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Complete Leadership Challenge (Sales Management) - minimum 2 pages, marketing homework help

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Complete Leadership Challenge based on the attached content. Minimum 2 pages

Leadership Challenge: Understanding Salesperson 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 mid-western states. A formal evaluation process had been implemented nine years ago. The process focused on salespeople meeting specific targets on account development (sales per account and average order 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 (Johnston & Marshall, 2013).

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


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C H AP T E R 1 3 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 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 Y c.:::...Chally Group> - Y 448 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 Y Y © 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. Y Y 449 450 EVALUATION AND CONTROL OF THE SALES PROGRAM 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 © 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 Y Y EVALUATING SALESPERSON PERFORMANCE 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 © 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 Y EXHIBIT 13.1 Common output and input measures used to evaluate salespeople Y 452 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 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. © 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. Y Y EVALUATING SALESPERSON PERFORMANCE 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 th ...
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Final Answer

Attached.

Running head: LEADERSHIP CHALLENGE

1

Leadership Challenge
Institution Affiliation
Date

LEADERSHIP CHALLENGE
To measure the management skills of the sales persons, it is important to access the time
she or he takes to close a deal. A sales person who is well managed and organized will know
how to close deals faster when compared to an inadequate and disorganized sales person. More
so, his relationship with the customers will also be captured in the number of deals he is able to
close. A person with a poor relationship will rarely close deals because the customers will find
him inadequate and inefficient. The average size of the deals one is able to close is also quite
crucial. It is evidence of confidence and good negotiation skills in the sales person.
More so, a sales person is entitled with the responsibility of accessing the needs of...

agneta (47408)
Duke University

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