Business / Management Systems: Behavior Control And Output Control
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Autor: anton 26 June 2011
Words: 1336 | Pages: 6
Behaviour-control and output-control are opposing methodologies managers employ in control-systems. Organizational requirements are determined by size, goals and other variables. Control-systems are mechanisms Ð²Ð‚Ñšfor adjusting course if performance falls outside acceptable boundariesÐ²Ð‚Ñœ (Davidson & Griffin, 06), allowing adaptation to change. They include procedures for Ð²Ð‚Ñšmonitoring, directing, evaluating and compensating employeesÐ²Ð‚Ñœ, and influencing behaviors with the objective of having the best impact on both firms and employeesÐ²Ð‚â„¢ (Anderson & Oliver, 87).
Control-systems are divided into those monitoring outcomes, and those monitoring the individual stages of a process (behaviors), Ð²Ð‚Ñšmany sales-force systems are a mix of behavior and outcome-based controlÐ²Ð‚Ñœ. Choosing a system is dependent on Ð²Ð‚Ñšthe relative costs of measuring behavior versus outcomes and the various forms of uncertainty that creates risk in the environmentÐ²Ð‚Ñœ (Anderson & Oliver, 87). Ð²Ð‚ÑšOrganizations can choose to screen employees at the gate, incur high screening and staffing costs, and then rely on output controls. Or, organizations can be less selective in choosing employees, and rely on behavior controls by investing heavily in monitoring and training systemsÐ²Ð‚Ñœ (Challagalla & Shervani, 97). Different systems have their own relative impacts on organizations.
Managers monitor employee behaviors, directing and evaluating based on subjective measures of abilities and activities; not just outcomes. The manager makes sure that employee input and behavior reflects his expectations. Results should be at a certain level, long term, if the employee is deemed to be following the defined behaviors of the firm. Ð²Ð‚ÑšTo ensure cooperation the firm pays largely on a fixed basis (salary). The firm assumes risk to gain controlÐ²Ð‚Ñœ (Anderson & Oliver, 87). This attracts the risk-averters who are contented with a secure source of income and happy to follow direction and have performance reviews. Along with this shelter and security comes employee loyalty and commitment to firms.
Managers make decisions to increase or decrease salaries, promote or sanction employeesÐ²Ð‚â„¢ using Ð²Ð‚Ñšmore complex, subjectiveÐ²Ð‚Ñœ evaluations based on behaviors not measurable outcomes (Anderson & Oliver, 87). Managers dictate the level of performance required, not market pressures. Management cost increases because more monitoring is required. In evaluating performance, certain variables are rated, including Ð²Ð‚Ñšroutine activities like daily call-rateÐ²Ð‚Ñœ, and capabilities, Ð²Ð‚Ñšskills and abilities like negotiation, presentation, interpersonal-communicationÐ²Ð‚Ñœ, product knowledge etc (Challagalla & Shervani, 97). Behavioral-control Ð²Ð‚Ñšoperates in Ð²Ð‚?real timeÐ²Ð‚â„¢ during task executionÐ²Ð‚Ñœ (Abernethy & Brownell, 97), which allows for consistent, perpetual updates to strategy, whereas output-control only allows for periodic assessment.
Behavior-systems afford managers more control over employees through interaction and relationships, employee participation and corporate culture. Managers impose their own ideas of Ð²Ð‚Ñšwhat salespeople should be and do to achieve resultsÐ²Ð‚Ñœ. Managers can have employeesÐ²Ð‚â„¢ focus on the firmsÐ²Ð‚â„¢ long-term strategy as opposed to their individual goals to earn maximum commission seen in outcome-based systems. Emphasis is placed on enhanced customer service, goodwill and reputation, and Ð²Ð‚Ñšpioneering new product linesÐ²Ð‚Ñœ instead of focusing on the products that are easier to sell. Ð²Ð‚ÑšManagers can direct salespeople to perform behaviors as part of company strategyÐ²Ð‚Ñœ, this enables development (Anderson & Oliver, 87).
Behavioral-systems Ð²Ð‚Ñšeliminate inequities that arise using output measuresÐ²Ð‚Ñœ, when Ð²Ð‚Ñšfactors beyond employee control have major impacts on resultsÐ²Ð‚Ñœ. Whilst subjective judgments are often considered bias, situations can arise in which they are necessary to adjust evaluations (Anderson & Oliver, 87).
In firms that have high levels of training (firm-specialization), Ð²Ð‚Ñšwhen experience with organizations creates valuable specialized-knowledge and relationshipsÐ²Ð‚Ñœ these employees are valuable and irreplaceable. Ð²Ð‚ÑšWith outcome control and little credible threat of replacement, management may have a lack of actionable alternativesÐ²Ð‚Ñœ, if there is Ð²Ð‚Ñšhigh uncertainty and irreplaceable salespeopleÐ²Ð‚Ñœ (Anderson & Oliver, 87) the behavioral-control system is necessary.
Experienced managers prefer behavior-control, they are confident in their ability to direct effectively. Ð²Ð‚ÑšEgo considerationsÐ²Ð‚Ñœ are used in behavioral-systems to avoid issues arising from error or shortcomings because managers Ð²Ð‚Ñšmay not know what behavior to exercise to achieve desired resultsÐ²Ð‚Ñœ (Anderson & Oliver, 87). Behaviour-control Ð²Ð‚Ñštends to blur the distinction between descriptive and normative theoryÐ²Ð‚Ñœ in that it Ð²Ð‚Ñšembraces the rational assumption: managers use the practices that are best for firmsÐ²Ð‚Ñœ (Snell, 92). Managers are required to know exactly which directives have the best impact on their firm, this is unlikely.
Behavioral-control has disadvantages wherein complex and Ð²Ð‚Ñšsubjective ratings of salespeople by managers introduce bias, ignorance, halo effects, and lack of credibilityÐ²Ð‚Ñœ in evaluation. ManagersÐ²Ð‚â„¢ beliefs can be perceived as unfair, Ð²Ð‚Ñša brash salesperson who outsells a more personable, high effort compatriotÐ²Ð‚Ñœ would not be as highly valued in a behavioral-system as they would in an outcome-system (Anderson & Oliver, 87). As complexity increases more strain and cost is placed on management.
The output-control system involves objective measuring of results with little direction creating a semi-autonomous relationship with management. Salespeople are allowed to achieve using individual strategies and held accountable for results only. Market pressure dictates performance, reducing managerial costs, and making each salesman an Ð²Ð‚ÑšentrepreneurÐ²Ð‚Ñœ (Anderson & Oliver, 87). Rewards are Ð²Ð‚Ñšin direct proportion to each individuals performanceÐ²Ð‚Ñœ (Anderson & Oliver, 87), most commonly commissions. Judging is simple; output is quantified and related to the employee who generated it.
Selling is an independent task; employeesÐ²Ð‚â„¢ are often geographically separated from management making Ð²Ð‚Ñšsupervision difficultÐ²Ð‚Ñœ. Ð²Ð‚ÑšSalespeople are replaced if they failÐ²Ð‚Ñœ, therefore firms must provide greater compensation for risk assumed. The firm enjoys high performance salespeople, yet remains flexible by minimizing overhead. Risk and reward is placed with individuals and they develop Ð²Ð‚ÑšlonerÐ²Ð‚Ñœ attitudesÐ²Ð‚Ñœ and disloyalty. Firms Ð²Ð‚Ñšare perceived as exploitative of resultsÐ²Ð‚Ñœ, employeesÐ²Ð‚â„¢ Ð²Ð‚Ñšexpress a willingness to switch employers readilyÐ²Ð‚Ñœ (Challagalla & Shervani, 97) if they are displeased. High employee turnover can be detrimental to any firm.
Output-control induces Ð²Ð‚Ñšcompelling individual motivation in that non-producers receive no compensationÐ²Ð‚Ñœ. I believe that this only applies to employeesÐ²Ð‚â„¢ desiring greater risk and reward. Many individuals prefer Ð²Ð‚Ñšbeing freed from short-term pressures and being rewarded for desired behaviorsÐ²Ð‚Ñœ (Anderson & Oliver, 87) in behavioral-systems.
Outcome-control has disadvantages; employeesÐ²Ð‚â„¢ behave in a manner that is detrimental to firms in the long-run, having no desire to provide customer service, to create good reputation or to sell newly devised products with no consumer loyalty. They focus on prospects with immediate returns. To counteract this, managers need to employ more subjective measures of judging employees, no longer using the simplistic output-control system. Furthermore Ð²Ð‚Ñšit is less expensive for the risk neutral firm to assume risk (via salary) than to pay high commission rates that risk averse individuals will demandÐ²Ð‚Ñœ as compensation (Anderson & Oliver, 87).
Certain variables should be considered when deciding between outcome and behavior-control. For long-run objectives in large firms with big markets - positive reputation, comprehensive product knowledge and firm-specialized employees are necessary. These employeesÐ²Ð‚â„¢ are expensive to replace so managers need to be able to exercise control over them. Employees should feel integrated and be intrinsically motivated. Ð²Ð‚ÑšIn behavior based systems the agencyÐ²Ð‚â„¢s interest comes first because it is the agency that shelters from riskÐ²Ð‚Ñœ, gaining loyalty. EmployeesÐ²Ð‚â„¢ needs are ranked after the firm. Employees donÐ²Ð‚â„¢t perform as well output-wise but they serve future goals and focus on customer satisfaction. Therefore Ð²Ð‚Ñšrisk averse orientationÐ²Ð‚Ñœ and Ð²Ð‚Ñšintrinsically motivated environmentsÐ²Ð‚Ñœ (Anderson & Oliver, 87) are desirable. Maintaining this complex system is often very costly, but salaries are less risky opposed to commissions.
Behavior-control is expensive and can be cost ineffective for companies operating in small markets with little money at stake. In a small business, concerned with sales output at present, output-control is preferential. It attracts the best salespeople, willing to accept risk, relying on their stronger abilities to earn commissions. These employeesÐ²Ð‚â„¢ rank their personal needs ahead of the firm and feel no loyalty as it offers them no protection. Outcome-control is simplistic and cheap to maintain, but commissions can be relatively expensive.
In general, Ð²Ð‚Ñšenvironmental uncertainty, difficulty in the quantification of sales outcomes, and risk averse, firm-specialized, or intrinsically motivated salespeople argue for behavior controlÐ²Ð‚Ñœ whereas Ð²Ð‚Ñšsmall firms with high relative measurement costs and direct links between sales effort and performance argue for outcome controlÐ²Ð‚Ñœ. In Summation, Ð²Ð‚ÑšNo single control system is the best in all circumstancesÐ²Ð‚Ñœ, therefore Ð²Ð‚Ñšwe should ask under what circumstances each system functions wellÐ²Ð‚Ñœ (Anderson & Oliver, 87).
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