Chapter 16

Evaluating sales force performance

Prof. Sunitha Ratnakaram, Associate Professor, VVSB

MBA, M. Phil, MFM, M. SC. (Psychology),

UGC JRF, (Ph. D)

In this chapter we will discuss:

Sales force performance Determinants of sales force performance Performance evaluation Information sources for evaluation Criteria for the evaluation of sales force performance Establishing of performance standards Methods of sales force evaluation Monitoring & reviewing of sales force performance

Introduction
Sales mangers & their activities Function which is overlooked by them evaluation Achieving fair balance between costs & profits is the major responsibility

Sales force performance

Relation between sales force performance & overall performance of organizations Impact of effective sales force performance on the bottom-line Newer methods of sales force training Sales managers awareness about the factors influencing sales force performance

Determinants of sales force performance

Changing dynamics of the market have increased the pressure on sales force Many studies were conducted to know the factors which will influence sales force performance They are
1. Internal factors 2. External factors

Internal factors
a) b) c) d) e) Motivation Skill level Job satisfaction Role perception Personal factors (age, sex, weight, height, appearance, marital status, education & no. of dependents) f) Ego drive g) Empathy

External factors
a) Environmental factors b) Organizational factors
a) communication & work flow b) compensation system

c) Sales management functions

a) b) c) d) e) Sales force planning Forecasting Territory management Compensation Control

Performance evaluation
Important process which enhances the way organization is managed & provides recommendations for further improvement Why is it a critical function? What it constitutes?
Comparing objectives with results

Provides feedback, management expectations are made known

Sales force evaluation process

Determine the factors that influence sales force performance

Select criteria for sales force evaluation

Establish performance standards

Evaluation process

Compare sales force performance

Performance review & feed back

Purpose of evaluation
To monitor the performance & ensure that it is in alignment with corporate goals & objectives To keep track of progress To take decisions regarding compensation, promotion & transfer

Objectives to be fulfilled
Appreciate good performance Discuss & suggest ways to overcome short comings Review & update standards of performance Enhance superior sub ordinate relationship

Reasons for evaluation

1. To be aware of company objectives
Increasing the focus on new products Reducing time spent on non selling activities Retaining the existing customer base Providing training facilitates Providing focus on value added activities

2. To improve motivation & skills 3. To appraise past performance 4. To develop a sales plan to increase future sales

Who should evaluate?

Immediate supervisor better estimation Sales manager overall performance Territory manager rarely Regional manager - rarely

When to evaluate?
Weekly, monthly, quarterly, half-yearly or annual basis Systematic & formal procedures only comes under evaluation Depends on complexity & duration of sales plan Time to take corrective actions also to be considered As frequently as possible depending on job profile.

Information sources for evaluation

Source of information influences the criteria that the manager selects to measure sales force performance Sales manager should be aware of strengths & weaknesses of the sources of information Formal process for the collection of information helps in efficient & accurate evaluation system

Major sources of information

Company records
Sales volumes, sales order to call ratio, profitability, selling expenses etc.

Reports from sales persons

Activity, expenses, call reports

Customers
Inadequacy of sales persons reports can be removed

Managers field visit

Communication skills, interpersonal skills, technical product knowledge, personality traits

Managers personal insights Other sources

Distributors, personal contacts, published & electronic sources etc.

Information from peers & subordinates (3600 feed back)

Criteria for the evaluation of sales force performance

Performance can be considered & evaluated in terms of behavior & outcome based components Criteria for measurement should be derived form job description of the sales personnel

Qualitative criteria
Personal competencies
Planning skills, team work, aptitude & attitude, product knowledge

Measurability leads to ambiguity Shift from planning skills, knowledge of company policies, time management to communication skills, ethical behavior & team orientation

Major qualitative criterions

1. Sales skills
Technical skills Interpersonal skills Salesmanship skills

2. Territory management 3. Personality traits

Adaptability Locus of control Ego drive

Quantitative criteria
Mostly used & easier to standardize & implement Quantitative measures can be segregated into input & output measures Input measures
Avg. no. of sales calls per day Ratio of sales cost to sales No. of reports submitted by sales persons

Output measures
Sales volume Sales orders No. of new accounts No. of advertising displays Gross profit obtained from new accounts

Establishing of performance standards

Based on the criteria standards are to be formulated Standards act as a bench mark & helps in evaluating performance Can be prepared by a sales manager singly or in consultation with other sales personnel No. of standards to be used is one of major decisions & difficulty involved in the weight to be given to each factor Large companies will have common set of performance standards Relationship between input & output measures to be kept in mind while setting standards

Areas of performance standards

Quantity standards Quality standards Time based standards Cost based standards

Quantity standards Quality standards

Sales calls per day Number of orders No. of sales presentations No. of lunches hosted for a customer Team work Adaptability Ethical behavior Ability to gather information etc.

Time based standards

Time taken between identifying customer need & preparing sales proposal Time gap between a customer enquiry & the sales call Time between complaint & solving problem Time between getting order & collecting sales amount etc.

Cost based standards

Ratio of selling costs to sales Gross profit obtained from new customers Expenses incurred per order No. of gifts & entertainment expenses

Most widely used quantitative performance standards

Sales volume based on quota Sales volume in comparison to previous years sales & net profits

Methods of sales force evaluation

Several methods were developed in this regard Cotham & Cravens gave a model using standard deviation in 1969 Cravens, Woodruff & Stamper developed a model in 1972, using total sales volume Jackson & Aldag propounded MBO method for sales force in 1974 Cocanaugher & Ivancevich developed BARS in 1978 Few of them are behavior based, few of them are results based and few of them are personality trait based

Some f the methods for evaluation

1. Essays: where sales manager describes the performance of sales person in few paragraphs 2. Rating scales: based on standardized performance measures 3. Forced choice method: where the sales manager is asked to go through groups of statements & select those that best explain the individual 4. Ranking: useful when entire sales force has to be evaluated. Techniques used are alternative ranking, paired comparison ranking & multiple ranking

5. New methods of evaluation

a) b) c) d) Critical incident approach Work standards method Management by objectives (MBO) Behaviorally Anchored Rating Scale (BARS) e) Family of Measures (FOM) as a method of sales force performance evaluation (continuous & compares past performance with present performance)

Monitoring & reviewing of sales force performance

Need for monitoring How to monitor?
Sales reports, invoices, order forms, accounting records & direct interaction

Review is the final stage in evaluation An evaluation interview can be conducted in regard to this periodically where the aspects of improvements can be discussed along with clarifying doubts