PERFORMANCE EVALUATION FOR SALESMEN

Presented By:

J. Jacob

MBA School of Management Studies

INTRODUCTION

Performance Evaluation Process includes:

Establishing performance standards Recording performances Evaluating performances against the

standards Taking action

PURPOSES OF SALESPERSON PERFORMANCE EVALUATIONS

1. To ensure that compensation and other reward disbursements are consistent with actual salesperson performance

2. To identify salespeople that might be promoted

3. To identify salespeople whose employment should be terminated and to supply evidence to support the need for termination

PURPOSES OF SALESPERSON PERFORMANCE EVALUATIONS

4. To determine the specific training and counseling needs of individual salespeople and the overall sales force

5. To provide information for effective human resource planning

6. To identify criteria that can be used to recruit and select salespeople in the future

7. To advise salespeople of work expectations

PURPOSES OF SALESPERSON PERFORMANCE EVALUATIONS

8. To motivate salespeople9. To help salespeople set career goals10. To relate salesperson performance to

sales organization goals.11. To enhance communications between

salesperson and sales manager.12. To improve salesperson performance

STANDARDS OF PERFORMANCE

Performance standards are designed to measure the performance of activities that the company considers most important.

Performance standards are established for the business as a whole and, ultimately, for each salesperson. These standards are used to gauge the extent of achievement of general and related specific objectives.

QUANTITATIVE PERFORMANCE STANDARDS

Most companies use quantitative performance standards.

Comparisons of sales volume performance with sales volume potential.

Qualitative performance standards also measure success in achieving profit objectives.

TYPES OF QUANTITATIVE PERFORMANCE STANDARDS

Sales Quotas Selling expense ratio Territorial net profit/gross margin ratio Territorial market share Sales coverage effectiveness index Call frequency ratio Calls per day Order call ratio Average cost per call Average order size Non-selling activities Multiple quantitative performance standards

SALES QUOTAS

A Quota is a quantitative objective expressed in absolute terms and assigned to a specific marketing unit.

May be dollars, or units of product Quotas specify desired levels of

accomplishment for sales volume, gross margin, net profit, expenses, performance of non selling activities, or a combination of these and similar items.

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

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

Selling expense ratio:To control the relation of selling expenses to sales volume.Target selling expense ratio should be set individually for each person on the sales force.Selling expense ratio standards are used more by industrial product companies than by consumer-product companies.

Territorial net profit or gross margin ratio:Target ratios of net profit or gross margin to sales for each territory focus sales personnel’s attention on the need for selling a balanced line and for considering relative profitability..

QUALITATIVE PERFORMANCE CRITERIA

Qualitative criteria are used for appraising performance characteristics that affect sales results, especially over the long run, but whose degree of excellence can be evaluated only subjectively.

Factors of Qualitative analysis of salesperson performance:

Job Factors:Product KnowledgeAwareness of customer needsRelationship with customersNumber of sales callsQuota performanceService follow-up

Personal Factors:PunctualityGeneral attitudeDress & AppearanceDiligenceCooperationAccuracyAdaptabilityReliability

SalespersonSalesperson

360-DEGREE FEEDBACK SYSTEM

Salesperson is evaluated by multiple raters

Helps salespeople better understand their ability to add value to their organization and their customers

Inte

rnal C

ustom

ers

Evaluation

Evaluation

External Customers

Eval

uation

Eval

uation

Ones

elf

Evaluation

Evaluation

Sales ManagerEvalu

atio

nEvalu

atio

n

Team M

embers

Evaluation

Evaluation

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

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

BARS SYSTEMS Behaviorally anchored rating scale (BARS)

system concentrates on criteria the individual can control

Requires sales managers to consider in detail a wide range of components of job performance

Requires clearly defined anchors for each performance criteria

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

Behavior – what people do; the tasks on which they expend effort

Performance – behavior evaluated in terms of its contribution to the goals of the organization

Effectiveness – some summary index of organizational outcomes for which the individual is at least partly responsible

Performance versus Effectiveness

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

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

DIMENSIONS OF SALESPERSON PERFORMANCE EVALUATION

BehavioralBehavioral

ProfessionalDevelopmentProfessionalDevelopment

ResultsResults

ProfitabilityProfitability

SalespersonPerformanceSalespersonPerformance

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.

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

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

MARKET RESPONSE FRAMEWORK

Salesperson Factors

Characteristics• Role Perceptions• Aptitude• Skill Level• Motivation

Behavior• Effort• Quality

Planning and

Control Unit

Behavior• Effort• Quality

Environmental Factors• Control Unit Attractiveness• Business Position

Organizational Factors• Marketing Effort• Sales Management Effort

PERFORMANCE EVALUATION METHODSGRAPHIC 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

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

PERFORMANCE EVALUATION METHODS: OBJECTIVE-SETTING METHODS

Management By Objectives (MBO)

1. Mutual setting of well-defined and measurable goals within a specified time period.

2. Managing activities within the specified time period toward the accomplishment of the stated objectives.

3. Appraisal of performance against objectives.

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)