Relationships between Sales Management Control, Territory Design, Salesforce Performance and Sales Organization Effectiveness

cd6l-2026-01-28_19_17_13-relationships-between-sales-management-control-territory-design-salesforce-performance-and-sales-organization-effectiveness.pdf

Relationships between Sales Management Control, Territory Design, Salesforce Performance and Sales Organization Effectiveness

This research evaluates determinants of sales organization effectiveness in a sample of British companies, and contributes to an important new research stream by following recent empirical studies in the USA and Australia. We discuss a model of sales organization effectiveness determined by salesforce outcome performance and behavioral performance, as well as by the use of a behavior-based control approach. Sales territory design is also considered as a particularly important managerial variable, which has received little analytical attention in the traditional literature, but which appears to be an important influence on the effectiveness of the sales operation. Our exploratory path analytical model suggests that sales territory design has a large effect on sales organization effectiveness both directly, and indirectly through its relationship with salesforce behavioral performance. These findings are somewhat different to those in similar studies in other countries, and suggest some important implications for managers as well as for researchers in this field.

Introduction

In common with the majority of industrialized economies, expenditure on maintaining and deploying selling efforts in the form of the field salesforce is a substantial investment by many British companies, which at least equals marketing expenditures on advertising and sales promotion. The rationale for such investments is clear:

The importance of the sales organization is underscored by companies' continuous modifications to sales management strategies and sales organization variables in attempts to enhance or retain competitiveness, and the urgency of such changes appears greater in the current business environment. For example, multinational organizations like Colgate-Palmolive, Compaq Computer, IBM, Proctor and Gamble, Xerox and Kraft are illustrative of the many that have recently undertaken major sales organization restructuring in the search for greater effectiveness and competitiveness. While these changes vary in scope from simply changing account assignments, reallocating product responsibilities or making adjustments in sales coverage, through to the large-scale refocusing of entire salesforces, such realignments indicate a significant topic for analysis.

Research conducted with leading sales organizations in Europe, Japan and North America indicates that performance pressures are requiring sales organizations to respond quickly to new challenges, create innovative strategies and acknowledge that past premises about business relationships may be faulty in the contemporary selling environment. In the USA, for example, a recent survey of sales managers in major corporations indicated that imperatives for change in sales organizations come from factors such as:

One customer-oriented selling requires more varied types and sophisticated salespeople;

Two flexibility and quick decision-making requires infrastructural change away from traditional bureaucratic forms;

Three corporate restructuring to remove traditional barriers between manufacturing, sales, logistics and customers;

Four budget restrictions causing greater scrutiny of the sales process for effectiveness and profit contribution;

Five the need to organize field units to fit with different market segments requiring different selling approaches, managerial structures, and compensation systems.

However, much past research in the sales management field has attempted to provide a basis for improving sales performance and effectiveness primarily by studying the determinants of the individual salesperson's performance. Unfortunately these studies have typically resulted in low levels of explanation. As a consequence, a small but expanding stream of research has been focused on the importance of such situational contingencies as sales-management control systems and sales territory design choices, as moderators and/or determinants of the performance of salespeople and the effectiveness of sales organizations. The analysis of such contingencies is manifested in research which focuses on sales management practices and sales organizations, rather than the characteristics of individual salespeople. The present British study contributes to this emerging stream of research.

Surprisingly, despite these indications of significant organizational changes in major companies, combined with growing research interest in sales management processes, as well as general recognition of the importance of the design of marketing organizations, the design of sales territories has received remarkably little research attention. Indeed, in spite of considerable interest in sales-management control activities and salesforce effectiveness, even less attention has been paid to the potential interaction between these variables and sales-territory design issues. This oversight is significant, particularly if put in the context of the major role of selling activities in many organizations, the correspondingly high expenditures on the sales function and the impact of salesforce performance on customer satisfaction and the financial effectiveness of the company. It is also important in the light of the call for coherence in the control and organizational 'signals' sent to salespeople.

Drawing on the research stream represented by new studies carried out in other countries, the purpose of this research is to examine important relationships between sales management control, sales territory design, salesforce performance and sales organization effectiveness, in a sample of British companies. This contribution also adds to the very limited amount of sales management research conducted in Britain and throughout Europe, and attempts to identify commonalities and differences between the findings in Britain and studies in other cultures. This research study is significant in establishing benchmarks specific to the British context, rather than assuming the general applicability of study findings from other countries. Hypotheses are developed below and methods and results are discussed, leading to a discussion of management implications and important research directions.