Evaluating the Performance of Salespeople Module Ten Evaluating the Performance of Salespeople

Learning Objectives Discuss the different purposes of salesperson performance evaluations. Differentiate between an outcome-based and a behavior-based perspective for evaluating and controlling salesperson performance. Describe the different types of criteria necessary for comprehensive evaluations of salesperson performance.

Learning Objectives Compare the advantages and disadvantages of different methods of salesperson performance evaluations. Explain how salesperson performance information can be used to identify problems, determine their causes, and suggests sales management actions to solve them. Discuss the measurement Importance of salesperson job satisfaction.

Evaluating Salesperson Performance at City Wholesale Setting the Stage Evaluating Salesperson Performance at City Wholesale What were the primary changes Prince made to the performance evaluation process? How did the changes impact City Wholesale’s sales force? Answers Prince changed the frequency of the review process from annually to quarterly. He also began asking the question “What do you think we’re not doing?” 2. The more frequent evaluations improved communications and ultimately, improved salesperson performance.

Purposes of Salesperson Performance Evaluations To ensure that compensation and other reward disbursements are consistent with actual salesperson performance To identify salespeople that might be promoted To identify salespeople whose employment should be terminated and to supply evidence to support the need for termination 2

Purposes of Salesperson Performance Evaluations To determine the specific training and counseling needs of individual salespeople and the overall sales force To provide information for effective human resource planning To identify criteria that can be used to recruit and select salespeople in the future To advise salespeople of work expectations 2

Purposes of Salesperson Performance Evaluations To motivate salespeople To help salespeople set career goals To relate salesperson performance to sales organization goals. To enhance communications between salesperson and sales manager. To improve salesperson performance 2

Salesperson Performance Evaluation Approaches: Conclusions Most evaluate on an annual basis Most combine input and output criteria which are evaluated using quantitative and qualitative measures When used, performance standards or quotas are set in collaboration with salespeople Many assign weights to different objectives and incorporate territory data. 3

Salesperson Performance Evaluation Approaches: Conclusions Most use multiple sources of information Most are conducted by the field sales manager who supervises the salesperson Most provide a written copy of the review and personal discussion 3

360-Degree Feedback System Sales Manager Evaluation Salesperson is evaluated by multiple raters Helps salespeople better understand their ability to add value to their organization and their customers Salesperson Team Members Evaluation Oneself Evaluation Internal Customers Evaluation External Customers Evaluation 3

Key Issues in Evaluating and Controlling Salesperson Performance Outcome-Based Perspective Focuses on objective measures of results with little monitoring or directing of salesperson behavior by sales managers Behavior-Based Perspective Incorporates complex and often subjective assessments of salesperson characteristics and behaviors with considerable monitoring and directing of salesperson behavior by sales managers 4

Perspectives on Salesperson Performance Evaluation Outcome-Based Little monitoring of people Little managerial direction of salespeople Straightforward objectives measures of results Behavior-Based Considerable monitoring of salespeople High levels of managerial direction of salespeople Subjective measures of salesperson characteristics, activities, and strategies 6

Dimensions of Salesperson Performance Evaluation Behavioral Results Salesperson Performance Professional Development Profitability 7

Criteria for Performance Evaluation Behavior: Consists of criteria related to activities performed by individual salespeople Sales calls, customer complaints, required reports submitted, training meetings, letters and calls Should not only address activities related to short-term sales generation but should also include non-selling activities needed to ensure long-term customer satisfaction. 8

Criteria for Performance Evaluation Professional Development: Assess improvements in certain characteristics of salespeople that are related to successful performance in the sales job Characteristics include - Attitude, product knowledge, initiative and aggressiveness, communication skills, ethical behavior 8

Criteria for Performance Evaluation Results: Salespeople measured objectively based on results such as – sales, market share, and accounts A sales quota represents a reasonable sales objective for a territory, district, region, or zone Some research shows that rewards for achieving results have a negative effect on performance and satisfaction 8

Market Response Framework Salesperson Factors Characteristics Role Perceptions Aptitude Skill Level Motivation Behavior Effort Quality Planning and Control Unit Environmental Factors Control Unit Attractiveness Business Position Organizational Factors Marketing Effort Sales Management Effort 12

Elements Important in Assigning Sales Quotas Concentration of businesses within the territory Geographic size of the territory Growth of businesses within the territory Commitment by the sales manager to assist the sales representative Complexity of products sold 13

Elements Important in Assigning Sales Quotas Sales representative’s past sales performance Extent of product line Financial support (e.g., compensation) a firm provides Relationship of product line Amount of clerical support 13

Criteria for Performance Evaluation Profitability: 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. Criteria Examples Net profit dollars Gross margin per sale Return on investment Number of orders secured Selling expenses versus budget 8

Performance Evaluation Methods: Characteristics any method should include Job Relatedness Reliability Validity Standardization Practicality Comparability Discriminability Usefulness 12

Performance Evaluation Methods Graphic Rating/Checklist Methods Salespeople are evaluated using some type of performance evaluation form Especially useful in evaluating behavioral and professional development criteria May be filled out by customers Disadvantage is providing evaluations that discriminate sufficiently 13

Performance Evaluation Methods: Ranking Methods Rank all salespeople according to relative performance on each performance criterion These methods force discrimination as to the performance of individual salespeople May be complex Rankings only reveal relative performance evaluation 14

Performance Evaluation Methods: Objective-Setting Methods Management By Objectives (MBO) Mutual setting of well-defined and measurable goals within a specified time period. Managing activities within the specified time period toward the accomplishment of the stated objectives. Appraisal of performance against objectives. 15

Performance Evaluation Methods Behaviorally Anchored Rating Scales (BARS) Links behaviors to specific results Salespeople are used to develop performance results and critical behaviors Positive feedback about behaviors may be more affective than positive output feedback 16

Performance Evaluation Bias Occurs when a manager’s evaluation of a salesperson is affected by considerations other than the specified criteria Common sources of bias: Personal relationships Perceived difficulty of territory Outcomes (i.e., ends justifies the means) 17

Evaluating Team Performance Consider the criteria on which members will be evaluated and the methods used to evaluate performance Establish a link between team performance and positive outcomes to promote individual and team effort May be beneficial to allow team to help develop goals and evaluation criteria 18

Framework for Using Performance Information Evaluate Salespeople against Relevant Performance Criteria Compare Salesperson Evaluations to Identify Problem Area Investigate Problem Areas to Identify Causes of Performance Problems Determine Sales Management Actions to Eliminate Causes of Future Problems and to Solve Existing Problems 19

Salesperson Job Satisfaction Job satisfaction related to turnover, absenteeism, motivation, and organizational commitment Job satisfaction may be related to performance (direction of relationship is unknown) INDSALES may be used to measure job satisfaction Results may identify areas where manager may intervene to improve job satisfaction 20