Introduction

Effective sales performance tracking begins with clear, defined goals that are aligned with your companys core objectives for the year. But general goals only allow for a general performance gauge. To create a detailed and deliberate focus for development, you must identify specific, measurable goals within the product lines and departments that set your company apart from others PERFORMANCE EVALUATION Appraising a salespersons performance is a part of the managerial function of evaluation. It is part of a marketing audit. Management compares the results of a persons efforts with the goals set for that person. The purpose is to determine what happened in the past and to use this information to improve performance in the future either by taking corrective actions or by rewarding good performance. The evaluation system also is one of the means by which managers direct the activities of their salespeople.

Importance of Performance Evaluation A good performance review can be a major aid in other sales force managementtasks. Promotions and pay increases can be based on objective performance data rather than on favoritism, subjective observations, or opinions. Weaknesses in field-selling efforts, once identified, may be forestalled by incorporating corrective measures in training programs. On the other hand, management can identify the sales techniques of the outstanding performers with an eye toward having other salespeople adopt them. Performance evaluations also may uncover the need for improvements in the compensation plan. For instance, the existing plan may focus too much effort on low-margin items or too little attention on nonselling (missionary) activities.

By evaluating the salespeoples achievements, management helps them discover their own strengths and weaknesses. This should motivate them to raise their levels of performance. Like most people, sales reps seldom can make an effective self-evaluation. In fact, when asked to rate themselves, low-performing reps tend to overestimate their performance, while high-performing reps tend to underestimate their performance.2 Further, even when reps do understand their performance is unacceptable, they often are not able to determine the reasons for this poor productivity.

PERFORMANCE EVALUATION PROCESS This section suggests a five-step procedural system for evaluating sales force performance (see Figure 161). The program is complete, but it is also expensive and time-consuming. Step 1. Establish Some Basic Policies Preliminary to the actual evaluation, management should set some ground rules. One question that calls for a decision is: Who will participate in the evaluation? Several executives normally are involved. One of the most likely is the salespersons immediate superiorperhaps a field supervisor, a district manager, or a branch manager. The boss of the immediate supervisor also is likely to be involved. Over 25 percent of companies today use an employee assessment known as 360-degree feedback, which is especially effective in team environments. This technique involves getting evaluative feedback from an employees peers, subordinates, and clients, as well as superiors.

Step 2. Select Bases for Evaluation One key to a successful evaluation program is to appraise a sales reps performance on as many different bases as possible. To do otherwise is to run the risk of being misled. Lets assume that we are rating a sales rep, Ryan, on the basis of the ratio of selling expenses to sales volume. If this percentage is very low compared to the average for the entire sales force, Ryan probably will be commended. Yet Ryan actually may have achieved that low ratio by failing to prospect for new accounts or by otherwise covering the territory inadequately. Knowing the average number of daily calls Ryan made, even in relation to the average call rate for the entire sales force, does not help us very much. By measuring Ryans ratio of orders per call (batting average), we learn a little more, but we still can be misled. Each additional piece of informationsales volume, plus average order size, plus presentation quality, and so onhelps give a clearer picture of Ryans performance.

Bases of evaluation fall into two general categories: output measures and input measures. Both types of measures should be used to get a complete picture of the salespersons performance.

Output Measures Output measures relate to the salespersons resultssales volume, gross margin, number of orders, and so on. A list of some output factors ordinarily used as evaluation bases is shown in Figure 163. These measures are often used to make some meaningful comparisons. One rep may be compared to another, performance this year may be compared to performance for last year, performance may be compared to a goal or target, the reps share of the market may be compared to that of competitors, and so on.

Input Measures Two types of input measures are used in the evaluation process. Thequantitative measures focus on the salespersons efforts or activities. The number of calls a salesperson makes in a day and the number of e-mails sent to prospects are examples of quantitative input measures. Figure 164 lists the more commonly used factors. Tracking these factors is considered so important by Bell South Cellular that 25 percent of its sales managers quarterly bonus is based on how closely they monitor their reps activities.

Ratio Measures Most of the quantitative measures discussed above can be combined to create ratio measures that can be used for evaluative and comparative purposes. Orders/calls, expenses/sales, and sales/orders are some of the more common ratios managers use to evaluate and compare the performance of salespeople. A quantitative evaluation of a sales reps performance can involve the following equations:

If the sales volume for a representative is unsatisfactory, the basic cause must rest in one or more of these four factors. An analysis such can help focus the managers attention on the trouble spot so that additional detailed investigation can pinpoint the reps exact difficulties.

Step 3. Set Performance Standards Setting standards is one of the most difficult phases of performance evaluation. The standards serve as a benchmark, or a par for the course, against which a sales reps performance can be measured. Also, standards let a salesperson know what is expected and serve as a guide in planning work. Standards must be equitable and reasonable; otherwise, salespeople may lose interest in their work and confidence in management, and morale may decline. If the standards are too high or too low, using them to evaluate performance will be worthless or even harmful. Once the standards have been set, it is critical that these standards be communicated to the salespeople. Even if the salespeople were involved in establishing the standards, they should be formally communicated to the rep. This ensures that there are no misunderstandings about the benchmarks against which the reps performance will be judged. Step 4. Compare Performance with Standards The accumulated information must be interpreted. This step involves comparing an individuals performanceboth efforts and resultswith the predetermined standards. Interpreting Quantitative Data Some factors ordinarily used as bases for performance appraisal. The following discussion shows how these factors can be used with the performance standards in step 3 to evaluate a reps performance. Sales Volume and Market Share The first criterion most sales managers use to judge the relative performance of salespeople is their sales volume. Some executives believe that the rep who sells the most merchandise is the best salesperson, regardless of other considerations. Unfortunately, sales volume alone may be a poor indicator of a reps worth because it tells the firm nothing about the reps contribution to profit or customer relations.

Gross Profit In most firms, a sales manager is (or should be) more concerned with the amount of gross profit the salespeople generate than with their dollar sales volume. Gross margin in dollars is a much better measure of a salespersons effectiveness because it gives some indication of the reps ability to sell high-margin items. Since the prime objective of

most businesses is to earn a targeted return on investment, a persons direct contribution to profit is a logical yardstick for evaluating performance. Call Rate A key factor in sales performance is the call ratethe number of calls made per day. A salesperson ordinarily cannot sell merchandise without calling on customers; generally, the more calls, the more sales. Sales rep A makes three calls a day, but the company average is four for sales reps who work under reasonably comparable conditions. If management can raise As call rate up to the company average of four, his sales should increase about 33 percent. Direct-Selling Expenses Direct-selling expense is the sum of travel expenses, other business expenses, and compensation (salary, commission, bonus) for each salesperson. These total expenses may be expressed as a percentage of sales. Also, the expense-to-sales ratios for the various salespeople can be compared. Or management can compute the cost per call for each salesperson by dividing total expenses by the number of calls made. Routing Efficiency Dividing the miles traveled by the number of calls made gives the average miles per call. This figure either indicates the density of the sales reps territory or measures routing efficiency. If a group of salespeople all have approximately the same size and density of territories, then miles per call is a significant figure for indicating each ones routing efficiency. Suppose five salespeople selling for an office machines firm in a metropolitan area vary considerably in the number of miles traveled per call. Then the sales manager may have reason to control the routing of those who are out of line. Step 5. Discuss the Evaluation with the Salesperson Once the salespersons performance has been evaluated, the results should be reviewed in a conference with the sales manager. This discussion should be viewed as a counseling interview, in which the manager explains the persons achievements on each evaluation factor and points out how the results compared with the standards. Then the manager and the salesperson together may try to determine the reasons for the performance variations above or below the standards. It is essential to discuss the managers ratings on the qualitative factors and to compare them with the salespersons self evaluation on these points. On the basis of their review of all evaluation factors, the manager and the salesperson can then establish goals and an operating plan for the coming period.

Unperceptive managers often lose sight of subordinates virtues and strengths and criticize unimportant factors. One key factor in management is learning to use peoples virtues to the best advantage while not allowing their weaknesses to hurt the firm.