Chapter 12 Evaluation in the Global Marketplace

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Chapter 12Evaluation in the Global Marketplace

• Sales Management A Global Perspective
• Earl D. Honeycutt
• John B. Ford
• Antonis C. Simintiras

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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

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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

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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

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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

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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

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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

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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

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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

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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

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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?

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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?

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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

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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

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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

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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

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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

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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

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Qualitative Measures

• Judgment by the salespersons supervisor
• To what the salespersons 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

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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

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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

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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

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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

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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