recognition whilst being on the last page is disheartening.
Using data of five 8-week long contests with leaderboards updating twice a week, we find next-day sales after each leaderboard update displays a U-shape. Specifically, salespeople on the first page or the last page make more sales than people who are on the intermediate pages. This offers an identification of social motivation since a purely rational model predicts people who are on the last page would make fewer following-day sales than people on the penultimate page since people on the last page have less chance to catch up and win the prize(s). Regressions reinforce this takeaway. People who are close the boundaries of first and last pages make more next-day sales than their neighbors. These neighbors are farther away from the boundary but assumed to have similar monetary motivation with people close to the boundaries since they have similar cumulative sales. We build a structural model to estimate a) monetary motivation sensitivity, b) social motivation sensitivity, and c) cost of effort. These deep parameters help disclose the mechanisms at hand.
How Does Feedback Design Motivate the Next Generation of Salespeople? Theory and Evidence from an Experimental Study
Feedback matters! To make the young salespeople willing to go the extra mile, dont give the outcome and the explanation at the same time.
Ying Yang, University of Iowa, Xiaofei Pan, Bryant University, and Christine Lai-Bennejean, Emlyon Business School.
Providing effective and timely feedback is particularly critical to sales research because performance feedback influences salespeoples learning and achievement. Without appropriate feedback
information, salespeople are unclear about their progress towards the goals and the effort should be deployed to improve performance.
The goal of this research is to investigate how different feedback designs influence the young generations effort deployment and performance in accomplishing sales tasks. Incorporating the insights from ten interviews with managers, we built a theoretical model based on the utility function capturing the three dimensions of performance feedback: 1) timing: immediate vs. delayed, such that feedback is provided instantly or with delays after an individual has responded to a problem; 2) comparison: comparison vs. no comparison such that feedback information shows ones achievement with or without ones relative position compared to others; 3) assessment form: formative vs. summative, such that feedback information provided with or without explanation of how to improve performance.
We predicted three hypotheses and tested them by conducting incentivized experiments using real-effort sales tasks with university sales students. Our laboratory experiments find that performance feedback with social comparison information is more effective to participants performance and effort deployment than without. When the timing of providing summative and formative feedback is consistent, participants are more likely to expend effort to review the feedback information, compared to the group with the inconsistent timing condition. We also find that the inconsistent timing of summative and formative feedbacks induces longer review time once they decided to review.
Incentives and Burnout: Dynamic Compensation Design with Effort Cost Spillover
We examine the connection between salesperson burnout and incentive compensation plan design using a dynamic principal-agent model in which an agents effort can have long-term effects on her utility and willingness to work.
Rob Waiser, London Business School, Juan Dubra, Universidad de Montevideo, and Jean-Pierre, Beno簾t, London Business School.
Employee burnout is a significant issue for many firms, with salespeople particularly susceptible due to their high-pressure, boundary-spanning role. The prevalence of burnout indicates that the cost of exerting effort not only drives a salesperson’s utility and choices in the present, but spills over into the future as well. We use a dynamic, two-period model in which the salesperson’s effort cost in the second period increases in both her second- and first-period efforts, to consider compensation plan design over time, and examine the connection between plan design and burnout. When the firm can commit to contracts for both periods in advance, it achieves its first-best outcome by offering weakened incentives in the first period, inducing less effort in order to decrease the salesperson’s cost of effort in the future. When the firm is unable, or unwilling, to commit, the first-best outcome is not always achievable. Indeed, the firm’s best equilibrium strategy may be to induce the salesperson to burn herself out (i.e., work so hard in the first period that she cannot be profitably employed in the second), even when the firm cannot replace her in the second period. Such a burnout equilibrium can result in profits almost as low as fifty percent of first-best profits.
Research Session 3: COVID Calls on the Salesforce
Friday, April 22, 1:30 3:30 p.m., CAPF 3015
Effect of COVID-19 on Sales Employee Job Satisfaction: Evidence from Online Employee Reviews
In this research we study the effect of Covid-19 on sales employee job satisfaction on basis of their online reviews on an employee review site. In the process, we collect and analyze 36,305 sales employee review data for the 21 large firms in consumer packages goods, banking, pharmaceuticals, telecom, and technology industries from a prominent employee review website. Our analysis suggests that Covid-19 had a negative effect on sales employee online ratings across the companies.
Somnath Banerjee, North Dakota State University, and Aditya Gupta, Texas State University.
As boundary spanners in an organization, sales employees are often at the forefront of dealing with uncertainty and negative events. However, we have limited knowledge of how uncertain and negative events impact sales employee well-being and job satisfaction. Covid-19 is one such event that caused uncertainty and negative impact across many sales organizations. In this research we study the effect of Covid-19 on sales employee job satisfaction on basis of their online reviews on an employee review site. To do this we collect and analyze 36,305 sales employee review data for the 21 large firms in consumer packages goods, banking, pharmaceuticals, telecom, and technology industries from a prominent employee review website. Our analysis suggests that Covid-19 had a negative effect on sales employee online ratings across the companies. The negative effect was close to a magnitude of approximately 8% of the average online employee ratings of the companies. The effect was found to be stronger for banking as compared to other industries. Further, when we analyze interaction of the effect of Covid-19 with sales compensation data for the sales reps, we find that the effect of Covid-19 is more pronounced for employees whose incentive and additional pay is lower. However, when we explore Covid-19 related measures like introduction of remote working, we do not find a significant impact of such initiatives on sales employee review ratings. Managerial implications, academic contribution and future research opportunities are discussed.
What Comes Next? Towards a New Hybrid Model of Complex B2B Sales
The global pandemic that started in 2020 has been accused of changing sales forever and of killing face-to-face sales. In this research we go beyond these simplistic misconceptions to start developing a new sales model that will emerge when the world is allowed to go back to normal.
Jaime Castell籀, ESADE Business School.
The contact limitations that the response to the COVID-19 epidemic has imposed on society has impacted sales, as it is an activity that relies deeply on exchanges between people. This has caused many of those interactions to migrate to virtual environments such as online platforms (Zoom, Teams, etc.) in what has been called by many a new sales model. The goal of this research is to find if this new sales model is as effective as the traditional models it has replaced and to understand which activities that salespeople perform to sell have been more impacted by the changes. To have a first insight into this new model, 30 semi-structured interviews were conducted in the months of September and October 2021 with sales executives involved in complex B2B sales from different industries, but all based in Spain. The findings from this study confirm the emergence of a new hybrid model, in which salespeople must navigate between digital and face to face interactions. The findings suggest that face to face interactions are still necessary for relationship building and the generation of trust, both internally (within the supplier) and with customers and other outside actors, but that the digital interactions of the past sales cycles have opened the possibility to have distance interactions for other moments in the sales process. This requires the development of new sales processes, in which the salespeople need to find the right blend of digital and face to face interactions, considering the degree of relationship with the customer and the need for trust building in the process, but not necessarily the type of product or customer.
The Brave New World of Virtual Selling: What is It and How to Do it Well?
Given the profound changes in sales management, this research project aims to conceptualize virtual selling, make it measurable, and derive strategies for increasing its effectiveness.
Tim Kalwey, University of M羹nster, Murali Mantrala, University of Kansas, Manfred Krafft, University of M羹nster, Yeji Lim, California State University
Although virtual selling is the new reality in B2B sales management, there is no commonly shared definition or understanding of what constitutes and is entailed in this selling construct, and how to measure and enhance its effectiveness in sales organizations. The present study addresses the first of these questions, as a part of a larger research agenda, using a theories-in-use approach. Specifically, in this presentation, the authors will share their findings about managers perceptions of virtual selling and its effectiveness from a series of in-depth interviews with sales executives from different business markets and industries as well as virtual focus groups with salespeople. Based on these findings and learnings, the authors delineate and define the core dimensions and boundaries of the virtual selling construct and propose an approach for measuring and improving its effectiveness. The presentation concludes with the research teams plans for testing effects of improved training measures in selling practice in collaboration with a large multinational corporation in Europe.
Digitizing High-Touch Interactions: Insights from COVID-19 Induced Changes in Personal Selling
A quasi-random experiment of digitizing high-touch interactions suggests that in-person interactions generate twice the value of their digital counterparts. Yet, exploring the heterogeneous effects of using digitized interactions on sales outcomes shows the gap is smaller in regions where technology affinity is higher.
James C. Reeder, III, Purdue University, and Mohammad Rahman, Purdue University.
We study how digitization affects the value of high-touch interactions, specifically by looking at the relative value of in-person interactions (IPV) versus remote interactions (RV). These RVs can take the form of interacting with clients over a virtual environment, such as video conferencing, Facetime, or other such technologies. Before COVID-19, firms saw the benefits of digitizing many aspects of the marketing mix, such as e-mails over standard mail, through cost savings and targeted applications. However, high-touch interactions, such as direct sales meetings or personalized, in-person interactions, were generally left without a digital touch. To assess the values of IPV versus RV, our empirical strategy exploits a pseudo-random experiment performed by a large firm with their sales team, where agents switched from entirely using IPV to a mix of IPV and RV. By studying the changes in revenue of close to 15,000 clients across 27 months, we assess the differential in both contemporaneous and spillover effects of RV and IPV, respectively. We find that, on average, IPV represents double the value of RV. However, by exploiting regional heterogeneity, specifically with a measure of how a region is immersed in digital technology, we find that the gap between the value of an IPV versus an RV closes to almost a 1 to 1 ratio. Last, by studying the dynamic effects of these choices, we find a pulsing strategy to drive the value of IPV even higher if used in conjunction with RV.
Research Session 4: Sales Analytics
Saturday, April 23, 8:30 10 a.m., CAPF 1020
Effective Implementation of Predictive Sales Analytics
Whether a customer churn prediction increases salesperson performance depends on abilities, technology perceptions, customer task environment, and selling orientations.
Johannes Habel, University of Houston, Nicolas Heinitz, University of Bochum, and Sascha Alavi, University of Bochum.
While sales managers are increasingly interested in predictive analytics applications, they face persistent implementation challenges: Many salespeople show aversion or lack understanding and thus do not reap benefits from these applications. To implement predictive analytics effectively, it is essential to understand which factors mitigate or exacerbate these challenges. This article investigates these factors by studying heterogeneous performance outcomes of the implementation of a predictive sales analytics application that predicts customer churn. Using 9.7 million transactions from a B2B company, the authors first develop a predictive model of customer churn. They then implement it in a field experiment and use causal forests to study potential mitigating or exacerbating factors, which they synthesized from past literature on salespeoples abilities, technology perceptions, customer task environment, and selling orientations. Furthermore, the authors study one specific mitigation strategy proposed by prior literature: the fostering of users realistic expectations regarding the accuracy of an algorithm. Interestingly, results show that this intervention is counterproductive. A follow-up experiment reveals that the conceptual mechanism underlying effects of the tool implementation relates to the reps (de-) prioritization of customers with different levels of predicted churn probabilities.
Fixing Bad Marriages When Should Firms Reassign Sales Agents?
We explore the effect of managerially-driven, agent reassignment and find high heterogeneity in effects, some positive, although conventional wisdom suggests only negative effects. By leveraging machine learning, we provide solutions based on targeting heuristics that can improve the financial outcome of proactive sales agent reassignment by 8%.
Wreetabrata (Wreeto) Kar, Purdue University, Gary L Lilien, Penn State University, and James C Reeder III, Purdue University.
Many firms that rely primarily on personal selling often reassign clients, systematically and proactively, to sales agents hoping that the benefit of better matching will outweigh the cost of new relationship-building. Despite proactive reassignment being a common industry practice, academic researchers have largely overlooked studying its implications. In this research, we study a pseudo-field experiment where a large, multi-national manufacturing firm engaged in a major proactive reassignment. By leveraging machine learning, we show that proactive reassignment is often counterproductive when the reassigned agent is a new hire. Conversely, if the reassigned agent has been with the firm for an extensive time before reassignment, the average effect of reassignment on post-period sales is not statistically different from zero. However, we find there are specific circumstances when proactive sales agent reassignment pays off. For example, we find an increase in sales post-reassignment when clients have high sales potential and are being served by poor performing agents. Further, we find that if a client has a long history with a poor-performing agent or has seen multiple turnover events, the client benefits from being reassigned to a new agent. Through counterfactual exercises, we identify a potential increase in sales revenue of more than 8% in less than a year post-reassignment. Our approach and methodology allow both managers and researchers to better understand the nuances of proactive sales agent reassignment and leverage that understanding for superior sales performance.
Data-Driven Decision-Making in Sales: Can Marketing Analytics Enhance Sales Performance?
We empirically investigate the impact of a marketing analytics tool on sales performance. We found that on average the adoption of a new marketing analytics tool enhanced sales quota attainment by 14% with the effect varying by sales agent skill: while low performers utilize the tool to harvest more with the cross-selling, high performers use the tool to hunt inactive accounts and hence manage a more balanced account portfolio. Minjee Sun, University of Iowa, Avi Goldfarb, University of Toronto, and Mengze Shi, University of Toronto. Marketing analytics is increasingly used to aid sales force decision making. However, there is little empirical understanding of how the adoption of marketing analytics tools can affect sales performance. Using data from a global B2B information technology company, we find that on average the adoption of a new marketing analytics tool improved sales quota attainment rate by 14%. The reasons behind this increased attainment rate vary by type of sales agents. High performers using marketing analytics won more sales opportunities and performed better relative to quota with inactive customers (customers with no recent transactions). These high performers, however, reduced sales to active accounts. In contrast, compared to high performers, low performers using marketing analytics worked with more marketing-initiated leads and achieved more sales to active accounts. Overall, we interpret this to suggest that marketing analytics can empower the more-skilled sales agents to reach a more balanced account portfolio and help the less-skilled sales agents to seize opportunities that might have been missed.
Research Session 5: Analytical Models
Saturday, April 23, 10:30 a.m. 12 p.m., CAPF 1020
Optimal Compensation Design with the Utilization of Training Program: The Benefit of Information and Learning
We study a compensation design problem, where the firm utilizes a training program to incentivize the salesperson to learn and strategically disclose working information. By highlighting the benefits of learning behavior and strategic information disclosure, this study sharpens our understanding of training in practice.
Dawei Jian, University of California Riverside.
How should the firm design the training program and compensation scheme jointly to incentivize the salesforce? We study a salesforce compensation design problem, where the firm offers a training stage to the salesperson before he works. The training stage alters both the firm and the salespersons behavior: the salesperson can exert unobservable learning effort to reduce his private working cost, while the firm can also strategically disclose information about the realization of that cost. After characterizing the optimal compensation scheme and information disclosure plan, our contribution is three-fold: (i) We characterize the dual role of a salesperson’s learning behavior during training. Although the learning effort can improve the working efficiency by lowering the working cost, it can also exacerbate information friction by enhancing the salespersons ability to manipulate the working cost. (ii) We identify the effectiveness of strategic information disclosure in the training stage; the disclosure is beneficial when the salesperson is protected by limited liability. (iii) We provide new practical guidance. First, the firm needs not monitor the salesperson in the training stage. The enhanced information advantage in the working stage provides enough incentives for the salesperson to exert effort to learn. Second, as an incentive device, the firm’s strategic information disclosure in the training stage serves as a substitute of compensation: the firm incentivizes the salesperson to work with saved wages. By highlighting the benefits of unobservable learning behavior and strategic information disclosure in the training stage, this study sharpens our understanding of training programs in practice.
Managing with Style? Micro-Evidence on the Allocation of Managerial Attention
Managerial attention affects organizational behavior. Our analytical model shows that manager’s attention depends both on task expertise and attention capacity. Micro-level data from sales and retail managers from two unrelated, large companies provide converging evidence.
Desmond Lo, Santa Clara University, Francisco Brahm, London Business School, Wouter Dessein, Columbia University, Chieko Minami, Kobe University.
Managerial attention in organizations is a scarce resource as humans are bounded in their cognitive capacity. Although existing literature emphasizes the role of managerial attention in shaping an organizations behavior and outcomes, there is a lack of systematic evidence. Moreover, the mechanism of the effect of task expertise on the allocation of attention also requires further scrutiny. Our theory argues that when attention is scarce, expertise and attention are complements: a manager optimally focuses her attention on tasks in which she has relatively more expertise. This is known as managing with style.” In contrast, when attention is abundant, attention and expertise become substitutes: a manager shifts her attention towards tasks she has less expertise in; she “manages against her style.” We use micro-level data on sales and retail managers in two large, unrelated companies to test this novel theory. Our data contains information on managers allocation of attention across two tasks, and there is variation in attention capacity faced by managers at work, both between managers and, for one of our companies, within managers across time. Using micro-level cross-sectional and longitudinal data on managers from two unrelated companies, and employing various measures of time stress and attention capacity, we find converging and supporting evidence. A managers attention capacity determines whether she “manages with style,” or “against it.” While current behavioral approaches such as Upper echelons theory and the attention-based view of the firm presume “managing with style” as prevalent and biased, our theory and findings suggest, instead, that it is contingent and optimal.
Why Are Revenue Contracts So Ubiquitous?
Sales organizations seek margins but often reward revenue. Accordingly, in this research, we ask: what metric should compensation contracts be based on: margins, revenue, or separate commissions for price and quantity?
Kissan Joseph, University of Kansas, Murali Mantrala, University of Kansas, Paul Parker, University of Kansas, Alex Thevaranjan, Syracuse University
Sales organizations seek margins but often reward revenue. This disconnect is puzzling and has not escaped commentary. Accordingly, in this research, we ask: what metric should compensation contracts be based on: margins, revenue, or separate commissions for price and quantity? We develop a two-effort model where the first effort (quality) helps the salesperson garner a high price whereas the second effort (quantity) drives the number of customer transactions. We obtain three key results. First, when the salesperson does not control price, margin contracts are equivalent to revenue contracts in terms of efforts and profits. Second, we offer a conditional insight. In high value-added consultative environments, firms concerned about the adverse impact of negotiations may actually prefer revenue contracts because the fractional profit degradation of revenue contracts could well be lower than the fractional loss from negotiations. In contrast, firms concerned about the fixed cost of collecting margin information may prefer margin contracts because the absolute profit degradation of revenue contracts could likely exceed this fixed cost. Finally, we demonstrate that separate commissions on price and quantity perform substantially worse than either a margin contract or a revenue contract. Even though its ability to precisely control each effort might, at first blush, seem to be an ideal theoretical solution, the choices of the salesperson here with respect to price and quantity are too far removed from the margin optimization desired by the firm. We believe this last finding parallels the double marginalization finding reported in the channel literature.
Research Session 6: Conceptual Models
Saturday, April 23, 1:30 3 p.m., CAPF 1020
Span of Control and Salesforce Performance: An Empirical Investigation
How to plan the appropriate size of a sales team to get superior performance? And, what needs to be done if deviation from the optimal size of the sales team is necessary? Binay Kumar, Appalachian State University, V. Kumar (VK), St. Johns University.
The appropriate span of control is crucial for organizational effectiveness as it not only allows the sales manager to monitor and guide its salespeople without being overbearing but also salesperson putting adequate effort in achieving the superior performance. Despite the substantial importance of the span of control, research on the topic has been sparse. Using the lens of Leader-Member Exchange Theory, we hypothesize that the span of control has a curvilinear effect on sales force performance. In other words, a narrower span of control may lead to micromanagement, thus affecting salespeoples autonomy and flexibility in handling the sales task. However, as the span of control widens, the performance diminishes after a certain threshold, as the sales manager may neither be able to devote sufficient energy to high-quality interactions with its salespeople nor observe their performances. Analyzing monthly data of 495 salespeople over the five years (2014 2018) of a US-based firm, we investigate the effect of span of control on the salesforce performance. Contrary to the common wisdom of a negative association between the span of control and salesforce performance, our analysis suggests an inverted U-shaped relationship. Moreover, we find that customer heterogeneity and salesperson tenure with the focal firm flatten the curvilinear effect. We also investigate the impact on salesforce performance in case of deviation from the optimal size of the sales team. The study helps managers better understand how to use span of control as a tool to get improved performance not only from individual salespeople but also from the sales team.
The Impact of Cultural Intelligence on Sales Skills: An Explanatory Model
In todays global business context, salespeople must be culturally intelligent in order to create relationships with buyers from different cultural backgrounds.
Nadine Fischer, Montpellier Business School.
In todays global business context, employees must be aware of cultural differences in order to overcome problems in working with clients and colleagues from different cultural backgrounds. Not only are companies working worldwide, growing immigration also impacts the work contexts on a national level. The sales field is particularly affected by this intercultural challenge. It forces salespeople to create relationships with buyers from different cultures.
In the scientific research, a concept has been introduced to evaluate a persons abilities and skills to adapt and interact effectively in an intercultural context: Cultural Intelligence. This concept has been used especially in HR or International Management research to evaluate the general intercultural effectiveness of expatriates for example in different contexts. It is interesting also for the sales field because it can help companies choose the right personnel for working in the intercultural sales context. It can also help design better intercultural training for salespeople. Cultural Intelligence has been looked at briefly in the sales context before but to date, it remains unclear how this concept impacts relationship quality and sales performance. Therefore, this communication proposes a model to measure the impact of Cultural Intelligence on several sales skills and sales related outcomes including moderators and mediators. The model has been established based on a literature review and an exploratory qualitative study with sales managers working or having worked in an intercultural context.
Direct Selling Distributor Turnover in Europe: Detecting Potential Leavers Across Countries in a Non-Contractual Channel
Firms depending on direct selling face high turnover rates of their sellers. We develop a model to explain intentions to leave across Europe to help these firms gear up for the war of talent.
Michael Gerke, University of M羹nster, Manfred Krafft, University of M羹nster, Anne Coughlan, Northwestern University, and Leo Paas, University of Auckland.
In 2020, direct selling (DS) distributors generated revenues of more than 32 billion in Europe. Many firms rely on direct selling as their primary and in many cases exclusive distribution channel. Distributors are independent contractual partners of the DS firms and enjoy a high degree of freedom in many aspects of their distributorship. The variety of permissible ways to engage in a distributorship leads DS firms to terminate contracts with their distributors only under rare and severe circumstances. Rather, it is common for distributors to discontinue their distributorship themselves. Academia has dedicated little attention to this distribution channel, particularly from a cross-country perspective. We provide insight into DS distributors leave intentions as turnover of direct sellers is a key operational risk for the DS firms.
Based on relevant literature in organizational commitment, sales management, and direct selling, we develop and investigate a conceptual model that explains the intention of DS distributors to leave their DS company. We analyze a unique dataset containing about 27,000 DS distributors from 11 European countries. We find that a parsimonious model, including 16 covariates, consistently predicts leave intentions across those countries. The variables referral, followed by satisfaction and tenure, display the strongest impact on leave intent. The consistency of the effects across the 11 European countries implies that decision-makers can concentrate on the same key variables when addressing direct sellers retention in Europe.