Sales Management

Evaluating Sales Force Performance

Evaluating the sales force
• What are the objectives of performance evaluation?
• Who conducts the evaluation?
• What should be the frequency for evaluation?
• How should evaluation be done?
• Why do performance measures fail?
Section Overview
• Everybody wants to know: “How am I doing?”
• Sales evaluation systems provide needed feedback.
• Without sales evaluation, the supervision of
salespeople is impossible.
• The evaluation may be formal or informal.
• Sales evaluation is about gauging efficiency and
effectiveness based on set goals
• Sales evaluation is a positive activity for the
personal development of sales representatives.
 Performance evaluation
• Must be done for growth and development, not just promotions,
raise etc
• Must be done to foster communication between manager and
sales person
• Employee should keep a ‘me’ file, which must be sent to the
manager at the end of the quarter or year.
• The job description is a key tool in performance evaluation to
discuss how the employee is doing in each of the stated tasks.
• Performance measurement systems are the base for sales force
motivation.
• What are the objectives of performance
evaluation?
 Why Evaluate
 To determine how these salespersons have performed.
 To improve the salesperson’ s performance by identifying the cause of
unsatisfactory performance.
 To identify the salespeople who may be promoted.
 To determine the training needs of the salesperson/sales team.
 To identify the salespersons whose services may be terminated, after
giving adequate chances for improvement.
 To motivate salespeople through adequate recognition and reward for
good performance.
 Guides and controls the activities of the sales force.
 To ensure that compensation and other reward disbursements are
consistent with actual salesperson performance
 To find out their strengths and weaknesses.
 Keep sales job descriptions current and on target with changing market
conditions.
The Sales Audit
• a comprehensive, periodic review and evaluation of
the sales function
• The audit includes an appraisal of
• Sales objectives
• Sales personnel
• Sales tactics
• The objective is to:
• Find out what happened?
• Find out why it happened?
• Decide what to do about it?
Types of analysis CP2S
• Sales Volume Analysis
• Cost Analysis
• Profitability Analysis
• Productivity Analysis
The sales analysis
• Sales analysis is the detailed examination of a
company’s sales data and involves assimilating,
classifying, comparing, and drawing conclusions.
• making decisions based upon sales data
Sales analysis example
 From previous example
• The data must then be analysed in New Delhi, Chennai and
Bangalore to ascertain which salesperson (s) in these areas
missed the quotas.
• Then we can further analyse where and how (s)he missed the
quota
• Analysis is necessary to uncover the reason for poor
performance i.e.
• Was the quota set too high?
• Are salespeople having trouble with a particular product line?
• Can the problem be narrowed down to a particular salesperson,
sales district, or price?
• Do any sales divisions have poor management?
Use of sales analysis
• Planning sales force activities.
• Evaluation of salespeople’s performance.
• Adjust territorial boundaries
• Adjust product lines
• Change classes of customers
• Etc
Hierarchical sales volume analysis
• A multistage analysis which proceeds from one
sales organization level to the next by identifying
major deviations
• Investigating these in more detail at the next lower
level.
Hierarchical sales analysis
Cost analysis
• Cost analysis: examines costs as a percentage of sales.
• Compares cost to sales generated
• Examine the variance between actual and budgeted expenses
• Areas where actual costs vary significantly from budgeted
should be set aside for further analysis
• Sales and Cost analyses are used most frequently
• When sales and costs are combined profitability can be
determined
 Profitability analysis
• Profitability analysis: Profitability is determined by sales volume
and its associated costs and expenses.
• Can be explained using:
• Pareto rule
• 80% of your profits come from 20% of your customers
• 80% of your sales come from 20% of your products
• Managers can identify unprofitable territories and unprofitable
products
• Profitability is now easier to compute with IT advancements
• How do sales people impact on the profitability of the
organisation?
Cont…
• Salespeople have an impact on gross profits through the
specific products they sell and/or through the prices they
negotiate for final sale.
• Salespeople affect net profits by the expenses they incur in
generating sales.
Productivity analysis
• Productivity analysis: may be required to get a fuller
picture of organizational effectiveness.
• Sales and cost analysis help a sales manager identify
areas of high and low productivity in order to better
allocate sales efforts and resources
• Measured in terms of inputs and outputs.
Productivity Analysis
Sales force evaluation process DSECP
1. Determine factors that influence sales
performance
2. Select criteria for sales force evaluation
3. Establish performance standards
4. Compare sales performance
5. Performance review feedback
Major sources of evaluation information
• Company records
• Sales person’s reports
• Customers
• Manager’ s field visits
• Information from peers and subordinates
• Each of these sources of information does have its
strengths and weaknesses
Methods of Sales force Evaluation
• The most widely used methods are:
1. Ranking
2. Rating scales
3. Essays
4. MBO
5. 360 degrees
6. Man to man comparison
7. etc
Ranking
• An evaluation method in which all salespeople are
listed in order of their performance.
• Problem – deciding how people are to be ranked.
• To be successful, managers must use factors that are
simple to understand, not vague and not broadly
defined.
• Not place too much emphasis on personality traits.
 The 20-60-20 approach
• This is a ranking method that divides salespeople into
three groups made up of the top 20%, the middle 60%
and the bottom 20%
• Most companies use it to :
• identify people for special rewards and recognition
(top 20%)
• or special corrective action (bottom 20%).
• Sometimes salary increases are tied to the ranking.
The 20-60-20 Approach
1. Rutendo 20%
2. Abednigo_________________________
3. Tsitsi
4. Ronald 60%
5. Blessed
6. Kudzai_____________________________
7. Nomaswazi 20%
8. Sandra
Rating

• Focuses on behaviours/traits/competencies/tasks
etc
• Both manager and sales person must have the same
understanding of the aspect being measured.
Rating Scale Example

Criteria Outdng Good Sat Poor Vp

Manages time well X
Good customer relations X
Motivated to perform X
Shows maturity X
Shows good judgment X
 Essays
• An evaluation method in which sales managers write
brief narratives that gives judgement and describes
the performance of salespeople.
• The essay will focus on different aspects of the sales
person.
• Essays allow more flexibility but are not consistent
and tend to be subjective because each supervisor has
a different writing style and emphasis.
360-Degree Feedback System
• Salesperson is evaluated by multiple raters
• Gives a multi dimensional picture of performance.
• Fair, accurate, eliminates bias.
• Helps salespeople better understand their ability to
add value to their organization and their customers
• Sales manager
• Customers
• Peers/ Team members
• Oneself
Management By Objectives
• Accomplishment is measured against a clear set of
objectives
• Begin the year by listing the objectives
• Compare goal versus final outcome
• NB: Disregards non goal oriented success metrics.
Criteria for evaluation
• Criteria for measurement should be based on the
sales person’ s job description
• Qualitative techniques
• Quantitative techniques
Major qualitative criteria
• Personal competencies
• Sales skills:
• Technical skills
• Interpersonal skills
• Salesmanship skills
• Time management
• Ethical behaviour
• Team orientation
Quantitative criteria
• Quantitative measures are:
• Easier to implement
• Mostly used
• Easier to standardise
Quantitative inputs measures
• Average number of sales calls per day
• Number of orders
• Number of customer lunches
• Ratio of sales cost to sales:
• Expenses per order
• Entertainment expenses
• Number of reports submitted
Quantitative criteria
• Output measures:
• Sales volume
• Number of new accounts
• Sales revenue generated
• Profits
• Sales per account class
• Sales revenue as a percentage of potential
Evaluating Performance Using Behavior
and Outcome Data
• Performance factors Sales repXSales repY
• Sales (annual) $1,400,000 $1,100,000
• Days worked 210 225
• Calls 1,200 1,500
• Orders 480 750
• Expenses $19,000 $14,900
• Calls per day 5.7 6.7
• Batting average (orders per calls)40% 50%
• Sales per order $2,916 $1,466
• Expenses per call $15.83 $9.93
• Expenses per order $39.58 $19.86
• Expenses as % of sales 1.35%1.35%
Establishing/setting performance
standards
• Simply establishing quotas (Re-cap on quotas)
• Relationship between input and output measures
should be kept in mind
• This requires extensive market knowledge
• New sales reps require different measures
• It is important to note that the sales person’ s
performance is determined by numerous factors:
• Internal
• external
Determinants of sales force performance
• Internal factors:
• Motivation
• Skill level
• Job satisfaction
• Personal factors
• Organisation factors
• External factors:
• Environmental factors
Performance review and feedback
• Final stage:
• Makes use of all information sources discussed earlier
• When quota/target has been achieved:
• Appreciate effort
• Encourage continuity
• When not achieved:
• Find out what went wrong
• Push for change
• Encourage change
• Highly significant deviations:
• adjust performance to standards
• revise policy/plan/strategy
• Lower or raise standards
• FIRE!!!
A good sales evaluation program
• Realistic, achievable targets
• Continuous
• Constructive, motivating
• Informative, participatory
• Flexible
• Without a systematic evaluation, it is easy to
conclude that the sales force did not work hard
enough!!!
Performance evaluation
• What does a sales manager do when a sales person does not
agree with performance review feedback?
• How does a sales manager eliminate bias in performance
appraisals?
• How to evaluate team effort?