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BUS 3302, Sales Management 1

Course Learning Outcomes for Unit VIII

Upon completion of this unit, students should be able to:

2. Describe methods to recruit, select, hire, and develop salespeople.

3. Trace the evolving role of salespeople to business consultants.

4. Discuss the role of vision in leading and motivating a sales force.

5. Identify the role of the sales manager in forecasting sales, developing budgets, and managing sales
territories

6. Explain methods used by sales managers to evaluate the performance of individual salespeople.
6.1 Explain why salesperson performance evaluation is done.
6.2 Describe different criteria used to evaluate salesperson performance.
6.3 Identify the advantages and disadvantages of different methods of salesperson

performance evaluation.

7. Explore ethical situations facing salespeople and sales management.

Required Unit Resources

Chapter 10: Evaluating the Performance of Salespeople

Unit Lesson

While there are many reasons to evaluate the performance of employees, they generally fit into three broad
categories: administrative, current performance, and future development. Reasons related to hiring,
promotion, compensation, rewards, and benefits fall into the administrative category. Annual (or more
frequent) reviews, feedback, coaching, and mentoring fall into the current performance group (Ingram et al.,
2020). Development for future career growth falls into the third category.

As noted earlier in the course, leading a salesforce, particularly a salesforce that works remotely, presents
special challenges. Payment by commission and the nature of the sales job—which may involve frequent
rejections—also present challenges. Many of the tasks performed by personal selling representatives, such
as servicing accounts and building goodwill with customers, are subjective in nature.

It is also difficult to equate the wide variety of conditions under which salespeople work, even within the same
company. There are differences in accounts, differences in territories, and differences in the competitive
environment. In many ways, it is hard to equate the performance of salespeople who work in cities with
salespeople who work in suburban or rural territories.

The sales manager faces these same questions regarding measurements when evaluating the sales
organization. If the principal measure of performance is sales volume, then important work like servicing
accounts, building relationships with customers, and helping customers identify and meet needs are not
included in the measurements.

UNIT VIII STUDY GUIDE
Evaluating the Performance
of Salespeople

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UNIT x STUDY GUIDE
Title

Despite these difficulties, evaluating the performance of salespeople and helping them improve is vital both
for the salesperson and for the organization. A more productive and effective sales staff has a direct and
immediate impact on the profitability of the company.

Many companies begin their performance evaluation of salespeople the same way they evaluate other
employees—with a job description (Ingram et al., 2020). A strong job description outlines what the
salesperson is supposed to do. It should include traditional personal selling activities as well as the variety of
activities that constitute the current era of relationship selling. Another advantage of using the job description
is that it is the basis for applying for and accepting the position.

Determining who will do the performance evaluation is the next step. If the company is one in which the sales
staff works from a central location, like an auto dealership, the direct manager or supervisor would be in a
position to do the evaluation. The evaluator would have access to performance data, as well as the
opportunity to observe performance.

With most personal selling, where the salespeople work away from the office, the selection of an evaluator
can be more complex. Performance data would still be available, but the regular observation of performance
would be absent. That means the evaluator may have to take additional steps to gather impressions about
how the salesperson is performing the more selective elements of the position. These impressions can be
gathered from the salesperson’s customers, peers, or other members of the sales organization support team.

Because of the nature of the sales job, evaluation is often done more frequently than with other positions. In
many companies, regular performance reviews are done annually or biannually. According to a survey
conducted for the Journal of Management Development in 2001, 19% of sales organizations do not conduct
performance evaluations, 43% conduct evaluations at least quarterly, another 13% do evaluations quarterly to
biannually, and 25% conduct evaluations biannually to annually (Pettijohn et al., 2001).

Some sales organizations do performance appraisals once a month or even more frequently. This takes more
time, both by the evaluator and the salesperson, and it costs more. However, these companies are convinced
that this additional investment is a good one based on the improvements in performance they have observed.
It also is a way to build a closer relationship between sales leadership and remote salespeople.

Sales performance evaluations, like most others, are based on identifying whether there is a gap between
expected performance and actual performance. An evaluator should identify performance standards and
interpret quantitative data and qualitative data when doing a gap analysis.

Most sales managers will use sales volume as the primary criterion to judge the effectiveness of a sales rep
(Ingram et al., 2020). This does not take into account the rep’s contribution to the profitability of the
organization or account services, but it can be a useful measure. Sales volume should be compared to any
quotas that have been established. It should also be compared to previous periods. Is sales volume
increasing, decreasing, or remaining constant?

The salesperson’s market share is another useful criterion. It is a measure of how the salesperson is doing
compared to the competition. An evaluator needs to take into account that changes in product quality, price,
and other marketing (such as advertising campaigns by the company or competitors) could have a significant
impact on market share.

Since the main objective of most businesses is to operate profitably, an evaluator should calculate the gross
profit that is generated by a salesperson. A sales rep could generate high sales volume by selling products at
a lower price. A rep who sells several different products could concentrate on lower priced products that make
a smaller contribution to profit. The more effective sales rep will be the one who sells the higher margin
products and makes a greater contribution to gross profit.

There are other performance measures that can be helpful. They are number of orders, size of orders, call
rate, batting average, and direct-selling expense. Number and size of orders are usually calculated by product
and customer category. Call rate is measured by the number of calls a salesperson makes in a day. This is a
traditional measure that is based on the idea that more sales will result from more calls. As technology is

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playing a more significant role in the sales organization and their accounts, there should be a new look at
what constitutes a sales call and how the call rate should be determined.

Batting average is a measure determined by dividing the number of orders obtained by the number of calls
made. A high batting average usually indicates an ability to close a sale and an ability to locate and call on
good prospects. A low batting average indicates the salesperson may be calling on poor prospects or may
have trouble closing a sale.

Direct-selling expense is an important statistic. It is determined by adding up the compensation, travel
expenses, entertainment expenses, and other business expenses for each salesperson. Since the goal of the
business is profitability, the efficiency of the salesperson in the field as reflected by these costs is a valuable
indicator. As with the other measures, management must understand them in detail and be sure to draw the
proper conclusions.

The basic purpose of evaluating a salesperson is to gather objective and subjective information that can be
shared with the sales reps to let them know where they stand and how they can improve. If approached
constructively by the sales manager and sales rep, the session can lead to a coaching relationship. Both
parties can come to an agreement about current performance and ways to improve.

The sales manager needs to recognize that most people do not like to be criticized and frame the meeting
accordingly. One way to do this is to focus on strengths and not weaknesses. Applicants for a position with a
company are hired because of their strengths and because they have the knowledge and skills required for
the job. While it is always a good idea to work on weaknesses, the sales organization will see a greater
benefit from sales reps who work on further developing the strengths that resulted in their hiring.

References

Ingram, T. N., LaForge, R. W., Avila, R. A., Schwepker, C. H., Jr., & Williams, M. R. (2020). Sales

management: Analysis and decision making (10th ed.). Routledge.

Pettijohn, L. S., Parker R. S., Pettijohn, C. E., & Kent, J. L. (2001). Performance appraisals: Usage, criteria

and observations. Journal of Management Development, 20(9), 754–771.

Suggested Unit Resources

In order to access the following resources, click the links below.

The following PowerPoint presentation corresponds to the material in your textbook:

Chapter 10 Presentation
PDF version of the Chapter 10 Presentation