© Cranfield University 2009 Towards a Framework of Sales Performance Measurement Effectiveness...

© Cranfield University 2009

Towards a Framework of Sales Performance Measurement Effectiveness

Peter Kerr, Javier Marcos-CuevasCranfield School of Management

GSSI 2014 Conference London, 11-13 June 2014

© Cranfield University 2008© Cranfield University 2009

Background

Measures of sales performance play a critical role in sales force compensation, motivation, alignment and control

Often used as dependent variables in sales performance research…

…yet there is not a widely accepted set of approaches or frameworks for the design and implementation of effective performance measurement systems in sales Myriad of measures with no guide posts for choices Potential erroneous assumptions being made

Interchangeability of measures What constitutes high vs average vs low performance


Aims and objectives

This research aims to begin to move towards a framework of sales performance measurement effectiveness by Establishing a definition of sales performance measurement

effectiveness Mapping the contextual elements that must be considered when

designing effective sales performance measurement systems Identifying the possible theoretical mechanisms which explain the

relationship between performance measures and organizational outcomes under specific contextual conditions


Methodology: Systematic Review

Review Question: When designing effective measurement systems in sales, what are the contextual elements that must be considered?

Article Selection Data Synthesis

CIMO-Logic • Empirical findings related to measurement effectiveness

were extracted from each article in the form of ‘logical prescriptions’:

• In total, 131 prescriptions were created from 94 papers• Contextual factors influencing measurement

effectiveness were then extracted and grouped

Context Intervention Mechanism Outcome


Definitional Perspectives

Approach Focus

Psychometric Correctness (validity and reliability)

PerformanceManagement

Appropriateness, suitability or “fit”

Sales Effectiveness

Achievement of individual or organizational outcomes

Approach Advantages Disadvantages

Behaviour-Based

Allows management dictate approach and focus

Removes factors outside a salesperson’s control

Requires significant monitoring of salesperson

Introduces subjectivity bias

Outcome-Based

Allows salespeople to develop situation-specific strategies for success

Ties compensation to firm financial performance

Sales person focus may not align to organizational priority

Difficult to identify and manage uncontrollable factors influencing outcomes

Sales Performance

Measure Effectiveness

A set of practices which lead to appropriate and psychometrically correct behavioural or outcome-based representations of sales performance while delivering desired

organizational and/or individual outcomes.

Sales Performance Measurement Effectiveness


Derived Conceptual Framework

Situational Variables


Theoretical Mechanisms Identified

Theoretical mechanisms explaining the relationship between measurement systems and organizational and individual outcomes are plentiful in the literature – with 64% selected articles hypothesizing on a relationship

The literature identifies 6 potential mechanisms influencing outcomes:

Level of Alignment Employee Fairness Employee Control Motivation Informativeness Role/Task Clarity


Contributions

This paper makes 3 contributions:

1. A conceptualization of performance measurement effectiveness in sales which integrates two separate fields – business performance management and individual sales performance

Posits that a range of organizational outcomes needs to be considered in the conceptualization of performance measurement effectiveness

This broadens the traditional definition of sales performance measurement effectiveness as organizational outcomes are currently being treated in a limited way by the literature

2. Identification and classification of important contextual factors influencing performance measurement effectiveness in sales Important because there has not been a comprehensive exploration and categorization of the

contextual factors before Three broad categories can be identified: organizational characteristics, characteristics of the

business environment and characteristics of the selling environment

3. Extends contingency theory into the domain of individual sales performance measurement Aids in explaining the differences in the effectiveness of measurement systems


Implications for Future Research

Multi-Situational Factor Research Opportunity Significant research has been done around how individual contextual factors influence

the relationship between performance measurement systems and organizational outcomes

Sales people operate under multiple situational factors simultaneously and some of these individual factors may be associated with different and sometimes conflicting outcomes

The literature is currently silent regarding the net impact on outcomes resulting from measurement system interaction with multiple situational factors.


Implications for Practice

While measurement accuracy is important it is insufficient on its own to achieve measurement effectiveness in sales performance Sales performance is a multi-dimensional phenomenon – effective measures

reflect an understanding of what dimensions of sales performance are being measured

Measures are not simply interchangeable – the may be measuring different dimensions of sales performance; Managers must understand what dimensions of performance are important to the firm.

An understanding of one’s situational context is important to ensure the appropriateness and fit between measurement choices and the selling situation

Organizational outcomes need to be prioritized to allow for trade-offs between desirable and undesirable outcomes of performance measurement use

© Cranfield University 2009 Towards a Framework of Sales Performance Measurement Effectiveness...

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