The effect of salespersons motivation on role perceptions and role performance in the telecommunications sector in Mexico

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(1)Biblioteca. C...,.. C...., d. lW.-,. INSTITUTO TECNOLÓGICO Y DE ESTUDIOS SUPERIORES DE MONTER.REY CAMPUS CIUDAD DE MÉXICO. The Effect of Salespersons Motivation on Role Perceptions and Job Performaince in the Telecommunications Sector iin Mexico DOCTORADO EN CIENCIAS ADnnlNISTRATIVAS. TESIS PRESENTADA POR JORGE PEREZ RUBIO AGUILAR OCTUBRE 2009.

(2) Instituto Tecnológico y de Estudios Superiores de Monte1Tey Can1pus C,iudad de México. The Effect ofSalespersons Motivation on Role Perceptions and Job Performance in the Telecommunications Sector in Mexico. TESIS QUE PARA RECIBIR EL TÍTULO DE DOCTORADO EN CIENCIAS ADMINISTRATIVAS PRESENTA. Jorge Pérez Rubio Aguilar Director de tesis: Rajagopal, PhD Lectores: Dra. Imarú Arías Dr. Carlos Morales Troncoso México D.F, 21 Octubre 2009.

(3) THE EFFECT OF SALESPERSONS MOTIV ATION ON ROLE PERCEPTIONS AND JOB PERFORMANCE IN THE TELECOMMUNICATIONS SECTOR IN MEXICO. ABSTRACT. This study has been conducted in Mexico and discusses the effect of salesperson motivation on role perception and job performance in the telecommunications sector in Mexico. In spite of the unquestionable importance of it, being one of the youngest sectors of the economy of the country with an existence of only a decade, very little has been investigated in regard to the salesperson performance amongst the cluster of companies competing in the same arena. The analysis on effects on salesman motivation and job performance has been vastly explored in many other geographical contexts but there is no solid evidence of such a type of analysis for the Mexican Industrial sectors and particularly one for such a young sector as the telecommunications deregulated environment which was non-existent a decade ago. This particular investigation project provides initial insights on this important topic in the context of companies working in Mexico where literally no investigation work has been done. Although global interna! motivation has been demonstrated to mitigate role conflict and role ambiguity, a more integrative approach would incorporate the cognitive and affective dimensions of interna! and externa! (1/E) motivation. The differential impact of the cognitive and affective dimensions of 1/E motivation on job performance is theorized as partially mediated by role perceptions. Moreover, to better understand the distinct impact of role conflict and role ambiguity on job performance, this investigation captures both dimensions of the performance measure-behavioral and outcome performance. (Miao, F; Evans, K, 2007). Main reasons considered in the decision of developing the study: The importance of the industry in the economy of the country (Mexico). No other industry has invested more than the High-Tech one, which includes IT and Telecommunications sectors: 50 B US dollars in the last decade, Sales growth in sorne businesses have reached levels of more than 100 percent per annum, One of the sectors with more job rotation over the same period, about 20% of hired salesmen leave the company in less than 18 months, The hit-rate has never been as low as it is today. Less than 10 percent (closed sales vs total opportunities) and finally the sector pays above industry average.. 1.

(4) The role attached to the position of salesman in any firm represents the set of activities or behaviors to be performed by any person occupying that position. This role is defined largely through the expectations, demands, and pressures communicated to the salesman by his or her role partners. Top management, the individual's supervisor, custorners, and family members. The salesperson's perceptions of these expectations strongly influence the individual's definition of his or her role in the company and behavior on the job.. The role perceptions component of the model has three dimensions: role accuracy, perceived role conflict, and perceived role ambiguity. The term role accuracy refers to the degree to which the salesperson's perceptions of his or her role partners' demands - particularly company superiors - are accurate. Perceived role conflict arises when a salesperson believes the role demands of two or more of his of her role partners are incompatible. Thus, he or she cannot possibly satisfy them all at the same time, for example, when a customer demands a delivery schedule or credit terms the sales rep believes will be unacceptable to company superiors. Perceived role ambiguity occurs when salespeople believe they do not have the information necessary to perform the job adequately. The salespeople may be uncertain about what sorne role partners expect of them in certain situations, how they should satisfy those expectations, or how their performance will be evaluated and rewarded. The study will focus on role perception and role ambiguity.. These variables have psychological consequences of the individual salesperson. They can produce dissatisfaction with the job. They can also affect thc salesperson's motivation (Hartenian, Hardaway, 1994). All these effects can increase turnover within the sales force and hurt performance.. Role perceptions affect salesperson performance in many ways. Feeling of ambiguity, conflict, and inaccurate role perceptions can cause psychological stress and job-related anxiety for salespeople. These, in tum, can lead to lowered performance. The kind of salespeople that are hired, the way they are trained, the incentives used to motivate them, the criteria used to evaluate them, and the way they are supervised can ali affect perceptions of role.. What makes understanding and managing role perceptions even more complicated is that not all the consequences of role ambiguity, role conflict, and role accuracy are negative. Creating 2.

(5) sales positions that eliminate ambiguity and conflict can reduce the "challenge" for a salesperson and actually limit long-term performance.(Brown,Petcrson, 1993). Most industrial and organizational psychologists view motivation as a general label referring toan individual's choice to (1) initiate action on a certain task, (2) expenda certain amount of effort on that task, and (3) persist in expending effort overa period of time. For the purpose of this project, motivation is viewed as the amount of effort the salesperson desires to expend on each activity or task associated with the job. A nwnber of theori,es of motivation do exist, and most of them are useful for explaining at least a part of the motivation process.. This study suggests a number of opportunities for future research. While the cognitive and affective dimensions of 1/E motivation have been demonstrated to have a distinct impact on role perceptions and sales performance, future research might measure motivation using both our conceptualization and the classic Vroom's approach (i.e., motivation as a multiplicative function of expectancies, instrwnentalities, and valence for rewards) such that results can be compared and contrasted. Moreover, it has been suggested that different industries or job characteristics require different selling strategies (Moncried 1986).. The extent to which. different cognitive and affective dimensions of 1/E motivation fit different industry/job characteristics offers an opportunity for future investigators. Another important question is whether the cognitive and affective dimensions of 1/E motivation are stable traits or can be influenced by managerial practice such as sales force control systems (e.g., Anderson and Oliver 1987), the answer to which bears important theoretical and managerial implications. Finally, research attention directed toward salesperson motivation and role perceptions in the cross-cultural setting is limited. Intemational marketing researchers are encouraged to investigate the applicability of our results in their future research endeavors.. In summary, this study provides a more expansive view of the rnle of salespeople's intrinsic motivation.. Investigating the cognitive and affective dimensions of the 1/E motivation. framework, we found important implications as to how salesp,erson motivation affects role perception and job performance.. These findings should serve to direct future research. regarding a salesperson's 1/E motivation in the context of the Mexican market.. 3.

(6) Table of contents l. INTRODUCTION. 1.1 MOTIVATIONS, CHARACTERISTICS AND CONTRIBUTIONS OF THE STUDY 1.2 SALESPERSON ROLE IN COMPANY PERFORMANCE 1.3 THE PSYCHOLOGICAL PROCESS OF MOTIV ATION 1.4 TELECOMMUNICATIONS AS AN ECONOMY DRIVJ[NG FORCE 1.4.1 THE TELECOMMUNICATIONS SECTOR IN MEXICO 2. LITERA TURE REVIEW 2.1 CONTRIBUTIONS OF STUDIES IN SALESPERSON MOTIVATION 2.2 CONTRIBUTIONS OF STUDIES IN ROLE PERCEPTIONS 3 RESEARCH METHODS 3.1 PROPOSED MODEL FOR ANAL YSIS 3.2 RESEARCH APPROACH 3.3 RESEARCH QUESTIONS AND HYPOTHESES 3.4 SAMPLE SELECTION 3.5 INSTRUMENT DESIGN 3.6 MEASURES OF CONTRUCT 4. RESULTS S. MANAGERIAL IMPLICATIONS 6. REFERENCES 7. APPENDICES. 4.

(7) l. INTRODUCTION. Performance of salesperson in a company has emerged as a principal parameter to improve the market share and competitive advantage of the company in the marketplace. With the increase in competition the companies are struggling hard to capture their share in the existing market and also finding ways to tap the untapped market to enlarge their market size. the analysis on effects on salesman motivation and job performance has been vastly explored in many other geographical contexts but there is no salid evidence of such a type of analysis for the Mexican Industrial sectors and particularly one for such a young sector as the telecommunications deregulated environment which was non-existent a decade ago. This study explores managerial insights on this important perspective in the context of companies working in Mexico where literally no investigation work has been done. Sales managers are undergoing the pressure of achieving the targets fixed by their management. They in turn pass on the pressure to the lower level management, p·~rsonnel and in turn to the Sales force of the companies, but unfortunately the Sales Managers fail to understand the inputs that they have to provide to the Sales representatives from the company side facilitating the Salesmen to canvass orders for the company. It is clear that sales performance requires effective administration in a phased manner to resolve conflicts and ambiguities during the negotiation process (Rajagopal, 2007). The companies are trying to exploit the qualified sales professionals by misleading them with attractive monetary packages but not providing the need satisfying product for which a purchase is made by the buyer. This results in unethical selling practices adopted by the salesmen or otherwise results in frustration among the genuine professionals. This problem has several other dimensions including non-monetary benefits such as motivation and job enrichment to fulfill the task. Based on the tangible and intangible components involved in the necd satisfaction process of a particular customer, the profile of the salesman is different and the s,~t of things to be carved to guarantee at least partially, his motivation on the job and his performance are also of a different nature. The scope of this work, focuses on the high-tech services sector within the Mexican telecommunications business.. 5.

(8) ORGANIZATION OF THE SALES FORCE IN TELECOMMUNICATION INDUSTRY IN MEXICO AND THE EXPECTATIONS OF THE SALESPERSON FROM THE COMPANY Organization of sales force in Mexican companies are largely controlled administratively and do not possess functional autonomy. Salespersons are expected to have promising behavior intending to offer a pleasant, positive and rewarding scenario of tbe situation under discussion and the unpleasant consequences are kept undisclosed. The members of the sales tearn tend to avoid any negativity in their conversation as far as possible. Sales tearn culture in general is embedded with 5-T power-grid comprised of a synergy of task ( commitment), thrust (driving tearn), time (punctuality), target (retailers and large accounts), and territory (market coverage), which are weak in Mexican salespersons and affect their overall performance. SMART variables are considered to administer sales tearns which include-strategy orientation, measurability, approach, reality and time frame. Tearns which need to work within an organization and across functional activities such as sales, marketing, purchasing, personnel and finance find that tearn working fosters as collaborative tool rather than a competitive approach. The SMART variables may be considered to administcr sales tearns which includestrategy orientation, measurability, approach, reality and time fnLille. The strategy orientation would drive the brainstorming discussion to result orientation and the measurability would count on the success of the deliberations. Besides SMART variable five essential qualities of aesthetic judgment which include interest, subjectivity, exclusivity, thoughtfulness, and internality need to be nurtured arnong consumers to develop conviction in buying. The quality of aesthetic judgment driven by in-store aura and arousal on new products, exercised by the customers in association with the sales people, will determine the ,~xtent to which new products and brands promoted enhances quality of life. In order to better understand why the average sales hit rate (percent ratio of: total sales opportunities closed/ total of sales opportunities) is normally so low, lets review the knowledge portfolio a salesman must handle to be successful. When selling products of the services Sector, Salesmen expects the company do a profound explanation of the so-called traditional marketing mix of Product, Price, Place, and Promotion plus three additional P' s: People, Physical evidence and Process.. 6.

(9) Product The essential offering of the company must be clearly transmitted to the salesperson. lt is of outmost importance to guarantee if he or she fully understand issues as: - Whether the quality of the product is to the expectations of the user - Whether the company ask him to sell the product variety which the user wants - Whether the company's product posses unique features compared to competitors - Whether the company is selling / planning to sell its products using Unique Selling Proposal - Whether there is less competition for the company's product / brand in the market - Whether the company is having adequate production capacity / procuring capacity to supply to the orders received. Price Today companies must be able to find a value added position to avoid pricing wars with the competitors in the same product-market. The extemal arm of the company, that is the salesperson, most be able to address a solution based position in order to overcome the over the counter low pricing scheme. To accomplish this task, tht: salesperson most know: - Whether the company prices the product taking into com:ideration the pnce of the competitors - Whether the company pnces the product properly taking into consideration the reasonableness Whether. and the. company. reach uses. ability Promotional. of pncmg. the. targeted. strategy. when. customers need. ar1ses. - Whether the company follows discipline while quoting prices to the users when the users contact directly or through the salesman. Place Today, the sales arena is not between compan1es but between companies with the best distribution network. Thus a company and top sales management must know:- Whether the salesman is made to work in the territory where people with need, people with capacity to huy and people with willingness to huy exist.. 7.

(10) - Whether the Market Demand Potential exceeds the Supply position in the territory where the Salesman is going to work - Whether the company is having effective distribution network to make the product available to the users when they want the product and the place where they want the product - Whether the company has made arrangements for the salesman to travel easily in the territory allotted to him to canvas business or otherwise whether ammgements are made by the company for the salesman - Whether the company provides initial training to the salesman to get familiarized with the territory / distributors of the territory and others. Promotion. In tight scenarios with restricted budgets, a company must seek for the best combination to manage the integrated marketing strategy, It must know: - Whether the company releases enough Advertisements to create awareness among probable customers, develop interest among potential customers, help the prospective customers in their decision making and reinforce the repeat buying of the permanent customers in the territory in which the salesman is going to work - Whether the company provides enough sales offers to the retailers I users like competitors - Whether the company has good image in the minds of the customers which would have been developed through image I brand building activities carried out by the company. When selling the products of the Services Sector: The salesman expects all the abo ve from the company and also the following when he is selling the product I service of the services sector industry Peo ple. - Whether the company employs personnel with the required qualifications and skill to execute the operations to the satisfaction leve) of the customers - Whether the personnel engaged in the operations are friendly while executing the operations - Whether the personnel employed in the company are committed.. 8.

(11) Physical evidence - Whether the infra structure of the premise is attractive to bring customers to the company - Whether the service area is accessible to avail the service. Process - Whether the process adopted by the service provider is of latest / proven technology which ensures expected results - Whether the process being adopted by the service provider of the company is not banned by the Government authorities As mentioned, basically all the above factors provided by the company should be to the acceptable level for a salesman to be a successful salesman OTHER SUPPORTS NEEDED FROM THE COMPANY TO THE SALESMAN The following factors will also contribute to motivate a salesman to be successful - Good working environment - Good remuneration package - Attractive incentive schemes - Bright future job prospects - Proper Training - Sales kit - Clear Job description. By enforcing the motto of "the quota is the quota", company management leaves aside a good induction process to new salesman coming on board, thus, cultivating a short term scenario of sales failures and the presence of a negative motivation attitude on the sales force, with a clear drop on sales performance. In swnmary, companies are fixing Sales Quotas to the Salesmen by tempting attractive incentives without rectifying the basic defeci:s of them in terms of the seven elements of the services marketing mix, as included in the previous paragraphs. The Salesmen also without knowing the weaknesses of the company and its product agree to sell and achieve high sales quotas. After entering into the market to sell the product only they come 9.

(12) to know about the such specific problems, say after spending one or two years of their young and energetic period of their life. For not achieving the target the Salesmen are punished and the frustrated Salesmen loose their confidence in their profession :for no fault of them.. 1.1 MOTI VATIONS, CHARACTERISTICS AND CONTRIBUTIONS OF THE STUDY. Although global internal motivation has been dcmonstrated to mitigate role conflict and role ambiguity, a more integrative approach would incorporate the cognitive and affective dimensions of internal and external (1/E) motivation. The differcntial impact of the cognitive and affective dimensions of 1/E motivation on job performance is theorized as partially mediated by role perceptions. Moreover, to better understand the distinct impact of role conflict and role ambiguity on job performance, this investigation captures both dimensions of the performance measure-behavioral and outcome performance. (Miao; Evans, 2007). Reasons determining the salesperson performance in reference to motivation and other cognitive variables are considered in conceptualizing this study as listed below:. The importance of the industry in the economy of the country (Mexico) No other industry has invested more than the High-Tech one, which includes IT and Telecommunications sectors. 50 B US dollars in the last decade .. Sales growth in sorne businesses have reached levels of more than 100% per annum. One ofthe sectors with more job rotation over the same period. About 20% of hired salesmen leave the company in less than 18 months. The hit-rate has never been as low as it is today. < 10% (closed sales vs total opportunities) The sector pays above industry average.. Source: Secretaria de Comunicaciones y Transportes, secretary annual report, 2008.. The boundary-spanning role of salespeople, which is frequently steeped in ambiguity, places them in vitally important and often uncertain positions within the selling firm (e.g., Singh 1998). In a meta-analysis conducted by Churchill et al. (1985), a salesperson's role perceptions (i.e., role conflict and role ambiguity) and motivation were found to be among the strongest determinants of sales performance. To the extent that the selling environment inherently entails role conflict and role ambiguity, management's ability to ,:ontrol and reduce these role 10.

(13) stressors, especially role conflict, is limited (Flaherty, Dahlstrom, and Skinner 1999; Hartline and Ferrell 1996; Walker, Churchill, and Ford 1975). Sorne studies have found that the salesperson's global intrinsic motivation significantly reduces perceived role conflict and role ambiguity within the motivation-role perceptions-performance framework (Grant et al. 2001; Low et al. 2001 ), but few studies have attempted to investigate the effect of salesperson' s extrinsic motivation-an important driving force behind salesperson's performance (e.g., Tyagi 1985}--on these role stressors.. Salesperson motivation has been identified in terms of global i:ntrinsic and extrinsic (1/E) motivation in the sales and marketing literature (e.g., Anderson and Oliver 1987). Global intrinsic motivation is defined as "the pleasure or value of an activity itself," while global extrinsic motivation "emphasizes the value an individual places on the results of an action and the individual's assessment of the probability of realizing the results" (lngram, Lee, and Skinner 1989, p. 26). Although literature has suggested that global 1/E motivation should have distinct antecedents (e.g., differential impact of sales control on intrinsic motivation, see Challagalla and Shervani 1996) and consequences (e.g., distinct impact of 1/E motivation on sales performance, see Weitz, Sujan, and Sujan 1986), empirical results using global 1/E motivation have been inconclusive (e.g., Ingram, Lee, and Skinner 1989; Leach, Liu, and Johnston 2005; Tyagi 1985). Research in social psychology has demonstrated that global 1/E motivation is composed of cognitive and affective dimensions tbat have distinct, and even opposite, consequences (Amabile et al. 1994).Therefore, relying on global 1/E motivation without incorporating a multidimensional perspective may have compromised marketing researchers' ability to uncover important relationships among 1/E motivation-role perceptionsperformance. For instance, if the cognitive and affective dimensions of extrinsic motivation indeed have opposite effects on role conflict, such a relationship may become elusive if we employ global 1/E motivation. This study, therefore, investigates the extent to which the cognitive and affective dimensions of 1/E motivation have a distinct impact on (1) role perceptions and (2) sales performance within the established nomological net of motivationrole perceptions-performance (e.g., Grant et al. 2001; Low et al. 2001).. 1.2 ROLE OF SALESPERSON IN DRIVING COMPANY PERFORMANCE.. Understanding salesman performance- Why is it important for sales management? It is considered extremely important to the sales manager, Sales management involves three interrelated processes. 11.

(14) •. The formulation of a sales program.. •. The implementation of the sales program.. •. The evaluation and control of sales force performance.. Almost everything the sales manager <loes can influence sales performance. For example, the way the sales manager organizes and deploys the sales force can affect salespeople's perceptions of the job. How the manager selects salespeople and the kind of training they receive can affect the aptitude and skill of sales personnel. The compensation program and the way it is administered can influence motivation levels and overall sales performance. The model offers the sales manager a tool for visualizing the effects of his or her activities and for appreciating the interrelated roles of the options under his or her command. EXHIBIT 1.1 Model: Determinants of Salesman's Peñormance r;;-rsonal, Organlzatlonal & Envlronmental variables. Satlsfactlon. Rewar s lnternally medlated Externa! medlated. lntr1nslc Extrlnslc. Source: Churchill, Johnston, 2003 Salesforce Management. 6th editiO'l. THEMODEL. The literature on industrial and organizational psychology suggests a worker's job performance is a function of five basic factors: (1) role perceptions, (2) apt:itude, (3) skill level, (4) motivation, and (5) personal, organizational, and environmental variables. (Brown, Cron, 1997) The success of any salesperson is a complex combination of these forces, which can positively (or negatively) influence his or her performance. (Please refer to exhibit 1). Although not pictured in the model, substantial interaction occurs among the determinants. Much of the published literature, for example, holds that the various factors combine and 12.

(15) interact to influence performance. The rationale is that is a worker is deficient in any of these factors, the individual could be expected to perform poorly. If the salesman had native ability and the motivation to perform but lacked understanding of how the job should be done, for example, he or she could be expected to perform at a low level. Similarly, if the salesperson had the ability and accurately perceived how the job should be performed but lacked motivation, the representative is likely to perform poorly.. The empirical research is somewhat equivocal about just how the factors interact, but it is fairly certain that the determinants are not independent. Substantial interaction effects exist among and between them. Although we know little about the fom1 or the magnitude of those interactions, we need to recognize that they do exist.. l. The Role Perceptions Component. The role attached to the position of salesman in any firm represcnts the set of activities or behaviors to be performed by any person occupying that position. This role is defined largely through the expectations, demands, and pressures communicated to the salesman by his or her role partners. Top management, the individual's supervisor, customers, and family members.. The salesperson's perceptions of these expectations strongly influence the individual's definition of his or her role in the company and behavior on the job.. The role perceptions component of the model has three dimensions: role accuracy, perceived role conflict, and perceived role ambiguity. The term role accuracy refers to the degree to which the salesperson's perceptions of his or her role partners' demands - particularly company superiors - are accurate. Perceived role conflict arises when a salesperson believes the role demands of two or more of his of her role partners are incompatible. Thus, he or she cannot possibly satisfy them ali the same time, for example, wht::n a customer demands a delivery schedule or credit terms the sales rep believes will be unacceptable to company superiors. Perceived role ambiguity occurs when salespeople believe they do not have the information necessary to perform the job adequately. The salespeople may be uncertain about what sorne role partners expect of them in certain situations, how they should satisfy those expectations, or how their performance will be evaluated and rewarded. 13.

(16) These variables have psychological consequences of the individual salesperson. They can produce dissatisfaction with the job. They can also affect the salesperson's motivation (Hartenian, Hadaway, 1994). All these effects can increase turnover within the sales force and hurt performance. However, roles stress (role conflict and role ambiguity) does not necessarily always imply a negative job outcome (i.e., increased turnover). Indeed, research suggests that a certain degree of role conflict and ambiguity enables salespeople to make creative decisions that can be beneficia! to the customer and the organization.. Industrial salespeople are. particularly vulnerable to role inaccuracy, conflict, and ambiguity.. Several personal and. organizational variables can affect people's role perceptions. Fortunately, many of these variables can be controlled or influenced by sales management policies and methods, thus allowing the sales manager to influence the performance of individual salespeople. (DeCarlo, Teas, 1997). 2. The Aptitude Component. The sales aptitude of an individual largely as a constraint on the person's ability to perform the sales job.. This assumes there is an adequate understanding of the role to be performed,. motivation, and leamed skills and an absence of other constraints. Many studies have found statistically significant relationships between the aptitude variabks and performance. However, the broad measures of aptitude by themselves have not been able to explain a very large proportion of the variation in sales performance. (Lamont, Lundstrom, 1997) Broad measures of aptitude may not predict sales performance for several reasons.. Consider first the. motivation component of the overall model. Motivation refers to the salesperson's desire to expend effort of specific sales tasks such as calling on new account or preparing sales presentations. This effort should lead to improved performance on one or more dimensions. The link between the effort a salesperson expends on any task and the resulting performance is affected by the salesperson's ability to carry out the successfully. In other words, the concept of sales ability or aptitude is very task-specific.. Therefore, the appropriate definition of. aptitude, and the appropriate measures of the construct, may vary greatly from industry to industry, firm to firm, and product line to product line. For example, selling highly technical products requiring an engineering background (e.g., building con:;truction) might demand math skills that an office supplies salesperson may not need to be successful.. 14.

(17) Aptitude of salespersons may affect performance in more ways than by simply moderating and individual's ability to do thejob. lt may also affect the salesperson's motivation to perform. lt seems, for example, that the salesperson's perceived ability to perform a task and general selfconfidence influence the individual's perceptions of whether increased effort will lead to improved performance. Furthermore, salespeople's intelligence and feeling as to whether they largely control their own destiny or whether this destiny is largely controlled by outside forces (interna} versus externa} locus of control) affect whether the repr1;:sentatives believe improved performance will lead to improvement in the rewards they desire. Thus, the salesperson' s intelligence and perceptions of this own ability as a salesperson may strongly influence the individual's motivation o expend effort on various aspects of the job. All this suggests that objective measures of sales aptitude may be insufficient by themselves. Predictions of sales performance could be improved by including measures of perceived aptitude as well.. 3. The Skill-Level Component. Role perceptions determine how well the salesperson knows what must be done in performing ajob, and aptitude determines whether the person has the necessruy native abilities. Skill level refers to the individual's leamed proficiency at performing the ne,:essary tasks (Leong, Busch, 1994) And include such leamed abilities as interpersonal skills, leadership, technical knowledge, and presentation skills. The skill sets of a salesperson for Lucent Technologies selling multi-million-dollar telephone switching equipment are di:fferent from someone selling BMW automobiles to consumers. The salesperson's past selling experience and the extensiveness and content of the firm's sales programs influence skill level.. 4. The Motivation Component. Motivation is viewed as the amount of effort the salesperson desires to expend on each activity or task associated with the job. These activities include calling on existing and potential new accounts developing and delivering sales presentations, and filling out orders and reports. The salesperson' s motivation to expend effort on any task seems to be a function of the person' s (i) expectancies and (ii) valences for performance. Expectancies are the salesperson's estimates of the probability that expending effort on a specific task will lead to improved performance on sorne specific dimension.. 15.

(18) For example, will increasing the number of calls made on potential new accounts lead to increased sales? Valences for performance are the salesperson's perceptions of the desirability of attaining improved performance on sorne dimension or dimem:ions. For example, <loes the salesperson find increased sales attractive?. A salesperson' s valence for performance on a specific dimension, in turn, seems to be a function. of the. salesperson' s (1). instrumentalities and (2). valences for rewards.. Instrumentalities are the salesperson's estimates of the probability that improved performance on that dimension will lead to increased attainment of particular rewards. For example, will increased sales lead to increased compensation? Valences for rewards are the salesperson's perceptions of the desirability of receiving increased rewards as a result of improved performance. Does the salesperson, say, find an increase in the compensation level attractive? A salesperson's expectancy, instrumentality, and valence perceptions can all affect the person's willingness to expend effort on a specific task or to engage in specific behaviors.. Sales. manager constantly try to find the right mix of motivation elements to direct salespeople in specific directions. The problem is particularly difficult becausc rewards that motívate one salesperson may not motívate another. There is the example of the manager of a leading consulting company in Chicago who gave his top performer a new mink coat.. The only. problem was that the individual did not wear fur. Rewarding the salesperson was a great idea, but the implementation ofthe reward led to problems for the sales manager. Moreover, what motivates a person at eme stage in his or her career may not motivate the rep during sorne other period. salesperson's expectancy, instrumentality, and valence perceptions are not directly under the sales manager's control. But they can be influenced by tings the sale manager <loes, such as how he or she supervises the salesperson or rewards the inclividual.(Quick, 1999) Since the salesperson's motivation strongly influences performance, the sales manager must be sensitive to how various factors exert their impact.. 5. The Personal, Organizational, and Environmental Variable Component. Influence sales performance in two ways: (1) by directly facilitating or constraining performance and (2) by influencing and interacting with the other performance determinants, such as role perceptions and motivation.. 16.

(19) 5.1 Organizational Variables. The discussion of the organization of the salesforce and the design of sales territories reviewed much of the evidence supporting the relationship between performance and environmental factors. These factors include company advertising expenditure:s, the firm' s current market share, and the degree of sales force supervision. There is a relationship between performance and environmental factors like territory potential, concentration of customers, the salesperson's workload, and the intensity of competition. Recent research reports that as salespeople are more satisfied with their territory's design and structure their performance increases.(Cravens, Lowe, 2002). Personal Variables. A few studies have found significant relationships between personal and organizational variables - such as job experience, closeness of supervision, performance feedback, influence in determining standards, and span of control - and the amount of role conflict and ambiguity perceived by salespeople.(Chonko,Tanner, 1992). Rewards. Job performance affects the rewards the representative receives. A company might evaluate its salespeople on total sales volume, quota attainment, selling expenses, profitability of sales, new accounts generated, services provided to customers, performance of administrative duties, or sorne combination of these.. Extrinsic rewards. Are those controlled and bestowed by people other than the salesperson, such as managers or customers. Such things as pay, financia! incentives, security, recognition, and promotion rewards that are generally related to low-order human needs. Intrinsic rewards that salespeople primarily attain for themselves.. are those. They include :mch things as feelings of. accomplishment, personal growth, and self-worth - all of which relate to high-order human needs.. 17.

(20) Satisfaction Job satisfaction characteristics of the job that representatives find rewarding, fulfilling, and satisfying, or frustrating and unsatisfying. (1) the job itself, (2) fellow workers, (3) supervision, (4) company policies and support, (5) pay, (6) promotion and advancement opportunities, and (7) customers. (Lagace,Goldsby, 1993). THE SALESPERSON'S ROLE PERCEPTIONS. Role perceptions affect salesperson performance in many ways. Feeling of ambiguity, conflict, and inaccurate role perceptions can cause psychological stress and job-related anxiety for salespeople. These, in tum, can lead to lowered performance. Thc kind of salespeople that are hired, the way they are trained, the incentives used to motívate them, the criteria used to evaluate them, and the way they are supervised can ali affect percé:ptions of role.. What makes understanding and managing role perceptions even more complicated is that not ali the consequences of role ambiguity, role conflict, and role accuracy are negative. Creating sales positions that eliminate ambiguity and conflict can reduce the "challenge" for a salesperson and actually limit long-term performance.(Brown,Peterson, 1993). The salesperson may suffer from perceptions of role ambiguity, role conflict, or role inaccuracy. Perceived role ambiguity occurs when representatives do not think they have the necessary information to perform the job adequately. Perceived role conflict exists when a salesperson believes the role demands of two or more members of the role set are incompatible. Perceived role inaccuracy arises when the salesperson's perceptions of the role partners' demands are inaccurate.. To understand why salespersons perform the way they do, it is necessary to understand what salespersons think the members of the role set expect. At this stage of the role definition process, three factors can interfere with a salesperson's job p1!rformance. As exhibit 1.2 suggests the salesperson may suffer from perceptions of role ambiguity, role conflict and role maccuracy.. 18.

(21) EXHIBIT 1.2. Sales Perceptions of the Job. ·--i--Role expec1atlons: Does role partner expect me to engage In that actlvlty? Role amblgulty:. Role confllc1:. Do I know what role partner expec1s wlth regard to that ac11vlty? Is there dlsagreement between. two of these role partners over the performance of that actlvlty?. 1 Role lnaccuracy:. Are the salesman's perceptlons of the demands belng placed upon hlm or her correc1?. Source: Churchill, Johnston, 2003 Salesforce Management.. Salesperson Behaviors. A final step to consider in the role definition process involves the salesperson's conversion of these role perceptions into actual behavior.. Both the sale:,person's job behavior and. psychological well being can be affected if there are perceptions of role ambiguity or conflict or if these perceptions are inaccurate. There is a good <leal of evidence, for exarnple, that high levels of both perceived ambiguity and conflict are directly related to high mental anxiety an tension and low job satisfaction. Also, the salesperson's feelings of uncertainty and conflict and the actions taken to resol ve them can have a strong impact on ultimate job performance.. Ata mínimum, the salesperson's performance is less likely to be consistent with management's expectations and desires when the representative is uncertain about what those expectations are, or believes that the customers or farnily hold conflicting expectations, or has inaccurate perceptions of those expectations.(Singh, 1993). Another important area to discuss is the personality factors. The process of meeting the responsibilities of sales managers in the direct supervision of assigned salespeople describes the control paramcters. Generally, a field sales manager may have the responsibility for sorne salespeople, who constitute the sales unit.. 19.

(22) In the process of behaviour control, the activities of monitoring, directing and evaluating sales persons, the efforts of sales managers are devoted to a greater extent as compared to the result ---oriented control (Anderson and Olivier, 1987). lt has been observed through empiricals investigations that the method of compensation and control system are important determinants of ethical behaviour while the age of the salesperson also proves to be a significant antecedent of ethical behaviour. The behaviour of a salesperson is an important predictor of salesperson and sales organizational consequences in developed countries studies. (babakus et al; 1996; Piercy, et. Al. 1999). Role Conflict and Ambiguity. Given that conflict and ambiguity produce dysfunctional psychological and behavioral consequences for salesmen, the next question is: can sales management do anything to hold conflicts and ambiguities at a manageable leve! or help the salesmen to <leal with them when they occur? Evidence suggests that experienced salesmen perceive less conflict than less-experienced salesmen (Walker,2003). Perhaps this is because salesmen who experience a great <leal of conflict become dissatisfied and quit, whereas those who stay on the job do not perceive much conflict.. Common Expectations and Key Areas of Conflict and Ambiguity. Different sales jobs reqmre different tasks and confere difforent demands on salesmen. Nevertheless, the empirical evidence prompts severa! major conclusions. (Maher,2001). 1. Different role partners emphasize different types of expectations. Salespeople see sorne role partners as being concemed with what they do - company superiors focus on the functional aspects of the job such as handling back charges and adjustments, expediting Orders and supervising installations.. Others are more concemed with how they do it - family. members are concemed about the salesperson's hours of work and personal relations with customer.. 2. Perceived role expectations are consistent among salespeople. Large proportions of sales representatives are consistent in their perceptions of what their company superiors and sales managers expect of them.. 20.

(23) The major area where sales representatives do not perceive simi:lar role expectations involves the demands of family members. These demands are much more likely to differ from one salesperson to the next than are the expectations of customers or company superiors. This suggests that no matter what the company expects in hours of work, relations with customers, travel, and the like, a substantial nwnber of its salespeople are likely to be in conflict with the expectations of their families. That is becoming an increasingly serious problem for today's workers.. 3. Most industrial salespeople seem fairly certain about what they are expected to do how their performance is being evaluated. However, substantial numbers are plagued by ambiguity concerning sorne aspect of their job and role partners. Sales reps say they are particularly uncertain about company policies, how company superiors are evaluating their performance, and what their sales managers expect.. In comparison, very few are uncertain about the. expectations or evaluations of customers or family members. This suggests customers and family members communicate their role expectations more effectively than company superiors do. Perhaps this is not surprising since a representative faces cu.stomers and family members almost daily, whereas company policies are communicated through infrequent sales meetings, written memos, and other less effective means.. 4. Most salespeople perceive conflicts between sorne company policies or expectations and their customers' demands.. Customers are usually seen as demanding more functions. performed by the salesperson, more services, more honesty, more liberal use of the expense account, and so forth. Sales managers and other company executives are seen as demanding that the salespersons hold down selling expenses and customers expect them to travel, work flexible hours, and be available to customers in the evenings and on weekends. Unfortunately, most representatives believe these expectations conflict with i:he desires of their families. Although job - family conflicts are not unique to salespeople, their pervasiveness in the sales force should be recognized as a major influence onjob satisfaction and performance.. Consequences of Conflict and Ambiguity. Most people experience sorne occasional role conflict and ambiguity. In small doses, role conflict and ambiguity may be good for the individual and the organization. 21.

(24) When there are no disagreements and no uncertainty associated with a role, people can become so comfortable in the position that they constantly strive to preserv1! the status quo. Sorne role stress, therefore, can lead to useful adaptation and change. In sum., there is a level of hostility below which conflict and ambiguity may be begin but above which they will be malign. Excessive role stress can have dysfunctional consequences, both psychological and behavioral, for the individual and the organization as Exhibit 1.3 indicates. Consider first:. Psychological Consequences When a salesperson perceives that role partners have conflicting 1!xpectations about how the job should be performed, the salesperson becomes the "person in the middle". Although both conflict and ambiguity affect job satisfaction negatively, they affoct it somewhat differently. Perceived role conflict primarily affects extrinsic job satisfaction, but has little or no effect on the intrinsic satisfactions salespeople derive from the job.(Teas,2003). Behavioral Consequences Perceived role conflict and ambiguity produce dysfunctional behav:ior consequences among the sales force. It is naYve to think that a happy worker is invariably a productive worker, but evidence collected from a variety of occupations suggests that a worker' s satisfaction influences job behavior. Role ambiguity and role conflict even affect whether sales managers and salespeople agree on how well the salesman is doing the job.(Berhman, 1991) EXHIBIT 1.3 Causes and Consequences of a Salesman's Job Perceptions Personal and Organlzatlonal variables. Motlvatlon Component Role accuracy. • Closeness of supervlslon • lnfluence In determlnlng standards of supervlslon • Sales tralnlng • Job Experlence. confllct. Perceived role amblgulty. Psychologlcal consequences. Behavloral conseqL1ences. • lntrlnslc satlsfactlon. • Emploiree turnover. • Extrinslc satlsfactlon. • Extrlnslc satlsfactlon. • Mental anxlety. • Mental anxlety. Envlronmental factors • Economlc condltlons • Employment rate. Source: Churchill, Johnston, 2003 Salesforce Management.. 22.

(25) Role Accuracy. The role component of the model contains three variables: role conflict, role ambiguity, and role accuracy. lt is convenient to highlight role accuracy for separate analysis for two reasons: First, role accuracy can be viewed both generally and from the stanclpoint of specific linkages.. When it is viewed generally, its impact and antecedents are similar to those ofrole conflict and ambiguity. But additional insight is gained by looking at role accuracy with respect to specific linkages. Second, role accuracy specifically influences the motivation component of the model, and to understand role accuracy, it is necessary to assess its impact on the salesmen motivation to perform. (Keaveney, N el son, 1993). 1.3 COGNITIVE PROCESS OF MOTIV ATION. Most industrial and organizational psychologists view motivation as a general label referring toan individual's choice to (1) initiate action on a certain task, (2) expenda certain amount of effort on that task, and (3) persist in expending effort overa period of time. For the purpose of this project, motivation is viewed as the amount of effort the salesperson desires to expend on each activity or task associated with the job. A number of theories of motivation do exist, and most ofthem are useful for explaining at least a part of the motivation process.. Expectancy theory incorporates and ties together (at least implicitly) important aspects of many of those theories, it has been the subject of much empirical research in sales management, and it also provides a useful framework for guiding the many decisions managers must make when designing effective motivational programs for a sales force. Consequently, the reminder of this discussion focuses primarily on expectancy theory.. 23.

(26) EXHIBIT 1.4. Psychological Determinants of Motivation. Level of effort. Job activity task. Levelofperformenc. Attalnment of rewa!",. Valence for Reward. Valence for performance. Model Specification. The effort expended by a salesperson on each task associated with the job will lead to sorne level of achievement on one or mode dimensions of job perfom1ance.. These dimensions. include for example total sales volume, profitability of sales, and new accounts generated. lt is assumed the salesperson' s performance on sorne of these dimensions will be evaluated by superiors and rewarded with one or more rewards.. These might be extemally mediated. rewards, like a promotion, or intemally mediated rewards, such as foelings of accomplishment or personal growth. A salesperson's motivation to expend effort on a given task is determined by three sets of perceptions: (1) expectancies - the perceived linkages between expending more effort on a particular task and achieving improved performance, (2) instrumentalities the perceived relationship between improved performance and the attainment of increased rewards, and (3) valence for rewards - the perceived attractiveness of the various rewards the salesperson might receive.. Expectancies - perceived link between effort and performance. Expectancies are the salesperson's perceptions ofthe link betweenjob effort and performance. Specifically, and expectancy is the person's estímate of the probability that expending effort on sorne task will lead to improved performance on a dimension. Sales managers are concemed with two aspects of their subordinates' expectancy perceptions: magnitude and accuracy. The following statement illustrates an expectancy perception: "If I increase my calls on potential 24.

(27) new account by 10 percent (effort), then there is a 50 percent chance (expectancy) that my volume of new account sales will increase by 1O percent c!uring the next six months (performance level)".. The accuracy of a salesperson's expectancy perceptions refcrs to how clearly the rep understands the relationship between effort expended on a task and the resulting achievement of sorne performance dimension. When salespeople' s expectandes are inaccurate, they are likely to misallocate job efforts. They spend too much time and energy on activities that have little impact on performance and not enough on activities with a greater impact. Consequently, sorne authorities refer to attempts to improve the accuracy of expectancy estimates as "trying to get salespeople to work smarter rather than harder".. Most industrial psychology literature concerning work expectanc:ies assumes that a worker's immediate superior, by virtue of greater knowledge and experience, will more accurately perceive the linkages between effort and performance in the worker's job than the worker will. If this is also true in the selling profession, the inaccurate expectm1cy perceptions in the sales. force can be improved through closer contact between salespcople and their supervisors. Expanded sales training programs, closer day-to-day supervision of the sales force, and periodic review of each salesperson' s time and effort allocation by the supervisor might improve the accuracy of expectancy estimates. Salespeople often complain that their supervisors have an unrealistic view of conditions in the field. In addition, they do not realize what it takes to make a sale. If these complaints are valid, rr:.anager's perceptions of the linkages between effort and performance may not be appropriate criteria for judging the accuracy of salespeople' s expectancies. It may be better to use tht: expectancy estimates of the highest performing salesperson in the company as a model for sales training and supervision.. Magnitude of expectancies. The magnitude of a salesperson's expectancy estimates reflects the salesperson perceptions of his or her ability to control or influence his or her own job performance. Several individual characteristics are likely to affect these expectancies.. Sorne psychologists suggest that a. worker's overall level of self-esteem and perceived ability to perform necessary task are positively related to the magnitude of the person's expectancy estimates. 25.

(28) Similarly, the salesperson's general intelligence and previous sales experience may influence the individual's perceived ability to improve performance through personal efforts. If these relationships are also true for salespeople, the characteristics might be useful supplementary criteria for the recruitment and selection of salespeople.. Environmental characteristics also influence perceptions of the linkages between effort and performance.. How the rep perceives general economic conditions, territory potential, the. strength of competition, restrictions on product availability, and so forth, are all likely to affect his thoughts on how much sales performance can be improved by simply increasing efforts. The greater the environmental constraints a salesperson sees as restricting performance, the lower the rep's expectancy estimates will be. The conceptual framework outlined in exhibit 1.5 is based on a view of motivation known as expectancy theory. EXHIBIT 1.5. Factors influencing the Motivation Process. Level of effo~. Perso~ Organizational • -·· • variables ¡. 1 -Expectancy -----. /. Í. I.Compensation plan~,1,/,, ~---~/. ·,.,.. Valence for performance. IRole perceptionsr Levelofperformanc. ~--e-~. ttainment of reward~. I Job satisfaction. ~·--. lnstrumentality. .. Personal & ··-- -·-'"'" ..•...J Organizational 1 ' variables Valence for Reward 1. Performance Drivers: - perceived links between performance and rewards. Like expectancies, instrumentalities are probability estimates made by the salesperson. They are the individual's perceptions of the link between job perfom1ance and various rewards. Specifically, and instrumentality is a salesperson's estímate of the probability that an improvement in perfonnance on sorne dimension will lead to a spedfic increase in a particular reward. The reward may be more pay, winning a sales contest, or promotion to a better. 26.

(29) territory. As with expectancies, sales managers should be concemed with both the magnitude and the accuracy of their subordinates' instrumentalities.. Accuracy of instrumentalities. The accuracy of a salesperson' s instrumentalities refers to the true linkages between performance on various dimensions and the attainment of rewards as determined by management practices and policies on sales performance evaluation and rewards for levels of performance. These policies and practices may be misperceived by the salesperson. The rep may concentrate on improving performance in areas that are less important to management and ultimately become disillusioned with his or her ability to attain rewards. Thus, it is important to compare salespeople's instrumentality perceptions with stated company policies and management perceptions of the true or desired linkages between performance and rewards. lf salespeople misperceive how performance is rewarded in the firm, management must improve the accuracy of those perceptions. This can be done through closer supervision and more direct feedback about evaluation and the determination of rewards. Sometimes, however, its salespeople may inaccurately perceive a firm's evaluation and reward policies. They may devote too much attention to activities or objectives that are relatively unimportant to management, and they may ultimately become disillusioned with their inability to attain desired rewards.. Magnitude of performance drivers. One variable that has a notable impact on the magnitude of a salesperson's instrumentality estimates is the firm's compensation plan. For example, a salesperson compensated largely or entirely by commission is likely to perceive a greater probability of attaining more pay by improving performance on the dimensions directly related to tota.l sales volume (increase in total sales dollars or percentage of quota). On the other hand, the ;5alaried salesperson is more likely to perceive a grcater probability of receiving increased pay for improving performance on dimensions not directly related to short-term sales volume (new-account generation, reduction of selling expenses, or perfom1ance of administrative duties).. The salesperson may also be rewarded with promotion, recognition, and feeling of accomplishment. The rep may value there other rewards more highly than an increase in pay.. 27.

(30) In any case, the company' s compensation plan is unlikely to affect the rep' s perceptions of the linkages between performance and these nonfinancial rewards. Therefore, a compensation plan by itself is inadequate for explaining differences in motivation among salespeople.. Valences for rewards. Valences are salespeople' s perceptions of the desirability of receiving increased amounts of the rewards they might attain as a result of improved performance. One question about valences that has always interested sales managers is whether there are consistent preferences among salespeople for specific kinds of rewards. Are sorne rewards consistently valued more highly than others? Historically, many sales managers and most authors of books and articles on motivating salespeople have assumed monetary rewards are the most highly valued and motivating rewards. They believe recognition and other psychological rewards are less valued and spur additional sales effort only under certain circumstances. Only a few recent studies have empirical tested whether salespeople typically have higher vak:nces for more pay than for other rewards. Thus, the assumption that they do has been based largely on the perceptions of sales managers rather than on any evidence obtained from salespeople themselves. No universal statements can be made about what kinds of rewards are rnost desired by salespeople and most effective for motivating them. Salespeople's valences :for rewards are likely to be influenced by their satisfaction with the rewards they are currently receiving.. Their. satisfaction with current rewards, in tum, is influenced by their personal characteristics and by the compensation policies and management practices of their firm.. Motivation model as a predictor of salesperson effort and performance. The findings support the validity of such expectancy models of motivation, explaining as much as 25 percent of the variation in effort among workers. Motivation is only one determinant of job performance. Thus, it seems inappropriate to use only motivation to predict differences in job performance among workers. Nevertheless, severa} studies havéi attempted to do just that, and with surprising success. Sorne studies have found that predictions of worker's motivation to expend effort can explain as much as 40 percent of the variation in their overall job performance.. 28.

(31) There emerges a question of even greater relevance to sales managers as they struggle to design effective compensation and incentive programs.. The question is how the three. determinants of motivation - expectancy perceptions, instrumentality perceptions, and valences for rewards - are affected by (i) differences in the personal characteristics of individuals, (ii) environmental conditions, and (iii) the organization's policies and procedures. Therefore, the impact of each of these variables on the determinants of motivation is now examined in greater detail. When place in the same job with the same compensation and incentive programs, different salespeople are likely to be motivated to expend widely differing amounts of effort. People with different personal characteristics have divergent perceptions of the links between effort. and. performance. (expectancies). and. between. performance. and. rewards. (instrumentalities). They are also likely to have different valences for the rewards they might obtain through improved job performance. The personal characteristics that affect motivation include (1) the individual's satisfaction with current rewards, (2) demographic variables, (3) job experience, and (4) psychological variables - particularly thc salesperson's personality traits and attributions about why performance has been good of bad.. Impact of environmental conditions on Motivation. Environmental factors such as strength of competition can constra.in a salesperson ability to achieve high level of performance. Such environmental constra::nts can cause substantial variations in performance across salespeople. In addition to placing actual constraints on performance, however, such conditions can affect salespeople perceptions of their likelihood of succeeding and thus their willingness to expend effort. Although management can do little to change the environment faced by its salespeople, an understanding of how and why salespeople perform differently under varying environmental circurnstances is always useful to sales managers. In sorne industries the pace of technological change is very rapid, as demonstrated in the telecommunications sector through the recent advances in mobile communication and network connectivity. Salespeople in such industries must <leal with a ,:onstant flow of product innovations, modifications, and applications. Salespeople often look with favor on a constantly changing product line because it adds variety to their jobs, and their markets never have a chance to become saturated and stagnant. Consequently, an unstable product line may lead to less accurate expectancy estimates among the sales force.. 29.

(32) Impact of Organizational Variables on Motivation. Company policies and characteristics can directly facilitate a salesperson effectiveness. Such organizational variables may also influence salespeople's perforrn.ance indirectly, however, by affecting their valences for company rewards and the size and accuracy of their expectancy and instrumentality estimates. EXHIBIT 1.6 M011VA110NAL VARIABLES Organizational variables Closeness of supervision Span of control Frequency of Communications. Expectancies Magnitud e Accuracy. lnstrumentalities Accuracy Magnitude. +. +. +. +. Valen ces Higher Order LowerOrder. -. -. Recognition Rate. Curvilinear. -. Compensation Rate. The relationships between organizational variables and the determinants of motivation are summarized in exhibit 1.6. each organizational variable has a different impact on the motivational variables. v.gr. the closeness of supervision has a positive effect on the accuracy of the motivational variable expectancy and no effect on the magnitude, whereas compensation rate only affects the lower order of the valence.. 1.4 TELECOMMUNICATIONS ASAN ECONOMY DRIVING FORCE. The global economy is rapidly transforming from an industrial society into a new, serviceoriented information society - a phenomenon also known as the New Economy. The New Economy's driving force is digital and information focused telecornmunications technology that enables cheaper and easier access to information, its processing, storage and transfer. The conversion of digital information into economic and social value forms the basis of this new economy, which is creating new industries and revolutionizing existing ones and radically transforming people's lifestyles. Ali big companies will have to respond to this market restructuring and experience from the United States shows that it is these very technologies that do most to foster economic growth and the creation of new jobs. The development of the Internet has, for example, enabled the creation of more than 2.3 million new jobs. 30.

(33) An economist of the World Bank, Joseph Stiglitz (1999: 1), v1ews development as "a. transfonnation of society, a movement from traditional relations, traditional ways of thinking, traditional methods of production, to more modern ways". (Stiglitz 1999) argues that a characteristic of traditional societies is the acceptance of the world as it is; the modern perspective recognizes change, it recognizes that we, as individuals and societies, can take actions that, for instance, reduce mortality, increase life spans, and increase productivity. ICTs influence this change from traditional to modern societies, through infonnation-transfer explained earlier in this study unit. For example, Infonnation & telecommunications technologies (ICTs) and mass media and their Western content, influence the lifestyles of people in Least Developed Countries (LDCs) (where Western cont,ent dominates local media), according to what they see in the media like television, the Intemet and Web TV where it is available. Countries should build ICT and telecommunications infrastructures as these infrastructures contribute towards socio-economic development. Nadir (1998) states that in the global infonnation society we now live in, there is a direct correlation between access to telecommunications and socio-economic development, and that telecommunications is no longer the consequence of development, rather it is a necessary precondition for development. This view is shared by various other telecommunications and development theorists and experts, including (Hudson 1997), (Nulens & Van Audenhove 1999), (Castells 1998), Van Dijk 1999). An improved teledensity of a country, and the use of international communication by that country will both improve a country's development and economic status. However, Van Dijk (1999:220) cautions that new media technologies are not the w:i1ole substance of society. Van Dijk believes that it is an exaggeration to suggest that new media technologies are the whole substance of society. According to (Nandi 2002) the pnmary means by which telecommunication serv1ces can promote economic development is by serving as a medium that facilitates the acquisition and transportation of infonnation in cost effective ways while minimizing the obstacle of distance and time. Barnett, Jacobson, Young and Sun-Miller (1997), state that telecommunication is a space-adjusting technology that links various countries together through interconnectivity, making the world a global village. From these brief explanations of the role of telecommunications m economic development, by the above-mentioned authors, we can. 31.

(34) identify various mechanisms by which telecommunication influences the efficiency of different economic activities at the micro, macro and global level. Information plays an important role in business and economic development by being the source of knowledge, education and human capital. Availability of better information helps to improve education, health services and provides knowledge, ideas and opportunities and thus contributes to national productivity. The efficiency of household activities increases with telecommunications by allowing easy access to services like health care, education and financia} services. However, this easy access to telecommunications services should be affordable to many ordinary people. This affordability of telecommunications services is a challenge in LDCs as most people are unemployed so access to ICTs for the unemployed is a problem. Telecommunications service providers have a duty to make access to ICTs a practica! experience, not just a policy of universal access written in govcrnment policies, statutory documents and companies' annual reports. Universal access means that telecommunications and ICT services should be available (and affordable) to most people in a society at a reasonable distance to where these people live. In business and in academic institutions especially those in distance education where academics write and produce electronic reading material for their learners (tele-education and/or electronic learning/e-learning), the introduction of ICTs, tclecommunications and/or information technology leads to higher productivity growth through greater specialization and in many other ways. Nandi (2002) states that at the firm level, it results in significant economies of scope which are achieved through more centralized coordination of production units. During the last two decades, modem telephone networks and highly advanced telephone equipment have significantly increased the speed at which the inforrnation could be transported and exchanged. A few areas are stated below that explain how telecommunications as an efficient medium for transporting information is contributing towards higher economic development through its direct and indirect meaos. Direct Effects of Telecommunications on Economic Development. According to the ITC (International Telecommunications Committee) there has always been a direct correlation between the development of countries and the development of telecommunications. The Internet, the convergence of computers and communications, the. 32.

(35) bundled offering of voice, data and video have opened a wide spectrum of opportunities to the global community. Diffusion of New Ideas and Knowledge. The flow of information plays an essential role in the diffusion of new technology and ideas at the level of individual enterprises, the industrial sector and the national economy. The importance of the new knowledge and new ideas as key elements for stimulating growth rate has long been recognized by economists but is receiving more atterüion in recent years among new growth theorists. The source of knowledge and new ideas can be domestic or global. lf knowledge is local, telecommunications technology can be used to globalize that local knowledge and this process is known as localization, making a local idea global. In the case where information oran idea is made known in various countries (and usually adopted in those countries), this process is known as globalization. ICTs then make both localization and globalization possible. Modem telecommunications provide a cost effective and time efficient medium for accessing rapid development of computer and communication technology. (Bamett, Jacobson, Young, & Sun-Miller, S. 1996). Role of Telecommunications on Socio-Economic Development. Many. economists. have. observed. a. positive. correlation. between. the. level. of. telecommunications use and sorne index of economic well being. the relationship between the income of a nation and telephone density, using data for different countries, showed a positive correlation between the two. Jipp 1963), also studies on the relationship between telephone facilities and their use and economic performance using data from 29 countries at different stages of development. The results of this studies, made it possible to c:onstruct three indices: a telephone index representing the availability of telephone facilities ancl their use, an economic performance index and a development support index representing other supporting factors needed in economic development. (Bee and Gilling 1976) Their analysis shows a strong positive correlation between the telephone index and the economic performance index and also explains the role of supporting factors in enhancing the contribution of telecommunications to economic development. It was also found a strong positive correlation between telephones facilities and economic development at the macro leve!" (Nandi 2002:6). All these studies illustrate that growth theorists who have studied the impact of tclecommunications on. 33.

(36) economic development have identified a positive impact of the former (telecommunications) on the latter (economic development). (Moss 1981 and Hardy 1980) Furthermore, (Nandi 2002) stated that studies showed the relatiorship between investment in telephone infrastructure and economic development. (Dholakia and Harlem, 1994). They. (Dholakia et al) examined the connection among a number of factors such as education, energy, telephones, other physical infrastructure and economic develop:ment. The results of their multiple regressions suggest that simultaneous investment in dcvelopment inputs such as education; telecommunications and other physical infrastructures are complementary m helping to promote economic growth. Saunders, (Warford and Wellenius 1994) conducted several studies examining the correlation between the density of telephone lines and economic development (Nandi 2002). The latter also mention (Madden and Savage 1998), who empirically examined the relationship between gross fixed investment, telecommunication infrastructure investment and economic growth for a sample of transitional countries of Central and Eastem Europe. Their (madden & Savage) estimated results suggest a strong relationship between investment in telecommunications and national economic growth. However, these studies did not establish a causal relationship. Furthermore, eGonomists have acquired empirical evidence showing that investment in telecommunications enhances efficiency of economic activity while at the same time economic growth stimulates the demand for telecommunications. Theoretical Approaches. In general, two schools of thought explain the relationship between telecommunications and development. These are the technophilic and the technophobic views of the relationship between telecommunications and development. Technophiles believe that telecommunications have a positive effect on development, while technophobes regard telecommunications as having a negative effect on development and contributing towards the expansion of the information gap between the rich and the poor, the literate and the illiterate. The utopian (technophilic) perspective on ICT supports the deployment of ICT in communities and associates positive developments arising as a result of this deployment. This perspective argues that in the economy, ICT will expand productivity and improve employment opportunities, and will upgrade the quality of work in man y occupations.. 34.