Assessing the Performance of the Sales Force and the People Who Comp：中国经济管理大学 MBA课堂笔记《销售管理：塑造未来的领导者》
Assessing the Performance of the Sales Force and the People Who Comp
中国经济管理大学/中國經濟管理大學
Assessing the Performance of the Sales Force and the People Who Comprise It
Learning Objectives:
After completing this chapter your students should be able to:
Explain why it is important to evaluate the overall performance of the firm’s sales force.
List the advantages and disadvantages of sales, cost, and profit analyses.
Understand the importance of profitability and the application of ROI and ROAM.
Explain both input and output objective sales performance measures.
Explain the differences between performance and effectiveness.
Compare formal and informal evaluations.
Describe how the sales manager can implement an effective performance review.
Introducing the Chapter:
Sales managers are responsible for planning, implementing, and controlling a firm’s sales activities. To control the sales effort so that the firm’s goals are accomplished, sales managers must continually monitor and evaluate the performance levels of both the individuals who comprise the sales force and the sales force as a whole.
One way to introduce this chapter is to ask students if they have ever been evaluated unfairly. Several will likely relate that they worked hard and were criticized by managers (or parents) who didn’t understand how hard they worked even though things did not go well. A follow-up question should be: should evaluations only focus on how hard someone works but also what they are able to accomplish? Most students will begrudgingly say yes, but…. A third question should be: would it be important to you for the boss to figure out why you worked hard but were not able to accomplish your goal? Now is the time to discuss how firm’s must evaluate their sales force through how hard they work (inputs), what they accomplish (results) and even more importantly how much profitability they generate. This type of introduction helps the students relate their own experience to what you will discuss in the book.
A second way to introduce the chapter is to tell an old story that I heard when I worked as a sales engineer in the electronics industry. Apparently our firm had a salesperson in the far western
Chapter Outline:
I. Evaluation Helps the Sales Manager Know What is Working and Why:
Sales managers must continually evaluate their sales efforts to know what is working and more importantly “why” things are working!
A. Sales Manager’s Responsibilities involve three activities:
1. Plan
2. Implement
3. Control
a. Monitor and evaluate the performance levels for individual sales force members and sales force as a whole
B. Importance of Evaluations
1. Helps determine whether a new strategy is working or not
a. Answers the question: “Are the predetermined goals inadequate or is a team displaying a weak performance?”
2. Shows what actually is taking place in the business
3. Aids in planning for sales in future periods
4. Aids in giving incentives
a. Assigning raises
b. Giving promotions
c. Recommending training
d. Replacing low performing sales force members
II. Evaluating the Performance of the Sales Force as a Whole
In general sales managers evaluate the overall performance of their sales teams by comparing and analyzing different types of information.
A. Multiple goals lead to the need for multiple evaluation efforts
1. There is no single measure to define sales force success
2. Three most common measures of sales force success are:
a. Sales analysis
b. Cost analysis
c. Profitability analysis
3. Sales analysis – assessing and making decisions based upon a firm’s sales revenues
a. Sales info routinely gathered for accounting purposes
b. Sales managers must organize to evaluate from a sales perspective
i. Are sales increasing or decreasing?
ii. How well are different products selling in each territory?
iii. How are salespersons in different regions performing?
c. To perform consistent evaluations, two sales points must be determined:
i. Accurately define when a product is sold
ii. Monitor sales revenues and units sold during inflationary period
4. Cost analysis – is the relationship between the sales generated and the costs of making that sale.
a. Sales costs can be stated as a percentage of sales to assess sales-cost relationship
b. Sales costs will vary by industry and location
c. Most sales managers monitor deviation from planned expenses and investigate any deviation from expectations
d. Cost data allows pricing levels and budgets to be set
e. Costs also allow manager to identify inefficient company functions, determine if cost of sales call is increasing, and decide when it is time to change commission structure
f. Sales manager can also identify cost differences by product and market
g. Sales manager must consider costs in relationship to selling opportunity of market—costs are not standardized!
h. Sales and cost analysis is the two most common evaluation criteria used by sales managers
i. Sales managers face problems in analyzing costs since there is no accepted way of allocating direct and indirect selling costs
i. For example, how are executive salaries allocated?
5. Profitability Analysis - Sales managers compute profitability by taking sales revenues and subtracting costs (sales revenue minus expenses = profits)
a. This allows the sales manager to:
i. Identify unprofitable product lines, territories, and segments
ii. Evaluate territory and product performance
iii. Calculate year-end bonuses
iv. Profitability used to computer Customer Lifetime Value (CLV)
6. Ratio Measures - allow the sales manager to standardize evaluations
a. Two measures useful for evaluating sales force include:
i. Return on investment (ROI)
ii. Return on assets managed (ROAM)
1. Contribution margin – selling price minus variable costs (costs of goods sold and sales commission)
2. This is the contribution toward satisfying fixed costs
iii. ROAM should only be employed when the sales manager controls assets
7. After determining the data to use to evaluate sales force performance, the sales manager collects and organizes the data
a. Typically the manager wants to know why goals were or were not met
i. Simplistic answer is the sales force did not work hard enough
ii. Other possible reasons include:
1. Firm’s pricing isn’t competitive
2. Firm’s products suffer quality or delivery problems
3. Salespeople lack ability and need training
iii. Sales manager lists each possible explanation and analyses
iv. When initial analysis fails to pinpoint shortcomings, sales manager may want to look at competition
v. Also, were original goals correctly set?
vi. Once confirmed, sales manager must review other data to confirm hypothesis.
III. Evaluating Individual Sales Representatives
Most firms appraise their sales reps on a regular schedule and consider input measures, outcomes, profitability, and personal development. A new type of measurement, called pipeline analysis, shows how well a salesperson is maintaining a stream of customers at different stages in the sales process. CRM software now permits sales managers to constantly monitor sales performance.
A. Previously, salespersons mailed, faxed, phoned, or emailed their results to managers.
1. Technology now allows near real-time data flow
B. Input measures – gauge the level of effort put forth by the salesperson
1. There are a number of different input performance measures:
a. Number of days worked, sales calls per period, service calls
b. Dealer meetings, customer training sessions, product demonstrations
c. Reports completed, letters/phone calls, displays set up
2. Input measures can be segmented by:
a. Current vs. potential customer
b. Sales vs. service call
c. Telephone vs. on-site call
d. Scheduled calls vs. cold calls
3. Sales managers often compare how a salespersons spends their time in comparison to top sales personnel
4. Input measures tell sales managers the strategies the salesperson is using
a. Transactional or relationship
C. Outcome measures – are the actual results of the salesperson’s efforts
1. How well can the salesperson close the sale?
a. Sales revenue generated, revenue per account, revenue as percentage of potential, orders generated, new customers, canceled orders, lost accounts
2. Output measures can be misleading when sales cycle extends over several sales periods
3. Sales managers believe that outcome measures are highest when salespersons devote sufficient time to input activities!
D. Profitability measures – tells managers whether salesperson is selling products at a profit
1. Net profit as percentage of sales, net profit contribution, net profit in dollars, return on investment, and gross margin
2. Salesperson impacts firm profitability through:
a. specific products sold
b. final prices negotiated
E. Ratio Measures for Performance Appraisals
1. Ratio measures allow sales managers to assess individual performance by combining various input and output data
a. sales volume per call = assesses efficiency
b. order per call = number of sales made per sales call (batting average)
c. average cost per sales call = total sales expenses/total calls made
d. close rate = number of orders/number of quotations
e. profit per call = total profit/number of calls made
F. Qualitative Performance Measures – judgments made by sales managers about a salesperson’s performance or abilities
1. job knowledge, problem-solving ability, creativity, attitude and morale, relationship building, initiative, communication with management, and timeliness in completing reports
2. There are a number of methods to assess qualitative performance:
a. essay technique – a brief statement that summarizes salesperson performance
b. rating scales – use terms or phrases to describe performance or personal characteristics
c. Forced rankings – occurs when sales personnel are rated top to bottom
d. Management by objective (MBO) – agreed upon objectives and assessments between the sales manager and salesperson
e. Behaviorally anchored rating scale – a set of scaled statements that describe the level of performance for a salesperson
G. Overall goal of performance appraisal it to improve future performance
1. Appraisals also important for personal development
2. Bonuses and raises, plus promotions
3. Determines when termination is required
H. The Problem of Evaluation Bias – a systematic tendency toward a lack of objectivity, fairness, or impartiality on the part of the evaluator that is based upon personal preferences and beliefs or a systematic error in the assessment instrument and procedures or in the interpretation and evaluation process.
1. Base evaluation on results or behavior rather than traits or personal characteristics – e.g. 4 sales calls a day
2. Evaluation should be from point of neutrality
3. At least five types of evaluation bias:
a. halo effect – one area of assessment influences overall evaluation
b. leniency or harshness – when a salesperson is rated at extremes
c. central tendency – rate person in center of scale
d. interpersonal – ratings are influenced by how well the manager likes
e. outcome – a single outcomes influences overall assessment
4. Informal evaluations – assessments that vary by individual or situation
a. different amounts and quality of information
b. informal evaluations are most often biased
c. formal evaluations likely to produce objective appraisals
5. To minimize Performance Appraisal Errors
a. Read and be familiar with each rating on the form
b. Do not allow one factor to influence other factors
c. Base ratings on actual, rather than potential, performance
d. Evaluate based upon an objective, unbiased standard
e. Rate individual for entire period, not one incident
f. List sound reasons for all performance appraisal ratings
IV. Summary
A. Evaluation tells a sales manager what is working or not and why.
1. Information shapes daily decisions about how to improve sales force performance
2. To improve performance sales managers examine sales, costs, and profitability measures
3. Continual evaluation, using CRM, allows managers to help sales team on track
4. Formal appraisals are conducted once or twice a year
5. Multiple sales duties mean the sales force must be evaluated on multiple measures
6. Sales managers must be aware of potential for biased evaluations and take steps to maximize the objectivity of performance assessments
Questions and Problems:
1. What is the relationship between managerial control and sales team evaluations? When managers make decisions without the benefit of accurate information, what is the likely outcome?
Without data provided by objective evaluations, it is not possible to accurately control the activities of the sales force. If sales managers don’t have accurate information they are more likely to make poor or totally inappropriate decisions.
2. When a sales manager detects a deviation from the performance expected by the firm, what are the two most common aspects they investigate?
What caused the deviation: the setting of improper goals or lack of effort due to capabilities or lack of motivation.
3. What are the different goals of evaluation and assessment? That is, what types of decisions must a sales manager make, and how are these decisions linked to the type of evaluation information needed?
The basic reason to evaluate and assess sales force members is to improve performance. If a sales manager evaluates the sales team and the current strategy is not working, she can change the strategy to improve sales and profits. The same is true for performance appraisal. The individual salesperson needs feedback on what they are doing well and what they can do better. The sales manager also uses this information to assign raises, provide training, promote, or even terminate the employee. Different criteria are examined for assigning raises than for promoting the individual.
4. Why is sales revenue the most common data used? What are some limitations of considering only sales revenue generated?
Sales revenue is the most common criteria used to evaluate the sales force because it is their job to generate sales revenue! Also, it is available and constantly tracked by most managers within the firm. A limitation of sales revenue is that inflation and costs are not considered.
5. List three managerial decisions that are possible based upon a cost analysis.
The sales manager can identify inefficient company functions, determine whether the cost of making a sales call is increasing, and decide when it is time to change the commission structure.
6. Review the data presented for Hannah, Moe, and Sydney in Exhibit 14.8. What areas do they excel in? Which areas, as their sales manager, would concern you?
Looking at this exhibit, Hannah excels in input activities (demos and new accounts); Sydney exceeds goals in sales volume and profitability (outcomes and profits); and finally Moe has turned in 103 percent of the sales revenue goal (outcome). Each salesperson also has performance figures that should concern the sales manager. For example, Hannah did not meet either sales revenue or profitability goals. Her total score is skewed by her input percentages for demos and new accounts of 140 and 120 percent, respectively. Sydney is not meeting input goals, but she is exceeding her sales revenue and profitability goals, which are more important. Input activities suggest that the salesperson is doing the correct things and this will lead to sales and profits. Since Sydney was exceeding sales and profitability goals, she may not have had time to conduct demos and open new accounts. The sales manager might want to reconsider this level of input goals for Sydney. Finally, Moe appears to be struggling on all categories except sales revenue. Although Moe reached his sales revenue goal, his profits were significantly below expected levels. This infers that Moe is selling lower margined goods and he is having trouble meeting demos and new accounts (input) goals. Based upon the relationship of input and output success, Moe will likely continue to struggle to reach his assigned level of performance.
7. The handheld mini-PCs discussed in the chapter can be upgraded with Global Positioning Systems (GPS) to allow a sales manager to track exactly where each sales representative has been and is currently. What do you think the pros and cons of using this technology might be? As a sales manager, would you use it?
The “pros” of merging the handheld mini-PCs and GPS would allow the sales manager to monitor the activities of a salesperson at all times. Thus, it would be difficult for a salesperson to take time away from the job to sleep in, play golf, or take the afternoon off. In the “cons” category, good salespersons would probably not mind this monitoring since they are doing their job anyway; however, a few salespersons might not like being monitored by “big brother” and they would seek a job elsewhere. Thus this system could de-motivate sales efforts. It is possible for the sales manager to understand what the field salesperson is doing without resorting to electronic monitoring.
8. If a salesperson received 32 purchase orders during the month based upon 123 sales calls, what is his order per call, or “close rate”?
32 purchases/123 sales calls = 26 percent close rate. It would be helpful to know past close rates and/or the sales force average close rate. Ratios are important because all salespersons can be compared using the same criteria. This does not mean that two persons with close rates of 24 and 26 percent are not very close in their performance, but if you had an average close rate of 18 percent while the company average was 25 percent, this would be cause for concern and further investigation.
9. In what ways can salespeople influence the profitability of their territories?
By the products they sell and the prices they negotiate.
10. Sales managers should assess qualitative measures against what standard? Why?
Evaluations should always be based upon neutrality and set standards. It is imperative to set standards (4 sales calls per day) and base performance appraisals on these standards. Did salesperson Smith complete 4 calls per day and did she call upon 10 new accounts this sales period? If she did, she met standards and if she exceeded this requirement she likely exceeded this input criterion. Starting at a point of neutrality reduces bias in the form of halo, interpersonal, and outcome. Likewise, having set standards reduces the likelihood of leniency and harshness and outcome bias. It is important for the sales manager to understand these biases and take active steps to minimize them.
11. What challenges are posed when firms evaluate a global sales force’s efforts?
Introducing culture into evaluations raises a number of issues. First is the issue of transfer pricing. Many firms sell products to subsidiaries and base the sales price on tax laws rather than actual value. This means the global salesperson may not have any input into the sales price. Perhaps more complicated is the impact of culture on motivation (God’s will in the Middle East) and the perceived role of the salesperson in newly capitalistic societies (
12. Explain the common types of bias to which sales managers can fall victim.
At least five types of evaluation bias can influence the sales manager:
a. halo effect – one area of assessment influences overall evaluation
b. leniency or harshness – when a salesperson is rated at extremes
c. central tendency – rate person in center of scale
d. interpersonal – ratings are influenced by how well the manager likes
e. outcome – a single outcomes influences overall assessment
Answers for Chapter Caselets:
Caselet 14.1
Happy Hanna:” Did the Sales Reps Meet Their Goals?
Sales manager “Happy” Hanna Johanson helped establish goals for two of her sales reps: the outspoken, Ella Lynn, and the on-again-off-again, Syd Vance. Three sales quarters have passed since that meeting and Hannah has collected the performance measures for both of the reps outlined in Figure 1 below. She’ll being meeting with both reps tomorrow and needs to prepare for the feedback sessions tonight for mid-morning meeting tomorrow. Ella has continued to be the firm’s “sustainability” advocate and Hanna has learned that Syd is the star pitcher for a local softball team. How should Hanna prepare for these two evaluations and meetings with the salespersons?
1. Based on the performance data in Figure 1, what “deviations” would you focus on during your meeting with Ella?
Ella’s not meeting sales goals two of three quarters and her lack of meeting demonstrations two of three quarters. Stress the need to increase input activities and determine why outcomes were not being met. Ask Ella for her rationale for not meeting expectations, ask how you can help, but stress the need to meet future expectations.
2. Based on the performance data, what factors would you focus on during your meeting with Syd? What approach would you take in your meeting with Syd?
One way to start the meeting with Syd would be to congratulate him on his sports prowess and ask him to explain why he has not met his numbers for the past three quarters. This lets Syd know that you are aware that he has been putting a tremendous amount of time taking his team to the national championships (and thus not giving that time to customers). Syd has met his input requirements, but the sales manager should question the quality of these demonstrations and look at sales to all customers to understand why Syd opened 5 new accounts each quarter but his total sales figures were below expectations? It may be that Syd is trying to make input numbers but he is not taking care of existing accounts. I would tell Syd he must improve his numbers and must reach his goals if he is to remain a salesperson with the firm.
3. Would your response differ if Syd’s team was sponsored by a religious or a civic organization?
The reason for Syd’s not meeting expectations should not hinge upon his motivations. If a salesperson enjoys working for Special Olympics®, their church, or Habitat for Humanity® that is their right. However, starting from a point of neutrality, Syd is not meeting his expectations and the sales manager’s responsibility is to help Syd see that he will need to give more time to his job or leave the work force to be a professional athlete.
Figure 1
Last 3 Sales Quarters Actual Vs. Goal Figures
Sales Goals and Actual Quarter | Ella’s Sales Figures | Syd’s Sales Figures | ||||
Sales Vol. Goal Sales Vol. Actual | 125,000 120,000 | 125,000 128,000 | 125,000 118,000 | 150,000 140,000 | 150,000 130,000 | 150,000 105,000 |
Demonstrations Goal Demonstrations Actual | 9
8 | 7
8 | 11
8 | 10
10 | 8
10 | 6
10 |
New Account Goal New Account Actual | 4
4 | 3
4 | 5
4 | 4
5 | 3
5 | 2
5 |
Caselet 14.2
Ligon Industrial
Ligon’s sales manager, Fred Stephenson, recently ranked each of the company’s five salespeople in five performance areas: sales revenue, new accounts opened, lost accounts, expenses, and profitability. However, once Stephenson had ranked his sales staff, it was hard for him to identify the salesperson who should receive the top rating. He wanted to devise an improved system that would allow him to utilize the information to coach each salesperson to improve his or her performance.
Questions:
Are all five categories used for ranking the sales force equal in importance?
As currently configured they are, but in reality sales and profitability are more important.
What are the advantages and disadvantages of a ranking system?
A ranking system forces the sales manager to “rank” each of his sales members from “best” to “worst.” However, one way to do this is to assign a weight to each category and then assign a grade for that category to each salesperson. For example, if Ford exceeded his sales revenue he might be given a 10 and the weight for that category might be .3. His score for that category is 3. Rather than a forced ranking a weight and grade evaluation provides a more valid picture of who is performing and at what level. Said differently, the sales manager would be able to gauge the distance between all salespersons’ performance.
Under what conditions is it appropriate to rank one’s sales force?
Ranking is appropriate for promotions and retention only. But again, it is best to do such rankings objectively rather than fall into the trap of halo, interpersonal, or outcome bias.
What can be concluded if each category receives the same importance weight?
That all salespersons are performing at the same level! Which they are probably not doing!
What recommendations would you offer Fred Stephenson?
That Stephenson switch to a weight and grade evaluation based upon set expectations. Rankings are best for promotions and/or terminations –we need to promote one person to management. Who should we promote? We have ranked the sales force based upon management criteria and feel that Thelen is best suited for this promotion.
Role Play:
Johnson Controls Considers Changing Its Assessment Criteria
Rhonda Jones is meeting with the President and Operations Manager to determine if and how evaluation criteria should be changed based upon the sales strategy becoming more customer centric (selling what and how the customer wants). A major question is: should sales revenue remain a major assessment criterion at Johnson Controls? The purpose of this role play is to determine whether the evaluation criteria need to be modified since Johnson Controls is moving from a sales to a customer oriented strategy. The current criteria utilized—sales revenue generated, number of new accounts opened, and sales increase at existing accounts may all still be applicable for the switch to customer driven selling. Other criteria the management team might want to add include: customer satisfaction ratings, number of customers lost, and sales amount per purchase. The idea is that customer centric selling results in greater focus on customer satisfaction and that satisfied customers buy larger amounts when they purchase. If sales revenue is kept as an evaluation category, Johnson may use it as a guide but understand that profits, satisfied customers, and retained customers are more important.
Sales Manager’s Workshop:
As Promedia’s district sales manager, it is time to conduct an end of the year evaluation of your five salespersons. After reviewing the evaluation criteria discussed in this chapter, go to the Applicor data and analyze the performance of your five salespersons. Consider looking at several activity, outcome, and profitability figures. Based upon the performance of each salesperson, write a short report to the national sales manager detailing their performance and also justify the raise you will recommend for each salesperson. When you are satisfied with your report, turn it in to your sales management professor.
In order to register for Aplicor, email tanner@aplicor.com. Within 2 business days, you will be verified as an instructor, and then will be provided with your login information. Once you log in to Aplicor at www.pearsonhighered.com/tanner, you will be able to register all your students. Once you do so, share the login information with your students so they may access the site as well, via the same URL.
Self-Assessments:
In your copy of Sales Management, you will find an Access Code Card. By using this code at www.pearsonhighered.com/tanner, you will gain access to the SAL program. Students will find an Access Code Card in their copy of the book as well.
This chapter suggests that students take self-assessment:
IIIA3 – How Good Am I at Giving Performance Feedback?
After taking the assessment the student is provided feedback about how well they give the type and depth of information salespersons need to improve. Said differently, are you more likely to be tactful and give accurate information or sugar-coat the feedback in a way that confuses the salesperson. No matter the initial score giving performance feedback is a skill that one can develop through training and practice.
A second self-assessment provides the taker with a view of how they feel about people:
IC4 – What’s My View of the Nature of People?
Do you view people as someone you can trust or perhaps that people cannot be trusted. This is an important area to understand since managers approach the way they evaluate based upon how individual salespersons are viewed. Plus, this perspective could greatly influence several of the evaluation biases discussed in Chapter 14.
Using Videos:
To access these videos, go to www.pearsonhighered.com/tanner and consider the two videos selected for this chapter. The videos on coaching allow the sales manager to use information gained from evaluations to help the salesperson improve. Listed below are potential ways to introduce each video and questions that can be asked to spur discussion after you show the videos.
Video 1: Sales Coaching for the Next Level – Keith Rosen
Rosen explains that the best way to coach is to ask a series of questions. First, though the sales manager must have the salesperson fill out a form that identifies what areas they feel weak in and that they would like to be coached on (again, evaluations provide the sales manager an even better insight). Rosen starts by asking: what are you currently doing? What is your process? Ah, you seem to be putting forth the effort, but are not succeeding? What exactly are you saying? The key is to involve the salesperson in the dialogue rather than simply “telling.”
1. How does Keith Rosen describe the act of coaching?
2. Why are the first 15 seconds important when talking to a customer?
3. Why should all claims be “measurable and profitable”?
4. Why is it important to engage the salesperson in the coaching session?
Video 2: Coaching to Build Confidence – Jim Cathcart
Cathcart states that high performers have elements that other salespersons need: knowledge, skill, and confidence. Knowledge allows the salesperson to reach their potential, while skill and confidence helps the salesperson stay motivated. There is a large difference between high performers and all others. The sales manager should coach to encourage a belief that the salesperson can handle the situation. When a salesperson fearfully approaches Cathcart, he tries to get them to take a deep breath and look at the broader view. Without reflection, no lesson is learned. Salespersons must use their time wisely and Cathcart feels that is true of sales manager coaching. If a salesperson does not have the skills and knowledge to succeed, the sales manager is wasting their time coaching. More is to be gained from working with the better salespersons than the weakest salespersons.
1. What three skills do successful salespersons possess?
2. How does Cathcart define “encouragement”?
3. Cathcart says that without reflection what happens?
4. How long should a sales manager invest time coaching a salesperson?
Full Case Recommendations:
Case 11: Concord and Associates provides students with an excellent opportunity to employ the evaluation techniques taught in Chapter 14.
This case is about Emily Murray and her responsibility to formally evaluate her sales force in the Southwest US for a year of work. Emily sends messages to her sales team to gather data, think about the previous year, etc. and schedule a meeting with her during a specified period of December. As Emily sifts through the sales data, she identifies several salespersons who have not met standards—expected sales vs, actual sales. Emily must analyze the information to determine if the salesperson has been given goals that are unrealistic or whether the salesperson has not performed at a level that was attainable. This case focuses on one salesperson, Jose, who manages the Arizona territory. In addition to the raw data that Emily is perusing, she also has notes from her field visits with Jose. The students’ jobs are to evaluate the information in the possession of Emily and to make recommendations similar to what Emily would do.
This case is an excellent way to teach students how to analyze sales performance. The data provided allow students to play the role of Emily and to objectively compare the performance of her sales team. Every sales manager faces this dilemma—who is doing a good job and who needs to improve? Some questions to ask to introduce the case include:
Which of Emily’s sales team is doing an excellent job? Based upon what criteria?
Which of Emily’s sales team needs to improve? Based upon what performance factors?
How should you determine the performance of the sales team based upon the data that are available?
Why are accuracy and objectivity important in performance appraisals?
How can you help insure your performance appraisals are objective?
Other In-Class Exercises:
Evaluation Design
Chapter 14
Your group assignment is to design an evaluation system that results in the best performance for your sales force. Looking at the three scenarios below, how would you design the way your sales force is evaluated?
(The professor should break the class into 3, 6, 9 or 12 groups and have each group work on either scenario 1, 2, or 3 below. Each recommended evaluation system should vary to match the strategies proposed by management).
A mature computer firm that wants to establish and maintain positive relationships with their best customers.
Look at number of lost customers, sales growth by account, number of purchases in the pipeline, or number of long-term contracts signed.
A financial services company whose goal is to maximize sales and profits.
Sales revenue as percentage of sales goals, closed sales, profit per account.
A consumer goods manufacturer that wants to maintain customers and grow market share at retail stores.
Number of demonstrations, increase in sales per store location, number of repeat visits to stores that result in increased sales.
Be sure to consider the assortment of available criteria* you could measure.
Activities
Outcomes
Profitability
Qualitative measures
How often would you conduct a performance appraisal of your sale force?
Formally once or twice a year but salespersons would receive interim reports that detail their performance toward reaching set goals and expectations.
What factors might complicate the evaluation system you design?
Team selling, the economy, and competitive actions to name just a few.
Can the evaluation system be used at all firm locations? Why or why not?
As always, it depends. If orders are placed centrally and shipped to all locations such behavior complicates the evaluation system. It is easier to design evaluation systems for salespersons that control what they sell and call singly upon buyers. Such a “lone wolf” salesperson is becoming scarce in most companies.
*Activities:
Sales calls per period, reports completed, complaints, customer training meetings conducted, letters/phone calls, product demonstrations/dealer meetings, service calls, sales calls per customer,: BY existing or new customer; planned vs., cold calls, in-person vs. telephone calls.
*Outcome:
Sales revenue generated, profits, sales per account, sales revenue as a percentage of potential, number of orders, number of new customers, sales to new customers.
*Profits:
Net profit as a percentage of sales, net profit contribution, net profits in $, ROI, gross margin.
*Qualitative Measures:
Professional development, product knowledge, sales presentation.
Comparative Performance Analysis
Cost Analysis
Ben Leonard Nancy Hanks
Gross Margin (%) 34.70% 32.26%
Expense (%) 14.97% 15.72%
Contribution Margin 19.73% 16.54%
Average Order Size $470 $388
Average Cost per Sales Call $100.43 $102.54
T & E Expense per Sales Call $ 10.00 $ 15.00
Miles per Sales Call 26.67 miles 28.00 miles
Special handling/regular orders (%) 4.00% 10.34%
What can you say about the comparative performances of Ben Leonard and Nancy Hanks?
Ben has slightly higher margins, slightly lower expenses, higher contribution margin, average order size, lower costs and fewer special handling (rush orders).
More importantly, why do you make these statements?
Based upon this analysis, Ben appears to be performing at a higher level that Nancy. Without having additional information, it is difficult to justify why Nancy’s average orders are smaller (smaller customers?), why her travel and expense per call is 50% higher (more miles and having to spend overnight?), and why her special handling is >10% versus 4% for Ben. There may be logical reasons for Nancy’s behavior but the sales manager should further investigate to “explain” the differences before labeling the deviations as positive or negative. All other things being equal, Ben appears to be performing at a higher level!
Further analysis should provide the following evaluative results:
Gross margin, expense, and CM also indicate superior performance by Lomand.
Lomand sells larger orders at lower average costs and miles driven.
Lomand generates fewer special handling orders = lower costs!
Overall, Lomand appears to be performing at a higher level.
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