Chapter 12 Evaluation in the Global Marketplace Sales Management: A Global Perspective Earl D. Honeycutt John B. Ford Antonis C. Simintiras

Introduction Sales managers plan, implement and control sales activities To control, evaluation must occur Without evaluation it is difficult to know what has worked, what has not, and WHY? The purpose of evaluation is to improve salesperson and firm performance

Source of Deviations Attributable to incorrectly set goals or weak performance? Evaluation criteria differ depending upon the goal If goal is to reward, then focus on salesperson activities and results If goal is to promote, then focus on factors related to success as a sales manager

Global Evaluation Guidance Evaluation allows management to identify substandard performance and take corrective action Adjust training, compensation, or strategy Assessing personnel in global markets is more complex Global evaluations may include technical ability, cultural empathy, adaptability, flexibility, diplomacy, and language ability Cultural skills may be more relevant in global markets

Global Market More Complex Global system must be accessible, easy to understand, equitable, and motivating Financial metrics may be less revealing since global firms use transfer pricing and attempts to maximize total company profit Global evaluations are often conducted from a distance with little accurate information about field behavior of sales personnel

Evaluating Sales Force Performance Sales Managers can evaluate overall sales performance by analyzing sales, cost, and profit data No one measure of effectiveness best Multiple measures are employed Three most common methods are: Sales, Cost, and Profit analyses

Sales Analysis Gathering, sorting, assessing, and making decisions based upon sales data Must organize data to show market and salesperson deviations (see Table 12.1) Examine how markets are performing in comparison to one another Sales data most readily available Sales force goal is to increase customer demand and reach sales goals Must define “sold” and compare in local currency or units sold

Cost Analysis Compares cost to sales generated Examine the variance between actual and budgeted expenses (See Table 12.2) Areas where actual costs vary significantly from budgeted should be set aside for further analysis Firms can use to set pricing levels, budgets and commission rates Sales and Cost analysis used most frequently

Profit Analysis When sales and costs are combined profitability can be determined Managers can identify unprofitable territory, unprofitable products, and year-end bonuses Profitability easier to compute with information technology advancements

Analyzing Performance Conducting sales, cost, and profitability analysis is a three-step process: Identify the needed information Establish procedures Analyze results CRM systems permit managers to play “what if” scenarios to see how different inputs would vary performance

Discussion Questions What challenges are encountered when firms evaluate sales force efforts globally? What is the difference between sales force effectiveness and salesperson performance? What are the advantages of assessing sales, cost, and profitability data when evaluating sales force performance?

Performance Appraisal Performance appraisal is the assessment of individual sales force members Individual appraisal should be conducted regularly Annually or every six months Some firms do not evaluate at all! Without an objective analysis, how can salesperson be developed or advised by sales manager?

What we know about appraisal Most firms examine both qualitative and quantitative input and output criteria Greater emphasis put on output – e.g., sales revenue Input is sought for setting quotas & standards Sales objectives receive different weights based upon activities and territories Firms gather multiple sources of information Field sales managers conduct most evaluations Written evaluations normally conducted in office setting

Appraisals should cover wide range of areas Salesperson responsibilities are diverse Necessitates four areas being assessed: Activities Outcomes Profitability Personal development Each area provides managers with different insights about performance

Sales Activities Important that identical data computed for all salespersons regardless of who compiles Sales calls per period, required reports completed, customer complaints, customer training sessions completed, letters/phone calls to customers, product demonstrations, service calls, dealer meetings held Can subdivide by existing vs. potential customers or planned vs. cold calls

Understanding activities Different probabilities for each activity Planned vs. cold calls How salespersons devote their time Differences between high and low performers All sales effort not the same Two sales persons make same effort with different results Sales managers need to know effort-result ratio For example, batting average or sales/total calls

Outcome Measures Activities lead to outcomes, such as: 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 Outcomes higher when time and quality devoted to input activities Supported by a study in Singapore

Profitability Measures Firms now look at profitability measures Net profit as a percentage of sales Net profit contribution Net profit dollars Return on investment Gross margin Salesperson can impact profitability by Specific products sold and final price negotiated

Qualitative Measures Judgment by the salesperson’s supervisor To what the salesperson’s knowledge and performance compare with an ideal person To minimize bias, sales managers should follow a systematic assessment process Includes three steps: Objectives Techniques Items

Bias in Appraisals Managers must minimize bias that creep into evaluation efforts Set standards whenever possible Based upon behavior or results Evaluate from a point of neutrality Informal evaluations Often subjective in nature Results in differing amounts and quality of information

Diagnosing Salesperson Performance Data is collected, organized and interpreted Why has one product not met expectations? Monitor salesperson performance for a variety of reasons: Counseling, promotion, bonus, termination, or transfer Without a systematic evaluation, it is easy to conclude that sales force did not work hard enough

Evaluation and Action Once evaluation takes place, it is time for action: Personal development Reallocation of effort Modifying the performance setting Changes may be needed in sales procedures or methods New products, selling strategies or credit policies changed Must submit detailed study to upper management

Discussion Questions What is the relationship of activities and outcome measures? What pitfalls are inherent in informal evaluation systems? Explain the evaluation problems caused by sales manager bias

Chapter Summary Evaluation tells us what is working, what is not, and most importantly, why! Analysis helps managers identify potential problems Individual salespersons appraised to identify effort and performance level Evaluation leads to greater success for salesperson, sales force, and the firm