Evaluating the Effectiveness of the Organization

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Evaluating theEffectiveness of the Organization

• Module Nine

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Evaluating EffectivenessAn Experts Viewpoint
Sovereign Bank recently installed Salesnet, a
sales force automation product. According to
Bill Pattern, director of MIS and project
administration, We can look and see who our
prospects are the probability of closing.
Tracking our pipeline is an enormous amount of
our responsibility. The software also allows
managers to monitor salespeoples performance and
productivity.
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Evaluating EffectivenessAn Experts Viewpoint
According to Pattern, Salesnet pays for itself.
It has reduced paperwork and improved sales
productivity. The system allows managers to
better analyze sales and customer relationships,
more carefully track sales force productivity,
pinpoint problems, and define opportunities. As
such, it not only helps track sales force
effectiveness, but helps improve it.
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Sales Organization Effectiveness vs. Salesperson
Performance
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• Sales force performance sales per salesperson
• Sale force effectiveness selling expenses as a
  percentage of sales.

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Sales Organization Audit

• Comprehensive, systematic, diagnostic and
  prescriptive tool.
• Assesses the a firms sales management process
• Provides direction for improved performance and
  prescription for needed changes.
• Should be performed regularly,
• Should be conducted by someone from outside the
  sales organization.

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Sales Organization Audit Framework
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Benchmarking
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Benchmarking Process
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Sales OrganizationEffectiveness Evaluations

• No one summary measure of sales organization
  effectiveness.
• Multiple factors must be assessed
• Four types of analyses are typically necessary to
  develop a comprehensive evaluation of any sales
  organization
• Conducting analysis in each of these areas is a
  complex task

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Sales Organization Effectiveness Framework
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Sales Analysis

• When should we count an order as a sale?
• When an order is place
• When an order is shipped
• When payment is received
• What is the primary metric?
• Dollars
• Units

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Sales Analysis Framework
Sales Analysis
Organizational Level of Analysis
Type of Sales
Type of Analysis
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Sales Analysis Framework
Sales Analysis
Organizational Level of Analysis
Type of Sales
Type of Analysis
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Sales Analysis Framework
Sales Analysis
Organizational Level of Analysis
Type of Sales
Type of Analysis
Total Sales Type of Product Type of Account Type
of Distribution Order Size
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Sales Analysis Framework
Sales Analysis
Organizational Level of Analysis
Type of Sales
Type of Analysis
Comparisons with Forecasts Comparisons with Sales
quotas Comparisons with Previous
period Comparisons within Sales
Organization Comparisons with Industry/Competitors
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Example of Hierarchical Sales Analysis
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Example of Type-of-Sales Analysis
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Types of Analysis Examples
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Cost Analysis

• The emphasis is on assessing the costs incurred
  by the sales organization to generate the
  achieved levels of sales.
• The general approach is to compare the costs
  incurred with planned costs as defined by selling
  budgets.
• Corporate resources earmarked for personal
  selling expenses for a designated period
  represent the total selling budget.

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Selling Budgets

• Developed at all levels of the sales organization
  and for all key expenditure categories.
• The basic objective of budgeting for each
  category is to determine the lowest expenditure
  level necessary to achieve the sales quotas.
• Two approaches to setting the selling budget
• percentage of sales method
• objective and task method

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Selling Expense Categories
14750
15000
15500
15400
15400
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Cost Analysis Examples
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Profitability AnalysisIncome Statement Analysis

• Full cost approach attempts to allocate shared
  costs to individual units based on some type of
  cost allocation procedure
• Contribution approach only includes direct costs
  in the profitability analysis

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Profitability Analysis Example
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Profitability AnalysisActivity-Based Costing
(ABC)

• Allocates costs to individual units on the basis
  of how the units actually expend or cause these
  costs.
• Places greater emphasis on more accurately
  defining unit profitability by tracing activities
  and their associated costs directly to a specific
  unit.

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Profitability Analysis Return onAssets Managed
Analysis (ROAM)

• Calculations provide an assessment of
  profitability and useful diagnostic information.
• ROAM is determined by both profit contribution
  percentage and asset turnover.

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Return on Assets Managed (ROAM)
District 1
District 2
District 3
District 4
24,000,000
24,000,000
24,000,000
24,000,000
12,000,000
14,000,000
14,000,000
12,000,000
12,000,000
12,000,000
10,000,000
10,000,000
7,200,000
8,800,000
5,200,000
9,600,000
Profit Contribution
4,800,000
2,400,000
4,800,000
1,200,000
4,000,000
8,000,000
4,000,000
16,000,000
4,000,000
8,000,000
4,000,000
16,000,000
8,000,000
16,000,000
8,000,000
32,000,000
5
20
10
20
3.0
1.5
3.0
.75
15
30
30
15
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Productivity Analysis

• Compares profits and asset investments
• Expressed in terms of ratios of inputs to output
• Productivity improvements are obtained in one of
  two basic ways
• Increasing output with the same level of input
• Maintaining the same level of output but using
  less input

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• Inputs
• Behavior
• Calls
• Days worked
• Expenses
• Selling vs. non-
• selling time
• Quotas

• Inputs
• Attitude
• Motivation
• Skills
• Abilities
• Job Perception

• Outputs
• Orders
• Order Size
• New, lost,
• or active
• accounts

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Productivity Analysis Example
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Call Productivity Ratios

• Calls per day Calls _
• Days worked
• Calls per account Calls_
• of Accounts
• Planned Call Planned calls
• Total Calls
• Batting Average Orders__
• Total Calls

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Expense Ratios

• Expense to Sales Expenses
• Sales
• Cost per Call Total Costs
• of Calls

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Account Related Ratios

• Sales to Account Dollar Sales _
• Accounts
• Average Order Size Dollar Sales
• Orders
• Growth Ratio New Accounts
• Total Accounts
• Account Success Accounts sold_
• Total Accounts

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Models Combining Input Output Controls

• Four Factor Model
• How can sales be increased?
• Optimum Number of sales calls to maximize
  profits?
• Who is doing best? Ann or Pete?
• What management strategies for Pete? for Ann?