Chapter 12 Evaluation in the Global Marketplace

1. Chapter 12Evaluation in the Global Marketplace Sales Management: A Global Perspective Earl D. Honeycutt John B. Ford Antonis C. Simintiras

2. Introduction • Sales managers plan, implement and control sales activities • To control, evaluation must occur • Without evaluation it is difficult to know what has worked, what has not, and WHY? • The purpose of evaluation is to improve salesperson and firm performance

3. Source of Deviations • Attributable to incorrectly set goals or weak performance? • Evaluation criteria differ depending upon the goal • If goal is to reward, then focus on salesperson activities and results • If goal is to promote, then focus on factors related to success as a sales manager

4. Global Evaluation Guidance • Evaluation allows management to identify substandard performance and take corrective action • Adjust training, compensation, or strategy • Assessing personnel in global markets is more complex • Global evaluations may include technical ability, cultural empathy, adaptability, flexibility, diplomacy, and language ability • Cultural skills may be more relevant in global markets

5. Global Market More Complex • Global system must be accessible, easy to understand, equitable, and motivating • Financial metrics may be less revealing since global firms use transfer pricing and attempts to maximize total company profit • Global evaluations are often conducted from a distance with little accurate information about field behavior of sales personnel

6. Evaluating Sales Force Performance • Sales Managers can evaluate overall sales performance by analyzing sales, cost, and profit data • No one measure of effectiveness best • Multiple measures are employed • Three most common methods are: • Sales, Cost, and Profit analyses

7. Sales Analysis • Gathering, sorting, assessing, and making decisions based upon sales data • Must organize data to show market and salesperson deviations (see Table 12.1) • Examine how markets are performing in comparison to one another • Sales data most readily available • Sales force goal is to increase customer demand and reach sales goals • Must define “sold” and compare in local currency or units sold

8. Cost Analysis • Compares cost to sales generated • Examine the variance between actual and budgeted expenses (See Table 12.2) • Areas where actual costs vary significantly from budgeted should be set aside for further analysis • Firms can use to set pricing levels, budgets and commission rates • Sales and Cost analysis used most frequently

9. Profit Analysis • When sales and costs are combined profitability can be determined • Managers can identify unprofitable territory, unprofitable products, and year-end bonuses • Profitability easier to compute with information technology advancements

10. Analyzing Performance • Conducting sales, cost, and profitability analysis is a three-step process: • Identify the needed information • Establish procedures • Analyze results • CRM systems permit managers to play “what if” scenarios to see how different inputs would vary performance

11. Discussion Questions • What challenges are encountered when firms evaluate sales force efforts globally? • What is the difference between sales force effectiveness and salesperson performance? • What are the advantages of assessing sales, cost, and profitability data when evaluating sales force performance?

12. Performance Appraisal • Performance appraisal is the assessment of individual sales force members • Individual appraisal should be conducted regularly • Annually or every six months • Some firms do not evaluate at all! • Without an objective analysis, how can salesperson be developed or advised by sales manager?

13. What we know about appraisal • Most firms examine both qualitative and quantitative input and output criteria • Greater emphasis put on output – e.g., sales revenue • Input is sought for setting quotas & standards • Sales objectives receive different weights based upon activities and territories • Firms gather multiple sources of information • Field sales managers conduct most evaluations • Written evaluations normally conducted in office setting

14. Appraisals should cover wide range of areas • Salesperson responsibilities are diverse • Necessitates four areas being assessed: • Activities • Outcomes • Profitability • Personal development • Each area provides managers with different insights about performance

15. Sales Activities • Important that identical data computed for all salespersons regardless of who compiles • Sales calls per period, required reports completed, customer complaints, customer training sessions completed, letters/phone calls to customers, product demonstrations, service calls, dealer meetings held • Can subdivide by existing vs. potential customers or planned vs. cold calls

16. Understanding activities • Different probabilities for each activity • Planned vs. cold calls • How salespersons devote their time • Differences between high and low performers • All sales effort not the same • Two sales persons make same effort with different results • Sales managers need to know effort-result ratio • For example, batting average or sales/total calls

17. Outcome Measures • Activities lead to outcomes, such as: • Sales revenue generated • Profits • Sales per account • Sales revenue as a percentage of potential • Number of orders • Number of new customers • Sales to new customers • Outcomes higher when time and quality devoted to input activities • Supported by a study in Singapore

18. Profitability Measures • Firms now look at profitability measures • Net profit as a percentage of sales • Net profit contribution • Net profit dollars • Return on investment • Gross margin • Salesperson can impact profitability by • Specific products sold and final price negotiated

19. Qualitative Measures • Judgment by the salesperson’s supervisor • To what the salesperson’s knowledge and performance compare with an ideal person • To minimize bias, sales managers should follow a systematic assessment process • Includes three steps: • Objectives • Techniques • Items

20. Bias in Appraisals • Managers must minimize bias that creep into evaluation efforts • Set standards whenever possible • Based upon behavior or results • Evaluate from a point of neutrality • Informal evaluations • Often subjective in nature • Results in differing amounts and quality of information

21. Diagnosing Salesperson Performance • Data is collected, organized and interpreted • Why has one product not met expectations? • Monitor salesperson performance for a variety of reasons: • Counseling, promotion, bonus, termination, or transfer • Without a systematic evaluation, it is easy to conclude that sales force did not work hard enough

22. Evaluation and Action • Once evaluation takes place, it is time for action: • Personal development • Reallocation of effort • Modifying the performance setting • Changes may be needed in sales procedures or methods • New products, selling strategies or credit policies changed • Must submit detailed study to upper management

23. Discussion Questions • What is the relationship of activities and outcome measures? • What pitfalls are inherent in informal evaluation systems? • Explain the evaluation problems caused by sales manager bias

24. Chapter Summary • Evaluation tells us what is working, what is not, and most importantly, why! • Analysis helps managers identify potential problems • Individual salespersons appraised to identify effort and performance level • Evaluation leads to greater success for salesperson, sales force, and the firm