C H AP T E R
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Evaluating Salesperson Performance
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TH E CA S E F OR A F OC U S ON S ALES FORCE
P E R F O RM A NC E MANAGE ME NT SYSTEMS
An effective salesperson performance management system (1) informs your sales force
of the way you want them to sell; (2) provides sales management with a framework from
which to manage; and (3) enables measurement and continuous improvement of the sales
force’s performance.
Performance management has come into sharp focus as a key issue for world-class sales
organizations. Over time, sales organizations have tended to remain a bit of a holdout in
implementing various new-age approaches to evaluation and control. Somehow, the entire
business process reengineering (BPR) and total quality management (TQM) movements of
the last 25 years largely passed right through the world without leaving much of a mark on
the sales force. Perhaps credit for the current interest goes to the widespread adoption of
customer relationship management (CRM) and sales force automation (SFA). That is, after
years of expensive, chaotic software implementations, sales executives are finally clueing
in to the fact that without fundamental business processes underpinning their information
systems, they have invested enormously in what are essentially large databases with input
screens and output reports. By adding comprehensive performance management systems
with proper milestones, workflow, business logic, and controls to the systems, sales managers can actually bring order to the chaos and begin to proactively manage their productivity as manufacturing and other areas of the firm have for decades.
Numerous executives interviewed by Chally Group Worldwide highlighted major milestones
in integrating performance management systems, defined their key performance metrics, and
discussed how the processes influence everything from selling, to coaching, to managing, to
measuring and rewarding. World-class sales forces have come to acknowledge two key truths
that now usher in a new era in sales force management. First, sales is no longer the domain
of individualist mavericks who succeed through inherent personal ability and brute force of
will. Professional selling is a highly complex affair that involves the participation of many
team contributors. Long, extended sales cycles now commonly involve roles such as inside
salespeople, major account managers, technical specialists, business partners, customer service, and other internal resources. Explicitly defining the responsibilities of each and coordinating customer touchpoints is impossible to accomplish without a structured process to assign
ownership, timing, and performance accountability to the people and associated tasks.
A second truth is that senior executives are now demanding accountability from all of
the functional areas inside their companies—and sales is certainly not excluded. Sales can
no longer remain the black box that it has been to many CEOs, most of whom have no
front-line sales experience. Research by State Farm in 2006 identified only 15 of the Fortune
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500 CEOs as having had front-line sales experience. Consequently, the pressure for sales
forces to perform is increasing, and average tenure of Chief Sales Officers (CSOs) is falling.
According to Jim Dickie of CSO Insights, in 2004 the average tenure of a CSO had fallen to
just over 23 months. Given these conditions, sales executives are no longer satisfied to wait
and see how their sales force is performing—they must aggressively engage in performance management. This desire to manage, coupled with enhanced information technology
capability to collect and report data in an accurate and timely manner, has driven sales
management to take control of their sales forces. But you can’t manage what you can’t
measure, and you can’t measure without formal performance management processes.
The bottom line is that world-class sales forces are focusing on comprehensive performance management systems and processes for the first time in earnest. They have the motive,
they have the capability, and they are making it happen. Looking forward, you can bet that
such processes will continue to rise in stature as the performance gap widens between
firms who have them and firms who don’t.
Source: Chally Group Worldwide (2012).
L E AR NING OB JECTI VES
Performance evaluations should be a process that provides a forum for dialogue between a
salesperson and the sales manager, focused on gaining the impetus for future professional
development and performance success. In order to successfully execute a performance
review, sales managers must have a strong working knowledge of different measures of
performance that are appropriate to a particular selling situation. Then they must conduct
the appraisal in a manner that allows the salesperson to build on current strengths and
proficiencies and make performance improvements where warranted.
After reading this chapter, you should be able to
•
•
•
•
Explain the difference between performance and effectiveness.
Identify objective measures of salesperson performance, both 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
the forms that might be used to administer such an evaluation.
• Understand how a sales manager can make the performance review process more productive and valuable for the salesperson.
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P E R F OR MANC E VERSUS EFFECTI VENESS
A key issue in evaluating the performance of salespeople is the distinction among
the concepts of behavior, performance, and effectiveness.1 Although role perceptions, aptitude, skill level, and motivation level were discussed in Chapter 6 as
being directly linked to performance, it is also important to understand that they
are directly linked to behavior as well.
Behavior refers to what salespeople do—that is, the tasks on which they expend
effort while working. These tasks might include calling on customers, writing
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EVALUATING SALESPERSON PERFORMANCE
orders, preparing sales presentations, sending follow-up communication, and the
like. These are the sales activities discussed in Chapter 2.
Think of performance as behavior evaluated in terms of its contribution to the
goals of the organization. In other words, performance has a normative element
reflecting whether a salesperson’s behavior is good or bad, appropriate or inappropriate, in light of the organization’s goals and objectives. Note that behavior and
performance are both influenced by relevant sales activities. Of course, these activities in turn depend on the types of sales jobs in question.
Before we discuss salesperson evaluation further, let’s also distinguish between
performance and effectiveness. By definition, effectiveness refers to some summary index of organizational outcomes for which an individual is at least partly
responsible. Examples include sales volume, market share, profitability of sales, and
customer retention rate. The crucial distinction between performance and effectiveness is that the latter does not refer to behavior directly; rather, it is a function
of additional factors not under the individual salesperson’s control. These include
such things as top management policies, sales potential or difficulty of a territory,
and actions of competitors.
It is generally agreed that salespeople should be evaluated solely on those phases
of sales performance over which they exercise control and should not be held
responsible for factors beyond their control. If a company’s method of measuring salesperson performance is to result in valid comparisons, serious consideration must be given to distinguishing between factors within a salesperson’s control
versus those outside his or her control in developing yardsticks for objective or
subjective evaluation. The Leadership box presents a classic theory of motivation,
attribution theory, that is quite relevant to this managerial dilemma.
One could argue that a sales manager’s careful specification of performance standards by territory should eliminate inequities across territories. For example, percentage of quota attained should be an acceptable measure of performance because quotas
supposedly consider variations in environmental factors across territories. Admittedly,
a comparison of salespeople with respect to percentage of quota attained is a better
measure of their performance than is a comparison that simply looks at each representative’s level of absolute sales or market share, assuming the quotas were done well.
However, assuming that quotas are done well is a big “if”—sometimes quotas are not
so well developed. In some instances, they are arbitrary and are not necessarily based
on an objective assessment of all the factors that facilitate or constrain a salesperson’s
ability to make a sale. This is especially true if quota development relies too heavily on
historical trends and not enough on emerging trends in a given sales territory.
Even when quotas are done well, the measure “percentage of quota attained” still
omits much with respect to a salesperson’s performance. For one thing, it ignores
the profitability of sales. Sales reps can be compared with respect to profitability, or
the return they produce on the assets under their control. Establishing quotas that
accurately consider the many factors affecting the level of sales a representative
should be able to produce in a territory is difficult, but determining the appropriate
standards of profitability for each territory is even more difficult.
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LEADERSHIP
Attributions and Salesperson Performance Evaluation
Evaluating the performance of a salesperson is all about the sales manager attributing causes of that performance.
That is, managers seek out why a salesperson’s effectiveness is diminished or enhanced so that appropriate reinforcing or remedial actions may be taken. This process of attributing causes of outcomes has been studied extensively
under the rubric of attribution theory, an approach quite relevant to sales management practice.
Psychologist Fritz Heider developed the cornerstone concept that evaluators tend to operate as “naïve psychologists” when they observe and analyze the behavior of others. He classified variables used by evaluators to interpret
the actions of others into three categories: (1) a performance variable (i.e., task success, or effectiveness); (2) environmental variables (task difficulty and luck); and (3) person, or dispositional, variables (ability and effort). Heider
proposed that evaluators assess performance based on the following relationships among these factors:
1. Ability = Task difficulty/Effort
2. Performance = (Ability × Effort) ± Task difficulty
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According to equation 1, if two salespeople put forth the same amount of effort, the one who performs the
more difficult task is expected to have the greater ability. Also, if two salespeople accomplish the same task with
equal levels of performance, the one who expends the least effort is expected by the rater to have the higher ability.
According to equation 2, a sales manager’s perception of a salesperson’s performance is a function of ability times
effort, plus or minus the effects of differing task difficulty.
In the context of salesperson evaluation, Heider’s concept of task difficulty may be easily translated to territory difficulty. Territory difficulty is important because rarely, if ever, in professional selling does one find any two territories
that are equal in all respects. Therefore, sales managers must adjust performance ratings by taking into account the differences in territory difficulty among the salespeople they supervise. Unfortunately, this if often neglected when sales
managers complete performance evaluations. A phenomenon known as the fundamental attribution error predicts
that contextual or background information (such as differences in territories among salespeople in a sales manager’s
unit) will be systematically ignored by evaluators, and instead their ratings will be based on “person” factors such as
perceived ability and effort. Heider proposed that background situational (contextual) information is less salient to
evaluators than is person (appraisee) information, which is analogous to the Gestalt concept of figure against ground.
In the context of salesperson evaluations, such thinking suggests that an evaluation bias may arise in which sales managers focus on dispositional factors, such as the salesperson’s ability and effort (the “figure”) and ignore contextual
factors (the “ground”), such as territory difficulty and luck.
Sales organizations must work hard to guard against this form of evaluation bias. Assuming equal performance,
over time a salesperson who is evaluated equally or lower than a peer whose territory is less difficult may become
dissatisfied and feel unfairly treated, resulting in a very effective salesperson leaving the company. Firms must train
their sales managers to fully consider all contextual and person factors when making their evaluations. By doing so,
sales managers can avoid succumbing to the fundamental attribution error.
Even if good sales and profit standards could be developed, the problem of evaluating salespeople would not be solved because neither measure incorporates activities that may have no short-term payout but still have substantial consequences to
the firm in the long run. These include the time devoted to laying the groundwork
for a long-term client relationship, particularly when developing a potentially large
account. Other activities that often go unmeasured are building long-term goodwill
for the company and developing a detailed understanding of the capabilities of the
products being sold. Thus, other measures beyond sales and profits are needed to
more directly reflect salesperson performance.
The other measures firms use to evaluate salespeople fall into two broad categories: (1) objective measures and (2) subjective measures.2 Objective measures reflect
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451
statistics the sales manager can gather from the firm’s internal data. These measures
are best used when they reflect elements of the sales process. Subjective measures
typically rely on personal evaluations by someone inside the organization, usually
the salesperson’s immediate supervisor, of how individual salespeople are doing.
Subjective measures are generally gathered via direct observation of the salesperson
by the manager but may involve input from customers or other sources.
O B J E C T I V E ME AS U R E S
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Objective measures fall into three major categories: (1) output measures, (2) input
measures, and (3) ratios of output or input measures. Exhibit 13.1 lists some of the
more common output and input measures, and Exhibit 13.2 (later in the chapter)
provides some of the more commonly used ratios.
The use of outputs, inputs, and ratios to measure salesperson performance is a
recognition of the nature of the relationship selling process. As we have learned,
some sales processes, especially those experienced by salespeople seeking to secure,
build, and maintain long-term relationships with profitable customers, can take
months or years. Within the relationship selling process, salespeople engage in
Output Measures
Input Measures
Orders
Number of orders
Average size of orders
Number of canceled orders
Accounts
Number of active accounts
Number of new accounts
Number of lost accounts
Number of overdue accounts
Number of prospective accounts
Calls
Total number of calls
Number of planned calls
Number of unplanned calls
Time and time utilization
Days worked
Calls per day (call rate)
Selling time versus nonselling time
Expenses
Total
By type
As a percentage of sales
As a percentage of quota
Nonselling activities
E-mails to prospects
Phone calls to prospects
Number of formal proposals developed
Advertising displays set up
Number of meetings held with
distributors/dealers
Number of training sessions held with
distributor/dealer personnel
Number of calls on distributor/dealer customers
Number of service calls made
Number of overdue accounts collected
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EXHIBIT 13.1
Common output
and input measures
used to evaluate
salespeople
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activities with (or in pursuit of) the prospect or buyer. The manager can measure
those activities and compare the activities with results for each stage. By examining
this performance evidence, managers can pinpoint potential areas for improvement by each salesperson, or identify changes that should be made in the sales
strategy so that it is aligned with how buyers want to buy.
Output Measures
Output measures represent the results of the efforts expended by the salesperson.
Orders
The number of orders each salesperson secures is often used to assess the rep’s ability to ultimately close sales. Although the number of orders a salesperson secures is
important, the average size of those orders is equally so. Having many orders may
mean the orders are small and may indicate the person is spending too much time
calling on small, low-potential customers and not enough time calling on large,
high-potential customers.
Still another related measure is the number of canceled orders. A salesperson who
loses a large proportion of total orders to subsequent cancellation may be using highpressure tactics in sales presentations rather than engaging in relationship selling.
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Accounts
The various account measures provide a perspective on the equity of territory
assignments and also on how the salesperson is handling the territory. Attention
to these measures can help the sales manager overcome the tendency to discount
territory difficulty information as discussed in the Leadership box on p. 450. One
popular measure focuses on the number of active accounts in the salesperson’s
customer portfolio. Various definitions of an active account are used. For example,
it may be any customer that has placed an order in the past six months or in the
past year. A salesperson’s performance in one year may be compared with performance in past years by contrasting the number of active accounts. Closely related to
this yardstick is a measure that tracks the number of new accounts a salesperson
develops in a given time. Some companies even establish new-prospect quotas for
salespeople that allow a ready comparison of performance to standards in this area
of evaluation.
As with the number of new accounts, the number of lost accounts can be a revealing statistic, since it indicates how successfully the salesperson is satisfying the ongoing needs of the established accounts in the territory. Still other account measures
by which salespeople can be compared are the number of overdue accounts, which
might indicate the level to which the salesperson is following company procedures in
screening accounts for their creditworthiness, and the number of prospective accounts,
which assesses the salesperson’s ability to identify potential target customers.
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Input Measures
Many objective measures of performance evaluation focus on the efforts sales representatives expend rather than the results of those efforts. These efforts are input
measures of performance. Input measures are important for two key reasons. First,
efforts or desirable behaviors are much more directly controllable than results in
the short term. If a rep’s sales fall short of quota, the problem may lie with the
person, the quota, or a change in the environment. On the other hand, if the
number of calls a salesperson makes falls short of the target, it is much clearer that
the problem lies more directly with the individual.3 Second, in relationship selling
a time lag frequently exists between inputs and outputs. A particularly large sale
may be the result of several years of effort. Thus, a focus on the efforts (behaviors)
themselves affords the sales manager the opportunity to evaluate and coach the
salesperson during the relationship selling process into making changes that can
positively affect the output (results).
Calls
The number of current customer or prospect calls is often used to decide whether a
salesperson is covering the territory properly. The number of calls on each account
is an important factor in the design of territories and also should be used to evaluate the salesperson assigned to the territory. After all, sales calls are a resource with
finite supply—they represent a resource that is time-sensitive in that the time available to make them evaporates if it is not used.
CRM software systems integrate customer contacts by salespeople into their
information collection, analysis, and reporting capabilities. Also, contact and customer management software, such as GoldMine by FrontRange and Act! by Sage,
automates the call report process. In a record established for each account, the
salesperson can input information about each call. This information can be summarized by the software for a report made available to the sales manager either by
e-mail or Web access. Of course, if the CRM software resides on a shared network,
the sales manager can access the information directly. Such technological advances
minimize the time spent preparing paperwork and help salespeople maximize their
time in front of buyers; they also serve as a great aid to sales managers in performance evaluation.
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Time and Time Utilization
The number of days worked and the calls per day (or call rate) are routinely used by
many companies to assess salespeople’s efforts since the product of the two quantities provides a direct measure of the extent of customer contact. If the amount of
customer contact by a salesperson is low, one can look separately at the components to see where the problem lies. Perhaps the salesperson has not been working enough because of extenuating circumstances, a situation that would show up
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in the number of days worked. Alternatively, perhaps the salesperson’s total time
input was satisfactory, but the salesperson was not using that time wisely and, consequently, had a low call rate.
Comparing salespeople’s division of time between sales calls, traveling, office
work, and other job aspects offers a useful perspective. For the most part, the firm
would want salespeople to maximize the time in face-to-face customer contact at
the expense of the other two factors. Sales organizations want salespeople to minimize unproductive time. Of course, telecommuting, or working from a home office,
is not new in the field of professional selling. Through necessity (e.g., no company
facility from which to work in the salesperson’s headquarter’s city) or convenience,
many salespeople maintain their primary office space in their home.
Analysis of time utilization requires detailed input on how each salesperson is
spending time, and collecting and analyzing this data can be expensive and can
itself be time-consuming. Some companies, however, routinely conduct such analysis because the benefits are deemed to outweigh the costs.
Expenses
The objective inputs discussed so far for evaluating salespeople (calls; time and
time utilization) focus mainly on the extent of a salesperson’s efforts. Another key
emphasis when evaluating salespeople is the cost of those efforts. Many firms keep
records detailing the total expenses incurred by each salesperson. Some break these
expenses down by type, such as automobile expenses, lodging expenses, entertainment expenses, and so forth. Sales managers might look at these expenses in total
or as a percentage of sales or quota by salesperson and then use these expense ratios
as part of the salesperson’s performance evaluation.
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Nonselling Activities
In addition to assessing the direct contact of salespeople with customers, some
firms monitor indirect contact. They use indexes such as the number of letters written, number of telephone calls made, and number of formal proposals developed.
As we have learned, in relationship selling a salesperson’s activities go beyond
what might be considered a pure selling emphasis. For example, companies that
sell to retailers may ask salespeople to help monitor and stock shelves, create displays, help retailers advertise, and engage in a number of other nonselling activities as part of an ongoing client relationship. In such instances, firms often try to
monitor the extent of these duties, using such indexes as the number of promotional or advertising displays set up, the number of dealer meetings, the number of
training sessions for distributor personnel held, the number of calls the salesperson
made on dealer customers, the number of service calls made, the number of customer complaints received, and the number of overdue accounts collected. Some of
this information can be gathered from the salesperson’s reporting system, but it is
becoming increasingly commonplace to gain feedback on elements of salesperson
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performance directly from customers. This trend is discussed in a later section of
this chapter on 360-degree performance feedback.
Ratio Measures
As we have learned, a focus on outputs other than straight sales volume and profit
can provide useful information on how salespeople are performing. So can analysis
of input factors. Additional insights may also be gathered by combining the various
outputs or inputs in selected ways, typically in the form of various ratio measures.
As mentioned earlier, Exhibit 13.2 lists some of the ratios commonly used to evaluate salespeople. These are grouped by expense ratios, account development and
servicing ratios, and call activity or productivity ratios.
Expense Ratios
The sales expense ratio combines both salespeople’s inputs and the results produced by those inputs in a single number. Salespeople can affect this ratio either by
making sales or by controlling expenses. The ratio can also be used to analyze salesperson expenses by type. Thus, a sales/transportation expense ratio that is much
higher for one salesperson than others might indicate the salesperson is covering
his or her territory inefficiently. However, it is important that the sales manager
recognize territory difficulty differences when comparing these ratios, as the salesperson who has an out-of-line ratio may simply have a larger, more geographically
dispersed sales territory to cover.
The cost per call ratio expresses the costs of supporting each salesperson in the
field as a function of the number of calls the salesperson makes. The ratio can be
evaluated using total costs, or the costs can be broken down by elements so that
ratios such as expenses per call and travel costs per call can be computed. Not only
are these ratios useful for comparing salespeople from the same firm, but they can
also be compared with those of other companies in the same industry to assess the
efficiency of the firm’s selling effort. Such comparative data may be available from
trade or professional associations.
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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 their territories. The account penetration ratio, for example, measures the percentage of accounts in the territory from
which the salesperson secures orders. It provides a direct measure of whether the salesperson is simply skimming the cream of the business or is working the territory systematically and hard. It can also aid management in identifying both underperforming accounts and accounts that have low lifetime value to the sales organization.
The new-account conversion ratio similarly measures the salesperson’s ability
to convert prospects to customers. The lost account ratio measures how well the
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EXHIBIT 13.2
Common ratios
used to evaluate
salespeople
Expense Ratios
• Sales expense ratio =
• Cost per call ratio =
Expenses
Sales
Total costs
Number of calls
Account Development and Servicing Ratios
• Account penetration ratio =
Accounts sold
Total accounts available
• New-account conversion ratio =
• Lost account ratio =
Number of new accounts
Total number of accounts
Prior accounts not sold
Total number of accounts
• Sales per account ratio =
Sales dollar volume
Total number of accounts
• Average order size ratio =
Sales dollar volume
Total number of orders
• Order cancellation ratio =
Number of calcelled orders
Total number of orders
• Account share =
Salesperson’s business from account
Account’s total businesss
Call Activity or Productivity
• Calls per day ratio =
Number of calls
Number of days worked
• Calls per account ratio =
Number of calls
Number of accounts
• Planned call ratio = Number of planned calls
Total number of calls
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• Orders per call (hit) ratio =
Number of orders
Total number of calls
salesperson maintains active customers, reflecting how well the rep is serving the
established accounts in the territory.
The sales per account ratio indicates the salesperson’s success per account on
average. A low ratio could indicate the salesperson is spending too much time calling on small, less profitable accounts and not enough time calling on larger ones.
One could also look at the sales per account ratios by class of account, which can
reveal the strengths and weaknesses of each salesperson. For example, a salesperson
who has a low sales per account ratio for large, high-potential accounts might need
help in learning how to sell to a buying center.
The average order size ratio can also reveal the salesperson’s patterns of calling on customers. A very low average order size might suggest that calls are too
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frequent and the salesperson’s productivity could be improved by spacing them
more. The order cancellation ratio reflects on the salesperson’s method of selling. A
very high ratio could mean the salesperson is using high-pressure tactics to secure
orders rather than pursuing relationship selling approaches and handling customers in a consultative manner.
A key measurement in some types of businesses, particularly those that provide
supplies and raw materials, is account share. Account share is the percentage of
the account’s business that the salesperson gets. Many buyers will split their business among a number of vendors, believing (often erroneously) that they get better
service and lower prices when sellers have to compete for the business. In industries
where such buying practices are prevalent, the number of accounts is less important to salespeople than the share of each account. As account share increases,
economies of scale increase, which raises the profit of the account. Similarly, the
measure is an indication of the strength of the relationship with the account.
Call Activity or Productivity Ratios
Call activity ratios measure the effort and planning salespeople put into their customer call activities and the successes they derive from it. The measures might
be used to compare salesperson activities in total—such as when using calls per
day or when using calls per total number of accounts, or by type of account. The
planned call ratio could be used to assess if the salesperson is systematically planning territory coverage or whether the representative is working the territory without an overall game plan. The orders per call ratio bears directly on the question of
whether the salesperson’s calls on average are productive. This ratio is sometimes
called the hit ratio or batting average, since it captures the number of successes (hits
or orders) in relation to the number of at-bats (calls).
S U M M A R Y OF OB JE C T IV E ME ASURES
As Exhibits 13.1, 13.2, and the preceding discussion indicate, many objective output measures, input measures, and ratio measures are available by which salespeople may be evaluated and compared. As you probably sense, many of the measures
are somewhat redundant in that they provide overlapping information on salesperson effectiveness. A number of other ratios could be developed by combining the
various outputs, inputs, or ratios in different ways. For example, one combination
that is often used to evaluate salespeople is the following equation:
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Sales = Days worked ×
Calls
Orders
Sales
×
×
Days worked
Calls
Orders
or
Sales =
Days
worked
×
Call
rate
×
Batting
Average
×
average
order size
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The equation highlights nicely what a salesperson can do to increase sales. The
representative can increase the (1) number of days worked, (2) calls made per day,
(3) level of success in securing an order on a given call, and (4) size of those orders.
Thus, the equation can be used to isolate how an individual salesperson’s performance could be improved. Such an equation, though, focuses on the results of the
salesperson’s efforts and ignores the cost of those efforts. Similarly, many of the
other measures that have been reviewed could be combined via similar equations,
but these too would probably ignore one or more elements of salesperson success.
Bottom line: No single measure exists that can fully capture the scope of salesperson effectiveness.
In concluding this discussion of objective measures of salesperson performance,
two essential points deserve mention. First, just as measuring straight sales volume
and profit have advantages and disadvantages for use in evaluating salespeople,
so do all of these other objective measures of performance. Rather than relying on
only one or two of the measures to assess performance, the methods are more productively used in combination. Second, and also very important, all of the indexes
are an aid to judgment, not a substitute for it. For example, the United States Army
Recruiting Command (the part of the Army that sells young people on joining) once
overrelied on conversion ratios (the percentage of prospects who actually ended up
joining the army) to evaluate recruiters’ performance. Orders were issued that calls
of certain types had to be increased by a high percentage. The problem was that
while the calls could be increased, quality could not be maintained. Recruiting
effectiveness not only did not increase but actually went down as recruiter morale
declined. The comparisons allowed by the various indexes should be the beginning, not the conclusion, of any analysis aimed at assessing how well individual
salespeople or the entire sales force are doing.
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S U B JE C T IV E ME ASURES
A useful conceptual distinction exists between the quantitative nature of objective
measures of performance discussed in the preceding section and the qualitative
nature of the subjective measures discussed here. Quantitative measures of performance focus on the outputs and inputs of what salespeople do, whereas qualitative
measures reflect behavioral or process aspects of what they do and how well they do
it. This difference in what is being measured creates some marked differences in the
way objective and subjective measurements are taken and how they are used.
In many ways, it is more difficult to assess the quality rather than the quantity
of a salesperson’s performance. Quantity measures can require a detailed analysis
of a salesperson’s call report, an extensive time utilization analysis, or an analysis of the type and number of nonselling activities employed. However, once the
measurement procedure is set up, it typically can be conducted with less bias and
inconsistency than can quality measurement. On the other hand, when assessing
qualitative performance factors, even a well-designed measurement process that
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is firmly in place leaves much more room for bias in the evaluation. Bias refers to
performance evaluations that differ from objective reality, usually based on errors
by the evaluator. Even well-designed systems must invariably rely on the personal
judgment of the individual or individuals charged with evaluation, in our case, the
sales manager. Typically, these judgments are secured by having the manager rate
the salesperson on a performance appraisal form on each of a number of attributes
using some type of rating scale. The attributes most commonly evaluated using
performance evaluation forms include,
1. Sales results. Volume performance, sales to new accounts, and selling the full
product line.
2. Job knowledge. Knowledge of company policies, prices, and products.
3. Management of territory. Planning of activities and calls, controlling expenses,
and handling reports and records.
4. Customer and company relations. The salesperson’s standing with customers, associates, and company.
5. Personal characteristics. Initiative, personal appearance, personality, resourcefulness, etc.
Note that these include a mix of objective and subjective performance measures.
In fact, it is true that most formal performance evaluations of salespeople involve a
combination of these two types of evaluative criteria.
©
Forms Used for Subjective Measurement
Exhibit 13.3 shows a typical salesperson evaluation form for various subjective performance criteria. The specific evaluative criteria should match those identified as
key success factors for the position (see Chapter 2 for a discussion of the identification of key success factors for sales positions). Such evaluations may be completed
annually, semiannually, or quarterly, depending on the firm’s human resource
management policies. These evaluations supplement the objective performance
data generated for the same time frame to provide an overall evaluation of salesperson performance. The form in Exhibit 13.3 is better than many of those in use
because it contains anchors or verbal descriptors for the various points on the scale.
Another favorable feature of this example form is the space provided for comments,
which can enhance understanding of the ratings supplied. The form contains a section where needed improvements and corrective actions may be detailed. All in all,
the form should facilitate a constructive dialogue between the salesperson and sales
manager and help the salesperson understand his or her strengths and weaknesses
and develop approaches to improve performance.
The worst type of rating forms simply list the attributes of interest along one
side of the form and the evaluation adjectives along the other. Little description is
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EVALUATION AND CONTROL OF THE SALES PROGRAM
provided, thus the potential for much ambiguity exists in the evaluation. Exhibit
13.4 illustrates such a poor form. Of course, this type of form can be completed very
easily since the evaluator simply checks the box for the adjective that most clearly
describes his or her perceptions of the salesperson’s performance on each attribute.
Unfortunately, such forms are quite common in sales organizations, and they work
very poorly in practice and do little to stimulate a constructive dialogue between
the salesperson and sales manager. Salespeople typically receive little useful information on improving performance when forms such as Exhibit 13.4 are used.
Problems with Subjective Performance Measurement
Some common problems with performance appraisal systems that rely on subjective rating forms, particularly those using the simple checklist type, include the
following:4
1. Lack of an outcome focus. The most useful type of performance appraisal highlights areas of improvement and the actions that must be taken to implement
such improvements. For this to occur, the key behaviors in accomplishing the
tasks assigned must be identified. Unfortunately, many companies have not
taken this step. Rather, they have simply identified attributes thought to be
related to performance, but they have not attempted to systematically assess
whether the attributes are key. One type of performance appraisal called BARS
(behavioral anchored rating scale) helps overcome this weakness. A BARS system
attempts to identify behaviors that are more or less effective with respect to the
goals established for the person. BARS will be discussed in more detail shortly.
2. Ill-defined personality traits. Many performance evaluation forms contain personality factors as attributes. In the case of salespeople, these attributes might
include such things as initiative and resourcefulness. Although these attributes
are intuitively appealing, their actual relationship to performance is open to
question.5
©
3. Halo effect. A halo effect is a common phenomenon in the use of any performance evaluation form. It refers to the fact that the rating assigned to one characteristic may significantly influence the ratings assigned to all other characteristics, as well as the overall rating. The halo effect holds that a sales manager’s
overall evaluations can be predicted quite well from their rating of the salesperson on the single performance dimension they believe is the most important.
Different branch or regional managers might have different beliefs about what
is most important, compounding the problem.
4. Leniency or harshness. Some sales managers rate at the extremes. Some are very
lenient and rate every salesperson as good or outstanding on every attribute,
whereas others do just the opposite. This behavior is often a function of
their own personalities and their perceptions of what comprises outstanding
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SALES PERSONNEL
INVENTORY
Employee’s Name
Territory
Position Title
Date
EXHIBIT 13.3
Sample subjective
performance
evaluation form
INSTRUCTIONS (Read Carefully)
1. Base your judgment on the previous six-month period and not on isolated incidents
alone.
2. Place a check in the block that most nearly expresses your judgment on each factor.
3. For those employees who are rated at either extreme of the scale on any factor—for
example, outstanding, deficient, limited—please enter a brief explanation for the rating in the appropriate space below the factor.
4. Make your rating an accurate description of the person rated.
FACTORS TO BE CONSIDERED AND RATED:
1. Knowledge
of work
(includes
knowledge
of product,
knowledge
of customers’
business)
Does not have
sufficient
knowledge of
products and
application to
represent the
company
effectively.
Has mastered
minimum
knowledge.
Needs further
training
Has average
amount of
knowledge
needed to
handle job
satisfactorily.
Is above average
in knowledge
needed to
handle job
satisfactorily.
Is thoroughly
acquainted
with our
products and
technical
problems
involved in
this
application.
Comments __________________________________________________________
____________________________________________________________________
2. Degree of
acceptance
Not acceptable
by customers to most
customers.
Cannot gain
entry to their
offices.
Manages to
see
customers but
not generally
liked.
Has
satisfactory
relationship
with most
customers.
Is on very good
terms and is
accepted by
virtually all
customers.
Enjoys
excellent
personal
relationship
with virtually
all customers.
Comments __________________________________________________________
____________________________________________________________________
©
3. Amount of
effort
devoted
to acquiring
business
Exceptional in
the amount of
time and effort
put forth in
selling.
Devotes
constant
effort in
developing
business.
Devotes
intermittent
effort in
acquiring
moderate
amount of
business.
461
Exerts only
minimum
amount of time
and effort.
Unsatisfactory.
Does not put
forth
sufficient
effort to
produce
business.
Comments __________________________________________________________
____________________________________________________________________
(continued)
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EXHIBIT 13.3
Sample subjective
performance
evaluation form
(continued)
4. Ability to
acquire
business
Is able to
acquire
business
under the
most difficult
situations.
Does a good
job acquiring
business
under most
circumstances.
Manages to
acquire good
percentage of
customer’s
business if
initial
resistance
is not too
strong.
Able to
acquire
enough
business to
maintain
only a
minimum
sales average.
Rarely able
to acquire
business
except in a
seller’s
market.
Comments ______________________________________________________
________________________________________________________________
5. Amount of
service
given to
customers
Rarely
services
accounts
once a sale
is made.
Gives only
minimum
service at
all times.
Services
accounts with
regularity but
does not do
any more
than called
on to do.
Gives very
good service
to all
customers.
Goes out
of the way
to give
outstanding
service
within
scope of
company
policy.
Comments ______________________________________________________
________________________________________________________________
6. Dependability—
amount of
supervision
needed
Always
thoroughly
abreast of
problems in
the territory,
even under
most difficult
conditions.
Rises to
emergencies
and assumes
leadership
without
being
requested
to do so.
Consistently
reliable under
normal
conditions.
Does special
as well as
regular
assignments
promptly.
Little or no
supervision
required.
Performs with
reasonable
promptness
under normal
supervision.
Effort
occasionally
lags. Requires
more than
normal
supervision.
Requires
close
supervision
in all
phases of
job.
©
Comments ______________________________________________________
________________________________________________________________
7. Attitude toward
company—
support given
to company
policy
Does not
support
company
policy—
Gives only
passive support
to company
policy—does
Goes along
with company
policy on
most
Y
Adopts and
supports
company
policy in
Y
Gives
unwavering
support to
the
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EVALUATING SALESPERSON PERFORMANCE
blames the
company
for factors
that affect
customers
unfavorably.
not act as
member
of a team.
occasions.
all
company and
transactions. company
policy to
customers
even though
he/she
personally
may not
agree with
the policy.
463
EXHIBIT 13.3
Sample subjective
performance
evaluation form
(continued)
Comments _______________________________________________________
_________________________________________________________________
8. Judgment
Analyses and
conclusions
subject to
frequent error
and are often
based on bias.
Decisions
require
careful
review
by supervisor.
Judgments
usually sound
on routine,
simple
matters but
cannot be
relied on
when any
degree of
complexity is
involved.
Capable of
careful
analyzing of
day-to-day
problems
involving
some
complexity
and
rendering
sound
decisions.
Decision
rarely
influenced
by prejudice
or personal
bias.
Decisions
can be
accepted
without
question
except when
problems or
extreme
complexity
are involved.
Little or no
personal
bias enters
into
judgment.
Possesses
unusual
comprehension
and
analytical
ability.
Complete
reliance may
be placed on
all judgments
irrespective of
degree of
complexity.
Decisions and
judgments are
completely free
of personal
bias or
prejudice.
Comments _______________________________________________________
_________________________________________________________________
©
9. Resourcefulness
Work is
Frequently
Meets new
consistently
develops
situations in
characterized
new ideas
satisfactory
by marked
of merit.
manner.
originality,
Handling of
Occasionally
alertness,
emergencies develops
initiative, and
is generally
original
imagination.
characterized ideas,
Can be relied
by sound
methods,
on to develop decisive
and
new ideas and action.
techniques.
techniques in
solving the most
difficult problems.
Follows
Requires
closely
frequent
previously
reinstruction.
learned
Has failed to
methods
demonstrate
and
initiative or
procedures. imagination in
Slow to
solving
adapt
problems.
to changes.
Tends to
become
confused in
new situations.
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EXHIBIT 13.3
Sample subjective
performance
evaluation form
(continued)
Comments ______________________________________________________
________________________________________________________________
10. Based on the above evaluation, this employee should:
1. Be given additional instruction on _____________________________________________________
_____________________________________________________________________________________
2. Be given additional experience such as _________________________________________________
3. Study such subjects as _______________________________________________________________
4. Change attitude as follows ___________________________________________________________
5. There is nothing more that I can do for this employee because _____________________________
6. Remarks ___________________________________________________________________________
____________________________________________________________________________________
_____________________________________________________________________________________
EXHIBIT 13.4
Sample of a poorly
constructed
subjective
performance
evaluation form
Knowledge of work
Degree of acceptance
by customers
Amount of effort devoted to
acquiring business
Ability to acquire business
Amount of service given to
customers
Dependability, amount of
supervision needed
Attitude toward company,
support for company policies
Judgment
Resourcefulness
Poor
Fair
Satisfactory
Good
Outstanding
©
performance, and no fundamental differences may exist in the way the salespeople under each of the managers are actually performing. The use of different
definitions of performance depending on the manager can seriously undermine
the whole performance appraisal system.
5. Central tendency. Some managers err in the opposite direction in that they never,
or very rarely, rate people at the ends of the scale. Rather, they use middle-of-the
road or play-it-safe ratings. One learns very little from such ratings about true
differences in performance, and such ratings can be particularly troublesome
when a company attempts to use a history of poor performance as the basis of a
termination decision.
6. Interpersonal bias. Interpersonal bias refers to the fact that our perceptions of others and the social acceptability of their behaviors are influenced by how much
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we like or dislike them personally. Many sales managers’ evaluations of sales
reps are similarly affected. Furthermore, research suggests a salesperson can use
personal influence or impression management strategies on the manager to bias
evaluations upward.
7. Organizational uses influence. Performance ratings are often affected by the use
to which they will be put within the organization. If promotions and monetary
payments hinge on the ratings, a tendency may exist toward leniency on the
part of the manager who values the friendship and support of subordinates who
press for higher ratings. It is not difficult to imagine the dilemma of a district
sales manager if other district sales teams received consistently higher compensation increments and more promotions than his or her sales group. On the
other hand, when appraisals are used primarily for the development of subordinates, managers tend to more freely pinpoint weaknesses and focus on what is
wrong and how it can be improved.6
By now, it should be clear that performance evaluation may be fraught with
opportunities for biases and inaccuracies to creep into the process. The Leadership
box describes one form of potential evaluator bias in more detail, the outcome
bias. An outcome bias occurs when a sales manager allows the outcome of a decision or a series of decisions made by a salesperson to overly influence the performance ratings made by the manager.
Avoiding Errors in Performance Evaluation
To guard against the distortions introduced in the performance appraisal system
by problems such as those listed earlier, many firms provide extensive training and
guidelines to sales managers on completing the forms and conducting the appraisal
process. Some common instructions issued with such forms include,
1. Read the definitions of each trait thoroughly and carefully before rating.
2. Guard against the common tendency to overrate.
3. Do not let personal likes or dislikes influence your ratings. Be as objective as
possible.
4. Do not permit your evaluation of one factor to influence your evaluation of
another.
©
5. Base your rating on the observed performance of the salesperson, not on potential abilities.
6. Never rate an employee on several instances of good or poor work, but rather on
general success or failure over the whole period.
7. Have sound reasons for your ratings.7
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LEADERSHIP
Outcome Bias in Salesperson Performance Evaluations
By nature, professional selling is focused on bottom-line results. Persons who are successful in sales tend to like meeting tough goals and thrive on the immediacy, regularity, and visibility of feedback on their results. Thus, it is common
for results (or outcomes) in sales to be viewed by management as a surrogate for the behavioral side of salesperson
performance. In short: Make your quota, you must be doing things right; but miss your quota and, boy, are you ever
doing the wrong things.
These “things” we are talking about are all the process steps that go into the job of selling. On a very basic level,
they are all the decisions made by the salesperson over the course of a day, week, month, quarter, and year that add
up to that person’s performance (remember, earlier in this chapter we defined performance in terms of behavior
evaluated in the context of its contributions to the goals of the organization).
Sometimes the outcomes and the process leading to those outcomes match: for example, a salesperson has a great
sales quarter and also was great at doing all the things that are part of the sales job (presentations, customer care,
administration, etc.). Clearly, the sales manager should recognize and reward this achievement. And in the opposite
case, where a salesperson has a lousy sales quarter and also is struggling with the process elements of the job, clearly
the sales manager needs to document the poor performance and a developmental plan needs to be put in place.
But what about the mixed cases? Consider the salesperson who has a great sales quarter but is not cutting the
mustard in the day-to-day elements of the job. Maybe the favorable outcome was due to an unexpected windfall
from a client, an easy territory, or some other event not directly attributable to much of anything the salesperson
actually did to earn the business. Evaluating this salesperson favorably overall, based strictly on his or her performance outcome, can open a huge can of worms in a sales unit, as peer salespeople will see this person as a slacker who
got lucky. And finally, perhaps the worst case of all, consider the salesperson who has a lousy sales quarter but has
done absolutely everything right. If this salesperson is evaluated as a poor performer, based strictly on the outcome,
chances are the organization will lose him or her.
The outcome bias is that evaluators tend to overlook process and rate performers based on outcomes. As illustrated in the mixed-case examples here, this tendency of outcome to overwhelm process can lead to poor morale, ill
will, and turnover within the sales force.
It should be mentioned, however, that one school of thought in sales is that a bias toward outcomes isn’t really
a bias at all. That is, salespeople know when they get into the profession that bottom-line sales volume is the key
to success. This perspective may be somewhat valid in straight commission selling situations. But in most of today’s
relationship-driven professional sales jobs, it is folly to utilize performance evaluation systems that ignore good, or
bad, behavioral aspects of performance in favor of just the short-run bottom line. As we have learned, much of what
constitutes success in relationship-driven sales organizations involves a complex set of actions inside and outside the
selling firm, and the true outcome of these activities may not be realized for a long time. Fortunately, most modern sales
organizations understand the threat of the outcome bias and work to integrate multiple aspects of performance into
the evaluation process. One approach that addresses this is the BARS system, which is discussed in this chapter.
©
These admonitions can help, particularly when the evaluator must supply the
reasons for ratings. However, they do not resolve problems related to the selection of attributes for evaluation and how the resulting items are presented on the
form. A trend in performance appraisal directed at resolving this issue is the BARS
(behaviorally anchored rating scale).
Using a BARS System
A BARS system attempts to concentrate on the behaviors and other performance
criteria that can be controlled by the individual. The system focuses on the fact that
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a number of factors affect any employee’s performance. However, some of these factors are more critical to job success than are others, and the key to evaluating people is to focus on these critical success factors (CSFs).8 Implementing a BARS system
for evaluating salespeople requires identifying the behaviors that are key to their
performance. Also, the subsequent evaluation of a salesperson’s performance must
be conducted by rating these key behaviors using the appropriate descriptions.9
The process of developing a BARS system goes as follows. First, the key behaviors
with respect to performance are identified using critical incidents. Critical incidents
are occurrences that are vital (critical) to performance. To use the critical incident
technique, those involved could be asked to identify some particularly outstanding examples of good or bad performance and to detail the reasons why.10 The
performances identified are then reduced to a smaller number of performance
dimensions.
Next, 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. An incident is typically kept in if 60 percent or more of the group assigns it to
the same dimension as did the instrument development group. The sales personnel group is also asked to rate the behavior described in the critical incident on a
7- or 10-point scale with respect to how effectively or ineffectively it represents
performance on the dimension. Incidents that generate good agreement in ratings,
typically indicated by a low standard deviation, are considered for the final scale.
The particular incidents chosen are determined by their location along the scale, as
measured by the mean scores. Typically, the final scale has six to eight anchors. An
example of a BARS scale that resulted from such a process for the attribute “promptness in meeting deadlines” is shown in Exhibit 13.5.
A key advantage of a BARS system is that it requires sales managers to consider in
detail a wide range of components of a salesperson’s job performance. It must also
include clearly defined anchors for those performance criteria in specific behavioral terms, leading to thoughtful consideration by managers of just what comprises performance. Of course, by nature a BARS emphasizes behavior and performance rather than effectiveness. When used in tandem with appropriate objective
measures (sales and profit analyses and output, input, and ratio measures), a BARS
approach provides an attractive means of handling subjective evaluation criteria
and thus providing as complete a picture as possible of a salesperson’s overall performance and effectiveness.
BARS systems are not without their limitations, though. For one thing, the
job-specific nature of the scales they utilize suggests they are most effective in
evaluating salespeople performing very similar functions. They might be effective
in comparing one key account rep to another key account rep or two territory
representatives against each other, but they could suffer major shortcomings if
used to compare a key account rep against a territory salesperson because of differences in responsibilities in these positions. BARS systems also can be relatively
costly to develop since they require a good deal of up-front time from multiple
people.11
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EXHIBIT 13.5
A BARS scale with
behavioral anchors
for the attribute
“promptness in
meeting deadlines”
Very high
This indicates the
more-often-than-not
practice of submitting
accurate and needed
sales reports.
Moderate
This indicates regularity
in promptly submitting
accurate and needed
field sales reports.
Very low
This indicates irregular
and unacceptable
promptness and
accuracy of field
sales reports.
10.0
9.0
8.0
7.0
6.0
5.0
Could be expected to promptly submit all
necessary field reports even in the most
difficult of situations.
Could be expected to promptly meet
deadlines comfortably in most report
completion situations.
Is usually on time and can be expected to
submit most routine field sales reports in
proper format.
4.0
Could be expected to regularly be tardy in
submitting required field sales reports.
3.0
Could be expected to be tardy and submit
inaccurate field sales reports.
2.0
1.0
0.0
Could be expected to completely disregard
due dates for filing almost all reports.
Could be expected to never file field sales
reports on time and resist any managerial
guidance to improve this tendency.
©
3 6 0 -DE GR E E F E EDBACK I N PERFORMANCE
E V AL U AT ION
As we learned in Chapter 3, one important attraction of CRM systems to firms is the
inherent capability of such systems to provide feedback from a wide range of constituents and stakeholders. Although the usage focus of much of this information is
on product development and formulation of the overall marketing message, CRM
systems typically also facilitate the gathering, analysis, and dissemination of a great
deal of information directly relevant to the performance of the sales force.
In order for a sales organization to take full advantage of the available information generated by enterprise software such as CRM, the firm as a whole must embrace
the philosophy that the customer is a customer of the company, not just of the individual salesperson. We have seen that the complex and often lengthy process of
developing and managing customer relationships almost always involves more than
just a salesperson and purchasing agent. An effective CRM system should be gathering data at all the important touchpoints where members of a selling organization
interact with members of a buying organization, or members of a selling organization interact internally in order to forward a business relationship with a customer.
Such a comprehensive information management process allows for a rethinking
of the nature of input data for use in salesperson performance evaluation. Rather than
relying on purely objective measures or on subjective measures generated by one person (the sales manager), information for performance evaluation may come from
multiple sources simultaneously. This concept of 360-degree performance feedback opens the door to a new era in using the performance appraisal process as an
effective tool for salesperson development and improvement. Among the sources of
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feedback that would be useful to salespeople are external customers, internal organization members who serve as resources in serving external customers (this group is
often referred to as internal customers), other members of the salesperson’s selling
team, any direct reports the sales manager may have (such as sales assistants), and
of course the sales manager.12 Integrating feedback from these and other relevant
sources of performance information into the formal evaluation process (and thus
onto the evaluation form) can provide the impetus for a more productive dialogue
between the sales manager and salesperson when performance review time comes
around.
One other issue deserves mention related to 360-degree feedback—selfevaluation. Sales organizations should encourage salespeople to prepare an honest
assessment of their own performance against the established objective and subjective performance criteria, and this should be prepared prior to the formal performance review session with the sales manager.13 The best sales organizations use this
process to begin the dialogue of sales unit goal-setting for the next period, and
especially to establish a professional development program to help move the salesperson toward the fulfillment of his or her personal goals on the job. We learned in
Chapter 11 that intrinsic rewards are among the most powerful motivators—things
such as feelings of accomplishment, personal growth, and self-worth. Allowing the
salesperson to have direct input in establishing personal growth goals on the job,
and then institutionalizing the achievement of those goals via the formal performance evaluation process, goes a long way toward providing a workplace atmosphere
in which intrinsic rewards may be realized by salespeople.
It is particularly important to involve salespeople directly in all phases of the
performance appraisal process. When appraisals provide clear criteria, the criteria
meet with the salesperson’s approval, and the appraisals are perceived as fair and
used in determining rewards, salesperson job satisfaction increases. Thus, the critical determinants of appraisal effectiveness are not purely criteria-driven but rather
are largely determined by appraisal process factors that managers can influence,
such as buy-in by those being appraised and fairness with which the appraisal process is administered.14
An old adage in human resource management holds that if an employee is surprised by anything he or she is told during a formal performance review, the manager
providing the evaluation is not doing a very good job. Performance evaluation should
not be simply one cathartic event that happens periodically. Such a view can cause
great trepidation on the part of both employees and managers, and it often results in
managers procrastinating in conducting the review and minimizing the time spent
with the employee during the review. In contrast, great sales organizations use the
performance evaluation process to facilitate ongoing dialogue between salespeople
and their managers. The key goal of the process should be facilitating professional
and personal development—providing the salesperson the feedback and tools necessary to achieve his or her goals in the job. To make this happen, sales managers must
be prepared to carry on the dialogue beyond just the periodic formal appraisal event
and into day-to-day communication with the salesperson. Importantly, this developY
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EVALUATION AND CONTROL OF THE SALES PROGRAM
mental perspective on performance evaluation requires that sales managers not just
give feedback but also listen and respond to feedback and questions from the salesperson. The Innovation box provides insight on how sales managers can best use the
performance appraisal process to the benefit of both the salesperson and manager.
Ultimately, sales organizations need to work toward developing a performance
management system along the lines of the discussion in the chapter opener. To
do so requires a commitment to integrating all the elements of feedback on the
process of serving customers so that performance information is timely, accurate,
and relevant to the customer management aspects of the firm.15 The pieces of the
performance puzzle are integrated in such a way that the salesperson does not have
to wait on the manager for a formal validation of performance. Instead, under a
performance management approach, salespeople take the lead in goal setting, performance measurement, and adjustment of their own performance.16 The concept
of performance management is analogous to TQM approaches that advocate the
empowerment of employees to take ownership of their own jobs and conduct their
own analyses of performance against goals, creating a culture of self-management.
To successfully implement a performance management system, sales managers
must shift their leadership style to that of a partner in a mutually shared process.
INNOVATION
Making Appraisals More Effective
Appraisals can be a powerful tool if used correctly. Many managers dread the prospect of giving their staff honest
feedback in the formal setting of the performance appraisal. The following are three steps to follow that should
make the appraisal process more productive for both manager and employee:
1. Preparation—Have the reps rate themselves in the same areas that will be addressed in the appraisal. Focus on
questions such as, Why is our organization a better place because you work here? In what areas do you need
more support? What are your goals for the upcoming period?
2. Appraisal Interview—Make it clear that salary will not be discussed; use a separate meeting for this. The preparation work in step 1 will ensure that there is plenty to talk about. Focus on the areas where there may be differences in the answers to the preparation questions.
3. Post-appraisal—Hold a follow-up meeting and share the formal review documents. If salary is discussed be sure
to provide a clear connection between decisions in this area and the issues that arose in the appraisal.
©
While pointing out flaws or areas that could be improved, do not neglect the power of acknowledgment for a job
well done. While appraisals are an opportunity for a manager to improve the sales staff, the chance to build morale
through positive reinforcement should not be missed.
S U MMAR Y
Performance and effectiveness are different concepts. Performance may be thought of as
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tion. On the other hand, effectiveness is an organizational outcome for which a salesperson
is at least partly responsible, usually examined across a variety of indices.
Salespeople may be evaluated on the basis of objective and subjective criteria. Objective
measures reflect statistics a sales manager can gather from a firm’s internal data and other
means and may be categorized as output measures (the results of the efforts expended
by the salesperson) and input measures (the efforts they expend in achieving the results).
Objective measures also may take the form of ratios that combine various outputs or inputs.
On the other hand, subjective measures typically rely on personal evaluations of how the
salesperson is doing, usually as viewed by the sales manager. In most cases, sales managers
should pay attention to both objective and subjective measures in evaluating salespeople.
A variety of potential pitfalls exist in performance measurement, particularly utilizing subjective measures. These problems frequently take the form of various errors or biases in the
evaluation, which result in an inaccurate performance appraisal that is perceived (rightly so)
as unfair by the salesperson. Sales organizations and their managers must take great care
to ensure that the performance evaluation process is conducted in as fair and accurate a
manner as possible. Utilizing 360-degree feedback in the performance review, including a
strong component of self-evaluation by the salesperson, can be very helpful in improving
the usefulness of the performance evaluation process.
KE Y T E RM S
behavior
performance
effectiveness
attribution theory
objective measures
output measures
input measures
ratio measures
subjective measures
bias
outcome bias
BARS (behaviorally
anchored rating scale)
360-degree performance
feedback
internal customers
self-evaluation
performance management
system
©
B R E A K O U T QU E S T IONS
1. Kevin Harrison, sales rep for Allied Steel Distributors, had an appointment with his sales
manager to discuss his first-year sales performance. Kevin knew that the meeting would
not go well. One of Allied’s major accounts had changed suppliers due to problems with
Kevin. The purchasing agent claimed that “personality differences” were so serious that
future business with Allied was not possible. Kevin knew that these so-called personality
differences involved his unwillingness to entertain in the same style as the previous sales
rep. The previous sales rep frequently took the purchasing agent and others to a local
topless bar for lunch. The rep told Kevin that this was expected and that if he wanted
to keep the business, it was necessary. Besides, tickets to the professional basketball
games didn’t count anymore. What are the short- and long-range implications of this
type of customer entertaining? What would you do in a similar situation? How should
Kevin’s sales manager react?
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EVALUATION AND CONTROL OF THE SALES PROGRAM
2. A large corporation notices an irregular decrease in the sales of a particular representative. The sales rep, normally in very high standing among other salespeople and quotas,
has of late failed to achieve her own quota. What can be done by the sales manager to
determine whether the slump in the sales curve is the responsibility of the representative
or due to things beyond her control?
3. Given the following information from evaluations of the performance of different sales
representatives, what possible conclusions can be made about why the sales reps are
not achieving quota (assume each is not making quota)?
a.
b.
c.
Representative 1: Achieved goals for sales calls, telephone calls, and new accounts;
customer relations good; no noticeable deficiencies in any areas.
Representative 2: Completed substantially fewer sales calls than goal. Telephone
calls high in number, but primarily with one firm. Time management analysis
shows the sales rep to be spending a disproportionately large amount of time
with one firm. New accounts are low; all other areas good to outstanding.
Representative 3: Number of sales calls low, below goal. Telephone calls, letters,
proposals all very low and below goal. Evaluation shows poor time utilization.
Very high amount of service-related activities in sales representative’s log; customer relations extremely positive; recently has received a great deal of feedback
from customers on product function.
4. Is sales “just a numbers game,” as one sales manager states? She believes that all you
have to do is make the right number of calls of the right type, and the odds will work
in your favor. Make 10 calls, get one sale. So to get two sales, make 20 calls. Is this the
right approach? Why or why not?
5. Jackie Hitchcock, recently promoted to district sales manager, faced a new problem she
wasn’t sure how to resolve. The district’s top sales rep is also the district’s number-one
problem. Brad Coombs traditionally leads the company in sales but also leads the company in problems. He has broken every rule, bent every policy, deviated from guidelines,
and been less than truthful. Jackie knew Brad had never done anything illegal, but she
was worried that something serious could happen. Other problems with Brad include
not preparing call reports on time, failing to show up at trade shows, and not attending sales training programs. How should Jackie handle this problem? How does a sales
manager manage a maverick sales rep? Specifically, how can the performance evaluation process help Jackie deal with Brad?
©
L E ADE R S H IP C H ALLENGE: UNDERSTANDI NG
S AL E S P E R S ON PERFORMANCE
Mike Hunt had been in sales for 20 years, and, as sales manager for Market First Distributors, he was confident of his ability to evaluate salespeople. Market First was a regional
distributor of food products to restaurants. It competed with large distributors such as
Sysco and had developed a very good reputation for great service and reasonable prices.
The company had a sales force of 70 in six districts across five midwestern states. A formal
evaluation process had been implemented nine years ago. The process focused onsalespeople meeting specific targets on account development (sales per account and average order
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EVALUATING SALESPERSON PERFORMANCE
size) and call activity (calls per account). However, while the process had been successful
in the past and everyone understood the expectations under the current system, Mike felt
that something was missing.
Market First had begun to notice an increase in complaints with customers across all the
sales districts. While the specific nature of the complaints varied, some themes showed up
consistently. Customers were complaining that salespeople did not spend as much with
them as they used to and were not as interested in the relationship.
Mike as well as senior management believed that it was time to broaden the performance
evaluation process. They felt that by setting standards for territory management and customer satisfaction, the company could assess how well the sales force was doing in these
critical areas. At this point, however, he was unsure how to set up such a system. As he sat
in his office considering the options, he wondered if this would do more harm than good
in the long run.
Questions
1. You are Mike Hunt. How would you measure a salesperson’s territory management
skills and his or her relationship with the customer?
2. Mike has asked you to come in and explain the strengths and weaknesses of objective
versus subjective measures for territory management and relationships with customers.
What would you say?
R O L E - P L A Y : H AR V E Y INS U R ANCE AGENCY
©
Situation
Harvey Insurance Agency sells an extensive line of policies, representing several major insurance companies. Principal agent Bill Harvey started the business in 1993 with one office
assistant, and since then the company has grown to become one of the largest independent insurance agencies in the Los Angeles area. Besides the original office, Bill now has
two satellite offices around the metro area, each with a managing agent. Across the three
locations he also employs 14 other agents and 27 staff people who primarily assist with
clerical duties and follow-up.
Bill has always treated his people well, and as the agency has grown he has continued to
pride himself on the family feeling of the business. Yet recently he has begun to question
whether his performance evaluation system is appropriate. Yes, sales have continuously
grown and he has had very little turnover, but success in the industry (which has always
been oriented toward relationship selling) is becoming more and more about securing,
building, and maintaining long-term relationships with profitable customers. Relationship
selling necessitates many activities on the part of the agents to support sales.
Until now, Bill’s annual performance review of his agents has focused almost exclusively
on a few objectives: principally, sales volume, number of new customers, number of calls
per week, and number of policies sold by line versus goals. The agents make commission
and bonuses, plus a base salary. Bill likes this compensation plan because it allows him to
financially reward agents for volume and for selling specific items, and it still affords him the
opportunity, through the salary component, to have influence on their nonselling activities.
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EVALUATION AND CONTROL OF THE SALES PROGRAM
Bill sees his present challenge as follows: The focus on relationship selling necessitates
maintaining the current compensation plan with the salary component. But his performance evaluation system doesn’t match up well with the realities of his business, because it
focuses only on a few objective performance measures. He sees the opportunity to incorporate some appropriate subjective measures of performance into the evaluation process
and perhaps even add or change some of the objective measures. Bill calls a meeting with
Chip Landers and Connie Perez, the managing agents of his satellite offices, to brainstorm
ideas for changing the performance evaluation system for the agents.
Characters in the Role-Play
Bill Harvey, principal agent for Harvey Insurance Agency
Chip Landers, managing agent for the San Fernando Valley office
Connie Perez, managing agent for the Orange County office
Assignment
Break into groups of three, with one student playing each character. It doesn’t matter what the
actual gender mix of your group is. Before you stage the meeting, work separately using the
material in your chapter to come up with your own recommendation for a new set of objective
and subjective measures of agent performance. You will need to be prepared to justify your
recommendations in the meeting. Then get together and role-play the meeting among Bill,
Chip, and Connie. In the end, you want to come out of the meeting with a unified plan for
changing the performance evaluation system for agents at Harvey Insurance Agency.
MINICASE: WEST MIDLANDS RESTAURANT APPLIANCES
West Midlands Restaurant Appliances (WMRA), headquartered in Birmingham, UK, sells
large, industrial appliances such as refrigerators, freezers, and dishwashers to restaurants
all over Great Britain. For several years, the company has been second in UK market share to
industry leader Thames Restaurant Services, but it has been gaining share in recent years.
WMRA is especially optimistic about catching Thames this year because of the rise of its
star sales manager, David Epstein, an energetic 31-year-old, who has been with the company
since he was 22. Epstein is popular with the sales staff, but he also is aggressive and demands
high performance. One of his initiatives is to make all salespeople accountable by strictly
evaluating performance using ratios as well as purely objective measures. In particular, he has
collected performance data for each of his seven sales representatives as follows:
©
Sales rep
Previous
Sales
Current
Sales
Derek Francona
£480,000 £481,000
Johnny Schilling
750,000 883,000
Daphne Gellar
576,000 613,000
Robert Smythe
745,000 852,000
Jennifer McCarver
765,000 860,000
Manuel Lopez
735,000 835,000
Samantha Kerrey
665,000 670,000
Erin McCloud
775,000 925,000
Current
Quota
Number of
Accounts
Number of
Orders
Expenses
Number of Number of
Calls
Days
Worked
£575,000
835,000
657,000
850,000
850,000
825,000
720,000
875,000
1,100
1,600
1,150
1,350
1,300
1,400
1,600
1,700
780
1,970
1,020
1,650
1,730
1,790
960
1,910
£9,300
12,300
7,500
11,000
11,300
11,500
10,800
12,800
1,300
1,800
1,650
1,700
1,750
1,750
1,550
1,850
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223
228
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232
220
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EVALUATING SALESPERSON PERFORMANCE
Epstein would like to see an analysis of salesperson performance using the following
ratios: sales growth, sales to quota, sales per account, average order, sales expense, calls
per day, orders per call.
Most of the salespeople are happy to be evaluated, but a few are dubious and fearful
of the consequences. Robert Smythe, for one, feels that his territory, which includes the
some of the more rural areas in Western England is more difficult to sell in because there
are fewer restaurants and he has only been a salesperson for about a year. In addition, one
of Derek Francona’s largest customers recently went out of business, and he feels that his
numbers slipped as a result. Both are close to quitting because they feel they are being
evaluated unfairly.
Epstein wants to beat Thames very badly this year and feels that improving salesperson
performance is the key. Therefore, his performance evaluation system is of the utmost
importance.
Questions
1. Using the data given, calculate the performance ratios requested by Epstein and rank
the salespeople accordingly.
2. What advice or guidance should Epstein give to each of the salespeople to improve
performance?
3. What are the limitations of this evaluation system? What adjustments or additions could
Epstein make to more accurately evaluate salesperson performance?
S U G G E S T E D R E ADINGS
©
Bracken, David W. and Dale S. Rose. “When Does 360-Degree Feedback Create Behavior Change?
And How Would We Know It When It Does?” Journal of Business and Psychology 26 (June 2011),
pp. 183–192.
Jackson Jr., Donald W., John L. Schlacter, Claudia Bridges, Andrew S. Gallan.“A Comparison and
Expansion of the Bases Used For Evaluating Salespeople’s Performance.” Journal of Marketing
Theory and Practice 18 (Fall 2010), pp. 395–406.
Singh, Ramendra and Abraham Koshy. “Determinants of B2B Salespersons’ Performance and Effectiveness: A Review and Synthesis of Literature.” The Journal of Business and Industrial Marketing
25 (2010), pp. 535–546.
Stewart, Susan M., Melissa L.Gruys, and Maria Storm.“ Forced Distribution Performance Evaluation
Systems: Advantages, Disadvantages and Keys to Implementation.” Journal of Management and
Organization 16 (March 2010), pp. 168–179.
Üstüner, Tuba and Dawn Iacobucci. “Does Intraorganizational Network Embeddedness Improve
Salespeople’s Effectiveness? A Task Contingency Perspective.”Journal of Personal Selling & Sales
Management 32 (Spring 2012), pp. 187–206.
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