C H AP T E R
Evaluating Salesperson Performance
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
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
EVALUATION AND CONTROL OF THE SALES PROGRAM
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.
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
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.
EVALUATION AND CONTROL OF THE SALES PROGRAM
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
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
EVALUATING SALESPERSON PERFORMANCE
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
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
Number of orders
Average size of orders
Number of canceled orders
Number of active accounts
Number of new accounts
Number of lost accounts
Number of overdue accounts
Number of prospective accounts
Total number of calls
Number of planned calls
Number of unplanned calls
Time and time utilization
Calls per day (call rate)
Selling time versus nonselling time
As a percentage of sales
As a percentage of quota
E-mails to prospects
Phone calls to prospects
Number of formal proposals developed
Advertising displays set up
Number of meetings held with
Number of training sessions held with
Number of calls on distributor/dealer customers
Number of service calls made
Number of overdue accounts collected
and input measures
used to evaluate
EVALUATION AND CONTROL OF THE SALES PROGRAM
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 represent the results of the efforts expended by the salesperson.
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,
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.
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
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.
EVALUATING SALESPERSON PERFORMANCE
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 th ...
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