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 “for adjusting course if performance falls outside acceptable boundaries” (Davidson & Griffin, 06), allowing adaptation to change. They include procedures for “monitoring, directing, evaluating and compensating employees”, and influencing behaviors with the objective of having the best impact on both firms and employees’ (Anderson & Oliver, 87). Control-systems are divided into those monitoring outcomes, and those monitoring the individual stages of a process (behaviors), “many sales-force systems are a mix of behavior and outcome-based control”. Choosing a system is dependent on “the relative costs of measuring behavior versus outcomes and the various forms of uncertainty that creates risk in the environment” (Anderson & Oliver, 87). “Organizations 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 systems” (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. “To ensure cooperation the firm pays largely on a fixed basis (salary). The firm assumes risk to gain control” (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 employees’ using “more complex, subjective” 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 “routine activities like daily call-rate”, and capabilities, “skills and abilities like negotiation, presentation, interpersonal-communication”, product knowledge etc (Challagalla & Shervani, 97). Behavioral-control “operates in ‘real time’ during task execution” (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 “what salespeople should be and do to achieve results”. Managers can have employees’ focus on the firms’ 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 “pioneering new product lines” instead of focusing on the products that are easier to sell. “Managers can direct salespeople to perform behaviors as part of company strategy”, this enables development (Anderson & Oliver, 87).
Behavioral-systems “eliminate inequities that arise using output measures”, when “factors beyond employee control have major impacts on results”. 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), “when experience with organizations creates valuable...
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