Sales Force Management 11th Edition Mark W. Johnston Greg W. Marshall Routledge 2013

Evaluation and Control of the Sales Program Part 3 Evaluation and Control of the Sales Program Routledge 2013

Evaluating Salesperson Performance Chapter 13 Routledge 2013

The Case for a Focus on Sales Force Performance Management Systems Inform sales force of how to sell Provide managers w/ management framework Enable measurement and continuous improvement of sales force performance BPR and TQM movements didn’t significantly impact the sales force CRM and SFA have sparked the current interest Key elements Proper Milestones Workflow Business Logic Controls Source: HR Chally Group (2007), The Chally World Class Excellence Research Report: The Route to the Summit. Dayton, OH: HR Chally Group (2012). Routledge 2013

Learning Objectives Explain difference between performance and effectiveness Identify objective measures of salesperson performance, output and input Utilize ratio analysis as an objective approach to salesperson performance measurement Discuss key issues related to subjective measurement of salesperson performance and forms used to administer such an evaluation Understand how a sales manager can make performance review process more productive and valuable for the salesperson Routledge 2013

Performance versus Effectiveness Behavior – what people do; tasks on which they expend effort Performance – behavior evaluated in terms of contribution to organizational goals Effectiveness – summary index of organizational outcomes for which individual is at least partly responsible Attribution theory – a classic theory of motivation Routledge 2013

Performance Evaluation Measures Objective measures – reflect statistics sales manager can gather from the firm’s internal data Output Input Ratios of output or input Subjective measures – rely on personal evaluations by sales manager and others Routledge 2013

Leadership: Attributions and Salesperson Performance Evaluation Attributing causes of outcomes has been studied extensive under the rubric of the attribution theory Variables used for evaluations are in 3 categories: Performance variables (i.e. task success or effectiveness) Environmental variables (task difficulty and luck) Person or dispositional, variables (ability and effort) Heider proposed that evaluator assess performance based on the following relationships: Ability – task difficulty/effort Performance = (ability × effort ± task difficulty) Routledge 2013

Common Output and Input Measures Used to Evaluate Salespeople Exhibit 13.1 Common Output and Input Measures Used to Evaluate Salespeople Routledge 2013

Ratio Measures Expense ratios – combine both salespeople’s inputs and the results produced by those inputs in a single number Account development and servicing ratios – a number of ratios concern accounts and orders that reflect on how well salespeople are capturing the potential business that exists in territories Call activity and productivity ratios – call activity ratios measure the effort and planning salespeople put into their customer call activities and the successes they derive from it Routledge 2013

Common Ratios Used to Evaluate Salespeople Exhibit 13.2a Common Ratios Used to Evaluate Salespeople Routledge 2013

Common Ratios Used to Evaluate Salespeople Exhibit 13.2b Common Ratios Used to Evaluate Salespeople Routledge 2013

Common Ratios Used to Evaluate Salespeople Exhibit 13.2c Common Ratios Used to Evaluate Salespeople Routledge 2013

Summary of Objective Measures Sales = Days worked × Calls/Days worked Orders/Calls Sales/ Orders or Call rate Batting avg. Avg. order size Routledge 2013

Summary of Objective Measures The equations highlight what a salesperson can do to increase sales which include increasing: Number of days worked Calls made per day Level of success in securing an order on a given call Size of the orders Two essential points regarding objective measures: Measuring straight sales volume and profit have advantages and disadvantages for evaluating salespeople All the indexes are an aid to judgment not a substitute Routledge 2013

Subjective Measures Qualitative measures reflect behaviors or process aspects of what they do and how well they do it It is more difficult to assess quality rather than quantity of salesperson’s performance Bias – refers to performance evaluations that differ from objective reality, usually based on errors by the evaluator Routledge 2013

Typical Attributes on Appraisal Forms Sales results – volume performance, sales to new accounts, and selling the full product line Job knowledge – knowledge of company policies, prices, and products Management of territory – planning of activities, calls, controlling expenses, reports and records Customer and company relations – salesperson’s standing with customers, associates, and company Personal characteristics – initiative, personal appearance, personality, resourcefulness, etc. Routledge 2013

Sample Subjective Performance Evaluation Form Exhibit 13.3a Sample Subjective Performance Evaluation Form Routledge 2013

Sample Subjective Performance Evaluation Form Exhibit 13.3b Sample Subjective Performance Evaluation Form Routledge 2013

Sample Subjective Performance Evaluation Form Exhibit 13.3c Sample Subjective Performance Evaluation Form Routledge 2013

Sample Subjective Performance Evaluation Form Exhibit 13.3d Sample Subjective Performance Evaluation Form Routledge 2013

Problems with Subjective Performance Measurement Lack of an outcome focus Ill-defined personality traits Halo effect Leniency or harshness Central tendency Interpersonal bias Organizational uses influence Routledge 2013

Sample of a Poorly Constructed Subjective Performance Evaluation Form Exhibit 13.4 Sample of a Poorly Constructed Subjective Performance Evaluation Form Routledge 2013

Avoiding Errors in Performance Evaluation Read definition of each attribute thoroughly before rating Guard against tendency to overrate Be as objective as possible Do not permit your evaluation of one factor to influence your evaluation of another Base your rating on observed performance, not potential abilities Rate an employee on general success or failure over the whole period Have sound reasons for your ratings Routledge 2013

Leadership: Outcome Bias in Evaluations Sometimes outcomes and processes leading to outcomes match, sometimes they do not Evaluators tend to overlook process and rate performers based on outcomes Relationship selling requires attention to behaviors that may or may not influence the bottom line for some time Most modern sales organizations understand the threat of the outcome bias and work to integrate multiple aspects of performance into the evaluation process Routledge 2013

BARS Systems Behaviorally anchored rating scale (BARS) system concentrates on criteria the individual can control Process of developing a BARS system: Key behaviors with respect to performance are identified using critical incidents The group of critical incidents is presented to a group of sales personnel who are asked to assign each critical incident to an appropriate performance dimension Key advantage of BARS system is that it requires sales manager to consider a wide range of components of a salesperson’s job performance Job-specific nature of scales suggest they are most effective in evaluating salespeople performing similar functions Routledge 2013

Exhibit 13.5 A BARS scale with behavioral anchors for the attribute “promptness in meeting deadlines” Routledge 2013

360-Degree Performance Feedback Integrates feedback from external customers, internal customers, other members of the selling team, the sales manager, and the salesperson Provides the impetus for a more productive dialogue between the sales manager and salesperson at performance review time Routledge 2013

Performance Management System Requires a commitment to integrating all the elements of feedback on the process of serving customers Results in performance information that is timely, accurate, and relevant to the firm’s customer management initiative Salespeople take the lead in goal setting, performance measurement, and adjustment of their own performance Routledge 2013

Innovation: Effective Appraisals Preparation Reps rate themselves Focus on their impact, needs, and goals Appraisal interview Discuss salary separately Focus on own and rep’s preparation answers Post-appraisal Share formal review documents Connect salary to appraisal issues Routledge 2013

Routledge 2013